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Shahjalal Islami Bank: Annual Report - 2017

IM Insights
By IM Insights
6 years ago
Shahjalal Islami Bank: Annual Report - 2017

Ijara, Islam, Islamic banking, Mudaraba, Mufti, Murabaha, Riba, Shariah, Shariah compliant, Takaful, Waqf, Zakat, Credit Risk, Al-falah, Financing Assets, Net Assets, Participation, Provision, Receivables, Reserves, Sales, Specific Provision

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  1. Shahjalal Islami Bank Limited Annual Report 2017 i
  3. 0HVVDJHV IURPWKH 1.;74#0 Those who take Riba (usury) will not stand (on the day of Resurrection) except like the standing of a person beaten by Shaitan (Satan) leading him to insanity. That is because they say: “Trading is only like Riba (usury),” whereas Allah has permitted trading and forbidden Riba (usury). So, whosoever receives an admonition from his Lord and stops eating Riba (usury) shall not be punished for the past; his case is for Allah (to judge); but, whoever returns [to Riba (usury)], such are the dwellers of the Fire they will abide therein forever. Surah Al-Baquarah, verse-275 Allah will destroy Riba (usury) and will give increase for Sadaqaat (deeds of charity, alms, etc.) And Allah likes not the disbelievers, sinners. Surah Al-Baquarah, verse-276 O you who believe! Be afraid of Allah and give up what remains (due to you) from Riba [(usury) (from now onward)], if you are (really) believers. Surah Al-Baquarah, verse-278 And if you do not do it then take a notice of war from Allah and His Messenger; but if you repent, you shall have your capital sums. Deal not unjustly (by asking more than your capital sums), and you shall not be dealt with unjustly (by receiving less than your capital sums). Surah Al-Baquarah, verse-279 Shahjalal Islami Bank Limited Annual Report 2017 1
  4. 2 Shahjalal Islami Bank Limited Annual Report 2017
  5. Letter of Transmittal All Shareholders , Shahjalal Islami Bank Limited Bangladesh Bank Bangladesh Securities & Exchange Commission Registrar of Joint Stock Companies & Firms Dhaka Stock Exchange Limited Chittagong Stock Exchange Limited National Board of Revenue & other Stakeholders Dear Sir(s)/Madam(s), We are pleased to enclose a copy of the Annual Report 2017 of Shahjalal Islami Bank Limited including Audit Report and Audited Financial Statements for the year ended 31 December 2017 along with Notes thereon for your kind information and record. Thanking you, Yours Truly, Sd/Md. Abul Bashar SVP & Company Secretary Shahjalal Islami Bank Limited Annual Report 2017 3
  6. Shahjalal Islami Bank Limited Registered Office : Shahjalal Islami Bank Tower Plot No.-04, Block-CWN(C), Gulshan Avenue, Dhaka-1212 NOTICE OF THE 17TH ANNUAL GENERAL MEETING Notice is hereby given to all shareholders of Shahjalal Islami Bank Limited that the 17th Annual General Meeting of the Company will be held on Sunday, the 8th July 2018 at 9.00 a.m. at RAOWA Convention Hall No.1 (HELMET), VIP Road, Mohakhali, Dhaka-1206 to transact the following business: AGENDA 1. To receive, consider and adopt the Audited Financial Statements of the Company for the year ended 31 December 2017 along with the Auditor’s Report and the Directors’ Report thereon. 2. To approve Dividend for the year ended 31 December 2017 as recommended by the Board of Directors. 3. To appoint Auditors of the Company for the next term and to fix their remuneration. 4. To elect/re-elect Directors. All Members are requested to kindly make it convenient to attend the AGM in time. By order of the Board of Directors Dated:Dhaka Sd/st Md. Abul Bashar 21 May 2018 SVP & Company Secretary Notes:  The “Record Date” in lieu of Book Closure has been fixed on Thursday, 31 May 2018.  The Board of Directors has recommended 10% Stock Dividend for the year ended 31 December 2017. The Shareholders whose names would appear in the Register of Members of the company and/or in the Central Depository Bangladesh Ltd. (CDBL) on the Record Date i.e. 31 May 2018 will be eligible to attend the AGM and entitled to the dividend.  A member of the Company eligible to attend the AGM may appoint a proxy to attend and vote on his/her behalf. The instrument appointing a proxy duly signed by the Member and Revenue Stamped of Tk.20.00 (Taka Twenty) must be submitted at the Registered Office of the Company at least 72 (Seventy two) hours before the AGM.  The existing Auditors M/s. Hoda Vasi Chowdhury & Co., Chartered Accountants, had applied and being eligible for re-appointment.  Election/Re-election of Directors shall be dealt in accordance with the provisions of the Articles of Association of the Company and the relevant rules/circulars in force.  Annual Report 2017, Attendance Slip and Proxy Form along with the Notice will be sent to the shareholders’ Addresses by post/courier. In case of non-receipt of Annual Report 2017, members may collect the same from the Company’s Registered Office. Soft copy of the Annual Report 2017, Proxy Form and this Notice will be available in the Company’s website: www.sjiblbd.com  In Compliance with the Bangladesh Securities and Exchange Commission’s Circular No. SEC/ CMRRCD/2009-193/154, dated 24 October 2013, no Gift/Coupon/Food Box shall be distributed at the ensuing AGM. 4 Shahjalal Islami Bank Limited Annual Report 2017
  7. Standard Disclosure Index The table given below provides a cross reference to the standard disclosures to the key section of the Annual Report 2017 : Items Page No. Corporate Objectives, Values & Structure Vision and Mission 12-13 Overall strategic objectives 14-15 Core values and code of conduct/ethical principles 14-15 Profile of the Company 17 Directors’ profiles and their representation on Board of other companies & Organizations Chart 25-41, 275-277, 18-19 Management Report and analysis including Directors’ Report/Chairman’s Review/CEO’s Review etc. A general review of the performance of the company 82-88, 98-109 Description of the performance of the various activitices/products/segments of the Bank 98-109 and Group during the period under review A brief summary of the business and other risks facing the organization and steps taken to 163-183 effectively manage such risks A general review of the future prospects/outlook 84, 88, 94-95 Information on contribution of the Bank to its responsibilities towards the staff (including health & safety) 117-119, 154 Information on Bank’s contribution to the national exchequer & to the economy 107, 157-158 Sustainability Reporting Social Responsibility Initiatives (CSR) 69-71, 160-162 Environment related Initiatives 155-156 Environmental & Social Obligations 155 Integrated Reporting 156-159 Appropriateness of Disclosure of Accounting Polices and General Disclosure Disclosure of adequate and properly worded accounting policies relevant to assets, liabilities, 225-238 income and expenditure in line with best reporting standards Any specific accounting policies 232-233, 235-236 Impairment of assets 234 Changes in accounting policies/Changes in accounting estimates 232 Accounting Policy on Subsidiaries 299-300 Segment Information Comprehensive segment related information bifurcating segment revenue, segment results and segment capital employed Availability of information regarding different segments and units of the entity as well as non-segmental entities/units 247-248, Segment analysis of 265-268 - Segment Revenue - Segment Results - Turnover - Operating profit - Carrying amount of Net Segment assets Financial Statements Disclosures of all contingencies and commitments 213, 219 Comprehensive related party disclosures 275-278 Disclosures of Remuneration & Facilities provided to Directors & CEO 270 212-213, 218-219, Statement of Financial Position/Balance Sheet and relevant schedules 279-286 Income Statement/Profit and Loss Account and relevant schedules 214-215, 220-221 Statement of Changes in Equity/Reserves & Surplus Schedule 217, 223 Disclosures of Types of Share Capital 260-261 Shahjalal Islami Bank Limited Annual Report 2017 5
  8. Items Statement of Cash Flows Consolidated Financial Statement (CFS) Extent of compliance with the core IAS/IFRS or equivalent National Standards Disclosures / Contents of Notes to Accounts Information about Corporate Governance Board of Directors, Chairman and CEO Audit Committee (Composition, role, meetings, attendance, etc.) Internal Control & Risk Management Ethics and Compliance Remuneration and other Committees of Board Human Capital Communication to Shareholders & Stakeholders - Information available on website - Other information Environmental and Social Obligations Management review and responsibility Disclosure by Board of Directors or Audit Committee on evaluation of quarterly reports Any other investor friendly information Risk Management & Control Environment Description of the Risk Management Framework Risk Mitigation Methodology Disclosure of Risk Reporting Stakeholders Information Distribution of Shareholding (Number of shares as well as category wise e.g Sponsors, Fll etc) Shares held by Directors/Executives and relatives of Directors/Executives Redressal of investors complaints Graphical/Pictorial Data Earnings per Share (EPS) Net Assets Stock Performance Shareholders’ Fund Return on Shareholders’ Fund Horizontal/Vertical Analysis including following Operating Performance (Income Statement) - Total Revenue - Operating Profit - Profit before Tax - Profit after Tax - EPS Statement of Financial Position (Balance Sheet) - Shareholders’ Fund - Property, Plant & Equipment - Net Current Assets - Long Term Liabilites/Current liabilities Profitability/Dividends/Performance and Liquidity Ratios Net Profit (Interest) Income Ratio Earnings before Profit (Interest), Depreciation and Tax Price Earing Ratio Current Ratios Capital to Risk Weighted Assets/Capital Adequacy Ratio Return on Capital Employed ID (AD) Ratio 6 Page No. 216-222 212-217, 225-278 237-238 225-293 111-115 114, 146-148 15, 116 115 117-119 119 119 119 155 119 150 8-9, 20, 23, 47-49, 145, 286 164 163-205 184-205, 228-231 128, 260-261 128 119 50 51 57 51 51 54, 56 53, 55 49 Shahjalal Islami Bank Limited Annual Report 2017
  9. Items Page No . Statement of Value Added and Its Distribution Government as Taxes Shareholders as dividend Employees as bonus/remuneration 157-158 Retained by the entity Market share information of Bank’s products/services Economic value added Additional Disclosures Investment Projects of the Bank 77-81 Report of the Board Risk Management Committee 149-150 Human Resource Accounting 153-162 Sustainability Development Reporting Report on Risk Management 163-205 Annual Report of Shariah Supervisory Committee 206-207 Specific Disclosures Disclosure of Ratings given by various Rating Agencies for the Bank 145 Details of Investment portfolio classification wise as per the direction issued by the Central Bank 246-250 Disclosure for Non-Performing Assets - Movements in NPA 48, - Sector-wise breakup of NPA 248-250 - Movement of provisions made against NPA - Details of accounts restructured as per regulatory guidelines Maturity Pattern of Key Assets and Liabilities (ALM) 224 Classification and valuation of Investments as per regulatory guidelines/Accounting Standards 232-233, 248-250 Business Ratio/Information - Statutory liquidity Reserve (Ratio) - Net profit income as a percentage of working funds/Operating cost-efficiency ratio - Return on Average Asset - Cost/Income ratio - Net Asset Value per Share 48-49, - Profit per Employee 239-240, - Capital to Risk Weighted Assets/Capital Adequacy Ratio 286 - Cost of Fund - Operating profit as a percentage of working funds - Cash Reserve Ratio/Liquid Asset Ratio - Dividend Coverage Ratio - Gross Non-Performing Assets to Gross Investment (Advances)/Non-Performing Investment (Advances) (Assets) to Total Investment (Advances) (Assets) 102-104, 247-248 Details of credit concentration/Sector wise exposures The break-up of ‘Provisions and Contingencies’ included in the Profit and Loss Account 271 Disclosure under regulatory guidelines: Market Discipline Disclosures on Risk Based Capital (Basel III) 184-205 Details of Non-Statutory Investment Portfolio 244-246 Disclosure in respect of assets given on operating & finance lease 246 Disclosures for derivative investments 233 Bank’s Network: List of Branches 310-319 Shahjalal Islami Bank Limited Annual Report 2017 7
  10.     Total Capital Total Deposit Import Business Cost of Fund Classified Investment Operating Profit Earnings Per Share (EPS) 8 Tk. 19,376m 2016: Tk. 14,386m 2015: Tk. 13,355m Tk. 145,382m 2016: Tk. 124,410m 2015: Tk. 109,259m Tk. 129,244m 2016: Tk. 100,419m 2015: Tk. 85,959m 7.83% 2016: 8.08% 2015: 9.53% Tk. 207,886m 2016: Tk. 167,245m 2015: Tk. 137,870m Tk. 158,668m 2016: Tk. 122,998m 2015: Tk. 96,835m Tk. 97,437m 2016: Tk. 84,769m 2015: Tk. 82,571m Tk. 173,187m 2016: Tk. 138,949m 2015: Tk. 108,012m 3.97% 12.19% 2016: 4.70% 2015: 6.47% 2016: 11.54% 2015: 13.52% Tk. 3,328m 2016: Tk. 2,979m 2015: Tk. 2,377m Tk. 2,079m 2016: Tk. 2,306m 2015: Tk. 1,758m Tk. 1.55 Tk. 17.26 2016: Tk.2.02 2015: Tk.1.76 2016: Tk. 16.67 2015: Tk. 16.68 Total Asset Total Investment Export Business Profit Earnings Asset Capital to Risk Weighted Assets Ratio Profit Before Tax Net Asset Value Per Share Shahjalal Islami Bank Limited Annual Report 2017
  11.      Number of Number of FNEKUEEG FNEKUKH FNEJUENG FNEJUJH Delivery Points ATMs Staff Strength Contribution to FNEKUFXHNF FNEKUFXNHM/ FNEJUEXKFG/ National Exchequer FNEJUFXEME CSR Number of FNEKUEME/ FNEKUJIMXNEG FNEJUKK/ FNEJUIMJXLIG Number of Clients Number of Drawing Arrangements AD Branches FNEKUEN FNEKUEM FNEJUM FNEJUEM Shahjalal Islami Bank Limited Annual Report 2017 9
  12. +6*4756 619#4&54152'4+6; 10 Shahjalal Islami Bank Limited Annual Report 2017
  13. #$.'1( 106'065 12 & 13 Vision & Mission Corporate Governance Report 111 Compliance Status on BSEC Notification on Corporate Governance 120 Certificate on Compliance of Conditions of Corporate Governance Guidelines 127 Compliance Report on BSEC Notification 128 14 Our Core values 14 Our Strategy 15 Code of Conduct 16 Forward Looking Statement 17 Corporate Information 18 Organogram of Shahjalal Islami Bank Limited Compliance Status of Bangladesh Bank Guidelines on Corporate Governance 131 20 Milestones Credit Rating Report 145 22 Products & Services Report of the Audit Committee 146 23 Highlights 2017 Report of the Board Risk Management Committee 149 25 Board of Directors CEO/CFO’s Declaration to the Board 151 29 Directors’ Profile 41 Committees Evaluation of Quarterly Financials by the Audit Committee & Board 152 42 Management & Executives Sustainability Report 153 47 Five Years’ Financial Summary Value Added Statement 157 50 Graphical Presentation Economic Value Added Statement 158 53 Horizontal & Vertical Analysis Market Value Added Statement 159 57 Shareholders’ Information Corporate Social Responsibility 160 57 Dividend Information Report on Risk Management 163 Report of Chief Risk Officer 179 Disclosure on Risk Based Capital (Basel III) 184 Annual Report of Shariah Supervisory Committee 206 Financial Statements 209 Branch Network 311 Proxy form 323 59 Events of 2017 77 Investment Projects of the Bank 82 Message from the Chairman 85 Notes from the Managing Director 90 Report of the Board of Directors Shahjalal Islami Bank Limited Annual Report 2017 11
  14. Our Vision Where we want to be … Most admirable brand of shariah banking & investment in Bangladesh ensuring sustainable value for all our stakeholders embodied with human development based on morality and ethics. Our Motto Ethical bondage to aim… Cordial Service and Welfare Banking 12 Shahjalal Islami Bank Limited Annual Report 2017
  15. Our Mission What we want to achieve …  Uncompromised quality service and customer care  Setting high standards of integrity  Inclusive and innovative banking  Sustainable value for all stakeholders  Continuous development of professionals and system upgradation to face the challenges and drive for excellence  System Automation and digitization adopting the state-of-art technology with full proof security to ensure fast and accurate customer service  Human Resources Development based on morality and ethics Shahjalal Islami Bank Limited Annual Report 2017 13
  16. Our Core Values  Unique Bank  Dynamic  Professional Fast, Efficient and Responsive Service Our constant strive is to equip with the team of professionals to face the challenges and drive for excellence  Caring Approachable and Supportive Partner We are always attentive to customers’ needs & satisfactions  Trustworthy Dependable and Reliable We believe in both way communications and always care and share the views and knowledge with all stakeholders Our Banking Products are the Benchmark Our commitment is to contribute in building and expanding islamic banking industry Progressive and Innovative We are constantly moving ahead as we offer new and technologically advanced products and services Our Strategy Our strategy is to perform towards sustainable growth achievement Our strategic intent Our brand promises To be the unique shariah based Bank in Bangladesh A very caring bank to: DYNAMIC; PROFESSIONAL; CARING AND TRUSTWORTHY Our commitment to three core pillars:  facilitate trade across the markets  enable customers of all walks of life to conduct business transactions happily  provide easy solution of complex business situation capture the unbanked population of the country  14  people – we believe in long-last relationships and possess great value for the customers and people around us  progress – the way we conduct ourselves  prosperity – our passion for sustainable value addition to our all stakeholders Shahjalal Islami Bank Limited Annual Report 2017
  17. How we deliver : Our Strategic Pillars Our presence We have modest presence across the country and want to have an unequivocal focus all over the country with deep local relationships. We are trying to expand our horizon and service network by opening more branches especially in unbanked areas of the country. Strict Observance of Shariah We are committed to provide banking services purely based on Shariah. Diversified deposit and investment products: Emphasis both Wholesale banking and Retail banking We operate as a Bank in diversified areas of banking and always focus on both Wholesale Banking and Retail Banking. Client relationship rather than a product driven approach We focus our capabilities around customers’ needs, rather than seeking a rapid return on products or building product silos. Distinctive culture and values Our unique culture and values are the source of significant advantage. Conservative and disciplined on risk, capital and liquidity We regard balance sheet quality as a cornerstone of our business model & strategy. We are more cautious about capital adequacy, liquidity & risk mitigation rather than running after profit only. Organic growth, the primary driver of our strategy and value creation We believe that organic growth drives the greatest value creation for our shareholders. Where we cannot grow organically, or cannot do so within a reasonable time frame, we will explore acquisitions that will reinforce our core strategy. Our delivery We are committed to Cordial Service and with this commitment we constantly try to pull on sustainable business practices, upholding high standards of corporate governance, social responsibility, environmental protection and human resource development. Code of Conduct ... Ethical Principles of SJIBL The Bank has achieved a remarkable reputation since its inception. This reputation is our most important asset, source of inspiration & pride. Bank’s continued success depends heavily on all member staffs of SJIBL family doing their best to maintain and enhance our tradition of honesty, integrity, fairness, excellence, respect and concern for others. The ethical conduct of SJIBL is followed by its directors, officials and all the member staffs from their respective positions. The ethical conduct includes, but not limited to, the following: 1. Adhering to the Shariah and implementing its principles. 2. Maintain honesty and integrity, avoiding actual or apparent conflicts of interest in personal and professional relationships. 3. Provide customers with accurate, complete, objective, relevant, timely, and understandable informantion. 4. Comply with all applicable rules and regulations of the country. 5. Act in good faith, responsibly, with due care, competence and diligence, without misrepresenting material facts or allowing one’s independent judgment to be subordinated. Shahjalal Islami Bank Limited Annual Report 2017 6. Respect the confidentiality of information acquired in the course of one’s work except when authorized or otherwise legally obligated to disclose. Confidential information acquired in the course of one’s work will not be used for personal advantage. 7. Share knowledge and maintain skills important & relevant to customer’s needs. 8. Proactively promote ethical behavior as a responsible partner among peers in the work environment and the community. 9. Achieve responsible use of and control over all assets and resources employed or entrusted. 10. Any violation of this Code is strictly dealt with appropriate administrative measures. 15
  18. Forward Looking Statement Forward Looking Statement estimates certain conditions & changes that might effect business based on some factoral assumptions, future plans, strategies & expectations of the Bank. It is not always certain to predict results or the actual effect of future plans or strategies of a business concern. Changes in profit rates; changes in domestic/global economic trend; legislative/regulatory changes; changes in monetary and fiscal policies of the Government including policies of Bangladesh Bank; changes take place in quality or composition of general investment and or other investment portfolios; demand for investment products; deposit flows; business competition; demand for financial services in the Company’s market area and accounting principles and guidelines are the factors included but not limited to, that might have material effect on operation of Bank’s business and subsequent profitability/growth. The coherent risks and uncertainties should be considered while setting of the goals & business targets of the Bank. The Bank does not undertake and specifically disclaims any obligation to publicly release the result of any revisions which may be made to any forward looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. The Forward Looking Statement that the Bank recognizes may be as follows:  Adverse credit and capital market conditions may significantly affect the ability to meet liquidity needs and increase cost of funding;  Declining market value of assets could adversely affect the operations or profitability;  An increase in defaults under our investment portfolio could adversely affect our results of operations, liquidity, capital resources and financial condition;  There can be no assurance that actions of Bangladesh government and other governmental and regulatory bodies to stabilize financial markets will achieve the intended effect;  Banking businesses in Bangladesh are highly regulated and we could be adversely affected by changes in regulations and regulatory policy;  Reputational damage could harm our business and prospects;  Failure to maintain our credit ratings could adversely affect our cost of funds, liquidity, competitive position and access to capital markets;  Introduction of compliance issues strictly raised by the international forums likely to affect the export growth;  Rise in international prices of essentials may resulting to volatility in FX market;  International embargo/unrest in Middle-East countries may affect remittances and trade;  We may fail to realise the business growth opportunities, cost savings and other benefits anticipated from, or may incur unanticipated costs associated with the operations & financial condition. 16 Shahjalal Islami Bank Limited Annual Report 2017
  19. Corporate Information Name of the Company Legal Form Commencement of Business Registered Office Telephone No . Fax No. Website Shahjalal Islami Bank Limited A public limited company incorporated in Bangladesh on 1st April 2001 under the Companies Act 1994 and listed with Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited. 10th May 2001 Shahjalal Islami Bank Tower Plot No.-04, Block-CWN(C), Gulshan Avenue, Dhaka-1212 88-02-9845457 (Hunting) 88-02-9847607 www.sjiblbd.com SWIFT SJBLBDDH E-mail sjiblho@sjiblbd.com Chairman Akkas Uddin Mollah Managing Director Auditors Tax Advisor Credit Rating Agency No. of Branches No. of ATM Booths Subsidiary Company Off-Shore Banking Unit No. of Employees Authorized Capital Paid up Capital Farman R. Chowdhury M/s. Hoda Vasi Chowdhury & Co., Chartered Accountants BTMC Bhaban (7th & 8th floor) 7-9 Karwan Bazar Commercial Area, Dhaka-1215 Phone: +88-02-9120090 M/s. K.M Hasan & Co., Chartered Accountants 87, New Eskaton Road, Dhaka. Phone: +88-02-9351457, 9351564 Credit Rating Agency of Bangladesh Limited D H Tower, 6 Panthapath, Level 15, Dhaka-1215 Phone: 88-02-55013678, 55013681-84 113 74 Shahjalal Islami Bank Securities Limited Jiban Bima Bhaban (4th Floor), 10 Dilkusha C/A, Dhaka 1000 1 2,402 Tk. 10,000 million Tk. 7,714 million Shahjalal Islami Bank Limited Annual Report 2017 17
  20. Organogram of Shahjalal Islami Bank Limited Board of Directors Executive Committee of Board of Directors Audit Committee of Board of Directors Risk Management Committee of Board of Directors Board Audit Cell Managing Director MD ’S Secretariat Buss. Dev. & Marketing IC & CD Shariah Ins. & Comp. Div Audit & Inspection Monitoring Compliance FAD CSD Reconciliation IT Div. MIS & Returns HRD Budget & Financial Control Anti Money Laund. Div. Central Accounts & Financial Reporting Treasury Division Asset Mark. (SME, Retail, Agri, Large Inv, Syndication etc.) Liability Mark. & Cash Mgt. OBU Branding & Product Dev. Front Office Br. Manager Mid Office Back Office Branches Control & Audit Compliance 18 ALCO Card Operations Shahjalal Islami Bank Limited Annual Report 2017
  21. Shariah Supervisory Committee Board Secretariat Board Affairs Banking Operations Division SJIBL Foundation Legal Aff . Div Limit Loading Dept Central Clearing Unit Share Public Relations Dept. International Division Investment Adm. Division Law, Recovery & Special. Asset Mgt. Dept. Br. Deputy Managers Approval Monitoring Central Processing Centre Shahjalal Islami Bank Limited Annual Report 2017 Inv. Risk Mgt. Div. Risk Mgt. Division Training Training Institute R&D Compliance Alternate Delivery Channel 19
  22.   FNNK FNNE z Incorporation of the Company z Obtained License from Bangladesh Bank z Formal launching & Commencement of Banking Business 20 FNEN FNNL z Initial Public Offerings (IPO) z Enlisted with Dhaka Stock Exchange Limited & Chittagong Stock Exchange Limited z First trading of shares on Dhaka Stock Exchange Limited & Chittagong Stock Exchange Limited z Launching of 1st ATM FNEE z z Opening of Off-shore Banking Unit Agreement with LEADS Corporation Limited for getting Core Banking Software, BankUltimus z Incorporation and commencement of Subsidiary Company, Shahjalal Islami Bank Securities Limited z Refix the face value and market lot of shares z Started operation of Shahjalal Islami Bank Securities Limited Shahjalal Islami Bank Limited Annual Report 2017
  23. FNEH FNEG FNEI z z Full-fledged operation with BankUltimus , the Core Banking Soluation FNEJ z Construction of Head Office Buiding on own plot started Introduction of Central Limit Loading System Shahjalal Islami Bank Limited Annual Report 2017 FNEK z z Establishment of full-fledged Shahjalal Islami Bank Training Academy 100th Branch Opened at Hat Gopalpur, Jhenaidah z Bank’s Head Office shifted to permanent address at “Shahjalal Islami Bank Tower” (the iconic building of the country) z Implemented Layer-7 security in our ICT management system & infrastructure to combat cyber threats 21
  24. Products and Services Deposit Schemes Mudaraba Millionaire Scheme Mudaraba Monthly Income Scheme Mudaraba Double /Triple Benefit Scheme Mudaraba Monthly Deposit Scheme Mudaraba Hajj Scheme Mudaraba Cash waqf Deposit Scheme Deposit Accounts Al-Wadiah Current Deposit Mudaraba Savings Deposit Mudaraba Special Notice Deposit Mudaraba Term Deposit Receipt Mudaraba Foreign Currency Deposit Mudaraba SJIBL School Banking Mudaraba Money Spinning Mudaraba Savings Payroll Account SJIBL Cards VISA Debit Card VISA Prepaid Card (Local) VISA Prepaid Card (International) VISA Prepaid Card (Dual) VISA Souvenir Card (Gift Card - Local) Capital Market Operation Brokerage Operation Margin Facility Other Banking Services ATM Services Remittance Services Locker Services Online Banking SMS Push-Pull SWIFT REUTERS SJIBL Student File Evening Banking Services Internet Banking Services Utility Bill Payment Services Priority Banking Services e-GP Services Investment Products Corporate (Mode) Murabaha Bai-Muazzal Hire Purchase under Shirkatul Meelk Ijara Bai-Salam Quard-e-Hasana Retail Investment Products Household Durable Scheme Housing Investment Programme Car Investment Scheme Semi Pucca Housing Investment Scheme Investment for Self-employment Investment Scheme for Executives Investment Scheme for Doctors Investment Scheme for Marriage Investment Scheme for Overseas Employment Investment Scheme for Education SME Investment Products Cottage & Micro Enterprise Investment Programme Small Business Investment Programme Medium Enterprise Investment Programme Women Entrepreneur Investment Programme Agri Investment Programme Own Network & NGO linkage Sustainable Investment Products ETP/Waste Treatment Plant Solar Pane1/Solar Irrigation Pump Bio Gas/Bio Fertilizer/Vermicompost Green factory/Green office Waste paper/plastic recycle plant Compressed Block Brick/HHK/Tunnel Kiln LED bulb manufacturing/assembly plant PET Bottle/Plastic Waste Recycling Plant MÙ8Y.YH4LfJTYgC5JYfLg/ F°Z= JYgP 'FY5ƒE .LÀE  8Y.Y F°YŠYZM= _8Y.YHY*L ’Z<=. fK f.YE FZLJY< 8Y.Y LY/Y KYT_ 22 Shahjalal Islami Bank Limited Annual Report 2017
  25.  FNEK Addition of 10 new branches ATM transactions during the year with 34% growth over2016 Addition of 10 new ATM Booths Investment under woman entrepreneur program increased by 121% Green Finance increased by 205% Percentage of Classified Investment reduced to 3.97% Shahjalal Islami Bank Limited Annual Report 2017 Tk.5,544m Total Capital increased to BDT 19,376m SME finance increase by 5.40% Credit Rating Long Term 2 Short Term AA ST-2 Cost of fund reduced to 7.83% 23
  26. Islamic banking A form of banking that is harmonious with the goodness of humanity on Earth 24 Shahjalal Islami Bank Limited Annual Report 2017
  27. 1#4&1(+4'%6145 Chairman Akkas Uddin Mollah Vice Chairmen Mohammed Golam Quddus (Rep. of Anwer Khan Modern Hospital Ltd.) Khandaker Sakib Ahmed Directors Anwer Hossain Khan Md. Sanaullah Shahid (Rep. of Electra International Ltd.) Shams Uddin Khan (Rep. of Shamsuddin Khan & Harun Miah Ltd.) Md. Abdul Barek Abdul Halim Mohiuddin Ahmed Engr. Md. Towhidur Rahman A.K. Azad Mohammed Younus Fakir Akhtaruzzaman Khorshed Alam Khan (Rep. of Daffodils Trading International) Md. Moshiur Rahman Chamak (Rep. of Fresh Export Import Ltd.) Shahan Ara Begum Independent Directors Mosharraf Hossain Chowdhury Farida Parvin Nuru Managing Director Farman R. Chowdhury Shahjalal Islami Bank Limited Annual Report 2017 25
  28. 1#4&1(+4'%6145 Directors from left to right : Abdul Halim, Farman R. Chowdhury, Khorshed Alam Khan, Md. Sanaullah Shahid, Mohammed Golam Kuddus, A.K. Azad, Akkas Uddin Mollah, Anwer Hossain Khan, Md. Abdul Barek, Mosharraf Hossain Chowdhury, Fakir Akhtaruzzaman, Khandaker Shakib Ahmed and Md. Moshiur Rahman Chamak 26 Shahjalal Islami Bank Limited Annual Report 2017
  29. Directors are not seen in the group photo : Shams Uddin Khan, Mohiuddin Ahmed, Engr. Md. Towhidur Rahman, Mohammed Younus, Shahan Ara Begum and Farida Parvin Nuru. Shahjalal Islami Bank Limited Annual Report 2017 27
  30. The truthful merchant (is rewarded by being ranked) on the Day of Resurrection with prophets, veracious souls, martyrs. Jame’ Tirmidhi 28 Shahjalal Islami Bank Limited Annual Report 2017
  31.     Shahjalal Islami Bank Limited Annual Report 2017 29
  32. Akkas Uddin Mollah Chairman Akkas Uddin Mollah was born in 1954 in a respectable Muslim family . He is now Chairman of the Bank’s Board of Directors. Mollah has long and commendable business experience for more than three decades and established himself as a prominent figure of RMG Manufacturing & exporting sector. Mollah is the Chairman and Managing Director of Russel Spinning Mills Limited, PNR Industries Ltd., Russel Garments, Russel Knitting, Russel Washing Plant, Ekram Sweaters Limited, Saladin Garments Limited and Goodman Pharmaceuticals Ltd. He is also a Director of Shahjalal Islami Bank Securities Ltd. He was selected as C.I.P. by the Government of Bangladesh in the year 2012 for his contribution to National Economy. In addition to his success in trade and business, Mollah is immensely reputed for his contribution in the field of education and health services. He is the Founder of Osmania Madrasa and Osmania Memorial Hospital. His pleasant personality and amiable disposition is commendable. Mollah is also associated with different trade bodies and social organizations. Presently, he is the member of BGMEA, BTMEA and Narayangonj Club. He has traveled different parts of the world in connection with business promotion. 30 Shahjalal Islami Bank Limited Annual Report 2017
  33. Mohammed Golam Quddus Vice Chairman Mohammed Golam Quddus , son of late Fazlur Rahman, was born in 1954 in a respectable Muslim family. Quddus is a Director of the Bank who represents Anwer Khan Modern Hospital Ltd. He started his career as Assistant Commissioner at the Ministry of Public Administration of the Government of People’s Republic of Bangladesh in 1983 after completion of his Masters Degree in Economics from Dhaka University and has long contribution in the Government sector of our country. He served as Secretary to the Government under various Ministries and as a Member at Privatization Commission from 25-01-2011 to 31-12-2014. Moreover, he worked as Joint Secretary, Additional Secretary, Additional Divisional Commissioner and Additional Deputy Commissioner etc. He retired from his service on 01-01-2015. Quddus is widely experienced in general administration, office management, hospital management, field management & crisis management etc. He travelled different parts of the world like USA, Philippines, Thailand, Singapore etc. to participate training/workshop/seminars. Khandaker Sakib Ahmed Vice Chairman Khandoker Sakib Ahmed was born in 1975 in a respectable Muslim family and started business after completion of his MBA Degree. Ahmed is a sponsor shareholder and Vice Chairman of the Board of Directors of the Bank. He has long and creditable business experience for more than one decade. He is the Managing Director of Zuairia Group, Zuairia Trade International, Z. Agrovet Enterprise and proprietor of Khandoker Poultry & Fisheries. He is also a Director of Al-Arafah Islami Bank Securities Ltd. and a sponsor of Shahjalal Islami Bank Securities Limited. By dint of his talent, hard working and amiable disposition, he is regarded as an eminent business personality in the community. He has also traveled different parts of the world in connection with business. Shahjalal Islami Bank Limited Annual Report 2017 31
  34. Anwer Hossain Khan Director Anwer Hossain Khan was born in 1961 in a respectable Muslim family and started business after completion of M .Com. Degree. Former Chairman of the bank, Khan is now a Director and Chairman of Executive Committee of Board of Directors of the Bank. He is also the Chairman of Shahjalal Islami Bank Securities Ltd. He has long and outstanding business experience for more than two decades and emerged as a prominent figure in Medical/Health care business. Khan is also the Chairman and Managing Director of Modern Group of Companies, Anwer Khan Modern Hospital Ltd., Modern Diagnostic Centre Ltd., Hazi Sakawat Anwara Modern Eye Hospital Ltd., Modern Diabetic Center Ltd., Dhaka Telecommunication, Modern Environmental Technologies and sponsor of Fareast Finance & Investment Ltd., Takaful Islamic Insurance Ltd. and Fareast Stocks & Bonds Ltd. In addition to his success in trade and business, Khan is highly reputed for his contribution in the fields of education, social welfare and health care service. He is a Member of the Governing Body of Prime University and founder of Anwer Khan Modern Medical College, Anwer Khan Modern Nursing College and Anwer Khan Modern University. He is a man of pleasant personality and amiable disposition. He has also traveled different parts of the world in connection with business. Md. Sanaullah Shahid Director Md. Sanaullah Shahid was born in 1963 in a respectable Muslim family and started business after completion of Bachelor Degree. He is a sponsor shareholder and Director of the Bank and Vice Chairman of Shahjalal Islami Bank Securities Ltd. Shahid has long and creditable business experience for more than two decades. He is the Chairman of Electra International Ltd, Director of Electra Consumer Electronics Ltd. and Federal Securities & Investment Ltd. He is also a partner of Kashmir Chemical Co., Sazawa Brothers and Electra Furniture. He is a man of pleasant personality and amiable disposition. He has also traveled different parts of the world in connection with business. 32 Shahjalal Islami Bank Limited Annual Report 2017
  35. Shams Uddin Khan Director Shams Uddin Khan was born in 1935 in a respectable Muslim family and started business after completion of his education . Khan has long and creditable business experience for more than 45 years both in the UK & Bangladesh. Khan is the representative of Shamsuddin Khan & Harun Miah Ltd. In Bangladesh, he is the Director of Taj Tea and Trading Company Limited (Momincherra Tea Estate), Mathiura Tea Company Limited (Mathiura Tea Estate) and Proprietor of Shamsuddin Khan and Brothers. In addition to his success in trade and business, he is immensely reputed for his contribution to the field of education. He is the Member of Governing Body of London Grace International School and College. Khan who bears charming personality, traveled different parts of the world in connection with business. Md. Abdul Barek Director Md. Abdul Barek was born in 1960 in a respectable Muslim family and started business after completion of his education. Barek is a sponsor shareholder and Director of the Bank. He has long and creditable business experience for more than three decades. He is the Proprietor of Arju Electronics, Jony Electronics and Rony Electronics. At Present, he is the Vice Chairman of Shahjalal Islami Bank Securities Ltd. He is also a member of FBCCI. He is a man of pleasant personality and amiable disposition. He has also traveled different parts of the world in connection with business. Shahjalal Islami Bank Limited Annual Report 2017 33
  36. Abdul Halim Director Abdul Halim was born in 1948 in a respectable Muslim family and started business after completion of his education . Halim is a sponsor shareholder and Director of the Bank and also a sponsor of Shahjalal Islami Bank Securities Ltd. He has long and successful business experience for more than three decades. Halim is also the Chairman of Halim Group, Excellent Ceramic Industries Ltd. and Excellent Motors Ltd. He is also Proprietor of Abdul Halim & Brothers and sponsor of Islami Insurance Bangladesh Ltd. He is a man of pleasant personality and amiable disposition. He has also traveled different parts of the world in connection with business. Mohiuddin Ahmed Director Mohiuddin Ahmed was born in 1955 in a respectable Muslim family and started business after completion of his education. Ahmed is a sponsor shareholder and Director of the Bank. He has long and successful business experience for more than two decades. He is the proprietor of Mohiuddin Auto House and Rupsha Trading Corporation and a sponsor of Shahjalal Islami Bank Securities Ltd. and Islami Insurance Bangladesh Ltd. In addition to his success in trade and business, Ahmed is immensely reputed for his contribution in the field of education. He is the former Vice Chairman and current member of the Governing Body of Southeast University. He is also a Director of Bangladesh Chamber of Industries (BCI). He is a man of pleasant personality and amiable disposition. He has also traveled different parts of the world in connection with business. 34 Shahjalal Islami Bank Limited Annual Report 2017
  37. Engr . Md. Towhidur Rahman Director Engr. Md. Towhidur Rahman was born in 1952 in a respectable Muslim family and started business after completion of B.Sc. Engineering Degree from Europe. Immediate past Chairman of the Bank, Rahman is one of the sponsor shareholders and a Director of the Bank. He has long and outstanding business experience for more than three decades and established himself as an icon of Sea Food business. He is the Chairman and Managing Director of Fresh Foods Ltd.(one of the largest sea food exporters of the country), Libas Textiles Ltd, Fresh Knitwear Ltd, Sea Fresh Ltd., Hettich Bangladesh Ltd. (a joint venture company with Germany) and Fresh Properties Ltd. He is also a Director of Fresh Export Import Ltd, Chairman of Shahjalal Islami Bank Foundation and Director of Shahjalal Islami Bank Securities Ltd. He has been awarded with National Export Trophy (Gold & Silver) several times and also enjoying the C.I.P. status by the Government of Bangladesh for the last 15 years for his contribution to National Economy. In addition to his success in trade and business, he is immensely reputed for his contribution in the field of education. At present, he is the Chairman of the Governing Body of Prime University, founder Chairman of Alhaj Jalaluddin College and Chairman of Dhulasar High School. He has also been awarded with Mother Terresa Gold Medal and other awards for his contribution in social activities of the country. Rahman, a charming personality, has traveled different parts of the world in connection with business. A. K. Azad Director A. K. Azad was born on December,1959 in a respectable Muslim family. He completed his B.Sc.(Honors) in Applied Physics from University of Dhaka. After completion of graduation he got involved with business. Former Chairman of the bank, Azad is one of the sponsor shareholders and a Director of the Bank. He is one of those who has been playing the pivotal role to make an industrialized Bangladesh. A very energetic and sincere industrialist, Azad is the Managing Director of Ha-Meem Group of Companies, one of the leading business conglomerates of the country. Under the dynamic leadership of Azad, this group has been contributing significantly in a bid to expand RMG sector to a great extent. This Group has a vast contribution behind the economic growth of Bangladesh. He is also one of the sponsors of Shahjalal Islami Bank Securities Ltd. Azad has affiliation with different trade bodies and social organizations. He is the Former President of FBCCI & Bangladesh Chamber of Industries (BCI). At present, he is the President of Dhaka University Alumni Association. Alongside trade, commerce and industry, Azad is also involved in print & electronic media. He is the founder and publisher of The Daily Samakal, a leading Bengali daily newspaper of the country. He is also founder of Channel 24, a popular TV Channel of the country. His contribution in education sector is also commendable. Azad is a man of pleasant personality and amiable disposition. He has been honored by many sociocultural organizations for his philanthropic activities and outstanding contributions to the growth of the national economy of the country. Shahjalal Islami Bank Limited Annual Report 2017 35
  38. Mohammed Younus Director Mohammed Younus was born in 1958 in a respectable Muslim family and started business after completion of his education . Younus is now a Director and Chairman of Risk Management Committee of Board of Directors of the Bank. Younus has long and creditable business experience for about three decades. He is the managing Director of Younus Group which is a well-known and fast growing conglomerate in the industrial arena in Bangladesh. The group has been operating with 32 business units at present. He is also engaged in a Private Television channel NTV and an online newspaper Sonalinews.com. He is a Director of Shahjalal Islami Bank Securities Ltd., Athena Venture & Equities Ltd. and Sponsor of Express Insurance Ltd. In addition to his success in trade and business, Younus is immensely reputed for his contribution in the field of education. He is a member of the Board of Trustees of Fareast International University and Wordbridge School. He is the Managing Director of Galaxy Flying Academy Ltd. He is a man of pleasant personality and amiable disposition. He has also traveled different parts of the world in connection with business. Fakir Akhtaruzzaman Director Fakir Akhtaruzzaman was born in 1956 in a respectable Muslim family and started business after completion of his education. Fakir is a Director and Vice Chairman of the Executive Committee of the Board of Directors of the Bank. He has long and creditable business experience for more than three decades and established himself as an icon of Knit Garments industries. Akhtaruzzaman is the Managing Director of Fakir Knitwear’s Limited which is an export oriented Knit Composite Factory. He has been awarded with National Export Trophy (Gold & Silver) several times and also selected as C.I.P. by the Government of Bangladesh for his contribution to the National Economy. In addition to his success in trade and business, Akhtaruzzaman is immensely reputed for his contribution to the field of education. He is the Founder of Shaheb Ali High School, Begum Anowara College and Madrasa Darul Hadih Salafih at Araihazar in Narayanganj District. Akhtaruzzaman has also affiliation with different trade bodies and social organizations. Presently, he is the member of BGMEA, BTMEA and Narayangonj Club. He has also traveled different parts of the world in connection with business. 36 Shahjalal Islami Bank Limited Annual Report 2017
  39. Khorshed Alam Khan Director Khorshed Alam Khan was born in 1971 in a respectable Muslim family and started business after completion of his Bachelor Degree . Khan is the representative Director of the Bank. He is young and energetic businessman. He is also the Director of Modern Diagnostic Ltd. and Owner of Daffodils Trading International and Daffodil Color Lab & Studio. He has also traveled different parts of the world in connection with business. Md. Moshiur Rahman Chamak Director Md. Moshiur Rahman Chamak was born in 1989 in a respectable Muslim family and started business after completion of his MBA Degree. Chamak is the representative Director of the Bank. He is a very young and energetic business entrepreneur of the country. He is the Managing Director of Fresh Export Import Ltd. and Director of Libas Textile Ltd., Fresh Knitwear Ltd., Moshiur Infrastructure Ltd. and Sponsor of Takaful Islami Insurance Ltd. By dint of his talent, diligent and affable personality he is emerging as an eminent business figure. He has also traveled different parts of the world in connection with business. Shahjalal Islami Bank Limited Annual Report 2017 37
  40. Shahan Ara Begum Director Shahan Ara Begum was born in 1962 in a respectable Muslim family and started business after her Marriage . Shahan Ara Begum became the Director of the Bank on 12th February, 2018. She has long and creditable business experience for more than 18 years. She is a Director of Russel Spinning Mills Limited, PNR Industries Limited, Tania Cotton Mills Limited, Ekram Sweaters Limited & Goodman Pharmaceuticals Limited. She has also traveled different parts of the world in connection with business. Mosharraf Hossain Chowdhury Independent Director Mosharraf Hossain Chowdhury was born in 1945 in a respectable Muslim family and started his career as a banker after completion of Masters Degree. Chowdhury started his banking career in 1970 and has long contribution in the banking sector of our country. He was the Managing Director of Standard Bank Ltd. from 2003 to 2008 and then became the Managing Director of IFIC Bank Ltd. in 2009 and worked there till his retirement from service. He is now the Chairman of Board Audit Committee of the Bank. He has traveled different parts of the world like USA, Germany, China, Italy, Vietnam etc. to participate a number of workshops/seminars. 38 Shahjalal Islami Bank Limited Annual Report 2017
  41. Farida Parvin Nuru Independent Director Farida Parvin Nuru was born in 1967 in a respectable Muslim family and started business after completion of Masters Degree . Mrs. Nuru is the Independent Director of the Bank in her second term since October 30, 2016 and has long and successful business experience for more than 15 years in the UK. She is the Proprietor of Viceroy Group of Restaurant and Director of Property Management Ltd. of UK. She is also an Independent Director of Shahjalal Islami Bank Securities Ltd. Shahjalal Islami Bank Limited Annual Report 2017 39
  42. Farman R . Chowdhury Managing Director Farman R. Chowdhury joined Shahjalal Islami Bank Limited as Managing Director with effect from 1st December 2013. Prior to joining this Bank, he was the Managing Director of ONE Bank Limited. Chowdhury started his banking career with American Express Bank as Management Trainee in 1986 and gradually reached up to the position of Director (Marketing) in 1995. He served American Express Bank for 12 years up to 1998 and worked in various operational areas like Customer services, Remittance & Settlements, Credit operaion, Marketing etc. Farman R. Chowdhury joined ONE Bank Limited since its inception. During July, 1999 to June, 2007 he played roles in different fields of the Bank. He was the Manager of Principal Branch and Agrabad Branch and Head of Marketing of the Bank. Subsequently, he was elevated to the position of Deputy Managing Director. He was appointed Managing Director of ONE Bank Limited on 10 July, 2007. Chowdhury, a Business Graduate (MBA) from Institue of Business Administration (IBA) of Dhaka University, has attended many training programs, seminars & workshops at home and abroad. 40 Shahjalal Islami Bank Limited Annual Report 2017
  43. Executive Committee Anwer Hossain Khan Chairman Fakir Akhtaruzzaman Vice Chairman Khandaker Sakib Ahmed Member Mohammed Younus Member Engr . Md. Towhidur Rahman Member Md. Sanaullah Shahid Member Mohiuddin Ahmed Member Audit Committee Mosharraf Hossain Chowdhury Chairman Farida Parvin Nuru Member Khorshed Alam Khan Member Md. Moshiur Rahman Chamak Member Abdul Halim Member Risk Management Committee Mohammed Younus Chairman Anwer Hossain Khan Member Md. Abdul Barek Member Khorshed Alam Khan Member Md. Moshiur Rahman Chamak Member Shariah Supervisory Committee Allama Mufti Abdul Halim Bukharee Chairman Maulana Yousuf Abdul Majid Member Mufti Shahed Rahmani Member Prof. Dr. Muhammad Abdur Rashid Member Prof. Hamidur Rahman Member M. Azizul Huq Member Barrister Md. Arifur Rahman Member M. Kamaluddin Chowdhury Member Akkas Uddin Mollah Ex-Officio Member Farman R. Chowdhury Ex-Officio Member Md. Farid Uddin Member Secretary Shahjalal Islami Bank Limited Annual Report 2017 41
  44.  n  Managing Director Executive Vice Presidents Vice Presidents Farman R. Chowdhury Mahmud Hussain Amir Uddin Chowdhury Md. Monzurul Alam Chowdhury Md. Abdur Rahim Additional Managing Director Md. Saidur Rahman Sultana Parvin M. Shahidul Islam Rashed Sarwar Md. Abdulla Al Mahmud Siddiqui Mohammed Ashfaqul Hoque FCA Muhammad Asiful Haque Deputy Managing Directors Md. Habibul Islam Md. Iftekhar Shahid Md. Shahjahan Shiraj Md. Mahbubur Rasheed Md. Moshiur Rahman M. Akhter Hossain Abdul Aziz Md. Giasuddin Ahmed Mustaque Ahmed Mian Quamrul Hasan Chowdhury Mahmudul Shamim Talukder F. M. Nawaz Ali Senior Vice Presidents Md. Tufael Yakub Ms. Rumana Kutubuddin Tariqul Islam Shaikh Wahidul Hossain Md. Mokter Hossain Mohammad Nuruddin Md. Jafar Sadeq FCA (Chief Financial Officer) Engr. Md. Zahidul Islam Senior Executive Vice Presidents Md. Bahar Mahmud Abul Bashar Md. Zafry S. M. Jahangir Hussain Md. Shamsuddoha Md. Noor-A-Alam Hossain Syed Showket Rana Md. Naquibul Islam Ibne Md. Shamsuzzaman Md. Nazimuddoula Jashim Uddin Ahmed Chowdhury Firoz Hasan Md. Mahmudul Haque M. Imam Hossain Gazi Mohammad Shajedul Alam Md. Khalid Hussain Mohammed Sahab Uddin Md. Ashraful Azim FCA Md. Masudur Rahman Md. Nasir Uddin Imtiaz Uddin Ahmed Engr. Md. Rafiqul Islam Nasim Sekander Fazle Kader Ahmed Jahangir Javed Md. Abul Bashar (Company Secretary) Jyotirmaya Goswami Shamsul Arifin Ferdose Md. Shanoor Siddique Nawshad Abbas Md. Abdul Quddus Mohammed Eskander Alam Md. Abdul Khaleque Chowdhury Golam Rahman Nazir Ahmed Md. Wahidur Rahman Md. Soyeb Islam Chowdhury Mohammad Towfiqul Islam Md. Elias A. T. M. Qumruddin Chowdhury Tofayal Ahmed Md. Asadul Islam Khan Md. Arifur Rahman S. M. Rashedul Karim Mosleh Uddin Ahmed Md. Enamul Haque 42 Shahjalal Islami Bank Limited Annual Report 2017
  45. MANCOM ALCO From left to right : Mian Quamrul Hasan Chowdhury, Mustaque Ahmed, M. Akhter Hossain, Farman R. Chowdhury, M. Shahidul Islam, Md. Shahjahan Shiraj and Md. Giasuddin Ahmed Standing from left to Right: Md. Naquibul Islam, Syed Showket Rana, Md. Nazimuddoula, Md. Jafar Sadeq, Md. Mahmudul Haque, Mohammed Ashfaqul Hoque and Engr. Md. Rafiqul Islam. From left to right: Md. Chaliqur Rahaman, Md. Bahar Mahmud, Md. Monzurul Alam Chowdhury, Md. Nazimuddoula, Md. Shahjahan Shiraj, Farman R. Chowdhury, M. Shahidul Islam, M. Akhter Hossain, Jahangir Javed, Md. Jafar Sadeq and Mohammed Ashfaqul Hoque. Shahjalal Islami Bank Limited Annual Report 2017 43
  46. RMC SRP Team From left to right : Mustaque Ahmed, M. Akhter Hossain, Farman R. Chowdhury, M. Shahidul Islam, Md. Shahjahan Shiraj and Mian Quamrul Hasan Chowdhury Standing from left to Right: Md. Bahar Mahmud, Engr. Md. Rafiqul Islam, Md. Mahmudul Haque, Md. Monzurul Alam Chowdhury, Mohammad Abdul Majid, Jahangir Javed, Mohammed Ashfaqul Hoque, Md. Nazimuddoula, Md. Naquibul Islam and Md. Jafar Sadeq. From left to right: Mian Quamrul Hasan Chowdhury, M. Akhter Hossain, M. Shahidul Islam, Farman R. Chowdhury, Md. Shahjahan Shiraj and Mustaque Ahmed Standing from left to Right: Jahangir Javed, Mohammad Abdul Majid, Md. Mahmudul Haque, Bahar Mahmud, Engr. Md. Rafiqul Islam, Md. Jafar Sadeq, Md. Naquibul Islam, Md. Nazimuddoula, Md. Monzurul Alam Chowdhury and Mohammed Ashfaqul Hoque. 44 Shahjalal Islami Bank Limited Annual Report 2017
  47. SUSTAINABLE COMMITTEE From left to right : Mohammad Fakrul Islam, Mohammad Nuruddin, Md. Jafar Sadeq, Md. Monzurul Alam Chowdhury, Md. Mahmudul Haque, Mian Quamrul Hasan Chowdhury, Md. Shahjahan Shiraj, Engr. Md. Rafiqul Islam, Syed Showket Rana, Mohammed Ashfaqul Hoque, Md. Abdur Rahim and Md. Bahar Mahmud. INVESTMENT COMMITTEE From left to right: Md. Abdur Rahim, Md. Mahmudul Haque, M. Akhter Hossain, Farman R. Chowdhury, M. Shahidul Islam, Md. Shahjahan Shiraj, Md. Monzurul Alam Chowdhury and Md. Bahar Mahmud. Shahjalal Islami Bank Limited Annual Report 2017 45
  48. CENTRAL COMPLIANCE COMMITTEE From left to right : Md. Naquibul Islam, Md. Mahmudul Haque, Mian Quamrul Hasan Chowdhury, M. Akhter Hossain, Engr. Md. Rafiqul Islam, Md. Khalid Hussain, Mohammad Abdul Majid and Mohammad Fakrul Islam. 46 Shahjalal Islami Bank Limited Annual Report 2017
  49.    Shahjalal Islami Bank Limited Annual Report 2017 47
  50. Five Years ’ Financial Summary Figures in million Taka unless otherwise specified SL Items A. Financial Position 1 Authorized Capital 2 Paid up Capital 3 Reserve and Surplus 4 Total Shareholders’ Equity 5 6 7 8 9 10 11 12 Total Deposits Total Investments Investment in Share and Securities Fixed Assets Total Assets (excluding off-balance sheet items) Total Contingent Liabilities and Commitment Profit Earning Assets Non-profit Earning Assets 2017 2016 2015 2014 2013 10,000 7,714 5,604 10,000 7,347 5,510 10,000 7,347 4,907 10,000 7,347 4,352 10,000 6,679 4,272 10,951 13,318 145,382 158,668 10,526 3,957 207,886 89,226 173,187 34,699 12,857 124,410 122,998 7,593 3,433 167,245 63,326 138,949 28,296 12,254 109,259 96,835 6,184 3,299 137,870 43,526 108,012 29,858 11,698 98,601 84,062 7,309 3,165 126,758 40,229 97,873 28,885 96,481 85,707 7,221 2,955 128,554 45,433 100,434 28,120 12,860 11,154 10,510 11,364 13,615 B. Operating Result 1 Investment Income 2 Profit Paid on Deposit 8,419 6,986 6,943 8,209 10,578 3 Net Investment Income 4,441 4,168 3,567 3,156 3,037 4 Total Income 15,289 12,965 12,098 13,225 15,609 5 Total Expenditure 11,961 9,985 9,721 10,892 12,915 6 Operating Profit 3,328 2,979 2,377 2,333 2,694 7 Profit before Tax 2,079 2,306 1,758 776 2,383 8 Profit after Tax 1,196 1,557 1,290 747 1,305 158,937 124,704 98,790 93,820 88,702 C. Capital Adequacy 1 Risk Weighted Assets 2 Minimum Capital Requirements (MCR) 15,894 12,470 9,879 9,382 8,870 3 Tier 1 Capital 13,318 12,857 12,254 11,698 9,951 4 Tier 2 Capital 6,058 1,529 1,101 1,075 1,189 5 Total Regulatory Capital (Tier 1 & Tier 2) 19,376 14,386 13,355 12,773 11,140 6 Capital Surplus 3,482 1,916 3,476 3,391 2,270 7 Tier 1 Capital Ratio (%) 8.38 10.31 12.40 12.47 11.22 8 Tier 2 Capital Ratio (%) 3.81 1.23 1.12 1.14 1.34 9 Total Capital to Risk Weighted Assets Ratio (Basel-III/II) (%) 12.19 11.54 13.52 13.61 12.56 D. Investment Quality 1 Volume of Non-performing Investment 6,301 5,782 6,261 6,612 5,543 2 Amount of Provision kept against Classified Investment 1,415 1,431 1,850 2,379 1,512 3 Amount of Provision kept against Unclassified Investment 1,166 896 781 670 734 4 Amount of Provision kept against Off Balance Sheets Exposures 892 633 435 404 454 5 Classified Investment as % of total Investment 3.97 4.70 6.47 7.87 6.47 48 Shahjalal Islami Bank Limited Annual Report 2017
  51. Figures in million Taka unless otherwise specified SL Items 2017 2016 2015 2014 2013 E . Foreign Exchange Business 1 Import Business 129,244 100,419 85,959 83,731 81,926 2 Export Business 97,437 84,769 82,571 76,734 84,809 3 Inward Foreign Remittance 3,576 3,361 3,544 3,209 2,584 F. Profitability, Performance and Liquidity Ratio 1 Net Asset Value per Share (Taka) 17.26 16.67 16.68 15.92 16.40 2 Investment to Total Deposit Ratio (%) 90.17 85.98 82.77 80.82 84.32 3 Return on Equity (%) 9.14 12.40 10.78 6.60 12.67 4 Return on Assets (ROA) (%) 0.64 1.02 0.98 0.59 1.00 5 Operating Income Ratio (%) 21.77 22.98 19.65 17.64 17.26 6 Gross Income Ratio (%) 44.93 46.11 42.61 37.93 32.23 7 Net Income Ratio (%) 7.82 12.01 10.67 5.65 8.36 8 Cost of Deposit (%) 5.60 5.78 6.78 7.96 9.66 9 Cost of Fund (%) 7.83 8.08 9.53 10.34 11.65 10 Return on General Investment (%) 9.12 10.06 11.74 12.77 14.32 11 Net operating Cash flows per Share (Taka) 3.26 5.02 (7.50) 3.81 9.84 12 Profit Per Employee 1.39 1.36 1.10 1.09 1.24 - 10% 13% 10% - 10%* 5% - - 10% 1.55 1.41 1.35 1.02 1.24 25,457 11,020 9,918 8,449 11,200 G. Dividend 1 Cash Dividend (%) 2 Bonus Dividend (%) 3 Dividend Cover Ratio (Times) 4 Market Capitalization *Proposed by the Board of Directors H. Shareholders’ Information 1 No. of Share Outstanding (million share) 771.42 734.69 734.69 734.69 667.90 2 Earnings Per Share (Taka) 1.55 2.02 1.76 1.02 1.78 3 Number of Shareholders 38,782 52,614 63,480 82,713 85,944 4 Market Value Per Share (Taka) 33.00 15.00 13.50 11.50 16.77 5 Price Earning Ratio 21.29 7.43 7.67 11.27 8.60 113 103 93 93 92 8 8 8 8 8 2,402 2,191 2,156 2,145 2,173 410 430 436 419 397 I. Other Information 1 Number of Branches 2 Number of Brokerage House Branches 3 Number of Employees 4 Number of Foreign Correspondents Shahjalal Islami Bank Limited Annual Report 2017 49
  52. Graphical Presentation Key performance indicators Operating Profit (Million Taka) Total Income (Million Taka) 4,800.00 15,609 13,225 12,098 12,965 15,289 4,300.00 3,800.00 2,979 3,300.00 2,694 2,800.00 3,328 2,377 2,300.00 2,333 1,800.00 1,300.00 2013 2014 2015 Year 2016 2017 800.00 2014 2013 Profit before tax (Million Taka) 1,758 2,306 2016 2017 Profit after tax (Million Taka) 1,557 1,305 2,383 2015 Year 1,290 1,196 2,079 747 776 2013 2014 2015 Year 2016 2017 2013 Net Income Ratio (%) 2014 2015 Year 2016 2017 Earnings Per Share (Taka) 2.02 12.01% 1.78 10.67% 8.36% 1.76 1.55 1.02 7.82% 5.65% 2013 50 2014 2015 Year 2016 2017 2013 2014 2015 2016 2017 Year Shahjalal Islami Bank Limited Annual Report 2017
  53. Total Assets (Million Taka) Profit Earning Assets (Million Taka) 207,886 173,187 167,245 128,554 126,758 2013 2014 138,949 137,870 2015 Year 2016 2017 100,434 97,873 2013 2014 Regulatory Capital (Million Taka) 108,012 2015 Year 2016 2017 Return on Assets (%) 19,376 11,140 12,773 13,355 14,386 1.00% 0.98% 1.02% 0.64% 0.59% 2013 2014 2015 Year 2016 2017 Return on Equity (%) 2013 2014 2015 Year 2016 2017 Net Asset Value Per Share (Taka) 17.26 16.67 16.40 12.67% 10.78% 12.40% 15.92 16.68 9.14% 6.60% 2013 2014 2015 Year Shahjalal Islami Bank Limited Annual Report 2017 2016 2017 2013 2014 2015 Year 2016 2017 51
  54. CRAR /CAR 13.61% Investment Income and profit paid on deposit (Million Taka) 13.52% 12.56% 12.19% 2013 10,578 2014 8,209 11,364 6,943 2015 11.54% 6,986 2016 2014 2016 2015 Year 12,915 10,892 2014 2015 9,721 2016 9,985 2017 15,609 13,225 12,098 12,965 11,961 2013 28,120 2014 28,885 2015 29,858 2016 28,296 85,707 96,481 2013 2014 84,062 98,601 2014 122,998 124,410 2016 158,668 145,382 2017 52 93 2013 2014 93 2015 Year 97,873 108,012 138,949 34,699 173,187 2,584 2015 3,544 2016 3,361 2017 84,809 81,926 3,209 76,734 83,731 82,571 85,959 84,769 3,576 Number of Branches 92 100,434 Import, Export & Foreign Remittance (Million Taka) 2013 96,835 109,259 12,860 Earning & Non-earning Assets (Million Taka) 2017 15,289 Total Deposits & Total Investments (Million Taka) 2015 11,154 2017 Total Income & Total Expenditure (Million Taka) 2013 10,510 8,419 2017 2013 13,615 100,419 97,437 129,244 Number of Employees 103 2016 113 2017 2,173 2,145 2,156 2,191 2013 2014 2015 Year 2016 2,402 2017 Shahjalal Islami Bank Limited Annual Report 2017
  55. Horizontal Analysis For The Last Five Years Balance Sheet 2017 2016 2015 2014 2013 138 % 130% 103% 107% 110% 99% 83% 85% 100% 100% 139% 103% 111% 83% 100% Balance with other Banks and Financial Institutions Inside Bangladesh Outside Bangladesh 41% 29% 90% 166% 246% 71% 19% 11% 102% 217% 211% 309% 100% 100% 100% Placement with other Banks & Financial Institutions 85% 91% 204% 54% 100% Investments in Shares & Securities Government Others 139% 131% 159% 123% 131% 106% 85% 77% 108% 101% 100% 105% 100% 100% 100% Investments General Investment etc. Bills Purchased and Discounted 129% 132% 98% 127% 125% 146% 115% 116% 104% 98% 99% 86% 100% 100% 100% Fixed Assets Including Premises Other Assets Non Banking Assets Total Assets 115% 104% 174% 124% 104% 110% 100% 121% 104% 102% 109% 109% 107% 259% 100% 104% 100% 100% 100% 182% 117% 99% 143% 94% 126% 146% 100% 113% 145% 126% 550% 114% 117% 107% 120% 111% 149% 103% 92% 123% 91% 111% 155% 92% 122% 117% 109% 102% 89% 109% 39% 102% 139% 89% 113% 107% 140% 215% 85% 104% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 105% 109% 71% 104% 124% 100% 112% 115% 105% 121% 100% 110% 127% 105% 109% 110% 105% 91% 107% 104% 100% 100% 100% 100% 100%   PROPERTY AND ASSETS Cash Cash in hand (Including Foreign Currencies) Balance with Bangladesh Bank & Sonali Bank Ltd (Including Foreign Currencies) LIABILITIES AND CAPITAL Liabilities Placement from other Banks & Financial Institutions Deposits and Other Accounts Mudaraba Savings Deposits Mudaraba Term Deposits Other Mudaraba Deposits Al-Wadeeah Current & Other Deposit Accounts Bills Payable Mudaraba Subordinated Bond Other Liabilities Deferred Tax Liabilities Total Liabilities Capital/Shareholders’ Equity Paid-up Capital Statutory Reserve Retained Earnings Total Shareholders’ Equity Total Liabilities & Shareholders’ Equity Shahjalal Islami Bank Limited Annual Report 2017 53
  56. Horizontal Analysis For The Last Five Years Profit & Loss Account   2017 2016 2015 2014 2013 Investment Income 115% 106% 92% 83% 100% Less: Profit paid on Deposits 121% 101% 85% 78% 100% Net Investment Income 107% 117% 113% 104% 100% Income from Investment in Shares/securities 220% 96% 47% 132% 100% Commission, Exchange and Brokerage 132% 118% 93% 82% 100% Other Operating Income 114% 110% 92% 111% 100% 134% 114% 85% 93% 100% Total Operating Income 115% 116% 103% 100% 100% Salaries and Allowances 118% 107% 104% 119% 100% Rent, Taxes, Insurances, Electricity etc. 107% 113% 109% 107% 100% Legal Expenses 198% 47% 55% 356% 100% Postage, Stamps, Telecommunication etc. 111% 98% 89% 136% 100% Stationery, Printings, Advertisements etc. 107% 122% 107% 93% 100% Chief Executive’s Salary & Fees 106% 101% 116% 78% 100% Directors’ Fees & Expenses 116% 104% 94% 101% 100% Shariah Supervisory Committee’s Fees & Expenses 148% 121% 222% 45% 100% 75% 150% 114% 100% 100% Depreciation & Repairs of Bank’s Assets 109% 100% 99% 104% 100% Zakat Expenses 112% 109% 100% 121% 100% Other Expenses 144% 106% 101% 109% 100% Total Operating Expenses 118% 108% 104% 115% 100% Profit before Provision 112% 125% 102% 87% 100% Specific provision for Classified Investment 186% 111% 21% 876% 100% General Provision for Unclassified Investment 234% 104% 100% 0% 0% General Provision for Off-Balance Sheet Items 131% 637% 100% 0% 100% Provision for deminution in value of Investments in Shares 100% 0% 468% 45% 100% Provision for Other Assets 525% 69% 100% 0% 0% Total Provision 186% 109% 40% 501% 100% 90% 131% 227% 33% 100% Deferred Tax Expenses 486% -65% -67% -174% 100% Current Tax Expenses 111% 158% 985% 5% 100% 77% 121% 173% 57% 100% Auditors’ Fees Profit before Provisions for Taxation Net Profit after Taxation 54 Shahjalal Islami Bank Limited Annual Report 2017
  57. Vertical Analysis For The Last Five Years Balance Sheet   PROPERTY AND ASSETS Cash Cash in hand (Including Foreign Currencies) Balance with Bangladesh Bank & Sonali Bank Ltd (Including Foreign Currencies) Balance with other Banks and Financial Institutions Inside Bangladesh Outside Bangladesh Placement with other Banks & Financial Institutions Investments in Shares & Securities Government Others Investments General Investment etc. Bills Purchased and Discounted Fixed Assets Including Premises Other Assets Non Banking Assets Total Assets LIABILITIES AND CAPITAL Liabilities Placement from other Banks & Financial Institutions Deposits and Other Accounts Mudaraba Savings Deposits Mudaraba Term Deposits Other Mudaraba Deposits Al-Wadeeah Current & Other Deposit Accounts Bills Payable Mudaraba Subordinated Bond Other Liabilities Deferred Tax Liabilities Total Liabilities Capital/Shareholders’ Equity 2017 2016 2015 2014 2013 6.34% 11.60% 5.73% 12.32% 6.73% 11.92% 6.68% 13.24% 8.37% 12.88% 88.40% 87.68% 88.08% 86.76% 87.12% 0.48% 57.28% 42.72% 1.44% 80.42% 19.58% 1.06% 54.18% 45.82% 6.03% 91.41% 8.59% 2.89% 93.97% 6.03% 3.20% 4.70% 6.28% 3.34% 6.38% 5.06% 4.54% 4.49% 5.77% 5.92% 68.40% 72.43% 67.92% 74.84% 75.75% 31.60% 27.57% 32.08% 25.16% 24.25% 76.32% 73.54% 70.24% 66.32% 70.27% 93.51% 91.48% 92.60% 91.78% 90.66% 6.49% 8.52% 7.40% 8.22% 9.34% 1.90% 2.05% 2.39% 2.50% 2.42% 6.64% 7.96% 8.78% 9.33% 3.74% 0.04% 0.03% 0.04% 0.04% 100% 100% 100% 100% 100% 14.25% 9.71% 2.14% 2.57% 6.81% 69.93% 74.39% 79.25% 77.79% 79.11% 12.57% 14.88% 14.53% 10.39% 7.61% 44.19% 36.11% 38.30% 46.22% 52.82% 28.94% 35.99% 34.11% 30.94% 27.91% 12.58% 11.65% 12.00% 11.38% 10.87% 1.72% 1.38% 1.06% 1.07% 0.78% 1.92% 7.42% 8.16% 9.65% 10.33% 5.00% 0.07% 0.06% 0.08% 0.09% 0.11% 93.59% 92.31% 91.11% 90.77% 91.02% Paid-up Capital 57.92% 57.14% 59.95% 62.80% 60.99% Statutory Reserve Retained Earnings Total Shareholders’ Equity Total Liabilities & Shareholders’ Equity 36.19% 5.89% 6.41% 100% 34.25% 8.60% 7.69% 100% 32.17% 7.88% 8.89% 100% 30.69% 6.50% 9.23% 100% 31.37% 7.64% 8.98% 100% Shahjalal Islami Bank Limited Annual Report 2017 55
  58. Vertical Analysis For The Last Five Years Profit & Loss Account 2017 2016 2015 2014 2013 Investment Income 84.11% 86.04% 86.87% 85.93% 87.22% Less: Profit paid on Deposits 55.05% 53.85% 57.39% 62.07% 67.77%   Net Investment Income Income from Investment in Shares/securities Commission, Exchange and Brokerage Other Operating Income 29.06% 32.19% 29.49% 23.86% 19.46% 1.96% 1.05% 1.17% 2.30% 1.47% 10.56% 9.43% 8.56% 8.41% 8.74% 3.37% 3.48% 3.39% 3.36% 2.56% 15.89% 13.96% 13.13% 14.07% 12.78% Total Operating Income Salaries and Allowances 44.95% 46.15% 42.61% 37.93% 32.23% 14.46% 14.48% 14.44% 12.74% 9.07% Rent, Taxes, Insurances, Electricity etc. 2.97% 3.26% 3.09% 2.59% 2.05% Legal Expenses 0.01% 0.01% 0.01% 0.02% 0.01% Postage, Stamps, Telecommunication etc. 0.25% 0.27% 0.29% 0.30% 0.19% Stationery, Printings, Advertisements etc. 0.55% 0.61% 0.53% 0.45% 0.42% Chief Executive’s Salary & Fees 0.09% 0.10% 0.11% 0.09% 0.09% Directors’ Fees & Expenses 0.05% 0.05% 0.05% 0.05% 0.04% Shariah Supervisory Committee’s Fees & Expenses 0.01% 0.00% 0.00% 0.00% 0.00% Auditors’ Fees 0.00% 0.00% 0.00% 0.00% 0.00% Depreciation & Repairs of Bank’s Assets 0.99% 1.07% 1.15% 1.06% 0.86% Zakat Expenses 0.74% 0.79% 0.77% 0.70% 0.49% Other Expenses 3.03% 2.48% 2.51% 2.27% 1.76% Total Operating Expenses 23.16% 23.11% 22.96% 20.29% 14.98% Profit before Provision 21.79% 23.04% 19.65% 17.64% 17.26% Specific provision for Classified Investment 53.21% 52.96% 51.79% 97.91% 55.97% General Provision for Unclassified Investment 21.59% 17.11% 17.84% 0.00% 0.00% General Provision for Off-Balance Sheet Items 20.73% 29.40% 5.01% 0.00% 20.69% Provision for deminution in value of Investments in Shares 2.99% 0.00% 24.53% 2.09% 23.15% Provision for Other Assets 1.48% 0.52% 0.83% 0.00% 0.19% Total Provision 8.17% 5.19% 5.12% 11.78% 1.99% Profit before Provisions for Taxation 13.62% 17.85% 14.53% 5.87% 15.27% Less. Income Tax Expenses 5.77% 5.77% 3.86% 0.22% 6.91% Deferred Tax Expenses 4.82% -1.17% -2.89% -69.60% 1.07% Current Tax Expenses 95.18% 101.17% 102.89% 169.60% 98.93% Net Profit after Taxation 7.85% 12.08% 10.67% 8.36% 56 5.65% Shahjalal Islami Bank Limited Annual Report 2017
  59. Shareholders ’ Information Financial Calendar 2017 1st Quarter Results issued on : 3rd May 2017 2nd Quarter Results issued on : 26th July 2017 3rd Quarter Results issued on : 30th October 2017 Annual Results issued on : 25th April 2018 17th Annual General Meeting : 8th July 2018 2016 1st Quarter Results issued on : 8th May 2016 2nd Quarter Results issued on : 28th July 2016 3rd Quarter Results issued on : 31st October 2016 Annual Results issued on : 5th April 2017 16th Annual General Meeting : 5th July 2017 Dividend Rate : 10% (Cash) & 5% (Stock) Declaration Date : 5th April 2017 Record Date : 27th April 2017 AGM Date : 5th July 2017 Distribution Date : 17th July 2017 (Stock) & 18th July 2017 (Cash) Dividend Information Distribution of Dividend- 2016 Trade Volume last 12 Months Shahjalal Islami Bank Limited Annual Report 2017 Closing price last 12 Months 57
  60. Narrated Al-Miqdam May Allah be pleased with him . The Prophet (s.a.w.) said: Nobody has ever eaten a better meal than that which one has earned by working with one's own hands. The Prophet of Allah, David (upon him prayer and peace) used to eat from the earnings of his manual labour. Sahih Al-Bukhari 58 Shahjalal Islami Bank Limited Annual Report 2017
  61.  FNEK Shahjalal Islami Bank Limited Annual Report 2017 59
  62. 16th AGM … 16th AGM of the Bank is held on 5 July 2017 at RAOWA Convention Hall, Mohakhali, Dhaka. Bank’s Chairman Engr. Md. Towhidur Rahman is addressing the shareholders on the occasion. Managing Director of the Bank Farman R. Chowdhury is addressing the shareholders on 16th AGM. Md. Abul Bashar, Company Secretary of the Bank is seen conducting the 16th AGM. 60 Shahjalal Islami Bank Limited Annual Report 2017
  63. 16th AGM … Shareholders seen attending the 16th AGM of the Bank. Shareholders seen taking part in the proceedings of 16th AGM of the Bank. Shahjalal Islami Bank Limited Annual Report 2017 61
  64. Head Office Inauguration … Milad and Du’a Mehfil was arranged on 27th August, 2017 to mark the occasion of commencing Head Office operations in Bank’s permanent address at “Shahjalal Islami Bank Tower”, Plot No.-04, Block-CWN(C), Gulshan Avenue, Dhaka-1212, the first ever iconic building of the country. Honorable members of Board of Directors and officials/staffs of the Bank attended the Du’a Mehfil. 62 Shahjalal Islami Bank Limited Annual Report 2017
  65. Iftar Mehfil & Client Get together… Shahjalal Islami Bank Limited hosted an Ifter Mehfil on 16th June, 2017 in a City Hotel where a number of valued customers of the Bank, Islamic Scholars of the country and dignitaries along with members of Board of Directors and High Officials/Branch Managers of the Bank attended. Shahjalal Islami Bank Limited Annual Report 2017 63
  66. Meetings … A Board Meeting in progress A meeting of Executive Committee of the Board is seen progressing 64 Shahjalal Islami Bank Limited Annual Report 2017
  67. Meetings … An Audit Committee meeting is seen on going A meeting of Risk Management Committee of the Board in progress Shahjalal Islami Bank Limited Annual Report 2017 65
  68. Conference … Partial view of Annual Managers’ Conference 2018 is seen in the session Partial view of Half Yearly Managers’ Conference 2017 is seen in the session 66 Shahjalal Islami Bank Limited Annual Report 2017
  69. Agreements … Shahjalal Islami Bank Limited has signed an agreement with Bangladesh Bank (BB) for JICA-funded Foreign Direct Investment Promotion Project (FDIPP). M. Akhter Hossain, Deputy Managing Director of Shahjalal Islami Bank Ltd. and Rezaul Islam, General Manager of Bangladesh Bank exchanged the documents in presence of Fazle Kabir, Governer of Bangladesh Bank. Shahjalal Islami Bank Ltd. and Bangladesh Association of Software and Information Services (BASIS) signed a Memorandum of Understanding (MoU) with the view to facilitate the BASIS members and customers with investment facility from Shahjalal Islami Bank Ltd. Besides, the SME/Corporate clients of the Bank can purchase software at a discounted rate from BASIS members. On presence of the Managing Director of the Bank Farman R. Chowdhury, the Head of Business Development & Liability Marketing Division Mustaque Ahmed and the Chairman of the Standing Committee on Members Welfare of BASIS Delowar Hossain Faruk signed the MoU on behalf of their respective organizations. Launching Europay, Mastercard and Visa (EMV) chip based Cards Shahjalal Islami Bank Limited launched ‘EMV Chip Compliant Debit and Prepaid Card’’ in order to provide more updated, safe and riskless card services. Managing Director & CEO of the Bank Farman R. Chowdhury formally inaugurated the Chip Card. Shahjalal Islami Bank Limited Annual Report 2017 67
  70. Training & Workshop… Shahjalal Islami Bank Training Academy organized Foundation Training Course for newly recruited officers of the Bank Shahjalal Islami Bank Training Academy organized Managerial Training for prospective officials of the Bank 68 Shahjalal Islami Bank Limited Annual Report 2017
  71. Corporate Social Responsibilities … Shahjalal Islami Bank Ltd. donated Tk. 3 Crore to Prime Minister’s Relief Fund for helping flood affected people of different parts of the country. The Chairman of Shahjalal Islami Bank Limited Engineer Md. Towhidur Rahman handed over the Cheque to the Hon’ble Prime Minister Sheikh Hasina at Ganabhaban. The Chairman of Bangladesh Association of Banks Md. Nazrul Islam Mazumdar was also present. Shahjalal Islami Bank Ltd. donated Tk. 4 Crore to three OrganizationsFather of the Nation Bangabandhu Sheikh Mujibur Rahman Memorial Trust; the Prime Minister’s Education Assistance Trust Fund; and Shuchona Foundation in order to facilitate work for Social Welfare, Education and rehabilitation of the autistic People. The Chairman of Shahjalal Islami Bank Limited Engineer Md. Towhidur Rahman handed over the Cheque to the Hon’ble Prime Minister Sheikh Hasina at Ganabhaban. Shahjalal Islami Bank Ltd. donated Tk. 5 Crore to Prime Minister’s Relief Fund as a part of Bank’s CSR activities for the help of Rohingya People sheltered in Bangladesh from Myanmar. The Chairman of Shahjalal Islami Bank Limited Engineer Md. Towhidur Rahman handed over the Cheque to the Hon’ble Prime Minister Sheikh Hasina at Prime Minister’s Office. Shahjalal Islami Bank Limited Annual Report 2017 69
  72. Corporate Social Responsibilities … The Chairman of Board of Directors of Shahjalal Islami Bank Ltd. (SJIBL) Alhaj Akkas Uddin Mollah distributed Blankets among the winter hit distressed people at Nawabgonj Upazila in Dhaka District. Former Parliamentary Member Samsuddin was present as Special Guest. Shahjalal Islami Bank Limited distributed relief among the flood affected 1000 number of Families at Baruakhali, Nawabgonj in Dhaka District. The Chairman of Bank Akkas Uddin Mollah and Managing Director Farman R. Chowdhury distributed relief among the distressed People. Shahjalal Islami Bank Limited distributed relief among the Rohingya People. The Chairman of Shahjalal Islami Bank Limited Engineer Md. Towhidur Rahman, Vice-Chairman Khandaker Sakib Ahmed, Director of the Bank Abdul Halim, Additional Managing Director M. Shahidul Islam and Deputy Managing Directors Md. Shahjahan Shiraj distributed relief to Rohingya families. 70 Shahjalal Islami Bank Limited Annual Report 2017
  73. Corporate Social Responsibilities … Shahjalal Islami Bank Limited inaugurated a Hajj Booth and Free Medical Camp at Ashkona Hajj Camp for providing necessary guidelines, information and free Medical service to the Pilgrims. Free Medical service was provided to the Pilgrims on behalf of Anwer Khan Modern Medical College Hospital. Managing Director Farman R. Chowdhury inaugurated the Booth as the chief guest. Shahjalal Islami Bank Limited (SJIBL) awarded scholarship among the brilliant, but underprivileged students of the country. The Chairman of Shahjalal Islami Bank Limited Engineer Md. Towhidur Rahman presided over the ceremony while the Hon’ble Commerce Minister Tofail Ahmed, MP handed over the scholarship Cheque among the scholarship recipient students as Chief Guest. Shahjalal Islami Bank Limited Annual Report 2017 71
  74. Branch Opening … Shahjalal Islami Bank Limited inaugurated its’ 104th Shahajalal Islami Bank Tower Branch at it’s newly built Head Office premises in Gulshan Avenue, Dhaka Shahjalal Islami Bank Limited opened it’s 105th Branch at Ati Bazar, Keraniganj, Dhaka Openning ceremony of 106th Branch at Phanchabati, Narayanganj 72 Shahjalal Islami Bank Limited Annual Report 2017
  75. Branch Opening … Inaugural ceremony of 107th Branch of Shahjalal Islami Bank Limited at Joypurhat District Town. Shahjalal Islami Bank Limited (SJIBL) inaugurated it’s 108th Branch and an ATM Booth at Kalihati in Tangail. Shahjalal Islami Bank Limited launched its Sherpur Branch as it’s 109th Branch Shahjalal Islami Bank Limited Annual Report 2017 73
  76. Branch Opening … 110th Branch of Shahjalal Islami Bank Limited was opened at Dashgharia in Noakhali Shahjalal Islami Bank Limited opened its 111th Branch at Mainamati in Comilla Shahjalal Islami Bank Ltd. inaugurates it’s 112th Branch at Halishahar in Chittagong City 113th Branch of Shahjalal Islami Bank Limited was opened in Habiganj District Town 74 Shahjalal Islami Bank Limited Annual Report 2017
  77. Relocation of Existing Branches … Gulshan South Avenue Branch has been shifted to new location to facilitate the customers with better service. Mitford Branch has been shifted to new location to facilitate the customers with better service. Mirpur Branch has been shifted to new location to facilitate the customers with better service. Rangpur Branch has been shifted to new location to facilitate the customers with better service. Shahjalal Islami Bank Limited Annual Report 2017 75
  78. O you who believe ! Be afraid of Allah and give up what remains (due to you) from Riba [(usury) (from now onward)], if you are (really) believers. Surah Al-Baquarah, verse-278 76 Shahjalal Islami Bank Limited Annual Report 2017
  79. 08 '56/'06 41,'%651(6*'#0- Shahjalal Islami Bank Limited Annual Report 2017 77
  80. Investment Projects of the Bank ... A Liquefied Petroleum Gas (LPG) processing plant financed by SJIBL Gulshan Branch Pail production Factory financed by SJIBL Muradpur Branch A PVC pipe production factory financed by SJIBL Dhaka Main Branch 78 Shahjalal Islami Bank Limited Annual Report 2017
  81. Investment Projects of the Bank ... A modern Denim Fading machine. This Denim factory financed by SJIBL Motijheel Branch A ship building site. The ship building company has been financed by SJIBL Agrabad Branch This Re-Rolling Steel Mill has been financed by SJIBL Dhaka Main Branch Shahjalal Islami Bank Limited Annual Report 2017 79
  82. Investment Projects of the Bank ... A large sewing factory has been financed by SJIBL Uttara Branch A Felt (for mattress) manufacturing factory which has been financed by SJIBL Agrabad Branch An Automatic Rice Mill financed by SJIBL Chuadanga Branch 80 Shahjalal Islami Bank Limited Annual Report 2017
  83. Investment Projects of the Bank ... Poultry Farm financed by SJIBL Bhaluka SME Branch A Fish Feed Mill Packaging Site. The Fish Feed Company financed by SJIBL Jessore Branch A cattle farming project financed by SJIBL Rajshahi Branch Shahjalal Islami Bank Limited Annual Report 2017 81
  84.      Bismillahir Rahmanir Rahim Dear shareholders, Assalamu Alaikum Wa Rahmatullah Wa Barakatuhu. It is a great pleasure and honor to welcome you at the 17th Annual General Meeting of Shahjalal Islami Bank Limited. On behalf of the Board of Directors and myself, I would like to express sincere thanks and gratitude for your continuous support, co-operation and confidence reposed on us. You will be happy to learn that Shahjalal Islami Bank Limited has completed another successful year of business in 2017 having registered with the commendable and steady growth in all key areas of performance than previous year. It was the uphill task for bank’s Board and Management to steer the bank in right direction toward growth and stability. By the grace of almighty Allah we have been maintaining steady growth of business in all areas of operational activities like deposit mobilization, investment, foreign trade etc. and maintaining sustainable position in terms of liquidity, capital adequacy, asset quality, management, earnings and profitability. The bank has been able to secure an indispensable position in the banking sector of the country because of its commitment and cordial services. Enormous support of our valued customers, prudent guidance & bold leadership of Bank’s Board of Directors and relentless efforts of bank Management have made our journey a success. Bangladesh economy has shown resilience, despite facing the lingering effects of country-wide flooding in August and the ongoing accommodation of over half a million Rohingya refugees. The economy registered 7.28% economic growth in FY 2016-17 breaking the six percent cycle that continued for a decade. Major boost of growth has come from the industrial sector followed by the services sector. This is a positive sign for the country and banking prospects, as growth in services and industry sectors are regarded as very strong indicators for economic potential. Though profit 82 Shahjalal Islami Bank Limited Annual Report 2017
  85. rate remained considerably low during most part of the year , but in the later part of 2017 the profit rates were on an upward trend led by scarcity of liquidity in the market. Bangladesh Bank initially coninued its accommodaive monetary stance for H1FY18, but eventually has adopted a somewhat contractionary monetary policy for H2FY18. In 2017, the growth of deposit and investment of your bank were 17% and 29% respectively. Total deposit of the Bank as on 31 December 2017 stood at Tk. 145,382 million, while total amount of investment of the Bank stood at Tk. 158,668 million. During the year import volume stood at Tk. 129,244 million and export business was Tk. 97,437 million. Foreign Remittance of equivalent Tk. 3,576 million received during 2017. The Bank made the operating income of Tk. 6,870 million registering the growth of 15% compared to that of the previous year, while the net profit after tax of the Bank stood at Tk. 1,196 million in 2017. Net asset value (NAV) stood at Tk. 13,318 million in 2017 whereas it was Tk 12,857 million in 2016. In 2017, our earnings per share (EPS) stood at Tk. 1.55. The Regulatory Capital of the Bank as of 31 December 2017 stood at Tk. 19,376 million including paid up capital of Tk. 7,714 million. Capital to Risk Weighted Assets Ratio (CRAR) as of 31 December 2017 stood at 12.19% (Tier-1 capital 8.38% and Tier-2 capital 3.81%) that was adequate as against Minimum Capital Requirements (MCR) of 10% set by Bangladesh Bank under revised regulatory capital framework for banks in line with Basel III. The framework of Capital Management has been designed very prudently which ensures that Bank maintains sufficient Capital in consistent with the Bank’s risk profile, all regulatory requirements and credit rating considerations. The Capital Management process is consistently reviewed by Senior Management as well as by Board of Directors of the Bank and appropriate decision is taken from time to time to strengthen our capital base. Risk Management landscape of the Bank underwent changes in tandem with the changes in global markets and regulatory frontiers. Banks put emphasis on Liquidity Coverage Ratio guidelines as an offshoot of Basel III Compliance and began the journey under Basel III Compliance at length focusing on strengthening the capital base. In September 2017 Shahjalal Islami Bank Limited shifted to its new headquarters “Shahjalal Islami Bank Tower” constructed in its own premises. The headquarters building was designed, constructed and equipped with the features of green building incorporating a new way of environmentally responsible work practices and technologies, and truly sustainable architecture which have translated our corporate identity into a different level. The environmental-friendly new building has added another dimension of the Bank for offering better customer services with fresh zeal and courage. We have introduced unique Dress Codes for all Executives/Officers in 2017 in order to maintain the sense of proper attirement and positive appearance of all our officials/staffs. Introduction of this unique dress code will inspire our officials to provide cordial services to our customers and this help us to build a very good corporate image. The very slogan of your Bank is ‘Cordial Service & Welfare Banking’’ which is not only an utterance, but we literally mean it. We pay the utmost attention and sincere care to our customers. We have a wide range of products and services and continuously redesigning our products to meet the customers’ demands and satisfaction with competitive price. We provide a full range of banking & financial services to different segments of clients including individuals, small and medium sized companies/entrepreneurs and corporate bodies etc. The Bank recognizes the small and medium enterprises (SMEs) as an important sector in its business strategy. In view of this, it is imperative to operate with the ideal mix of corporate and retail banking in the portfolio composition with optimum size to maximize the returns to scale from these two key areas of core business activities of the Bank. We are always keen to present with our products & services in different fairs & campaigns arranged from time to time. Bank is presently providing services to its customers with the network of 113 branches, one off-shore banking unit and 74 own ATM Booths all over the country. We have also planned to set-up more new branches and own ATM Booths across the country in the year 2018 for meeting up the growing demands of our valued customers. Besides, there are arrangements for our customers to get services using the Q-Cash, OMNIBUS and Visa Networks having more than 4000 ATM Outlets. Remittance arrangements at present with various companies like Western Union, Global; Zenj Exchange, Bahrain; Arabian Exchange, Qatar; Money Gram, Global; Xpress Money, Global; Al Ahalia, UAE; Ria Financials, Global; IME, Global and Trans-Fast Remittance LLC, Global has strengthened our business network in the global financial market Shahjalal Islami Bank Limited Annual Report 2017 83
  86. with the significant increase of foreign remittance in the country . We are also providing real time on-line services to our customers using the state-of-art technologies and the smart Core Banking Solution (CBS) along with 24 hours ATM services. Corporate Governance is inevitable for sustainable development of an organization. Operational activities at all levels of Shahjalal Islami Bank Limited have been designed in such a manner that transparency and accountability can be ensured. The duties and responsibilities are appropriately segregated between the Board and the management to provide sufficient check and balance and flexibility for smooth business operations. The Board provides policy guidelines & directions to the management, approves strategic and major policy decisions and oversees the higher management to attain business goals. Audit Committee reviews the internal control & compliance process, the internal audit reports and related compliances of Bangladesh Bank, while the Risk Management Committee reviews the risk areas and overall risk management process/systems of the Bank. The Statutory Auditors were given absolute freedom in the process of audit and verification of the compliance, risk management and the Financial Statements prepared in accordance with Bangladesh Accounting Standards (BAS) and Bangladesh Financial Reporting Standards (BFRS). So, we are following the best practices of Corporate Governance in our Bank and committed to be the role model in the corporate industry. The Bank has also emphasized on compliance issues with all the rules, regulations and guidelines of Bangladesh Securities and Exchange Commission (BSEC), Bangladesh Bank and other regulatory authorities. Shahjalal Islami Bank Limited is always committed to serve the causes of humanities. We stand besides the distressed people affected in natural and other calamities across the country and extend financial support. We also promote different events of games & sports under our CSR activities. The bank also awards Scholarship to meritorious but underprivileged students with outstanding result in Secondary School Certificate (SSC) and Higher Secondary Certificate (HSC) examinations for pursuing their higher studies every year on regular basis. We also undertake various philanthropic activities/efforts throughout the year at ongoing basis. We are committed to remain responsible for carrying out our CSR activities within the organization, society and across the country. Looking ahead, Shahjalal Islami Bank Limited is mindful of the challenges that prevail on many fronts like changing socio-economic condition, industry competitive environment, regulatory compliances and international business situation etc. We must be striving for creating opportunities out of challenges. We will strengthen our position in the industry in terms of keeping good asset quality, innovative banking products & services, steady growth of profitability, strong footing on compliance culture and more presence in CSR activities. We will explore our all activities by means of ensuring better risk management, develop the quality of human resources and improve the Corporate Governance system. Insha-Allah we will maximize the value for all stakeholders in coming days. Honorable Shareholders are the source of inspiration of the Bank. I would like to express my heartfelt gratitude to all our honorable shareholders for their immense confidence on us. I also express thanks and gratitude to the valued customers of Shahjalal Islami Bank Limited for their patronization and continued support. Special thanks to the Statutory Auditors for their very professional cooperation. We are indebted and grateful to the Ministry of Finance, Bangladesh Bank, Bangladesh Securities & Exchange Commission (BSEC), Dhaka Stock Exchange Limited, Chittagong Stock Exchange Limited, Registrar of Joint Stock Companies & Firms and National Board of Revenue for their very effective guidance, support & role. We are also looking forward to get their continuous support and co-operation in future and we renew our promise to remain disciplined and compliant. May Almighty Allah bestow His unbound favors upon all of us. Allah Hafez With warmest regards, Akkas Uddin Mollah Chairman 84 Shahjalal Islami Bank Limited Annual Report 2017
  87. 16'5(41/6*' #0#)+0)+4'%614 Bismillahir Rahmanir Rahim By the grace of Almighty Allah, Shahjalal Islami Bank Limited has completed another year of its operation sucessfully. At the outset I would like to express my heartfelt thanks & gratitude to our shareholders, valued clients, distinguished patrons and well wishers whose co-operation and continuous support has helped us to move forward. The year 2017 has been a mixed year of achievements and challenges. One of the major achievements of the economy has been a 7.28 percent economic growth in FY 2016-17 breaking the six percent cycle that continued for a decade or so. Though average inflation has been around 5.5 percent, food inflation is showing an increasing rate in recent months, mainly because of agricultural loss due to two rounds of flood. The banking sector experienced weaknesses through major indicators such as rise of non-performing investments, lower capital adequacy, liquidity mismatch and governance issues. The profit rate remained considerably low during most part of the year but in the later part of 2017 the rates were on an upward trajectory led by scarcity of liquidity in the market. Banks are preparing for BASEL III which will be implemented in 2019. The central bank has taken initiatives to improve the present situation of banking sector which will be reflected to near future. The year witnessed several challenges in the operating and business environment. Despite the uncertainities, challenges and changes in the financial sector, we delivered satisfactory result during the year 2017. We have managed to effectively organize the work of the operating segments and categorize them based on our clients’ needs. Performance of 2017 marked another successful step for Shahjalal Islami Bank Limited to the forefront of excellence in providing stable and consistent Islamic banking services. Our strategy of balancing growth, profitability and risk management has enabled us to make continued progress on our strategic path. Shahjalal Islami Bank Limited Annual Report 2017 85
  88. We also sustained satisfactory growth in our investment portfolio which increased significantly compared to the previous year . We were able to maintain the ratio of non-performing financing assets to total financing assets is one of the lowest in the industry. We selectively grew our investment portfolio with a revised limit framework aimed at reducing concentration risk in the portfolio. We also maintained our healthy deposit profile by maintaining standard deposit mix. Our efforts were focused towards improving the deposit mix targeting to reduce the cost of fund. Simultaneously, efforts were on to maintain assets quality and look for diversified sectors with emphasis on non-funded business. Consequently the Bank had been able to maintain a strong position in all key areas of operations. Total Asset Total asset has reached to BDT 207,886 million at the end of 2017 from BDT 167,245 million at the end of 2016 showing 24% growth year-on-year basis. Total Deposit As on 31st December 2017, our Total Deposit has reached at 145,382 million which indicates a growth of 17%. Total Investments Investments of the bank in 2017 stood at BDT 158,668 million compared to BDT 122,998 million made in the previous year registrering a grwoth of 29%. Operating Income The Bank earned BDT 6,870 million operating income in 2017 which is 15% higher than previous year, of which 65% was from profit earning products, 4% from investment income from shares/securities, 23% from commission, exchange & brokerage income and rest 8% from other income sources. Profitability Operating profit was recorded at BDT 3,328 million for the year 2017, which was BDT 2,979 million in the previous year, resulting in a growth of 12%. Assets Quality and NPI We have been successful in reducing NPI ratio from 4.70% in 2016 to 3.97% in 2017. This shows that we have displayed growth without sacrificing our assets quality. Capital to Risk Weighted Asset Ratio (CRAR) Capital to Risk Weighted Asset Ratio (CRAR) of the Bank as at 31 December 2017 remained satisfactory at 12.19% which is 2.19% above the required rate of 10% as per ‘‘Guidelines on Risk Based Capital Adequacy’’ (Revised regulatory capital framework for banks in line with Basel III). This shows the strength of Capital and the levelof compliance of Shahjalal Islami Bank Limited with the regulatory requirements with regards to a sustainable growth. In order to strengthen the capital base of the bank, we have issued Mudaraba Sub-ordinated Bond of BDT 4 billion during the year 2017 which facilitated high levels of liquidity as well. NAV Net Assets Value (NAV) per share for the year 2017 was Tk 17.26 which was Tk 16.67 in 2016. The outcome has been the result of increased profitability. Credit Rating Credit Rating Agency of Bangladesh Limited (CRAB) rated the Bank AA2 for the long term & ST-2 for short term based on the financials as of December 31, 2017. 86 Shahjalal Islami Bank Limited Annual Report 2017
  89. We strive to earn and maintain our customers ’ trust by constantly adhering to the highest Ethical standards. Everything we do in Shahjalal Islami Bank Limited should be in our customers’ interest and create economic value. This inspires thestructure of our products, the delivery of our services and the principles that run through our business. In furtherance of this commitment, we arranged regular training sessions on ethical banking for motivating our employees to adopt best ethical practices that are in harmony with our values. In our journey towards continuous excellence we are relentlessly striving to become a leading Islamic Bank in Bangladesh. We always try to provide our customers with the quality banking experience in order to achieve utmost confidence level and deliver the best value to all our stakeholders by adopting the best practices and state-of-the-art technological solutions. The acquisition and development of quality employees remains critical to our strategic vision and business success. The alignment of our human capital strategy with ourvision sets a challenging mandate for maintaining an effective workforce. We continued to focus on investing in staff training, learning and development with the intent to improve the skills of its employees and to drive the bank towards delivering the best performance. We had been able to set-up a full fledged Training Academy. A good number of officials of the Bank took part in different training programs/seminars, workshops both at home and abroad. Bank also arranged in-house training courses, workshops and seminars on every aspects of Banking throughout the year. To keep the employees motivated, performance rewards, promotion, accelerated promotion and incentive etc. are given on a regular basis. Information and Communication Technology has become the inevitable part of today’s modern business and its operation. The Bank successfully up-graded it’s IT platform and installed the core banking software “BankUltimus” and currently all branches of Shahjalal Islami Bank Limited are running under core banking soluations enabling them to provide real time on-line banking services to its clients. The bank has built a new state of the art Data Center (DC) in its’ Corporate Head Office. Bank has also taken steps to secure its information through Disaster Recovery Site (DRS) to make sure that bank will not lose any data in case of any disaster. In 2017, the bank has also implemented Layer-7 security to protect cyber attacks on ICT Infrastructure. On another note, we are in the process of upgrading our existing major branches in vital locations to ensure that the latest banking systems are installed and that the clients’ needs are being met seamlessly; new branches are also planned to be open in several locations. Maintaining adequate liquidity is our top most priority. The bank was able to maintain a sufficient liquidity profile. We have undertaken strategic initiatives of building a core deposit base through attracting retail depositors to fund its business expansion. The Bank has undertaken the long-term strategy to expand the scale and scope of fee based revenue for sustainable profit growth. Another key strategy to maintain profitability growth in an environment of intense competition and continued narrowing of net profit margin is to improve operational efficiency by enhancing productivity. Among the initiatives taken in this direction is to enhance the use of alternative delivery channels through increasing the number of self-service machines and motivating customers towards e-banking, SMS banking etc. During the year Bank emphasized on ”Risk Management” which we consider to be one of the essentials for sustainable position in today’s banking business. The risk management function has been strengthened in line with the risk management guidelines prescribed by the Central Bank. The Bank continued its conservative approach to risk management and its proactive remedial efforts. As a result, and given that the asset quality outlook remains healthy. The Board Risk Committee effectively execute its oversight function, with regular meetings and closer scrutiny of risk appetites and management. The compliance function was separated from investment management, providing it with independent status in the Risk Management Framwork. Shahjalal Islami Bank Limited Annual Report 2017 87
  90. The Corporate Governance Framework provides the structure within which the Board guides , oversees and ensures that our strategy, risk management approach and methodologies and our operations are aligned in the interests of our shareholder and stakeholders. The functionaries of the Bank are structured, organized and aligned with accepted Corporate Governance practices in line with the guidelines of Bangladesh Bank and Bangladesh Securities & Exchange Commission (BSEC). Shahjalal Islami Bank Limited is quite conscious of its social responsibility. Shahjalal Islami Bank Limited Foundation is serving the Humanity through different welfare activities giving emphasis on Health, Habitat & Education. The Bank evaluates the environmental effects of projects in investment process and the projects found detrimental to the environment are not approved for financing. Our involvement in charities, scholarship program and different events enables us to address important community concerns, build and maintain relationships and play a role in the society beyond simply that of wealth creation. More and more welfare activities and Institutional Development Programs will be drawn in future, Insha-Allah to the cause of serving the communities and the country as a whole. The year 2018 will be a turning point for Bangladesh in many ways. Bangladesh will prepare to graduate from the least developed country status in 2018. It will also continue its efforts toward becoming a middle-income country. Things, however, may not be as bright for the banking industry. There is intense competition in the industry due to the large number of banks operating in Bangladesh. NPIs still remain a major problem for the banking industry. It is unlikely that the asset quality situation will change anytime soon. Shahjalal Islami Bank Limited has set its priority for the year 2018 to implement its growth strategy with particular emphasis on improving deposit mix, reducing cost of fund, maintaining quality of assets and strengthening overall risk management process. The Bank has adopted appropriate strategies for its different business and set clear and concise targets considering the external business environment and realities. We will continue to work hard to attain the business targets as well as achieve our corporate objectives in the year 2018 & beyond. On behalf of the management team, I most humbly submit to the greatness of Almighty Allah soliciting His mercy to pave the journey towards glorious success of the Bank in the days to come. Besides, I seek sincere cooperation, continuous support and confidence of the Board of Directors, Shareholders, valued clients, well-wisher, patrons as well as the regulatory bodies i.e. Bangladesh Bank, Bangladesh Securities and Exchange Commission (BSEC), Stock Exchanges, National Board of Revenue (NBR) for the steady growth of the bank. Aameen. Farman R. Chowdhury Managing Director 88 Shahjalal Islami Bank Limited Annual Report 2017
  91.  Report of the Board of Directors Corporate Governance Report Credit Rating Report Report of the Audit Committee Report of the Board Risk Management Committee Sustainability Report Corporate Social Responsibility Report on Risk Management Report on Shariah Supervisory Committee Shahjalal Islami Bank Limited Annual Report 2017 89
  92. Report of the Board of Directors In the name of Allah The Most Gracious , the Most Merciful Dear Shareholders, Assalamu Alaikum Wa Rahmatullah Wa Barakatuhu. We are delighted to present before you the Directors’ Report and Audited Financial Statements together with Auditors’ Report of the Bank for the year ended 31 December 2017. We have also provided a brief description of the performance and affairs of the Bank for the same year as well as various aspects of the world market trend with highlights of the performance of Bangladesh economy. World Economy The last decade has been punctuated by a series of broad-based economic crises and negative shocks, starting with the global financial crisis of 2008–2009, followed by the European sovereign debt crisis of 2010–2012 and the global commodity price realignments of 2014–2016. As these crises and the persistent headwinds that accompanied them sub-side, the world economy has strengthened, offering greater scope to reorient policy towards longer-term issues that hold back progress along the economic, social and environmental dimensions of sustainable development. GDP Growth 2015 2016 2017E 2018f 2019P World 2.8 2.4 3.0 3.1 3.0 USA 2.9 1.5 2.3 2.5 2.2 Euro Area 2.1 1.8 2.4 2.1 1.7 Emerging & Developing Economics 3.6 3.7 4.3 4.5 4.7 Source: World Bank In 2017, global economic growth is estimated to have reached 3.0 percent, a significant acceleration compared to growth of just 2.4 percent in 2016, and the highest rate of global growth recorded since 2011. Labour market indicators continue to improve in a broad spectrum of countries, and roughly two-thirds of countries worldwide experienced stronger growth in 2017 than in the previous year. At the global level, growth is expected to remain steady at 3.0 percent in 2018 and 2019. The recent acceleration in world gross product growth stems predominantly from firmer growth in several developed economies, although East and South Asia remain the world’s most dynamic regions. Conditions for investment have generally improved, amid low financial volatility, reduced banking sector fragilities, recovery in some commodity sectors and a more solid global macroeconomic outlook. Improved conditions have supported a modest revival in productive investment in some large economies. Gross fixed capital formation accounted for roughly 60 percent of the acceleration in global economic activity in 2017. Recent course adjustments in major trade relationships, such as the United Kingdom of Great Britain and Northern Ireland’s decision to withdraw from the European Union and the United States of America’s decisions to renegotiate the North American Free Trade Agreement and to reassess the terms of its other existing trade agreements, The United States and China have fired the dramatic opening shots of what could become a trade war and these issues have 90 Shahjalal Islami Bank Limited Annual Report 2017
  93. raised concerns over a potential escalation in trade barriers and disputes . these could be amplified if met by retaliatory measures by other countries. An increasingly restrictive trade environment may hinder medium-term growth prospects, given the mutually reinforcing linkages between trade, investment and productivity growth. In this regard, policies should focus on upholding and revitalizing multilateral trade cooperation, emphasizing the possible benefits from trade in services. Bangladesh Economy Overall, the economy is moving forward, growing at a decent pace by Bangladesh’s own historical as well as international standards. Many international organizations acclaimed Bangladeshi economy. Global investment firms like JP Morgan calling it the “frontier five” on the basis of its growth rate and economically active population. All the growth drivers are accounted for, it is the vast army of economically active population, young in age, that could fuel growth acceleration—a demographic dividend to move Bangladesh from being just an impressive underdog. In FY17 growth on the supply side was driven by services and industry which officially estimated 7.28 percent GDP growth. Domestic demand growth appears to have been the driving force with private consumption contributing 4.7 percentage points and investment contributing 3.25 percentage points. Weak exports and strong imports dragged growth in FY17. Private investment stagnated as a percentage of GDP. Bangladesh’s graduation from the LDC status will undoubtedly be a major milestone in the nation’s history, but pressing economic challenges would remain. Bangladesh has made good progress in terms of meeting all the three graduation thresholds. Fiscal Management The overall budget deficit (excluding grants) decreased in the first half to Tk 62.96 billion from Tk 65.75 billion during the same period in FY17. This reflects undershooting of both the revenue and expenditure targets, with the size of the expenditure shortfall relative to the budget target exceeding the size of the revenue shortfall. Total revenue collection declined by 0.9 percent in the first half, reflecting 9.8 percent decline in nontax revenues. Tax revenue collection grew marginally by 0.3 percent despite high import growth and exchange rate depreciation. Import taxes grew by 4.3 percent and supplementary duties by 2.9 percent. In the backdrop of anticipated revenue shortfall, primarily emerging from the failure to implement the VAT and SD Act 2012, the government has been exploring alternative avenues of revenue mobilization, particularly in collecting unpaid VAT accruing to the Large Taxpayers Unit (LTU). Appropriate use of the Alternative Dispute Resolution (ADR) system could be a useful step in this direction. Investment Private investment growth in real terms slowed to 8.1percent in FY17, compared with 10.3 percent growth in FY16. Consequently, private investment as a share of GDP almost stagnated at 23.1 percent, compared with 23 percent in FY16. On the other hand, public investment boomed, growing by 17.3 percent in FY17, compared with only 4.5 percent growth in FY16, leading to a significant 0.7 percentage points increase as a percentage of GDP to reach 7.4 percent. Import of capital goods increased by19.4 percent in the first half of FY18 compared with 23.7 percent increase during the corresponding period of the previous year. However, capital machinery imports increased by 32.5 percent in the first half of FY18 compared with 23.6 percent increase in the first half of FY17. The key driving force appears to have been the capital imports needed by the mega public investment projects such as the Padma Bridge, Dhaka Metro Rail Transport and the Special Economic Zones. Private investments remain constrained by cumbersome business regulation and inadequate coverage as well as quality of infrastructure. Bangladesh slipped one notch to 177 ranking in Doing Business DB 2017. This is the second lowest among South Asian economies, after Afghanistan (183). During the DB 2017 period, no reforms were recorded in Bangladesh. Bangladesh’s overall ranking was significantly affected by a nine-place slippage in the Starting a Business indicator minor improvements were recorded in DB 2017 rankings only in the areas of dealing with construction permits and getting electricity. The continued lackluster performance in DB indicators underlines significant shortcomings in Bangladesh’s business environment. Shahjalal Islami Bank Limited Annual Report 2017 91
  94. Monetary Development Monetary outcomes so far have largely been below target . The 10.9 percent monetary growth in FY17 fell short of the estimated 12.9 percent nominal GDP growth. Broad money growth remained subdued at 10.69 percent through December 2017 despite a reserve money growth of 13.31 percent. Slowdown in the growth of net foreign assets and decline in public sector borrowing from the banking system accounts for the slower growth in reserve and broad money. Domestic credit growth was stunted by the 14.48 percent decline in public sector borrowing through December 2017. Bangladesh Bank (BB) has taken a passive approach to domestic liquidity management. It has been reinjecting only part of the liquidity losses from the market due to its foreign exchange market intervention on the supply side. Balance of payments Current account deficit widened to over $4.8 billion in the first six months of FY18, compared with $543 million deficit in the corresponding period of FY17. This was mainly driven by near doubling of the trade deficit from $4.5 billion to $8.6 billion. A 25.2 percent growth in merchandize imports, driven by petroleum, food and industrial raw materials, far outweighed the modest 7.15 percent rebound in exports. These, together with an expansion in the service account deficit and weak recovery in remittances, led to the large increase in the current account deficit. The overall BoP was helped by more than doubling of medium and long-term (MLT) foreign loans from $1.1 billion in the first half of FY17 to $2.4 billion in the first six months of FY18 and over $1.2 billion net inflows from the banks’ holding of foreign currency denominated assets and liabilities, compared with just $ 186 million in the corresponding period of FY17. Yet, the overall balance recorded a deficit of over $0.35 billion, compared with $2.65 billion surplus during the same period of the previous year. Price Situation The general point to point inflation fell slightly by 0.08 percentage point to 5.83 percent in December 2017 from 5.91 percent in November 2017, despite a rising trend in the cost of living. While year-on-year, the inflation in December of FY18 increased by 0.80 percentage point to 5.83 percent, compared to 5.03 percent in the past month. The food inflation however increased slightly by as little as 0.04 percentage point, to 7.13 percent in December 2017 from 7.09 percent in the immediate past month of November. On the other hand, non-food inflation decreased by 0.25 percentage point to 3.85 percent in December 2017 from 4.10 percent in the previous month. BBS data also shows that prices of food items such as egg, fish, meat, pulses dropped, while house rents and costs of clothing, household goods, medical and transportation services, and education increased. The government has targeted to keep the average inflation rate up to 6.0 percent in the latest monetary policy statement for January-June 2018 (H2 of FY18). Exports Exports have rebounded in FY18. Total export earnings increased by 7.4 percent in July-December, FY18, compared with 3.96 percent growth in the corresponding period of FY17. However, the export growth is short of track to attain the FY18’s 8.2 percent growth target. Exports will need to grow by 16.2 percent during January-June 2018 relative to the same period in FY17 to achieve the target. Export growth this fiscal year has so far been driven by Ready-made garments (RMG) recording a growth of 7.75 percent during July-December, FY18, thanks to the 11.6 percent growth in export of knit products. Growth appears to have been primarily volume driven. Growth from non-RMG export earnings was unable to keep pace. Exports to the EU market gained some momentum with a growth of 11.7 percent in the first six months, higher than the growth rate for the corresponding period in FY17. Phase-out of the initial shock emanating from the Brexit and improvements in the global economic outlook contributed. Exports to US market grew by a miniscule 1.5 percent, leading to a fall in US market share in Bangladesh’s total export from 16.9 percent in July-December 2017 to 16 percent during the same period this year. This is attributable to loss of price competitiveness and lack of product diversification. Bangladesh’s export earnings from US declined by 6 percent in FY17, with its market share dropping from 18.2 percent 92 Shahjalal Islami Bank Limited Annual Report 2017
  95. in FY16 to 16 .8 percent in FY17. Other prime competitors of Bangladesh experienced significant growth in the US market. Vietnam registered over 7 percent growth in the US apparel market, followed by Mexico at 5.33 percent, India at 1.19 percent and Pakistan at 1 percent in 2017.Vietnam is taking the advantage of China’s displacement much better than her close competitors such as Bangladesh. China, the largest exporter of apparel products, also had a decline in export earnings as well as market share in the US. In general, however, an RMG import by the US has been on the decline in recent years. Imports Import payments during July-December of FY18, stood at US$28.44billion, which is 25.89 percent higher than import payments during the corresponding months of FY17. Import payments increased mainly due to higher imports of consumer & intermediate goods and capital machinery and also substantial depreciation of the taka against all major currencies. According to Bangladesh Bank data, the settlement of import Letters of Credit (LCs) increased by 9.17 percent to US$24.66billion during July-December of FY18 compared to US$22.59billion in the corresponding period of the previous fiscal. The opening of fresh import LCs also increased substantially by 74.76percent to US$40.23 billion in the first six months of FY18 from US$23.02 billion in the corresponding period of the previous fiscal. Remittance Remittance flow recovered impressively, growing 12.47 percent in the first six months of FY18, following successive declines in two previous years. The recovery has been spread over several countries such as GCC, US, UK and others. Rise in crude oil price, increase in the number of Bangladeshis working abroad, change in policies in KSA (a rise in minimum wage, change in akamasystem), depreciation of taka, and effective action against illegal money transfers may have contributed to the recovery. The composition of remittance inflow has remained unchanged with about 56 percent of remittance earnings coming from the Gulf countries in the first six months of FY18, reflecting resilience in the concentration of migrants in the Middle East. Bangladesh Bank increased their vigilance on mobile banking transfer. In September 2017, Bangladesh Financial Intelligence Unit (BFIU), the anti-money laundering wing of Bangladesh Bank, ordered bKash to suspend activities of 2,887 agents for breaching the laws and sent the account details of the agents to law enforcers for further probe and legal actions. These interventions may have helped improve Bangladesh’s remittance earnings and bring more transparency in the mobile banking transfers. Foreign Exchange Reserve Bangladesh Bank’s gross foreign exchange reserves stood at US$33.23 billion (with ACU liability of US$1.35 billion) as of end December 2017, as compared to US$32.09 billion (with ACU liability of US$0.68 billion) as of end December 2017. The foreign exchange reserve (less ACU liability) is equivalent to the import liability of 7.34 months. Calculated as the average import values for the previous 12 months (December 2016-December 2017), this import liability turns out to be US$4.34 billion per month. Service Sector Services had a better year with growth rising from 6.25 percent in FY16 to 6.7 percent in FY17. Services growth was driven by wholesale and retail trade, transport and hotel and restaurants. Export of services grew by 10.8 percent in nominal dollars in FY17, compared with a 2.6 percent decline in FY16. Service export growth increased to 14.1 percent in the first half of FY18, compared to the same period a year earlier. It is worth noting that the share of the services sector in GDP, which was at its peak at 55.59 percent in FY06, has been steadily declining thereafter, dropping to 52.73 percent in FY17. Among the different services sub-sectors, the wholesale & retail trade held the highest share in GDP (13.94%) in FY17 compared to 13.99 percent in FY16. The GDP shares of certain other sub-sectors in FY17 were: transport, storage & communication 11.25 percent; community, social & personal services 8.86 percent; construction 7.39 percent; real estate, renting & business activities 6.48 percent; public administration & defense 3.72 percent; financial intermediations 3.41 percent; and education 2.48 percent. Shahjalal Islami Bank Limited Annual Report 2017 93
  96. Industry Sustained momentum in industrial growth continues to impress . The industry sector grew by 10.22 percent in FY17, decelerating by 0.87 percent from the growth of 11.09 percent in FY16. However, despite the deceleration in growth, the share of the industry sector in GDP increased by 0.94 percentage point to 32.48 percent in FY17 from 31.54 percent in the previous fiscal year. The industries sector grew at double digit (10.2 percent) in FY17 with significant contribution from the 11 Percent growth in large and medium scale manufacturing industries. Quantum Index of Industrial Production (QIIP) data suggests that many large-scale industries posted significant growth in FY17 including leather and related products (53.4 percent), textile (21.2 percent),pharmaceuticals and medicinal chemical manufacturer (32.1 percent) and manufacture of other non-metallic mineral products (32.3 percent). Combined weight of these four industries was about one-third of the total industrial production. The QIIP for medium and large-scale manufacturing grew even faster (20.6 percent) in the first quarter of FY18 led by textiles, pharmaceuticals and leather products. Electricity production index in the first quarter increased by 10.4 percent and trade cargo handled by the Chittagong port. Agriculture Agriculture had a bad year in 2017 due to fungus attack and recurring floods. The crops most affected were Aus, Aman, Aman seedbed, seedling, jute, and vegetables. The secondary flooding destroyed freshly planted Aman paddy and seedbeds, which dealt a fresh blow to farmers. The setback was partially overcome by replantation through supply of seedlings and other related services in the affected areas. Some farmers switched to early winter crops instead of the costly seedlings, going for rice varieties that are submergence-tolerant and can withstand 15 to 17 days of stagnant water. The transplanting of Aman was completed quite late in the season owing to an atypical monsoon. Capital Market Stock prices increased by more than 10 percent in DSEX since June 2017, reaching a recent high, before starting to decline again. DSE turnover recorded the highest level in 2017 since the large stock market corrections in FY11. Participation by overseas investors and stable macroeconomic outlook contributed to the buoyance in stock trading activities. Foreign portfolio investment in the first half of FY18 amounted to $209 million, compared with $184 million in the first half of FY17. Bangladeshi diaspora abroad appeared to have increased their participation with their contribution in total foreign portfolio investment rising from 51.2 percent in the first half of FY17 to 67.3 percent in the first half of the current fiscal year. The stock market witnessed several positive developments in 2017. Banking Sector The banking sector, the most important player in the money market, has continued to move in the wrong direction. Despite some push from the Bangladesh Bank, asset quality and governance has not improved. State owned Commercial Banks (SCBs) performed with a poor record of large non-performing loans, bad governance, and continued recapitalization. The setback from several major financial scams has taken a heavy toll on both the health and reputation of SCBs. The 9 fourth-generation private banks are beset with large amounts of non-performing loans (NPLs) and are making losses. BB’s Financial Stability Report 2016,revealed that when exposed to various credit shocks, 23 out of 49 banks would become undercapitalized mainly due to default by large borrowers. This was a clear recognition of the gravity of the banking sector woes in Bangladesh. Non-performing loans (NPLs) surged to over Tk 800 billion (4 percent of GDP) for the first time at the end of September 2017 from Tk 657.31 billion (3.8 percent) a year back. The total NPLs accounted for 10.67 percent of the total outstanding loans from the banking sector at the end of September 2017. These figures do not include loan write-offs which amounted to Tk 4.52 billion in the last quarter of FY17 alone, higher by over 18 times relative to the third quarter. Thus, once restructured, rescheduled loans and write offs are factored in, the NPL size would increase very significantly. Poor management of state owned commercial banks, underpinned by malpractices and corruption, has contributed to the high levels of NPL. 94 Shahjalal Islami Bank Limited Annual Report 2017
  97. The liquidity crunch was in the making for the last several years with a declining growth in banks deposits , primarily due to the diversion of household financial savings to National Savings Directorate instruments. Large excess liquidity in the banking system made the impact of this diversion of deposits away from the banking system escape notice. Since the growth in bank deposits continued to plunge and growth in private sector lending accelerated, the excess liquidity evaporated rapidly. To sustain profit growth, many banks started to violate macro-prudential conditions such as the advance-deposit ratio. The violations pushed the ratio of many banks to the 90-92 percent range, well above the prudential norm of less than 85 percent. The liquidity problem was also accentuated by the increasing burden of nonperforming loans. Due to this excess lending, banks on the verge of becoming illiquid, started scrambling for deposits, thereby pushing up the deposit rates. The target for private sector credit has been reset at 16.8 percent or 1.3 percent lower than the actual growth at end 2017.As BB aims to decrease its regulatory limit for ADR, this accentuated pressure on market competition for deposit collection and the interest rate on advances. Combined with the competitive rates of the national saving schemes and pressures from the import payment obligation, there has been a steep reaction in interest rates. With no signs of change in National Savings Certificate (NSC) borrowing, private sector banks may continue to be crowded out of the deposit base and rates are likely to converge closer to the NSC rates. The saturation of Bank profitability in the corporate segment has induced banks to be more adventurous towards SME and retail. Prospect in 2018 Bangladesh is projected to maintain growth resilience despite internal political headwinds and emerging macroeconomic pressures. Rebound in exports and private investments are likely to be the key growth drivers. The impetus for such a rebound is expected from the broad-based cyclical upturn in the global economy, aided by a bounce back in investment and trade. This is expected to be sustained over the next couple of years, although not without downside risks. The latter include the possibility of financial stress, increased protectionism, and rising geopolitical tensions. With actual output exceeding the potential, inflation in Bangladesh is projected to rise. Investment driven imports will cause current account deficit to persist while fiscal space is likely to shrink with stagnating revenue effort and elevated expenditure levels. Profile of Shahjalal Islami Bank Limited Shahjalal Islami Bank Limited, a Shariah Based Commercial Bank in Bangladesh, was incorporated as a Public limited company on 1st April, 2001 under Companies Act 1994. The Bank commenced commercial operation on 10th May 2001 by opening its 1st branch, i.e. Dhaka Main Branch at 58, Dilkusha, Dhaka obtaining the license from Bangladesh Bank, the Central Bank of Bangladesh. The Bank went for public issue of its shares in 2007 and its shares are listed with Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited. Now its Head Office is situated at Shahjalal Islami Bank Tower, Plot#4, Block-CWN(C), Gulshan Avenue, Gulshan, Dhaka-1212. As on 31 December 2017 the bank had 113 branches across the country with diversified deposits and investment products. During the course of its successful journey, the bank has rooted out in all areas of Bangladeshi people’s/enterprise’s economic activities by means of introducing Shariah compliant contemporary and diversified product and service range through it’s strong branch network in country’s commercially crucial locations hiring people of all economic classes have the flavor of personalized banking service. Off-shore Banking Unit Off-shore Banking Unit (OBU) is a separate business unit of Shahjalal Islami Bank Limited, governed under the Rules and Guidelines of Bangladesh Bank. The Bank obtained the Off-shore Banking Unit permission vide letter no. BRPD (P3)744(99)/2008-2800 dated 24 July 2008. The Bank opened its Off-shore Banking Unit on 21 December 2008. The unit is located at Shahjalal Islami Bank Tower, Plot#4, Block-CWN(C), Gulshan Avenue, Gulshan, Dhaka-1212. Shahjalal Islami Bank Limited Annual Report 2017 95
  98. Subsidiary Shahjalal Islami Bank Securities Limited Shahjalal Islami Bank Securities Limited is a subsidiary company of Shahjalal Islami Bank Limited incorporated as a public limited company under the Companies Act 1994 and commenced its operation on the 25th day of May 2011 . The main objective of the company is to carry on business of stock broker/dealers in relation to shares and securities dealings and other services as mentioned in the Memorandum and Articles of Association of the Company. It has corporate membership of Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited. Shahjalal Islami Bank Limited holds 91.79% shares of Shahjalal Islami Bank Securities Limited. Principal Activities The principal activities of the Bank is to provide all kinds of commercial banking products and services to the customers including deposit taking, cash withdrawal, extending investments to corporate organization, retail and small & medium enterprises, trade financing, project finance, working capital finance, lease and hire purchase financing, issuance of Debit Card and Credit Card. Its vision is to be the best private commercial bank in Bangladesh in terms of efficiency, capital adequacy, asset quality, sound management and profitability. Branch Network The Bank has been operating with a network of 113 branches around the country. In the year 2017, the Bank has opened 10 new branches. The bank is working to expand its business by opening 10 more branches in Dhaka and some other important business location of the country in the year 2018 upon approval of Bangladesh Bank. No. of Branch 84 2012 92 93 93 2013 2014 2015 103 2016 113 2017 Year Correspondent Relationship Shahjalal Islami Bank has established correspondent relationship across the world with major foreign banks. The number of correspondent banks stood at 410 as on December 31, 2017 across 54 countries. The Bank is successfully maintaining such relationships around the world to facilitate international trade transactions. The bank maintains 27 Nostro accounts in 6 major currencies with reputed international banks around the world in all of the important global financial centers. The Bank is also enjoying sufficient credit lines from correspondent banks for add confirmation to Letter of Credits to facilitate international trade. 96 Shahjalal Islami Bank Limited Annual Report 2017
  99. Relationship with other Bodies Shahjalal Islami Bank Limited has established relationship with the following organizations /institutions: a) Bangladesh Institute of Bank Management (BIBM); b) The Institute of Bankers, Bangladesh (IBB); c) Bangladesh Foreign Exchange Dealers’ Association (BAFEDA); d) Bangladesh Association of Banks (BAB)s; e) Central Shariah Board for Islamic Banks of Bangladesh; f ) Islamic Banks Consultative Forum (IBCF); g) Dhaka Chamber of Commerce & Industry (DCCI); h) Bangladesh Chamber of Industries (BCI); and h) Association of Bankers, Bangladesh (ABB). Strategic Plan for Future Growth The Banking industry has been experiencing intensive competition as the domestic and international banks operating in Bangladesh strongly pursued the banking and financing needs of the Corporate, Retail & SME sector customers with diversified banking products and services and extending automated banking service with ATM, Debit Card facilities and Internet Banking. Besides, profit rates have become very competitive for both deposit and investment. Customers are demanding higher rate of return against their deposits. On the other hand, they are also demanding to reduce their investment rates. Considering the overall scenario, the Bank continues to focus on its delivery channel, technology, human resource and its brands along with branch network, business promotion, corporate social responsibility and product diversification. Strategies mean to achieve the goals. Aligned with the vision and mission statements of Shahjalal Islami Bank Limited, 12 strategies have been identified to address the development and changes we need. It is envisaged that this strategic plan will cascade effectively the vision-mission into concrete action on priority basis and transform the Bank into a dynamic, effective and forward looking modern shariah based bank in Bangladesh. Strategic plans of the Bank are: SL Strategic Plan 1 Revisit the existing deposit products to introduce new deposit products and redesigned the existing deposit products 2 Re-examine existing investment products to introduce new investment products and redesigned the existing investment products 3 Strengthen Debit Card and introduction of Shariah Based Credit Card facility to enhance card business 4 Strengthen and make effective of Offshore Banking Unit 5 Expand non-funded and fee based business to increase income 6 Strengthen treasury function to increase profit from treasury operation 7 Strengthen risk-based internal audit (including Shariah audit ) to add value to the risk management process in the Bank 8 Strengthen Marketing Division to ensure success of new deposit and investment products 9 Strengthen MIS to ensure accurate and timely information 10 Attract, retain and develop people (staff ) ensuring sound organizational development 11 Develop a Governance Manual to ensure proper Office Administration and Corporate Governance 12 Create a ‘Strategic Planning/Research & Development Unit’ Shahjalal Islami Bank Limited Annual Report 2017 97
  100. Information Technology of SJIBL With advancement of technology along with the rapid growth of business , need for capturing value from customer gives birth to eventual requirement of handling bulk data volume and created scopes to offer a wide variety of services accurately and rapidly by adopting secured technology that ultimately sparked up SJIBL for adopting top technologies and automation. The bank has built an International Standard 3 tier Data Center in its own building for securing the infrastructure from all sorts of structural level failure. To extend its capability of recovering from a known and predicted disaster, bank never stays on back foot to invest. It always pays utmost concentration on up-gradation of Core Banking Software (CBS) by adding or customizing the modules for better customer service. In this consequence, implementation of new Data Storage or extension of existing one is done in every periodical term as anticipated to enhance capacity for accommodation of large extended business data. Our arrangement of dual connectivity through ensuring economy of scale assures business continuity by adjusting and substituting network connectivity among the service providers. The bank pays topmost priority to establish and maintain automation in transaction through Bangladesh Automated Cheque Processing System (BACPS), Bangladesh Electronic Fund Transfer Network (BEFTN), Real Time Gross Settlement (RTGS) and Sanction Screening Software. The bank has been offering automated customer services by facilitating collection of utility bills like WASA, DPDC, DESCO, BTCL, TITAS, BRTA and PDB through our CBS. This automation level soon will take further height after launching Internet Banking shortly. All of mentioned utility payments including interbank fund transfer will become handy solution for customers by using SJIBL technology platform and SJIBL technology platform is already well protected by Layer-7 security features as per cyber security compliance requirement of regulatory body. As we know all the banks are now very concern in ensuring the SWIFT security, SJIBL remains continuously active in a process of enhancement of SWIFT security as guided by Bangladesh Bank and SWIFT authority. Development in customer service through ATM, POS, Mobile and other delivery channels are consistently acquired. Chip based cards have been distributed among the clients. Up-gradations of machines are also in our priority list. Automated Teller Machine (ATM) With the aim to provide 24/7 cash withdrawal facilities to the valued clients, Shahjalal Islami Bank Limited has established 73 ATMs at different important locations of the country. As a member of VISA International, the Bank is also connected through National Payment Switch, Bangladesh (NPSB) as well as Q-Cash Network. Through this shared network, the Bank is providing support to its customer to get access from any ATM of Bangladesh. Shahjalal Islami Bank Limited is committed to establish more ATMs for smooth and convenient servides of its cardholders. Point of Sales (POS) The valued cardholders can use their cards for dinning, shopping and other utility purpose at any VISA labeled POS Terminals at home and abroad (for International Card only). The Bank is also providing support to its cardholders to do POS transactions at NPSB (National Payment Switch, Bangladesh) as well as at Q-Cash POS Network. The “Card Support Center” is open for 24/7 days to provide support to the valued cardholders. Review of the Performance During the year under review, the bank maintained the progress of business through its 113 branches. The operating profit before tax stood at Tk.2,078.52 million. Net profit attributable to shareholders reached to Tk. 1,195.90 million, return on average equity was 9.14 percent and Earnings per Share (EPS) stood at Tk.1.55. Non- performing investments (NPI) ratio was 3.97 percent. Capital to Risk Weighted Assets Ratio of the Bank was 12.19 percent comprising maximum 98 Shahjalal Islami Bank Limited Annual Report 2017
  101. under Tier-I , which was above the stipulated rate of 10 percent. Out of deposit of Tk. 145,382.48 million, the bank could deploy Tk. 158,668.16 million in investment as on December 31, 2017. The Bank handled total Foreign exchange business of Tk. 230,257 million in the year 2017. Regulatory Capital of the Bank The Bank’s Capital is divided into two tiers i.e. Tier-I and Tier-II capital. Tier-I includes Paid-up Capital, Statutory Reserve and Retained Earnings. Tier-II includes General Provision on unclassified investments & Off-Balance Sheet items. The Authorized Capital of the Bank is Tk. 10,000 million and paid-up capital of the Bank is Tk. 7,714.23 million as on December 31, 2017. Total Regulatory Capital was Tk 19,375.98 million as on December 31, 2017. Comparative position of Capital for the year 2017 & 2016 is given below:Tier-I Capital (Going-Concern Capital) (Amount in million Taka) SL. No Particulars 2017 2016 a) Paid-up capital 7,714.23 7,346.88 b) Statutory Reserve 4,819.26 4,403.56 c) Retained Earnings 784.29 1,106.13 13,317.78 12,856.57 Sub total Tier-II Capital (Gone-Concern Capital): SL. No Particulars 2017 2016 a) General Provision 2,058.20 1,529.50 b) Mudaraba Subordinated Bond 4,000.00 - 6,058.20 1,529.50 19,375.98 14,386.07 Sub total Total Equity Regulatory Capital 2017 21% Paid-up Capital 40% Statutory Reserve 10% Retained Earnings 4% General Provision 25% Mudaraba Subordinated Bond Trend of Regulatory Capital (Million Taka) 19,376 11,140 12,773 Shahjalal Islami Bank Limited Annual Report 2017 13,355 14,386 99
  102. Mudaraba Subordinated Bond Trend of Regulatory Capital (Million Taka) 19,376 11,140 12,773 2013 2014 13,355 2015 14,386 2016 2017 Year Number of Shareholders A large number of shareholders reposed their trust in our Bank’s Shares. In the year 2017, total number of Shareholders stood 38,782. The position of shareholders for last three years is shown below: Year Shareholders 2017 38,782 2016 52,614 2015 63,480 Net Asset Value (NAV) The Net Asset Value per Share is always positive which indicates higher assets back up compare to per value. As a result, more investors has subscribed to Bank. Trend of NAV for last five years is given below: Year Net Asset Value (NAV) 2017 17.26 2016 16.67 2015 16.68 2014 15.92 2013 16.40 Capital Adequacy Total Regulatory Capital of the Bank as on December 31, 2017 stood at Tk. 19,375.98 million which was Tk. 14,386.07 million as on December 31, 2016, registering 12.19% of the Risk weighted Assets as against the requirement of 10%. 100 Shahjalal Islami Bank Limited Annual Report 2017
  103. The Tier-I capital was 8 .38% of Risk weighted Assets as on 31st December 2017 as against requirement of 5.50%. CRAR/CAR 12.56% 13.61% 13.52% 12.19% 11.54% 10% 10% 10% 10% 10% 2013 2014 2015 2016 2017 Year Risk Based Capital Adequacy A comparative quantitative feature of Risk Weighted Assets (RWA) and Minimum Capital Requirement (MCR) for December quarter ended 2017 & 2016 under Basel-III is furnished hereunder: Tk. In Million Particulars 2017 2016 Regulatory Capital: 1. Tier-1 (Going-Concern Capital) 13,317.78 12,856.57 2. Tier-2 (Gone-Concern Capital) 6,058.20 1,529.50 Total Regulatory Capital (1+2+3) 19,375.98 14,386.07 Total Risk Weighted Assets (RWA) 158,936.53 124,655.88 12.19% 11.54% Tier-I Capital to RWA 8.38% 10.31% Tier-II Capital to RWA 3.81% 1.23% 15,893.65 12,470.38 Capital to Risk Weighted Assets Ratio (CRAR) Minimum Capital Requirement (MCR) Liabilities Total liabilities (excluding equity) stood at Tk. 194,569 million at the end of 2017, which was 26.03% higher than the previous years’ figure. Liabilities increased mainly due to increase in deposits, issuance of Mudaraba Subordinated Bond and also placement received from other Banks & Financial Institutions. Deposit Total deposit of Shahjalal Islami Bank Limited stood at Tk. 145,382.48 million as on December 31, 2017 which was Tk. 124,409.83 million as on December 31, 2016. Deposit is the ‘life-blood’ of a Bank. Bank puts utmost importance in mobilization of deposits introducing a few popular and innovative schemes. The bank always tries to give the highest return on the deposits of the customers. The mobilized deposits are ploughed back in economic activities through profitable and safe investments. Shahjalal Islami Bank Limited Annual Report 2017 101
  104. The Deposit-mix of the Bank as on December 31 , 2017 was as bellow:Sl.No Nature of Deposit Taka in million Percentage of Total Deposit 1 Al-Wadia Current Deposit 7,416.18 5.10% 2 Mudaraba Savings Deposit 18,280.59 12.57% 3 Mudaraba Short Notice Deposit 4,956.74 3.41% 4 Mudaraba Term Deposit 64,248.15 44.19% 5 Mudaraba Schemes Deposit 37,121.57 25.53% 6 Other Deposits 13,359.25 9.19% 145,382.48 100.00% Total Deposit-Mix-2017 9.19% 5.10% 12.57% Al-Wadia Current Deposit Mudaraba Savings Deposit 3.41% 25.53% Mudaraba Special Notice Deposit Mudaraba Term Deposit Mudaraba Schemes Deposit Other Deposits 44.19% Total Assets Bank’s total asset as on December 31, 2017 stood at Tk. 207,886 million which was Tk. 167,245 million as on December 31, 2016. A major impact to this growth was the increase in Investments by 29.00% i.e. from Tk. 122,998 million to Tk. 158,668 million. Investments in Shares & Securities as well as Balance with Bangladesh Bank & Sonali Bank Ltd also increased by 38.63% and 38.83% respectively. Asset quality and non-performing investments Non-performing investment was increased by Tk. 519 million compared to the year 2016. The non-performing investment ratio was 3.97% as at the end of 2017 whereas it was 4.70% at the end of 2016. Investment Total investment of the Bank stood at Tk. 158,668 million as on December 31, 2017 as against Tk. 122,998 million as on December 31, 2016 registering an increase of Tk. 35,670 million, i.e. 29.00% growth. The Bank was very conscious 102 Shahjalal Islami Bank Limited Annual Report 2017
  105. & careful in deployment of investing fund. Mode wise investment portfolio as on December 31, 2017 is given below: Sl. No Modes of Investments Taka in million Percentage of Total Investment 1 Murabaha 14,197.54 8.95% 2 Bi-Muazzal 86,302.58 54.39% 3 Hire Purchase Shirkatul Meelk (HPSM) 29,972.94 18.89% 4 Ijara 1,288.40 0.81% 5 Bi-Salam 1,581.61 1.00% 6 Quard 70.85 0.04% 7 Bill purchased & discounted 10,303.97 6.49% 8 Others 14,950.29 9.42% 158,668.16 100.00% Total   The Bank always entertains quality investment proposals having sound creditworthiness and good track record of customers. The Bank has also introduced some Investment Schemes to provide financial assistance to comparatively less advantaged group of people. Investment Portfolio 2017 6.49% 0.04% 9.42% Murabaha 8.95% Bi-Muazzal 1.00% Hire Purchase 0.81% Ijara Bi-Salam Quard 18.89% Bill purchased & discounted 54.39% Others Trend of Investments (Million Taka) 158,668 96,835 85,707 2013 122,998 84,062 2014 2015 2016 2017 Year Shahjalal Islami Bank Limited Annual Report 2017 103
  106. Division-wise Investment   Horizontal Analysis Divisions Taka in Millions   2017 2016 Dhaka 117,798 Vertical Analysis Variance Taka in Millions 2017/2016 2016/2015 93,241 26.34% 26,889 20,012 Sylhet 2,002 Rajshahi Composition 2017 2016 2017 2016 32.01% 117,798 93,241 74.24% 75.81% 34.36% 3.59% 26,889 20,012 16.95% 16.27% 1,455 37.62% 22.81% 2,002 1,455 1.26% 1.18% 4,739 2,753 72.12% 50.34% 4,739 2,753 2.99% 2.24% Rangpur 1,251 1,119 11.78% 53.39% 1,251 1,119 0.79% 0.91% Khulna 5,417 4,063 33.34% 36.42% 5,417 4,063 3.41% 3.30% Barisal 572 356 60.73% 120.83% 572 356 0.36% 0.29% 158,668 122,998 29.00% 27.02% 158,668 122,998 100.00% 100.00% Chittagong Total Sector-wise Investment Sectors Horizontal Analysis Taka in Millions 2017 Agriculture & Fishing 2016 Vertical Analysis Variance 2017/2016 2016/2015 Taka in Millions Composition 2017 2017 2016 2016 5,234 5,982 -12% 59% 5,234 5,982 3% 5% Cotton & Textile 13,742 9,620 43% 19% 13,742 9,620 9% 8% Garments 19,129 14,473 32% 28% 19,129 14,473 12% 12% Cement 1,293 1,289 0% -37% 1,293 1,289 1% 1% Pharmaceuticals & Chemicals 2,170 2,345 -7% -1% 2,170 2,345 1% 2% Real Estate 8,075 8,326 -3% -12% 8,075 8,326 5% 7% Transport 2,581 2,640 -2% 19% 2,581 2,640 2% 2% 400 341 17% 144% 400 341 0% 0% Non Banking Financial Institutions 2,404 2,554 -6% 25% 2,404 2,554 2% 2% Steel & Engineering 9,085 5,783 57% 40% 9,085 5,783 6% 5% 11,230 9,320 20% 13% 11,230 9,320 7% 8% Power & Energy 4,350 3,029 44% 9% 4,350 3,029 3% 2% Paper & Paper Products 1,928 1,532 26% 1% 1,928 1,532 1% 1% Plastic & Plastic Product 3,690 2,935 26% 70% 3,690 2,935 2% 2% Electronics 4,023 2,797 44% 84% 4,023 2,797 3% 2% Services Industries 5,415 3,425 58% 33% 5,415 3,425 3% 3% 26,669 20,317 31% 17% 26,669 20,317 17% 17% 7,061 3,812 85% 8% 7,061 3,812 4% 3% 421 182 131% 102% 421 182 0% 0% Share business 1,042 1,449 -28% -45% 1,042 1,449 1% 1% Staff Investment 1,460 1,295 13% 54% 1,460 1,295 1% 1% 27,267 19,552 39% 133% 27,267 19,552 17% 16% 158,668 122,998 29% 27% 158,668 122,998 100% 100% Information Technology Food Processing & Beverage Trading Import Financing Consumer Financing Others Total 104 Shahjalal Islami Bank Limited Annual Report 2017
  107. Trend of Deposit & Investment (Million Taka) 158,668 145,382 124,410 122,998 109,259 98,601 96,481 85,707 2013 96,835 84,062 2014 2015 Year 2016 2017 Deposit Investment Foreign Exchange Business Total Foreign Exchange Business handled during the year 2017 was Tk. 230,257 million as against Tk. 188,549 million of 2016 registering an increase of Tk. 41,708 million, i.e. 22.12% growth. The particulars of Foreign Exchange Business are given below:Particulars Amount in Million Taka Growth Composition 2017 2016 2017 2016 2017 2016 Import 129,244 100,419 28.70% 16.82% 56.13% 53.26% Export 97,437 84,769 14.94% 2.66% 42.32% 44.96% 3,576 3,361 6.40% -5.16% 1.55% 1.78% 230,257 188,549 22.12% 9.57% 100.00% 100.00% Foreign Remittance Total Foreign Exchange Business 2017 1.55% Import Export 42.32% 56.13% Shahjalal Islami Bank Limited Annual Report 2017 Foreign Remittance 105
  108. Operating Result Income : Investment Income: Total Investment Income of the Bank stood at Tk. 12,860.04 million as on 31st December 2017 as against Tk. 11,154.36 million compare to that of the previous year. The amount of Investment Income represents 84.11% of the total income of the year 2017 as against 86.04% of the total income of the year 2016. Non-Investment Income: Total Non-Investment Income of the Bank as at 31st December 2017 stood at Tk. 2,428.73 million as against Tk. 1,810.31 million of the preceding year, which was 15.89% and 13.96% of the total income of the respective years. Expenditure: Profit Paid on Deposits: Bank distributed Profit of Tk. 8,418.98 million among the Mudaraba Depositors in the year 2017 against Tk. 6,986.50 million in the year 2016 which being 65.47% of the Investment income earned from deployment of Mudaraba Fund and 70.39% of the total expenditure of 2017 as against 69.97% of the total expenditure of 2016. Operating Expenses: Total operating expenses for the year 2017 was Tk. 3,541.88 million whereas it was Tk. 2,998.96 million for the year 2016. Total operating expenses was 29.61% of the total expenditure for the year 2017 as against 30.03% of 2016. Operating Profit: During the year 2017, the Bank earned an amount of Tk. 15,288.77 million and spent an amount of Tk. 11,960.85 million, resulting a total Operating Profit of Tk. 3,327.92 million which increased by Tk. 348.71 million over that of last year. From the operating profit, Tk. 934.50 million was kept as provision for investment, Tk. 259.00 million provisions was kept for Off-Balance Sheets, Tk. 37.40 million provision was kept for deminution in value of invest in shares, Tk. 18.50 million provision was kept for other assets and then profit before tax stood total Tk. 2,078.52 million and deducting income taxes of Tk. 882.62 million, net profit after taxation stood at Tk. 1,195.89 million. As appropriation of net profit Tk. 415.70 million was transferred to statutory reserve as per Bank Company Act and remaining Tk. 780.19 million was transferred to retained earnings. A summary of operating result of the bank as on December 2017 vis-a-vis the position of December 2016 is shown below:(Amount in Million Taka) Particulars 2017 2016 Total Income 15,288.77 12,964.67 Less: Total Expenditure 11,960.85 9,985.46 Net Profit before Provision & Taxation 3,327.92 2,979.21 1,249.40 673.13 2,078.52 2,306.08 882.62 748.71 1,195.89 1,557.37 Statutory Reserve 415.70 461.22 Retained Earnings 780.19 1,096.15 Less: Provision for Investment, Off Balance Sheets, Shares & others Net profit before Taxation Less: Provision for Taxation Net Profit after Tax Appropriation: 106 Shahjalal Islami Bank Limited Annual Report 2017
  109. Operating Result (Million Taka) 15,608.96 15,288.77 13,225.34 12,915.13 12,964.67 12,098.22 11,960.85 10,891.85 9,985.46 9,720.78 3,327.92 2,979.21 2,693.83 2,377.44 2,333.49 2013 2014 2015 2016 Income 2017 Expenditure Operating Profit Contribution to National Exchequer The Bank has made provision of Tk. 840.09 million for corporate tax in 2017 against 757.46 million in 2016. The bank has also contributed to the economy by generating employment of 2,402 full time officials. In the year 2017, Bank has paid Tk. 2,049.40 million to Government exchequer as source tax, salary tax, VAT, excise duty and other tax & VAT realized against various services. In the intermediation process, the Bank mobilized resources of Tk. 145,382.48 million from the surplus economic unit and deployed Tk. 158,668.16 million in 2017. The Bank has generated direct and indirect employment for a large number of people over the years. With the payment of taxes and the investment in the network, the Bank is making a significant contribution to the development and growth of the nation. Dividend The Board of Directors of the Bank has recommended 10% Stock dividend for each share for the year 2017. Over the last years, Board of Directors declared dividends out of profit to shareholders at good rates. The rates of dividend declared by Bank since 2013 are shown below: Year Dividend (%) 2017 10 (Stock) 2016 10 (Cash) & 5 (Stock) 2015 13 (Cash) 2014 10 (Cash) 2013 10 (Stock) Preparation of Financial Statements The financial statements of the Bank prepared by the management present fairly its state of affairs, the result of its operations, cash flows and changes in equity under the historical cost convention and in accordance with the First Schedule (Section-38) of the Bank Companies (amendment) Act 2013, related Bangladesh Bank circulars, Bangladesh Accounting Standards (BASs) and Bangladesh Financial Reporting Standards (BFRSs), the Companies Act 1994, the listing regulations of the Stock Exchanges, the Securities and Exchange Rules 1987 and other laws and rules applicable in Bangladesh. Shahjalal Islami Bank Limited Annual Report 2017 107
  110. The financial statements of 2017 have been reviewed by the Audit Committee of the Board of Directors of the Bank and then referred to the Board of Directors for its consideration . The external auditor, M/s. Hoda Vasi Chowdhury & Co, Chartered Accountants appointed by the shareholders, have certified the fairness of the financial statements for the year ended 31 December 2017. Maintaining Proper Books of Account Shahjalal Ialamic Bank Limited maintained proper books of account for its financial transactions occurred during 2017. The books of account have also been reviewed by the external auditor, M/s. Hoda Vasi Chowdhury & Co, Chartered Accountants with an opinion that proper books of account as required by the law have been properly maintained. Appropriate Accounting Policies Appropriate accounting policies have been consistently applied, except for the changes disclosed in the financial statements in preparation of financial statements and that the accounting estimates are based on reasonable and prudent judgement. Bank records financial transaction on accrual basis with required disclosures and also prepares the financial statements accordingly. Internal Control and Compliance Internal Control refers to the tools that provide a reasonable assurance regarding the achievement of Bank’s goal with respect to:  Effectiveness and efficiency of operation.  Safeguarding the assets of the bank.  Compliance of applicable laws and regulations, policy & procedures issued by both Bank and the regulators The above issues show significance of effective internal control of a bank in the light of traditional activities. But in the context of residual risk under SRP, internal control has now become much more significant. Keeping such significance in view, Shahjalal Islami Bank Limited has strengthened and segregated its Internal Control and Compliance Division into three separate units based on the relative guidelines framed by Bangladesh Bank: 1. Audit and Inspection 2.Compliance 3.Monitoring Shahjalal Islami Bank Limited has an Internal Control and Compliance Manual which has been lastly updated and approved by the competent authority on December 18, 2016. This manual contains Risk Assessment Methodology which has been designed to conduct Risk Based Internal Audit among some other significant issues. Statement of Directors’ Responsibility to Establish Appropriate System of Internal Control The Directors acknowledge their overall responsibilities for the Bank’s system of internal control for establishing efficiency, effectiveness, reliability, timeliness, completeness and compliance with applicable laws and regulations. This process involved a conformation that a system of internal control in accordance with best financial reporting practice was in place throughout the year and up to the date of the signing of these financial statements. 108 Shahjalal Islami Bank Limited Annual Report 2017
  111. Going Concern After reviewing the Bank ’s present and potential business growth, annual budget, performance, liquidity position, plans and financing arrangement, the Directors are satisfied that the Bank has adequate resources to continue to operate in the foreseeable future and confirm that there is no material issue threatening to the going concern of the Bank. For this reason Directors continue to adopt the going concern basis in preparing these financial statements. There are no significant doubts upon the Bank’s ability to continue as a going concern. Credit Rating Credit Rating Agency of Bangladesh Limited (CRAB) has made a rating on Shahjalal Islami Bank Limited. In their report on 24 May 2018, they rated the Bank as AA2 for long term and ST-2 for short term. CRAB performed the rating surveillance based on audited financial statement up to 31st December 2017 and other relevant information. The long-term rating is valid for only one year and short-term rating is for six months. Auditor’s Report The Board of Directors reviewed the Auditors Report issued by the Bank’s auditor M/s Hoda Vasi Chowdhury & Co, Chartered Accountants based on their audit of financial statements for the year ended 31 December 2017. The auditor didn’t mention about any material misstatement or significant disagreement regarding review of the Bank’s financial statements. The Board also reviews the auditors’ suggestion which auditor provides through a separate management report and gives the strategic guidelines to the management for improvement. Appointment of Auditors As per Dhaka Stock Exchange (Listing) Regulation, 2015, Notification dated 30 June 2015, an auditor of a listed company cannot be appointed for more than three consecutive years. M/s Hoda Vasi Chowdhury & Co, Chartered Accountants was the auditor of the Bank for the year 2017. As 2017 was the second year of audit and the firm is eligible for reappointment and they have also expressed their willingness to be reappointment for the year 2018. Section 210 of the Companies Act, 1994 gives authority to the shareholders to fix the appointment of the auditor and its remuneration. Hence, the board recommends appointing M/s Hoda Vasi Chowdhury & Co, Chartered Accountants as the auditor of the bank for the year 2018 subject to the approval of the shareholders in the upcoming Annual General Meeting. Future Outlook of the Bank Going towards 2018, there are considerable challenges surrounding Bangladesh. Considering the overall macroeconomic and geo-political outlook, significant pressure is expected on banking sector margins in the wake of low benchmark rates and limited financing opportunities. Accordingly, our Bank intends to focus on building and maintaining quality investment portfolio and to enhance its focus on customer service quality and major cost rationalization initiatives through continuous improvement in automation and product innovations. Similarly, our Bank intends to focus on low cost core deposit mix in future by effectively utilizing our extensive branch network and new upcoming initiatives like Internet Banking, Credit Card and Mobile Banking. Our Bank is confident that the above initiatives shall enable it to maintain a stable performance trend going forward. From the Bank’s perspective the focus will be provision of value added services via operational expansion and technological improvements. Effectiveness of the Bank’s risk management systems, capitalisation on low cost liability franchise, disciplined expense growth, expansion of our capital base and strengthened compliance culture are primary Shahjalal Islami Bank Limited Annual Report 2017 109
  112. factors in depicting continued strong financial soundness . Effective leadership with a clear vision is the key element of long term sustainability leading to highest levels of employee satisfaction and our aim is to build cohesive teams and strong ethical standards. We will strive to enhance our domestic as well as global image to take the Bank from strong to stronger. Vote of Thanks The Board of Directors expresses its profound gratitude to Almighty Allah (SWT) for enabling the Bank to achieve growth in operation during the year 2017. The Board extends thanks to the Ministry of Finance, Bangladesh Bank, Bangladesh Securities & Exchange Commission and the Government Agencies for providing assistance, guidance, support and cooperation at various stages of operation of the Bank. The Board appreciates the support and cooperation received from foreign correspondents of the Bank all over the world. The members of the Board of Shahjalal Islami Bank Limited take this opportunity to express gratitude and extend sincere thanks to its valued shareholders, customers, depositors, investment clients and well-wishers for their valuable support and confidence reposed on the Bank. Finally and more importantly, the Board would like to express its great appreciation and thanks to all of the officials of the Bank for rendering untiring efforts. May Allah grant us courage, dedication, patience and fortitude to run the bank to the best of our abilities. Ameen. On behalf of the Board of Directors Akkas Uddin Mollah Chairman 110 Shahjalal Islami Bank Limited Annual Report 2017
  113. Corporate Governance Report Corporate Governance is the set of processes , customs, policies, laws and institutions affecting the way a company is directed, administered or controlled. Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the company is governed. In contemporary business company, the main external stakeholder groups are shareholders, debtholders, trade creditors, suppliers, customers and communities affected by the company’s activities. Internal stakeholders are the board of directors, executives and other employees. Corporate Governance should be ensured in the Banks, as it deals with huge public money and interests of the depositors. Shahjalal Islami Bank Limited is committed to integrity and fair dealing in all its activities and upholds the highest standards of corporate governance. The Board has adopted a comprehensive framework of Corporate Governance Guidelines which has been designed to assure the stakeholders that the business of the Bank are built on, and grow from the firmest foundation. With a view to ensure Corporate Governance, responsibilities and authorities among the Board of Directors including its Chairman, the Management including the Managing Director has been demarcated in respect of its overall financial, operational and administrative policy making and executive affairs including overall business activities, internal control, human resources management, etc. Corporate Governance Practices Shahjalal Islami Bank Limited (SJIBL) is guided in its corporate governance practices mainly by two regulatory bodies: Bangladesh Bank (Central Bank of Bangladesh) and Bangladesh Securities and Exchange Commission (BSEC). However, the Bank’s Corporate Governance Philosophy encompasses not only regulatory and legal requirements but also various internal rules, policies, procedures and practices based on the best practices of local and global banks. Board of Directors, Chairman and Managing Director Board Size The Board consists of eighteen Non-executive members including two Independent Directors excluding the ex-officio Managing Director. The number of Board members is within the limit set by the Banking Companies Act 1991 (amended up to 2013) and BSEC notification on Corporate Governance. Appointment of Directors Directors are appointed following relevant provision/clause of the Companies Act 1994, the Banking Companies Act 1991 (amended up to 2013), Corporate Governance Guidelines of BSEC and Guidelines of Bangladesh Bank as well as Articles of Association of the Bank. The Board of Directors is consisted of noted entrepreneurs and business professionals having experience and acumen in diverse range of businesses and operations. Rotation of Directors As per provisions of section 91 of the Companies Act 1994 and section 79-87 of schedule 1 of the Act and clause 20.12 & 20.13 of Articles of Association of the Bank, in the Annual General Meeting in every subsequent year one third of the Directors or if their number is not multiple of three then the number nearest to shall retire from office and shall be eligible for re-election. Accordingly, the respective Directors of Shahjalal Islami Bank Ltd. will retire and eligible for reappointment in the 17th Annual General Meeting. Non-Executive Director All the Directors of SJIBL including the Chairman are Non-Executive Directors except the Managing Director. Shahjalal Islami Bank Limited Annual Report 2017 111
  114. Independent Directors In compliance with the Corporate Governance Guidelines issued by BSEC , the Banking Companies Act 1991 (amended up to 2013) and Corporate Governance Guidelines issued by Bangladesh Bank, the Board of Directors of the Bank has appointed 2 (two) independent directors in its Board. The independent directors being conversant in the field of financial, regulatory and corporate laws enjoy full freedom to carry out their assigned responsibilities. Board meetings and attendance The Board of Directors holds meetings on a regular basis, usually once in a month but emergency meetings are called when required. Management provides information, references and detailed working papers for each item of agenda to all the Directors well ahead of time fixed for the Board of Directors meeting for consideration. In the meeting, the Chairman of the Board of Directors allocates sufficient time for the Directors to consider each item of the agenda and allow them to discuss, inquire and express opinions freely on the items of interest so that they can fulfill their duties to the best of their abilities. During the year 2017, total 16 numbers of Board Meetings were held; the status along with the attendance is separately discussed in the report. Chief Financial Officer (CFO), Head of Internal Control & Compliance and Company Secretary (CS) The Bank appointed a Chief Financial Officer (CFO), a Head of Internal Control & Compliance and a Company Secretary (CS) as per the policy of the Bank and other regulatory laws and regulations. They are well conversant in the field of financial, regulatory and corporate laws to carry out their assigned responsibilities. The Board of Directors of SJIBL clearly defined and approved the respective roles, responsibilities and duties of Chief Financial Officer (CFO), Company Secretary (CS) and Head of Internal Control & Compliance. Chief Financial Officer (CFO) and Company Secretary (CS) of the Bank attend the meetings of the Board of Directors, provided that Chief Financial Officer (CFO) and/or Company Secretary do not attend such part of a meeting which involves consideration of an agenda item relating to their personal matters. Directors’ Shareholding Status In compliance with BSEC Notifications dated 22 November 2011 and dated 07 December 2011, all the eligible directors (other than independent directors) of SJIBL have been holding required percentage of shares individually (minimum 2%) as well as jointly (minimum 30%). Shareholding of MD, CS, CFO, Head of ICC and top 5 Salaried Executives No shares held by MD, CS, CFO, Head of ICC and top 5 Salaried Executives as on 31 December 2017. Separation of Roles of Chairman and Chief Executive Officer In compliance with Bangladesh Bank BRPD Circular No. 11 and Circular Letter No. 18 dated 27 October 2013 and Clause 1.4 of BSEC Guidelines on Corporate Governance dated 07 August 2012, the functional responsibilities of the Chairman of the Board and the Managing Director are kept separate and independent of each other. Roles and Responsibilities of the Board of Directors The main roles of the Board of Directors are to define the Company’s strategic objectives, to provide entrepreneurial leadership for the company, to create value for shareholders, to protect the interests of all Stakeholders including Depositors and to ensure that the necessary financial and other resources are available to enable the company and the Board to meet these objectives. The specific responsibilities of the Board are to determine the objective and goals of the Bank, annual business plan of the Bank, key performance indicators for the Managing Director, Human resource development, efficiency of operational activities of the Bank, set internal control procedure, capital plan, comply the regulatory laws & regulations, Corporate Governance, financial transparency, CSR activities and appointment of auditor etc. 112 Shahjalal Islami Bank Limited Annual Report 2017
  115. Responsibilities of the Chairman of the Board The responsibilities of the Chairman as defined in the BRPD Circular No . 11 dated 27 October 2013 issued by Bangladesh Bank and Corporate Governance Notification issued by BSEC on 07 August 2012 is fully complied with. The Chairman of the Board of Directors does not personally possess the jurisdiction to apply policy making or executive authority. He does not participate in or interfere into the administrative or operational and routine affairs of the Bank. The Chairman leads the Board in determination of its strategy and achievement of its objectives. The Chairman is responsible for organizing the business of the Board, ensuring its effectiveness and setting its agenda. The Chairman also ensures all key and appropriate issues are discussed by the Board of Directors in a timely and constructive manner. The chairman signs minutes of Board meeting. Roles and Responsibilities of the Managing Director The Managing Director is responsible for running the business and for formulating and implementing Board strategy and policy. He is also responsible for overall control of the company on a day to day basis and is accountable to the Board for the financial and operational performance of the company. Independence of Non-Executive Directors All the Non-Executive Directors enjoy full freedom to carry out their coveted responsibilities. They attend Board meetings regularly and participate in the deliberation and discussions effectively. They actively involve in the matter of formulation of general strategies of the Bank. But they do not participate in or interfere into the administrative or operational or routine affairs of the Bank. However, they ensure confidentiality of the Bank’s agenda papers, discussions at the Board/Committee Meetings, Notes and Minutes. Annual Appraisal of the Board’s Performance At Annual General Meeting (AGM) shareholders critically appraise the performance of the Board freely through evaluation of financial position and performance of the bank, its adequacy and effectiveness of internal control system and overall governance mechanisms. The shareholders also ask questions and make queries to the Board of Directors during AGM and the Chairman of Board of Directors gives a patient hearing and responds to all their queries. The performance of the Board is appraised based on certain parameters such as shareholder return, share price, return on capital employed, earnings per share etc. of the bank. The attendance of Directors and their active participation in the meeting on various agenda is ensured in every Board meeting. The Board approves annual budget at the beginning of each year and monitors the status of the same on monthly basis to ensure achievement of the target. The Board’s performance is greatly dependent on the achievement (under or over) of budgeted target. Besides, the performance reports of supporting committees of the Board are also placed in the Board meeting through which the performance of the Board members are regularly assessed. Annual Evaluation of the MD by the Board The Board of Directors of SJIBL clearly defined and approved the roles, responsibilities and duties of Managing Director. Based on these assigned responsibilities, Board of Directors make annual evaluation of Managing Director. Furthermore, the performance evaluation of Managing Director is done by the Board through various reports like financial position and performance report of the Bank, knowing update of various assignments given by the Board to the Managing Director and the Management from time to time and doing variance analysis of Budget with Actual result and steps taken by MD to achieve the Budgeted target. Among the financial parameters, NPI ratio, Growth of Investment & Deposit, Cost to Income Ratio, Investment write off and its recovery, Capital to Risk Weighted Assets Ratio, Investment to Deposit Ratio etc. are the common ones. Shahjalal Islami Bank Limited Annual Report 2017 113
  116. Directors ’ Report on Compliance with Best Practices on Corporate Governance The status of compliance of corporate governance guidelines issued by Bangladesh Bank has been presented in page no. 131-144 and the guidelines issued by BSEC have been presented in page no. 120-126. M/s. Mak & Co, Chartered Accountants, duly certified the compliance status of Corporate Governance Guidelines and issued a report which is presented in page no. 127. Accountability, Audit and Financial Reporting The Board undertakes responsibilities for preparing and presenting a balanced and comprehensive assessment of the Bank’s operations at the end of each financial year through annual Financial Statements and Annual Report and quarterly and half yearly announcement of financial performance of the Bank to shareholders. The Audit Committee of the Board assists in this respect by scrutinizing the information to be disclosed and to ensure accuracy, adequacy, transparency and completeness of the disclosed information. Board Committees The Board formed an Executive Committee, an Audit Committee and a Risk Management Committee complying Central Bank’s guidelines. There is no committee or sub-committee of the Board other than the above mentioned Committees. However, it has a Shari’ah Supervisory Committee to look after the Shari’ah matters and gives suggestions to the management on Shari’ah issues. Board’s Executive Committee (EC) The Board has an Executive Committee (EC) which carries out its functions which are beyond delegated power of the Management. The Executive Committee (EC) of the Board reviews the policies and guidelines issued by Bangladesh Bank regarding Investment and other operations of the banking industry. The committee ensures the implementation of policies and guidelines through the management. During the year 2017 total 43 no. of Executive Committee meetings were held. The status of the member along with the attendance is separately discussed in the report. Audit Committee of the Board Audit Committee is one of the sub-committee of the Board which plays very vital role in assisting the Board to perform its responsibilities. Audit Committee plays its role according to its Charter, approved by the Board of Directors in line with the direction of Bangladesh Bank and Bangladesh Securities & Exchange Commission. The Chairman of the Audit Committee is an independent director who performs his duties with full freedom; the Company Secretary acts as the secretary of the committee. The role of the Audit Committee of SJIBL includes the following:  Review the financial and other systems including internal control and its reporting procedure;  Oversee the work of external auditors, internal auditors including matters of disagreement between management and the auditors;  Require management to implement and maintain adequate/appropriate systems of internal control and discuss with the management to assess the adequacy and effectiveness of those systems;  Discuss with management major issues concerning accounting principles and disclosures in the financial statements;  Conduct audit concerning violation, if any, by the management in carrying out operation of the Company;  Recommend to the Board regarding appointment of the external auditors and their terms of appointment;  Meet the Management to discuss any matters if deem appropriate. During the year 2017, total 12 numbers of meeting of the Audit Committee of SJIBL were held. The Report of the Board Audit Committee is disclosed separately in the Annual Report. 114 Shahjalal Islami Bank Limited Annual Report 2017
  117. Risk Management Committee (RMC) of the Board Apart from the Executive Committee and Audit Committee of the Board, a Risk Management Committee (RMC) has been formed which is responsible for planning and guiding on overall risk management of the Bank. Key areas of responsibilities of the committee are as under:  The Committee reviews the risk management process to ensure effective prevention and control measures;  To ensure an adequate organizational structure for managing risk of the bank and supervise formation of management level committees and monitor their activities for the compliance of instructions of lending risk, foreign exchange transaction risk, internal control & compliance risk, money laundering risk, information & communication risk including other risk related guidelines;  The committee reviews risk management policies & guidelines annually;  Approve adequate record keeping & reporting system of the bank;  Monitor proper implementation of overall risk management policies to mitigate all risks including lending risk, market risk and management risk. Detailed role and responsibilities of the Committee is available in the “Report of the Risk Management Committee”. During the year 2017, total 7 meetings of the Risk Management Committee were held. Shariah Supervisory Committee of the Bank As per section 30 of the Articles of Association of the Bank, Shariah Supervisory Committee of the Bank has been constituted. The Shariah Supervisory Committee of the Bank consists of prominent Ulema, Bankers, Lawyers and Economists to advise and guide on the implementation of Islamic Shariah in business activities. The Committee enjoys a special status in the structure of the Bank and playing a vital role to make the bank as Shariah compliant. In the year 2017, total 4 meetings of the Shariah Supervisory Committee of the Bank were held, while 1 meeting of the SubCommittee were held in the same period. Benefits provided to Directors and Managing Director The Directors does not receive any type of remuneration and incentive. They are only paid Board Meeting attendance fees for attending in the Board Meeting and other committee meeting as per Article of Association of the Bank and within the Guidelines of Bangladesh Bank instruction. Information regarding expenses relating to Directors is separately disclosed in the financial statements. The remuneration package of the Managing Director is determined by the Board and is approved by Bangladesh Bank. The Managing Director has been appointed on contractual basis and his remuneration is also disclosed separately in the financial statements. No Remuneration Committee As the Bank is restricted (by Central Bank) to have more than three sub-committees of the Board, the Board oversees the remuneration process of the employees by reviewing/approving various policies like HR policies, recruitment and promotion policies etc. Establishment and Review of Internal Control System Shahjalal Islami Bank Limited has a sound system of internal control to safeguard the stakeholder’s interest. To ensure appropriate level of internal control system, an Internal Control and Compliance Manual has been introduced in line with global practices and Regulatory Guidelines. The Board of Directors time to time reviews the Internal Control System of the Bank and necessary guideline are provided to improve the system. SJIBL has also strengthened and segregated its Internal Control and Compliance Division into three separate unit based on the relative guidelines framed by Bangladesh Bank; (1) Audit and Inspection Unit (2) Compliance Unit (3) Monitoring Unit. The division is independent and carries out its assignment independently with objectivity and impartiality. Shahjalal Islami Bank Limited Annual Report 2017 115
  118. External Audits The external auditors are appointed by the shareholders with the recommendation of the Board of Director . External auditors covered sufficient number of branches and Head Office as part to the annual audit program. Auditors covered 80% of the risk weighted assets of the Bank. They have also discussed with the Management and Audit Committee of the Board on various issues including Internal Control and Compliance issues. Suggestions of the auditors (if any) are given due consideration and are implemented by the Management. Before presenting to the shareholders, the report is reviewed by the Audit Committee and the Board. Before recommending to the shareholders for appointment as auditors, Board considers the level of independence and integrity of the external auditors. Services not provided by External Auditors Complying with provision 4 of BSEC guidelines, M/s. Hoda Vasi Chowdhury & Co., Chartered Accountants, involved in statutory audit and was not engaged in any of following services during 2017:  Appraisal or valuation services or fairness opinions.  Financial information system design and implementation.  Book keeping or other services related to accounting records or financial statements.  Broker-dealer service.  Actuarial services.  Internal audit services.  Audit/ certification services on compliance of corporate governance guidelines issued by BSEC.  Any other service that the Audit Committee determines. Audit by the Central Bank Bangladesh Bank also conducts comprehensive inspection of the Bank every year. The reports are reviewed by the Board and its Audit Committee. The Bank gives utmost importance to the inspection report and actions are taken regarding the inadequacies or lapses mentioned in the report. Risk Management The Risk Management Division (RMD) of SJIBL is responsible for management, integration and monitoring of all risks within the risk appetite set by the Risk Management Committee (RMC). The Risk Management Committee (RMC) of the Board reviews and monitors the overall risk management system of the Bank and updates to the Board from time to time. The roles and responsibilities of RMC and major areas focused by RMC in 2017 have been presented in the annual report. Ethics and Compliance Code of Ethics for company employees For eminence corporate culture, all the employees should believe in same Code of Ethics. SJIBL has a standard Code of Ethical practices for its Employees which are followed by them with the strictest compliance. By any means, no employee will play a role detrimental to the interest of the business, society and the country as a whole as set in the Code of Ethics. The basic premise of the code of conduct is that each employee, while on the payroll of SJIBL, shall place SJIBL ahead of his/her personal interest. 116 Shahjalal Islami Bank Limited Annual Report 2017
  119. Human Capital Human Resources Development The bank always laid emphasis on human resource development . The Bank believes in the factor that helps the bank’s survive is closely interlinked with the quality of service and satisfaction of the requirements of the client and that directly depends on the qualification and efficiency of the employees. As our human resources give the organization a significant competitive edge, we continue our policy of recruiting the best professionals and implement programs to develop and retain high quality employees. Distribution of Manpower In the process of recruiting, inducting and retaining new talents, we are continuing our efforts to offer everyone a proper training that will help them become true professionals, whose skills will be essential for the betterment of their careers. Manpower 2017 (Number) 2016 (Number) 1,934 1,724 468 467 2,402 2,191 2017 (Number) 2016 (Number) Top Level Management 46 35 Mid Level Management 319 321 1,569 1,368 468 467 2,402 2,191 Officers Sub-staffs Total Level of Manpower Junior Level Management Supporting Staff Total Newly recruited manpower Shahjalal Islami Bank Limited is a preferred place for work of its existing and aspirant professionals in the industry. In the year 2017, the bank recruited a total of 259 new employees in different positions. Gender Positioning Shahjalal Islami Bank Limited provides equal opportunities for employment, learning & development and career advancement for both genders. Out of the total number of 2,402 employees, 380 employees are female and rest 2,022 employees are male. HR Strategy  As an employer, our aims to attract the most talented personnel.  We retain competent employees by recognizing them properly so that they can work effectively in a team.  Provide new employees with appropriate training.  Create a strong management team  Ensure equal opportunities with regards to employment, work facilities, assignment, training, career development and benefits.  Ensure congenial & comfortable working environment for all categories of employees and to create opportunities to show their talents for enrichment of professional career. Shahjalal Islami Bank Limited Annual Report 2017 117
  120. Work Environment & Culture The Bank is committed to maintain a congenial & comfortable working environment free from discrimination of race, religion, gender and age. The Bank ensures a positive, friendly and respectful environment where all employees are getting opportunities to show their talents and we believe in working as part of a team. The Bank tries to train up its employees with utmost professional outlook. The employees are recognized and rewarded for good jobs done. Our remuneration package, welfare policies, service benefits, timely promotion, increment, incentives are very lucrative compared to peer banks which ensure to retain the existing work force as well as to attract the aspirant professionals of the industry to explore opportunities in SJIBL. Shahjalal Islami Bank Continues to maintain a very satisfactory position in terms of people productivity. Particulars 2017 2016 Total Employees 2,402 2,191 Net income per employee (Tk. in million) 0.50 0.71 Operating revenue per employee (Tk. in million) 1.39 1.36 86.55 76.33 Assets per employee (Tk. in million) Training and Development Significant number of trainings have been provided to employees on various topics like Trade, Investment, Risk Management, Basel III, ALCO, Anti Money Laundering and many more both at home and abroad which is aligned with the philosophy of enabling officers in continuous development with their utmost potential. With a view to produce skilled workforce, Shahjalal Islami Bank Limited has established a full-fledged Training Academy. Before that we had a Training Centre since inception of the Bank. Summary of training, workshops and seminars where the employees of the Bank have attended in the year 2017 is given below: Sl. No. Course Type Trainer No. of Courses No. of Participants 1 SJIBL (in house) Training Program SJIBTA & Head Office 102 4,724 2 External Training Programs (Local) Bangladesh Bank & BBTA 20 31 3 External Training Programs (Local) BIBM 45 66 4 External Training Programs (Local) INTIMATE, BAB, Financial Excellence Limited, ICC Bangladesh, CSBIB, IICT and BIBM, IBCF, BAFEDA, BIM, ICSB, IRTI, IBBL and Center for Zakat Management, TMSS ICT  Ltd., SCB, NRB Ltd.,  Bank Asia Ltd., IBBL, Dhaka Bank Ltd., Janata Bank Ltd., Business Development South Asia. 47 89 118 Shahjalal Islami Bank Limited Annual Report 2017
  121. Sl . No. Course Type Trainer No. of Courses No. of Participants 5 External Training Programs (Foreign) Kuwait Finance House (Bahrain), SCB London (UK), EBL (Malaysia), Jointly BIBM & ICLIF (Kuala Lumpur, Malaysia), Dhaka Stock Exchange Ltd. [NIBM, Pune (India)], Habib American Bank [New York (USA)], Malaysia, NIBM [Pune (India)], COMMERZBANK AG [Frankfurt, (Germany)], Dun & Bradsteet Knowledge Forum [Jakarta (Indonesia)], London School of Economics and Political Science (London), Singapore, ICCB [Bangkok (Thailand)]. 13 16 227 4,926 Total Communication to Shareholders and Other Stakeholders Policy on Communication with Shareholders and Other Stakeholders The Share Department (which is under the Board Secretariat of the Bank) plays an instrumental role to make effective communication with its shareholders and other stakeholders of the Bank. Shareholders and other stakeholders may contact to this Department during office hour for any sort of information and queries. SJIBL provides updated information in its website from time to time for the shareholders and other stakeholders of the Bank. Policy on Ensuring Participation of Shareholders at AGM In order to make the AGM more participatory, SJIBL declares the AGM well ahead of time, circulate Annual Reports and other documents in time, arrange AGM in a well-known place and & convenient time. Shareholders are allowed to speak in the AGM freely to give their valuable suggestions. Redressal of Shareholders Complaints Any complaint, received at AGM or throughout the year, related to transfer and transmission of shares, non-receipt of Annual Reports and dividends timely and other share related matters is resolved lawfully in time. Management Review & Responsibility Management Committees In an effective Corporate Governance structure, Bank management has a collective mandate under the leadership of Managing Director to carry out daily operations to the best interest of the shareholders. Besides conventional segregation of functional departments, SJIBL formed a number of committees with a view to support the management in carrying out banking operation smoothly. Management Committee (MANCOM), Asset liability Committee (ALCO), Risk Management Committee, Supervisory Review Process (SRP) Team, Purchase Committee are supporting the Bank’s management in discharging its duties efficiently and effectively. Shahjalal Islami Bank Limited Annual Report 2017 119
  122. Compliance Status on BSEC Notification on Corporate Governance The Bangladesh Securities and Exchange Commission (BSEC) issued a Corporate Governance (CG) Guideline in 2012 which is being followed by banks on ‘Comply’ basis. Status of compliance by Shahjalal Islami Bank Limited with the said CG guidelines issued by BSEC through Notification no. SEC/CMRRCD/2006-158/134/Admin/44 dated 07 August 2012 issued under section 2CC of the Securities and Exchange Ordinance, 1969 is as follows: (Report under Condition No. 7.00) Compliance Status Condition No. Title (Put √ in the appropriate column) Not complied Complied 1.0 Board of Directors 1.1 Board’s size shall not be less than 5 and more than 20 1.2 Independent Director 1.2 (i) 1.2 (ii) At least one fifth (1/5) of the total number of directors in the Company’s Board of Director shall be independent director. √ Remarks  (if any)   -   The Board of Directors consists of 18 (Eighteen) members including 2 (Two) Independent Directors which is in compliance with Section15(9) of the Banking Companies Act, 1991 (Amended upto 2013) √ Independent director means a director-   1.2 (ii) (a) Holds no share or less than one percent (1%) shares of total paid up capital. √   - 1.2 (ii) (b) Neither a sponsor nor concerned with any sponsor or director or shareholder who holds 1% or more shares of the company on the basis of family relationship. √   - 1.2 (ii) (c) Not a stakeholder of the company or its subsidiary/ associated companies. √   - 1.2 (ii) (d) Not a member, director or officer of any stock exchange. √   - 1.2 (ii) (e) Not a shareholder, director or officer of any member of Stock Exchange or an Intermediary of the capital market. √   - 120 Shahjalal Islami Bank Limited Annual Report 2017
  123. Compliance Status Condition No . Title (Put √ in the appropriate column) Not complied Complied Remarks  (if any) 1.2 (ii) (f) Not a partner or executive during preceding 3 (three) years of concerned company’s statutory audit firm. √   - 1.2 (ii) (g) Not a independent director in more than 3 (three) listed companies. √   - 1.2 (ii) (h) Not convicted by a court of competent jurisdiction as a defaulter in payment of any loan to a bank or a non-bank financial institution (NBFI). √   - 1.2 (ii) (i) Not convicted for a criminal offence involving moral turpitude. √   - 1.2 (iii) Independent director(s) shall be appointed by the Board of Directors and approved by the Shareholders in the AGM. √   - 1.2 (iv) The post of independent director(s) cannot remain vacant for more than 90 days. √   - 1.2 (v) Laying down the Code of Conduct of all Board Members and record of Annual Compliance of the Code of Conduct. √   - 1.2 (vi) The tenure of office of an Independent Directors shall be for a period of 3 (three) years which may be extended for 1 (one) term only. √   - Independent director shall be knowledgeable individual with integrity who is able to ensure required compliance with financial, regulatory and corporate laws and can make meaningful contribution to business. √   - The independent director must have at least 12 (twelve) years of corporate management/ professional experiences along with other requisites. √   - 1.3 (iii) In special cases above qualification may be relaxed by the Commission. N/A   - 1.4 The Chairman of the Board and The Chief Executive Officer √   - 1.5 Directors Report to Shareholders 1.3 1.3 (i) 1.3 (ii) Qualification of Independent Director (ID) 1.5 (i) Industry outlook and possible future developments in the industry √   - 1.5 (ii) Segment-wise or product-wise performance. √   - 1.5 (iii) Risks and concerns √   - 1.5 (iv) Discussion on cost of goods sold, gross profit margin and net profit margin. √ Shahjalal Islami Bank Limited Annual Report 2017 Cost of Fund, Operating & Net Profit and related ratios are provided. 121
  124. Compliance Status Condition No . Title (Put √ in the appropriate column) Not complied Complied 1.5 (v) 1.5 (vi) Discussion on continuity of any Extra-Ordinary gain or loss. √ Remarks  (if any)   SJIBL does not have such gain or loss Basis for related party transaction, a statement of all related party transactions should be disclosed in the annual report. √   - 1.5 (vii) Utilization of proceeds from public issues, right issues and/ or through any others instruments. N/A   - 1.5 (viii) An explanation if the financial results deteriorate after the company goes for IPO, RPO, Rights Offer, Direct Listing etc. N/A   - If significant variance occurs between Quarterly Financial performance and Annual Financial Statements the management shall explain about the variance on their Annual Report.     N/A 1.5 (x) Remuneration to directors including independent directors. √   - 1.5 (xi) The financial statements prepared by the management of the company present fairly its state of affairs, the results of its operation, cash flows and changes in equity. √   - 1.5 (xii) Proper books of account of the company have been maintained. √   - 1.5 (xiii) Appropriate accounting policies have been consistently applied in preparation of the financial statements and that the accounting estimates are based on reasonable and prudent judgment. √   - International Accounting Standards (IAS)/Bangladesh Accounting Standards (BAS)/International Financial Reporting Standards (IFRS)/Bangladesh Financial Reporting Standards (BFRS), as applicable in Bangladesh, have been followed in preparation of the financial statements and any departure there-from has been adequately disclosed. √   - 1.5 (xv) The system of internal control is sound in design and has been effectively implemented and monitored. √   - 1.5 (xvi) There are no significant doubts upon the company’s ability to continue as a going concern. √   - 1.5 (xvii) Significant deviations from the last year’s operating results of the company shall be highlighted and the reasons thereof should be explained.     N/A 1.5 (ix) 1.5 (xiv) 122 Shahjalal Islami Bank Limited Annual Report 2017
  125. Compliance Status Condition No . Title (Put √ in the appropriate column) Not complied Complied Remarks  (if any) 1.5 (xviii) Key operating and financial data of at least preceding 5 (five) years shall be summarized. √   - 1.5 (xix) If the company has not declared dividend (cash or stock) for the year, the reasons thereof shall be given. N/A   - 1.5 (xx) The number of Board meetings held during the year and attendance by each director shall be disclosed. √   - 1.5 (xxi) The pattern of shareholding shall be reported to disclose the aggregate number of shares (along with name wise details where stated below) held by: 1.5 (xxi) a) Parent/Subsidiary/Associated Companies and other related parties (name wise details); √   - 1.5 (xxi) b) Directors, Chief Executive Officer, Company Secretary, Chief Financial Officer, Head of Internal Audit and their spouses and minor children (name wise details); √   - 1.5 (xxi) c) Executives (top five salaried employees of the company other than stated in 1.5(xxi)b); √   - 1.5 (xxi) d) Shareholders holding ten percent (10%) or more voting interest in the company (name wise details). √   - 1.5 (xxii) In case of appointment/re-appointment of a Director the Company shall disclose the following information to the Shareholders: 1.5 (xxii) a) a brief resume of the Director; √   - 1.5 (xxii) b) Nature of his/her expertise in specific functional areas. √   - 1.5 (xxii) c) Names of companies in which the person also holds the directorship and the membership of committees of the board. √   - 2.0 Chief Financial Officer, Head of Internal Audit & Company Secretary 2.1 Appointment of CFO, Head of Internal Audit and Company Secretary and their clearly defined roles, responsibilities and duties. √   - 2.2 Attendance of CFO and the Company Secretary at Board of Directors meeting √   - 3.0 Audit Committee 3 (i) Audit Committee as a sub-committee of the Board of Directors. √   - 3 (ii) The Audit Committee shall assist the Board of Directors in ensuring that the financial statements reflect true and fair view of the state of affairs of the Company and in ensuring a good monitoring system within the business. √   - The Audit Committee shall be responsible to the Board of Directors. The duties of the Audit Committee shall be clearly set forth in writing. √   - 3 (iii) Shahjalal Islami Bank Limited Annual Report 2017 123
  126. Compliance Status Condition No . Title (Put √ in the appropriate column) Not complied Complied 3.1 Remarks  (if any) Constitution of the Audit Committee 3.1 (i) The Audit Committee shall be composed of at least 3 members. √   - 3.1 (ii) Constitution of Audit Committee from Board Members including at least one Independent Director. √   - 3.1 (iii) All members of the Audit Committee should be “financially literate” and at least 1 (one) member shall have accounting or related financial management experience. √   - N/A   - 3.1 (iv) Filling of Casual Vacancy in Committee 3.1 (v) The Company Secretary shall act as the secretary of the Committee. √   - 3.1 (vi) The quorum of the Audit Committee meeting shall not constitute without at least 1 independent director. √   - 3.2 Chairman of the Audit Committee 3.2 (i) Chairman of the Audit Committee shall be an Independent Director. √   - 3.2 (ii) Chairman of the audit committee shall remain present in the Annual General Meeting (AGM). √   - 3.3 Role of Audit Committee 3.3 (i) Oversee the financial reporting process. √   - 3.3 (ii) Monitor choice of accounting policies and principles. √   - 3.3 (iii) Monitor Internal Control Risk management process. √   - 3.3 (iv) Oversee hiring and performance of external auditors. √   - 3.3 (v) Review along with the management, the annual financial statements before submission to the board for approval. √   - 3.3 (vi) Review along with the management, the quarterly and half yearly Financial Statements before submission to the Board for approval. √   - 3.3 (vii) Review the adequacy of internal audit function. √   - 3.3 (viii) Review statement of significant related party transactions submitted by the management. √   - 3.3 (ix) Review Management Letters/ Letter of Internal Control weakness issued by statutory auditors. √   - 3.3 (x) When money is raised through Initial Public Offering (IPO)/ Repeat Public Offering (RPO)/Rights Issue the company shall disclose to the Audit Committee about the uses/ applications of funds by major category (capital expenditure, sales and marketing expenses, working capital, etc.), on a quarterly basis, as a part of their quarterly declaration of financial results. N/A   - 124 Shahjalal Islami Bank Limited Annual Report 2017
  127. Compliance Status Condition No . (Put √ in the appropriate column) Title Not complied Complied 3.4 3.4.1 Remarks  (if any) Reporting of the Audit Committee Reporting to the Board of Direct 3.4.1 (i) The Audit Committee shall report on its activities to the Board of Directors. 3.4.1 (ii) The Audit Committee shall immediately report to the Board of Directors on the following findings, if any: √     3.4.1 (ii) (a) Report on conflicts of Interests. Nill   - 3.4.1 (ii) (b) Suspected or presumed fraud or irregularity or material defect in the internal control system; Nill   - 3.4.1 (ii) (c) Suspected infringement of laws, including securities related laws, rules and regulations; Nill   - 3.4.1 (ii) (d) Any other matter which shall be disclosed to the Board of Directors immediately. Nill   - 3.4.2 Reporting of anything having material financial impact to the Commission. Nill   - √   - √   - √   - 3.5 Reporting to the Shareholders and General Investors. 4.0 External/Statutory Auditors should not be engaged in 4 (i) Appraisal or valuation services or fairness opinions. 4 (ii) Financial information implementation. 4 (iii) Book-keeping or other services related to the accounting records or financial statements. √   - 4 (iv) Broker-dealer services. √   - 4 (v) Actuarial services. √   - 4 (vi) Internal audit services. √   - 4 (vii) Any other service that the Audit Committee determines. √   - 4 (viii) No partner or employees of the external audit firms shall possess any share of the company they audit at least during the tenure of their audit assignment of that Company. √   - systems design and 5.0 Subsidiary Company 5 (i) Provisions relating to the composition of the Board of Directors of the holding company shall be made applicable to the composition of the Board of Directors of the subsidiary company. √   - At least 1 (one) independent director on the Board of Directors of the holding company shall be a director on the Board of Directors of the subsidiary company. √   - 5 (ii) Shahjalal Islami Bank Limited Annual Report 2017 125
  128. Compliance Status Condition No . Title (Put √ in the appropriate column) Not complied Complied 5 (iii) 5 (iv) 5 (v) Remarks  (if any) The minutes of the Board meeting of the subsidiary company shall be placed for review at the following Board meeting of the holding company. √   - The Minutes of the respective Board meeting of the holding company shall state that they have reviewed the affairs of the Subsidiary Company also. √   - The Audit Committee of the holding company shall also review the Financial Statements, in particular the investments made by the Subsidiary Company. √   - 6.0 Duties of Chief Executive Officer (CEO) and Chief Financial Officer (CFO) 6 (i) They have reviewed financial Statements for the year and that to the best of their knowledge and belief: √   - 6 (i) a) These financial statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading. √   - These financial statements together present a true and fair view of the company’s affairs and are in compliance with existing accounting standards and applicable laws. √   - There are, to the best of knowledge and belief, no transactions entered into by the company during the year which are fraudulent, illegal or violation of the company’s code of conduct. √   - 6 (i) b) 6 (ii) 7.0 Reporting and Compliance of Corporate Governance 7 (i) The company shall obtain a Certificate from a Professional Accountant/Secretary (CA/CMA/CS) regarding compliance of conditions of Corporate Governance Guidelines of the Commission and shall send the same to the shareholders along with the Annual Report on a yearly basis. √   - The directors of the company shall state, in accordance with the Annexure attached, in the directors’ report whether the company has complied with these conditions. √   - 7 (ii) 126 Shahjalal Islami Bank Limited Annual Report 2017
  129. CERTIFICATE ON COMPLIANCE OF CONDITIONS OF CORPORATE GOVERNANCE GUIDELINES FOR THE YEAR ENDED ON 31 DECEMBER 2017 TO THE SHAREHOLDERS OF SHAHJALAL ISLAMI BANK LIMITED We have examined the compliances of Corporate Governance Guidelines by Shahjalal Islami Bank Limited (the “Company”) for the year ended on 31 December, 2017 as required under clause 7(i) of the Bangladesh Securities & Exchange Commission (BSEC) notification SEC/CMRRCD/2006-158/134/ADMIN/44 dated on 7th August 2012 and SEC/ CMRRCD/2006-158/147/Admin/48 dated 21 July 2013. The Company’s Responsibilities Those charged with government and management of the company are responsible for complying with the conditions of corporate governance guidelines. Those charged with the governance of the company are also responsible for stating in the director’s report whether the company has complied with the conditions of corporate governance guidelines. Our Responsibilities The compliance of conditions in the aforesaid notification and reporting the status of compliance is the responsibility of the Management of the Company. Our responsibility is to certify whether the company is in compliance with the said conditions of corporate governance based on our examination. For the purpose of issuing this certificate our examination was limited to the procedures as adopted by the Management of the Company for ensuring compliance to the conditions of Corporate Governance Guidelines and implementation status thereof. Opinion To the best of our information and according to the explanations given to us, we certify that, the company has complied with conditions of corporate governance guidelines as stipulated in the above mentioned notification issued by BSEC. Dhaka, 06 May 2018 Shahjalal Islami Bank Limited Annual Report 2017 Mak & Co. Chartered Accountants 127
  130. Compliance Report on BSEC Notification The authorized Capital of Shahjalal Islami Bank Limited is Tk . 10,000,000,000 divided into 1,000,000,000 ordinary shares of Tk. 10 each. The paid-up Capital of the Bank is Tk. 7,714,225,390 divided into 771,422,539 ordinary shares. As per Section 1.4(k) of BSEC Notification No. SEC/CMRRCD/2006-158/Admin/02-08 dated February 20, 2006 the pattern of shareholding is given below: i) Parent/Subsidiary/Associated companies and other related parties: N/A a) Shares held by the Directors and their Spouses: Annexure-I SL Name of Directors Position No of Shares % of Share 1 Akkas Uddin Mollah Chairman 15,429,286 2.00% 2 Anwer Khan Modern Hospital Ltd. (rep. by Mohammed Golam Quddus) Vice-Chairman 15,468,182 2.01% 3 Khandaker Sakib Ahmed Vice-Chairman 15,429,126 2.00% 4 Anwer Hossain Khan Director 23,060,446 2.99% 5 Electra International Ltd (rep. by Md. Sanaullah Shahid) Director 19,741,486 2.56% 6 Shams Uddin Khan (Rep. of Shamsuddin Khan & Harun Miah Ltd.) Director 15,428,504 2.00% 7 Md. Abdul Barek Director 15,428,570 2.00% 8 Abdul Halim Director 18,765,748 2.43% 9 Mohiuddin Ahmed Director 15,436,575 2.00% 10 Engr. Md. Towhidur Rahman Director 17,334,350 2.25% 11 A.K.Azad Director 29,409,812 3.81% 12 Mohammed Younus Director 19,071,782 2.47% 13 Fakir Akhtaruzzaman Director 15,428,451 2.00% 14 Daffodils Trading International (rep. by Khorshed Alam Khan) Director 15,807,000 2.05% 15 Fresh Export Import Ltd. (rep. by Md. Moshiur Raman Chamak) Director 15,575,241 2.02% 16 Shahan Ara Begum Director 15,466,557 2.00% 17 Mosharraf Hossain Chowdhury Independent Director Nil - 18 Farida Parvin Nuru Independent Director Nil - 19 Farman R. Chowdhury Managing Director Nil - b) Shares held by the Chief Executive Officer, Company Secretary, Head of Internal Audit and Chief Financial Officer: Nil c) Shares held by top five salaried employees other than the Directors, Chief Executive Officer, Company Secretary, Chief Financial Officer and Head of Internal Audit: NIL d) Shareholders holding ten percent (10%) or more voting interest in the company as at 31 December 2017 : Nil 128 Shahjalal Islami Bank Limited Annual Report 2017
  131. Number of Board Meeting held in 2017 and the attendance of Directors : From 01-01-2017 to 03-07-2017 Annexure-II Meeting Held SL Name of Directors Position 1 Engr. Md. Towhidur Rahman Chairman 7 2 Mohiuddin Ahmed Vice-Chairman 7 3 Harun Miah (Rep. of Shams Uddin Khan & Harun Miah Ltd.) Vice-Chairman 4 4 Anwer Hossain Khan Director 4 5 Md. Sanaullah Shahid (Rep. of Electra International Ltd.) Director 7 6 Md. Abdul Barek Director 5 7 Abdul Halim Director 6 8 Akkas Uddin Mollah Director 9 Khandaker Sakib Ahmed Director 7 10 A.K. Azad Director 3 11 Mohammed Younus Director 4 12 Fakir Akhtaruzzaman Director 7 13 Mohammed Golam Quddus (Rep. Anwer Khan Modern Hospital Ltd.) Director 7 14 Mosharraf Hossain Chowdhury Independent Director 6 15 Farida Parvin Nuru Independent Director 2 16 Farman R. Chowdhury Managing Director 7 7 Attended Remarks 7 From 04-07-2017 to 31-12-2017 Meeting Held SL Name of Directors Position 1 Engr. Md. Towhidur Rahman Chairman 9 2 Khandaker Sakib Ahmed Vice-Chairman 8 3 Mohammed Golam Quddus (Rep. Anwer Khan Modern Hospital Ltd.) Vice-Chairman 9 4 Anwer Hossain Khan Director 9 5 Akkas Uddin Mollah Director 6 6 Khandaker Sakib Ahmed Director 7 A.K. Azad Director 3 8 Mohammed Younus Director 8 9 Fakir Akhtaruzzaman Director 8 10 Mosharraf Hossain Chowdhury Independent Director 9 11 Farida Parvin Nuru Independent Director 1 12 Farman R. Chowdhury Managing Director 9 Shahjalal Islami Bank Limited Annual Report 2017 9 Attended Remarks 8 129
  132. Number of Executive Committee Meeting held in 2017 was 43 and the attendance of Directors : From 01-01-2017 to 03-07-2017 SL Name of Directors Position Meeting Held 1 Md. Sanaullah Shahid Chairman 22 2 Fakir Akhtaruzzaman Vice Chairman 15 3 A.K.Azad Member 3 4 Akkas Uddin Mollah Member 5 Anwer Hossain Khan Member 11 6 Mohammed Younus Member 10 7 Khandaker Sakib Ahmed Member 22 23 Attended 20 From 04-07-2017 to 31-12-2017 SL Name of Directors Position 1 Akkas Uddin Mollah Chairman 16 2 Fakir Akhtaruzzaman Vice Chairman 10 3 Anwer Hossain Khan Member 15 4 A.K.Azad Member 5 Khandaker Sakib Ahmed Member 17 6 Mohammed Younus Member 17 7 Engr. Md. Towhidur Rahman Member 18 130 Meeting Held 20 Attended 4 Shahjalal Islami Bank Limited Annual Report 2017
  133. Compliance Status of Bangladesh Bank Guidelines on Corporate Governance To ensure good governance i .e. corporate governance in bank management, Bangladesh Bank (BB) issued three circulars in 2013 covering three broad areas as follows: 1. BRPD Circular No.11 dated 27 October 2013: Formation and responsibilities of Board of Directors (BoD). 2. BRPD Circular Letter No. 18 dated 27 October 2013: Appointment and responsibilities of Chief Executive Officer (CEO). 3. BRPD Circular Letter No. 19 dated 27 October 2013: Contractual appointment of Advisor and Consultant. The summary of the BB guidelines and SJIBL’s compliance thereto are presented below: 1. Formation and responsibilities of Board of Directors (BoD) Sl. No. Particulars Compliance Status 1.0 Formation of Board of Directors: Prior approval of Bangladesh Bank before the appointment of new bank directors, as well as dismissal, termination or removal of any director from the post; director’s fit & proper criteria; maximum number of directors; appointment of independent directors; appointment of maximum 2 (two) members from a family as director. Complied 1.1 Appointment of New Directors: Every banking company, other than specialized banks, at the time of taking prior approval from Bangladesh Bank for appointing/reappointing directors should furnish the following documents along with the application: a. Personal information of the nominated person Complied b. Nominated person’s declaration Complied c. Declaration for confidentiality’ by the nominated person Complied d. In case of independent director, the approval letter from BSEC Complied e. In case of Independent director, a declaration of the directors concern Complied f. CIB report of the nominated person Complied g. Updated list of Directors Complied 1.2 Vacation of office of Director:  (a) The office of director shall be vacated according to the instructions specified in section 108(1) of the Companies Act, 1994. Besides, when a bank director becomes defaulter and does not repay the loan within two months after getting a notice under the section 17 of the Bank Company Act, 1991; provides false statement at the time of appointment; or fails to fulfil the minimum eligibility criteria, the office of the director will be vacated. No such case (b) If the office of a director is vacated by a notice under the section 17 of BCA, the person will not be eligible to become a director of the bank or any other bank or any financial institution for one year from the date of repayment of the total amount due to the bank. It is mentionable here that the dues can be adjusted with the shares held by the director in that bank. When a director receives a notice under section 17 of BCA, 1991, he/she can’t transfer his/her shares of that bank until he/she repays all the liabilities of the noticed bank or financial institution. No such case Shahjalal Islami Bank Limited Annual Report 2017 131
  134. Sl . No. Particulars Compliance Status (c) Bangladesh Bank can remove a director or chairman of a bank, except state owned banks, for conducting any kind of activities that is detrimental to the interest of the banks depositors or against the public interest under Section 46 and can supersede the board of a banking company under Section 47 of Bank Company Act, 1991. No such case 1.3 Removal of Directors from office: With the prior approval of Bangladesh Bank, a bank director other than specialized banks can be removed from his office for the reason specified in its Articles of Association. For this purpose, the reason and grounds of the dismissal/removal and copy of the decision of the board and list of directors should be submitted to Bangladesh Bank. In this case, the removal will be effective from the date of Bangladesh Bank’s approval. No such case 1.4 Appointment of Alternate Director: An alternate director can be appointed to act for a director during his absence for a continuous period of not less than three months from Bangladesh. In this context, the following instructions should be followed: No such Director in SJIBL  (a) Bank has to collect and properly maintain the documentary evidences relating to departure and arrival of the original director. If there is any exception, the chief executive officer should immediately inform it to Bangladesh Bank. N/A (b) The copy of the decision of the board regarding appointment of alternate director, with original director’s probable returning date from abroad should be sent to Bangladesh Bank within 7 days of taking the decision and the director’s arrival date must be intimated to Bangladesh Bank immediately after his return. N/A (c) Any loan defaulter or any person who is not eligible to become a director as per any rules & regulation will not be appointed as an alternate director. N/A (d) As appointment of alternate director is a temporary measure; therefore, he/she will not be included in any kind of committee constituted by the board. N/A (e) While in the office, an alternate director or his/her affiliated organization will not get any kind of loan facilities from his bank. In case of previous loan, enhancement of limit or extension of time period or any kind of exemption or interest waiver will not be allowed. Moreover, all restrictions applicable to directors according to rules & regulations will also be applicable to the alternate director. N/A 2 Depositor Director: As per appointment of director from depositors is no longer required. But, after complying regulation under sec 15(9) of the Bank Company Act, 1991 (amended upto 2013) bank can consider the tenure of existing depositor director or may appoint them as independent director. Complied, No Depositor Director in SJIBL 3 Information regarding Directors: Banks are advised to take the following steps regarding directors information:  (a) Every bank should keep an updated list of bank directors. Complied (b) Banks should send a directors’ list to other banks or financial institutions immediately after the appointment or release of director. Complied (c) Banks should display a list of directors on the website and update it on a regular basis. Complied 132 Shahjalal Islami Bank Limited Annual Report 2017
  135. Sl . No. 4 Particulars Responsibilities of the Board of Directors (Board) 4.1 Responsibilities and Authorities of the Board: (a) Work planning and strategic management (i) The board shall determine the objectives and goals and to this end shall chalk out strategies and work-plans on annual basis. It shall specially engage itself in the affairs of making strategies consistent with the determined objectives and goals and in the issues relating to structural change and reformation for enhancement of institutional efficiency and other relevant policy matters. It shall analyze/monitor, at quarterly rests, the development of implementation of the work-plans. (ii) The board shall have its analytical review incorporated in the Annual Report as regards to the success/failure in achieving the business and other targets as set out in its annual work-plan and shall apprise the shareholders of its opinions/ recommendations on future plans and strategies. It shall set the Key Performance Indicators (KPIs) for the CEO & officers immediate two tiers below the CEO, and have it evaluated from time to time. (b) Credit and risk management (i) The policies, strategies, procedures etc. in respect of appraisal of loan/investment proposal, sanction, disbursement, recovery, reschedule and write-off thereof shall be made with the board’s approval under the purview of the existing laws, rules and regulations. The board shall specifically distribute the power of sanction of loan/investment and such distribution should desirably be made among the CEO and his subordinate executives as much as possible. No director, however, shall interfere, direct or indirect, into the process of loan approval. (ii) The board shall frame policies for risk management and get them complied with and shall monitor the compliance at quarterly rests and review the concerned report of the risk management team and shall compile in the minutes of the board meeting. The board shall monitor the compliance of the guidelines of Bangladesh Bank regarding key risk management. (c) Internal Control Management   Compliance Status The board shall be vigilant on the internal control system of the bank in order to attain and maintain satisfactory qualitative standard of its loan/investment portfolio. The board will establish such an internal control system so that the internal audit process can be conducted independently from the management. It shall review the reports submitted by its audit committee at quarterly rests regarding compliance of recommendations made in internal and external audit reports and the Bangladesh Bank inspection reports. Shahjalal Islami Bank Limited Annual Report 2017 Complied Complied Complied 133
  136. Sl . No. Particulars Compliance Status (d) Human Resources (HR) Management and Development (i) Policies relating to recruitment, promotion, transfer, disciplinary and punitive measures, human resources development etc. and service rules shall be framed and approved by the board. The chairman or the directors shall in no way involve themselves or interfere into or influence over any administrative affairs including recruitment, promotion, transfer and disciplinary measures as executed under the set service rules. No member of the board of directors shall be included in the selection committees for recruitment and promotion to different levels. Recruitment, promotion, transfer & punishment of the officers immediate two tiers below the CEO shall, however, rest upon the board. Such recruitment and promotion shall have to be carried out complying with the service rules i.e., policies for recruitment and promotion. (ii) The board shall focus its special attention to the development of skills of bank’s staff in different fields of its business activities including prudent appraisal of loan/ investment proposals, and to the adoption of modern electronic and information technologies and the introduction of effective Management Information System (MIS). The board shall get these programmes incorporated in its annual work plan. (iii) The board will compose Code of Ethics for every tier and they will follow it properly. The board will promote healthy code of conducts for developing a compliance culture. (e) Financial Management (i) The annual budget and the statutory financial statements shall be finalized with the approval of the board. It shall at quarterly rests review/monitor the positions in respect of bank’s income, expenditure, liquidity, non-performing asset, capital base and adequacy, maintenance of loan loss provision and steps taken for recovery of defaulted loans including legal measures. (ii) The board shall frame the policies and procedures for bank’s purchase and procurement activities and shall accordingly approve the distribution of power for making such expenditures. The maximum possible delegation of such power of expenditures shall rest on the CEO and his subordinates. The decision on matters relating to infrastructure development and purchase of land, building, vehicles etc. for the purpose of bank’s business shall, however, be adopted with the approval of the board. (iii) The board will review whether an Asset-Liability Committee (ALCO) has been formed and it is working according to Bangladesh Bank guidelines. (f) Appointment of Chief Executive Officer (CEO): In order to strengthen the financial base of the bank and obtain confidence of the depositors, one of the major responsibilities of the board of directors is to appoint an honest, efficient, experienced and suitable CEO or Managing Director. The Board of directors will appoint a suitable CEO with the approval of the Bangladesh Bank. Complied. (g) Other responsibilities of the Board: The board should follow and comply with the responsibilities assigned by Bangladesh Bank. Complied. The BoD will do so as and when required by Bangladesh Bank. 134 Complied. SJIBL BoD approves HR Policy time to time. Complied. Shahjalal Islami Bank Limited Annual Report 2017
  137. Sl . No. Particulars Compliance Status 4.2 Meetings of the Board of Directors: Board of Directors may meet once or more than once in a month upon necessity and shall meet at least once in every three months. Excessive meetings are discouraged. Complied.Usually SJIBL holds one Board Meetings in a month. 4.3 Responsibilities of the Chairman of the Board: (a) As the chairman of the board of directors or chairman of any committee formed by the board or any director does not personally possess the jurisdiction to apply policy making or executive authority, he/she shall not participate in or interfere into the administrative or operational and routine affairs of the bank. Complied (b) The chairman may conduct on-site inspection of any bank-branch or financing activities under the purview of the oversight responsibilities of the board. He may call for any information relating to bank’s operation or ask for investigation into any such affairs; he may submit such information or investigation report to the meeting of the board or the executive committee and if deemed necessary, with the approval of the board, he shall effect necessary action thereon in accordance with the set rules through the CEO. However, any complaint against the CEO shall have to be apprised to Bangladesh Bank through the board along with the statement of the CEO. Complied (c) The chairman may be offered an office-room, a personal secretary/assistant, one peon/MLSS, one telephone at the office, one mobile phone to use inside the country and a vehicle in the business-interest of the bank subject to the approval of the board. Complied 5 Formation of Supportive Committees of the Board: Each bank company can form 1(one) executive committee, 1(one) audit committee and 1(one) risk management committee with the directors. Board can’t form any other permanent, temporary or sub- committee except the above mentioned three committees. Complied 5.1 Executive Committee (EC): Executive committee should be formed with the members of the board to continue the urgent and daily or routine works between the intervals of two board meetings. Executive committee will perform according to their terms of reference determined by the board of directors. Complied (a) Organizational structure: i. Members of the committee will be nominated by the board of directors from themselves; ii. The executive committee will comprise of maximum 07 (seven) members; iii. Members may be appointed for a 03 (three)-year term of office; iv. Chairman of the Board of Directors can be the chairman of executive committee; v. Company secretary of the bank will be the secretary of the executive committee. (b) Qualifications of the Members: i. Integrity, dedication, and opportunity to spare time in the functions of committee will have to be considered while nominating a director to the committee; ii. Each member should be capable of making valuable and effective contributions in the functioning of the committee; iii. To perform his or her role effectively each committee member should have adequate understanding of the detailed responsibilities of the committee membership as well as the bank’s business, operations and its risks. Shahjalal Islami Bank Limited Annual Report 2017 Complied Complied 135
  138. Sl . No. (c) Particulars Compliance Status Roles and Responsibilities of the Executive Committee: i. The executive committee can decide or can act in those cases as instructed by the Board of directors that are not specifically assigned on full board through the Bank Company Act, 1991 and other laws and regulations. ii. The executive committee can take all necessary decision or can approve cases within power delegated by the board of directors. iii. All decisions taken in the executive committee should be ratified in the next board meeting. (d) Meetings  i. The executive committee can sit any time as it may deem fit. ii. The committee may invite Chief Executive Officer, Head of internal audit or any other Officer to its meetings, if it deems necessary; iii. To ensure active participation and contribution by the members, a detailed memorandum should be distributed to committee members well in advance before each meeting; iv. All decisions/observations of the committee should be noted in minutes. 5.2 Audit Committee: The board will approve the objectives, strategies and overall business plans of the bank and the audit committee will assist the board in fulfilling its oversight responsibilities. The committee will review the financial reporting process, the system of internal control and management of financial risks, the audit process, and the bank’s process for monitoring compliance with laws and regulations and its own code of business conduct. (a) Organizational structure: Complied i. Members of the committee will be nominated by the board of directors from the directors; ii. The audit committee will comprise of maximum 05 (five) members, with minimum 2(two) independent director; iii. Audit committee will comprise with directors who are not executive committee members; iv. Members may be appointed for a 03 (three) year term of office; v. Company secretary of the bank will be the secretary of the audit committee. (b) Qualifications of the Member: i. Integrity, dedication, and opportunity to spare time in the functions of committee will have to be considered while nominating a director to the committee ; ii. Each member should be capable of making valuable and effective contributions in the functioning of the committee; iii. To perform his or her role effectively each committee member should have adequate understanding of the detailed responsibilities of the committee membership as well as the bank’s business, operations and its risks. iv. Professionally Experienced persons in banking/financial institutions specially having educational qualification in Finance, Banking, Management, Economics, Accounting will get preference in forming the committee. 136 Complied Complied Complied Complied Shahjalal Islami Bank Limited Annual Report 2017
  139. Sl . No. Particulars (c) Roles and Responsibilities of the Audit Committee i) Internal Control: 1. Evaluate whether management is setting the appropriate compliance culture by communicating the importance of internal control and the management of risk and ensuring that all employees have clear understanding of their roles and responsibilities; 2. Review management’s actions in building computerization of the bank and its applications and bank’s Management Information System (MIS); 3. Consider whether internal control strategies recommended by internal and external auditors have been implemented by the management; 4. Consider reports relating to fraud, forgery, deficiencies in internal control or other similar issues detected by internal and external auditors and inspectors of the regulatory authority and place it before the board after reviewing whether necessary corrective measures have been taken by the management. (ii) Financial Reporting: 1. Audit committee will check whether the financial statements reflect the complete and concrete information and determine whether the statements are prepared according to existing rules & regulations and standards enforced in the country and as per relevant prescribed accounting standards set by Bangladesh Bank; 2. Discuss with management and the external auditors to review the financial statements before its finalization. (iii) Audit committee will monitor whether internal audit working independently from the management. 2. Review the activities of the internal audit and the organizational structure and ensure that no unjustified restriction or limitation hinders the internal audit process; 3. Examine the efficiency and effectiveness of internal audit function; 4. Examine whether the findings and recommendations made by the internal auditors are duly considered by the management or not. Complied Complied External Audit 1. Review the performance of the external auditors and their audit reports; 2. Examine whether the findings and recommendations made by the external auditors are duly considered by the management or not. 3. Make recommendations to the board regarding the appointment of the external auditors. (v) Compliance with existing laws and Regulations:   Complied Internal Audit: 1. (iv) Compliance Status Review whether the laws and regulations framed by the regulatory authorities (central bank and other Boardies) and internal regulations approved by the board are being complied with. Shahjalal Islami Bank Limited Annual Report 2017 Complied Complied 137
  140. Sl . No. (vi) Particulars Compliance Status Other Responsibilities:   1. Submit compliance report to the board on quarterly basis on regularization of the omission, fraud and forgeries and other irregularities detected by the internal and external auditors and inspectors of regulatory authorities; 2. External and internal auditors will submit their related assessment report, if the committee solicit; 3. Perform other oversight functions as desired by the Board of Directors and evaluate the committee’s own performance on a regular basis. (d) Meetings: 1. The audit committee should hold at least 4 meetings in a year and it can sit any time as it may deems fit; 2. The committee may invite Chief Executive Officer, Head of internal audit or any other Officer to its meetings, if it deems necessary; 3. To ensure active participation and contribution by the members, a detailed memorandum should be distributed to committee members well in advance before each meeting; 4. All decisions/observations of the committee should be noted in minutes. 5.3 Risk Management Committee: To play an effective role in mitigating impending risks arising out from strategies and policies formulated by the Board and to carry out the responsibilities efficiently, a risk management committee will be formed. After identifying and assessing several risk factors like credit risks, foreign exchange risks, internal control and compliance risks, money laundering risks, information and communication risks, management risks, interest risks, liquidity risks etc.; the risk management committee will scrutinize whether appropriate risk management measures are being put in place and applied and whether adequate capital and provision is being maintained against the risks identified. (a) Organizational Structure: 1. Members of the committee will be nominated by the board of directors from themselves; 2. The Risk Management Committee will comprise of maximum 05 (five) members; 3. Members may be appointed for a 03 (three) year term of office; 4. Company secretary of the bank will be the secretary of the Risk Management Committee. (b) Qualifications of the Member: 1. Integrity, dedication, and opportunity to spare time in the functions of committee will have to be considered while nominating a director to the committee; 2. Each member should be capable of making valuable and effective contributions in the functioning of the committee; 3. To perform his or her role effectively each committee member should have adequate understanding of the detailed responsibilities of the committee membership as well as the bank’s business, operations and its risks. 138 Complied Complied Complied Complied Complied Shahjalal Islami Bank Limited Annual Report 2017
  141. Sl . No. Particulars (c) Roles and Responsibilities of the Risk Management Committee: i) Risk identification & control policy :   Formulation and implementation of appropriate strategies for risk assessment and its control is the responsibility of Risk Management Committee. Risk Management Committee will monitor risk management policies & methods and amend it if necessary. The committee will review the risk management process to ensure effective prevention and control measures. ii) Construction of organizational structure:   The responsibility of Risk Management Committee is to ensure an adequate organizational structure for managing risk within the bank. The Risk Management Committee will supervise formation of separate management level committees and monitor their activities for the compliance of instructions of lending risk, foreign exchange transaction risk, internal control & compliance risk, money laundering risk, information & communication risk including other risk related guidelines. iii)   iv) Compliance Status Complied Complied Analysis and approval of Risk Management policy: Risk management policies & guidelines of the bank should be reviewed annually by the committee. The committee will propose amendments if necessary and send it to the Board of Directors for their approval. Besides, other limits including lending limit should be reviewed at least once annually and should be amended, if necessary. Complied Storage of data & Reporting system:   Adequate record keeping & reporting system developed by the bank management will be approved by the risk management committee. The committee will ensure proper use of the system. The committee will minute its proposal, suggestions & summary in a specific format & inform the Board of Directors. v) Monitoring the implementation of overall Risk Management Policy:   Risk Management Committee will monitor proper implementation of overall risk management policies. They will monitor whether proper steps have been taken to mitigate all risks including lending risk, market risk, and management risk. vi) Other responsibilities: 1. Committee’s decision and suggestions should be submitted to the Board of Directors quarterly in short form; 2. Comply instructions issued time to time by the controlling Boardy; 3. Internal & external auditor will submit respective evaluation report whenever required by the committee. d) Meetings: 1. The risk management committee should hold at least 4 meetings in a year and it can sit any time as it may deems fit; 2. The committee may invite Chief Executive Officer, Chief Risk Officer and any other Officer to its meetings, if it deems necessary; Shahjalal Islami Bank Limited Annual Report 2017 Complied Complied Complied   Complied 139
  142. Sl . No. Particulars Compliance Status 3. To ensure active participation and contribution by the members, a detailed memorandum should be distributed to committee members well in advance before each meeting; Complied    4. All decisions/observations of the committee should be noted in minutes. 6 Training of the Directors: The Directors of the Board will acquire appropriate knowledge of the Banking laws and other relevant laws, rules and regulations to effectively discharge the responsibilities as a Director of the bank. Complied 7 Intimation of the Circular to the Board and related persons by CEO: The CEO will inform about this Circular to the directors and other related persons. Complied 2. Appointment and responsibilities of Chief Executive Officer (CEO) Sl. No. Particulars Compliance Status A Rules and regulations for appointment of the CEO 1 Moral Integrity: In case of appointment to the post of CEO, satisfaction in respect of the concerned person should be ensured to the effects that: a) He has not been convicted by any Criminal Court of Law. b) He has not been punished for violating any rules, regulations or procedures/ norms set by any regulatory authority. c) He was not associated with any such company/organization; registration or license of which has been cancelled. 2 Experience and Suitability: a) For appointment as a CEO, the concerned person must have experience in banking profession for at least 15 (fifteen) years as an active officer and at least 02 (two) years experience in a post immediate below the CEO of a bank. b) He must have a Master’s degree at minimum from any recognized university. Higher academic education in the field of Economics, Banking and Finance or Business Administration will be treated as additional qualification for the concerned person. c) In respect of service, the concerned person should have excellent track record of performance. d) Satisfaction should be ensured that the concerned person was not dismissed from service when he was chairman/director/official of any company. e) Any director of any bank or financial institution or any person who has business interest in the concerned bank will not be eligible for appointment to the post of the CEO. 3 Transparency and financial integrity: Before making appointment as a CEO, satisfaction should be ensured to the effects that: a. The concerned person was not involved in any illegal activity while performing duties in his own or banking profession. b. He has not deferred payment to creditors or has not compromised with his creditors to be relieved from debts or he is not a loan defaulter. c. He is not a tax defaulter. d. He has never been adjudicated a bankrupt by the Court. 140 Complied Complied Complied Shahjalal Islami Bank Limited Annual Report 2017
  143. Sl . No. Particulars Compliance Status 4 Age Limit: No person crossing the age of 65 years shall hold the post of CEO of a bank. Complied 5 Tenure: The tenure of the CEO shall not be less than 03 (three) years, which is renewable. If the candidate has less than 3 years left to attain 65 years, he/she can be appointed for that shorter period Complied 6 Guidelines in fixing the salary and allowances: Banks are required to follow the guidelines stated below while determining the salary and allowances of the CEO and submitting such proposal to Bangladesh Bank: a. In fixing the salary and allowances of the CEO, financial condition, scope of operation, business-volume and earning capacity of the bank; qualifications, achievement of the candidate in the past, age and experience and the remuneration paid to the persons occupying same position in the peer banks shall have to be taken into consideration. b. Total salary shall be comprised of direct salary covering ‘Basic Salary’ and ‘House Rent’ and allowances as ‘Others’. The allowances (e.g., provident fund, utility bill, leave-fare assistance) in ‘Others’ head should be specified in amount/ceiling. Besides, other facilities (e.g., car, fuel, driver etc.), as far as possible, shall have to be converted in the monetary value and thus determining monthly total salary, it shall have to be mentioned in the proposal submitted to Bangladesh Bank. In the proposal, Basic Salary, House Rent, Festival Allowance, other allowances and other facilities shall have to be specified in Taka amount. c. Without improving the bank’s major financial indicator like- CAMELS, annual salary increment will not be payable. d. Terms of salary-allowances and other facilities as specified in the terms and conditions of appointment cannot be changed during the tenure. In case of renewal, proposal may be made for re-fixation of the salary considering the work performance of the current CEO. e. The CEO so appointed shall not get any other direct or indirect facilities (e.g., dividend, commission, club expense, etc.) other than the salary-allowances and other facilities as enumerated in clause (b) above. f. The bank shall not pay any income tax for the CEO, i.e., the CEO so appointed shall have to pay it. 7 Incentive Bonus: The CEO will get incentive bonus subject to paying incentive bonus to all executives/officers/workers of the bank and the said bonus amount will not exceed BDT 1,000,000 in a year. Complied 8 Honorarium for attending the Board Meeting: Being a salaried executive, CEO will not get any honorarium for attending the Board meeting or Board formed Committee meeting. Complied 9 Evaluation Report: For reappointment of the CEO, the Chairman of the bank shall have to submit a Board approved evaluation report to Bangladesh Bank. Complied Shahjalal Islami Bank Limited Annual Report 2017 Complied 141
  144. Sl . No. Particulars Compliance Status 10 Prior Approval from Bangladesh Bank: Prior approval from Bangladesh Bank is mandatory before appointing CEO as per section 15(4) & (5) of Bank Company Act 1991 (amended up to 2013). For processing such approval, along with the proposal signed by the Chairman of the Board, the selected person’s complete resume, offer letter (mentioning the direct & indirect remuneration and facilities) and copy of Board’s approval must be submitted to Bangladesh Bank. The selected person must also submit declarations as per Annexure Ka & Annexure Kha to Bangladesh Bank. Complied 11 Decision of Bangladesh Bank is final: The decision of Bangladesh Bank regarding appointment of the CEO will be treated as final and such appointed CEO cannot be dismissed, released or removed from his/her office without prior approval from Bangladesh Bank. Complied B Responsibilities and Authorities of the CEO: The CEO of the bank, whatever name called, shall discharge the responsibilities and exercise the authorities as follows: a. In terms of the financial, business and administrative authorities vested upon him by the Board, the CEO shall discharge his own responsibilities. He shall remain accountable for achievement of financial and other business targets by means of business plan, efficient implementation thereof and prudent administrative and financial management. Complied b. The CEO shall ensure compliance of the Bank Company Act 1991 and other relevant laws and regulations in discharging of routine functions of the bank. Complied c. The CEO shall include clearly any violation from Bank Company Act 1991 and/or other relevant laws and regulations in the “Memo” presented to the meeting of the Board or any other Committee (s) engaged by the Board. Complied d. The CEO shall report to Bangladesh Bank of issues in violation of the Bank Company Act 1991 or of other laws/regulations. Complied e. The recruitment and promotion of all staffs of the bank except those in the two tiers below him/her shall rest on the CEO. He/she shall act in such cases in accordance with the approved service rules on the basis of the human resources policy and approved delegation of employees as approved by the Board. Complied f. The authority relating to transfer of and disciplinary measures against the staff, except those at two tiers below the CEO, shall rest on him/her, which he/she shall apply in accordance with the approved service rules. Besides, under the purview of the human resources policy as approved by the Board, he/she shall nominate officers for training etc. Complied 142 Shahjalal Islami Bank Limited Annual Report 2017
  145. 3 . Contractual appointment of Advisor and Consultant Sl. No. Particulars Compliance Status A Rules and regulations for appointment of an Advisor 1 Experience and Suitability: For appointment as advisor, the concerned person will have to fulfill the following requirements with regard to experience and qualifications: a. Experience in Banking or Administration for at least 15 (fifteen) years or have a long experience in social activities. b. Higher academic education in the field of Economics, Banking and Finance or Business Administration will be treated as additional qualification for the concerned person. c. Satisfaction should be ensured that the concerned person was not dismissed from his service when he was Chairman/ Director/ Executive of any company. d. The person who is working in any bank or financial institution or who has business interest in that bank will not be eligible for appointment to the post of Advisor. e. Satisfaction should be ensured that the concerned person is not a loan defaulter or tax defaulter and has never been adjudicated a bankrupt by the Court. 2 Responsibilities of the Advisor: The roles and responsibilities of the Advisor should be defined specifically. The Advisor can advise the Board of Directors or CEO only on those matters specified in the appointment letter. The routine and general activities of the bank will not be included in his terms of reference. He will not be entitled to exercise any power or involved himself in the decision making process of financial, administrative, operations or other activities of the bank. N/A 3 Prior approval from Bangladesh Bank: Prior approval from Bangladesh Bank is mandatory before appointing an Advisor. For such appointment, the justifications of the post of advisor, responsibilities or terms of reference, complete resume of the concerned person, terms of appointment (mentioning remuneration and facilities) and copy of Board’s approval shall be submitted to Bangladesh Bank. The nominated person has to make a declaration as per Annexure A. This declaration shall also be submitted to Bangladesh Bank. N/A 4 Remuneration and other facilities of Advisor: The post of Advisor is not a fixed or substantive post in the bank’s organization structure. Advisor will not be entitled to salaries and allowances as regular employee except gross amount of remuneration, transport and telephone facilities. Remunerations inconsistent with the terms of reference of the advisor will not be considered as acceptable to Bangladesh Bank. N/A 5 Tenure of Advisor: The tenure of the Advisor shall be maximum 01(one) year, which is renewable. An evaluation report (by the Chairman that is approved by the Board) of previous tenure should be submitted to Bangladesh Bank along with the re-appointment proposal. N/A 6 Appointment of Ex-officials: For ensuring good governance, any former Director, CEO or any other Executive of the bank will not be eligible to become an Advisor in the same bank immediately after their retirement or resignation. However, after one year from such retirement or resignation, he/she will be eligible for appointment as Advisor. N/A Shahjalal Islami Bank Limited Annual Report 2017 N/A 143
  146. Sl . No. Particulars Compliance Status B Rules and regulations for appointment of a Consultant 1 Terms of reference of Consultant: Consultant can be appointed for specialized tasks like tax, law and legal procedures, engineering and technical works, information technology, etc. Consultants’ appointment should be avoided as much as possible for those works that could be done by regular employees of the bank. Complied 2 Responsibilities of a Consultant: The responsibilities or terms of reference of a Consultant should be specified. He/she should not be involved in any activities beyond his/her terms of references and he/she cannot exercise any kind of power in bank operation or cannot participate in the decision making process. Complied 3 Appointment of a Consultant: A Consultant can be appointed with the approval of the Board. After Such appointment the bank shall send the Consultant’s complete resume, terms of reference and details of remuneration to Bangladesh Bank immediately. Complied 4 Tenure of a Consultant: The tenure of a Consultant should be consistent with the terms of reference, but would not exceed 02 (two) years. Generally the Consultant will not be eligible for re-appointment. But to complete the unfinished tasks, his contract may be extended for maximum period of 01 (one) year with the approval of Bangladesh Bank. The Chairman of the bank upon approval of the Board shall have to submit the extension proposal to Bangladesh Bank with the evaluation report of his previous tenure. Complied 5 Remuneration/Honorarium of a Consultant: The Consultant’s remuneration should be in the form of monthly or single lump-sum payment and he is not entitled to any other facilities. Complied 6 Appointment of Ex-officials: For ensuring good governance, any former Director, CEO or any other Executive of the bank will not be eligible for appointment as a Consultant in the same bank immediately after their retirement or resignation. However, after one year from such retirement or resignation, he/ she will be eligible for appointment as a Consultant. Complied 144 Shahjalal Islami Bank Limited Annual Report 2017
  147. Credit Rating Report of Shahjalal Islami Bank Limited Surveillance Rating-2017 Long Term Short Term AA2 ST- 2 Outlook Stable Date of Rating-2017 28 May , 2018 Credit Rating Agency of Bangladesh Limited (CRAB) has affirmed the Long Term Rating of Shahjalal Islami Bank Limited at ‘AA2’ (pronounced Double A Two) and Short Term Rating at ‘ST– 2’. CRAB performed the rating surveillance based on audited financial statements up to 31 December 2017 and other relevant information. <HDUZLVH&UHGLW5DWLQJ 2017 AA2 Shahjalal Islami Bank Limited Annual Report 2017 2016 ST-2 ST--2 AA2 ST-2 ST--2 145
  148. Report of the Audit Committee The Audit Committee performs the oversight responsibilities of the Board of Directors of Shahjalal Islami Bank Limited by reviewing the financial reporting process , the system of internal controls, the audit process, the management of financial risks and the Bank’s process for monitoring compliance with the laws and regulations in force, including its own code of business conduct. In so doing, it is guided by the rules and regulations issued by Bangladesh Bank (BB), the Bangladesh Securities and Exchange Commission (BSEC) and the Banking Companies Act, 1991. Constitution of Audit Committee In compliance with BRPD Circular no.11 dated 27 October 2013 and Bangladesh Securities and Exchange Commission (BSEC) Notification No. SEC/CMRRCD/2006-158/134/Admin/44 dated 07 August 2012 on Corporate Governance, the Board of Directors of the Bank has reconstituted Board Audit Committee in its Meeting no. 262 held on 28-03-2018 consisting of the following five members: Name Status with the Bank Status with the Committee Educational Qualification Mosharraf Hossain Chowdhury Independent Director Chairman Masters Farida Parvin Nuru Independent Director Member Masters Khorshed Alam Khan Director Member B.Com. Md. Moshiur Rahman Chamak Director Member MBA Abdul Halim Director Member BA All the members are knowledgeable and have the ability to ensure compliance with the financial, regulatory and corporate laws. They have professional experience due to their long engagement with corporate & financial management in addition to having the relevant academic background. The Company Secretary acts as the Secretary of the Audit Committee of the Board. Roles and responsibilities of the Audit Committee Besides any other responsibilities which may assign from time to time by the Board, the audit Committee is responsible for the following matters: Internal Control  Evaluate whether the management has set the appropriate compliance culture by communicating the importance of the internal control and clearly define the duties and responsibilities of the bank officials, and whether the management has full control on their activities.  Review the arrangements made by the management for building a suitable Management Information System (MIS) including computerized system and its applications.  Consider whether the internal control strategies/structure recommended by internal and external auditors time to time have been implemented by the management.  Review the corrective measures taken by the management as regards the incidents relating to fraud-forgery, deficiencies in internal control or other similar issues detected by internal and external auditors and inspectors of the regulatory authorities and inform the Board on a regular basis. 146 Shahjalal Islami Bank Limited Annual Report 2017
  149. Financial Reporting  Review along with the management the annual, half yearly and quarterly financial statements before submission to the Board for approval and determine whether they are complete and consistent with the accounting standards set by the regulatory authorities, including full and precise disclosure.  Meet the management and the external auditors to exchange views before finalization of the financial statements. Internal Audit  Evaluate whether internal audit functions operate independently of the management.  Review the internal audit function and organizational structure in order to ensure that unjustified restrictions or limitations do not create a hindrance to audit functions.  Review and assess the annual internal audit plan.  Review the efficiency and effectiveness of internal audit functions.  Review whether the findings and recommendations made by the internal auditors for removing the irregularities are duly complied by the management in running the affairs of the bank. External Audit  Review the audit performance of the external auditors and audit report.  Review whether the findings and recommendations made by the external auditors for removing the irregularities are duly complied by the management in running the affairs of the bank.  Make recommendation to the Board regarding the appointment of the external auditors for conducting audit works of the bank. Compliance with Existing Laws, Rules and Regulations  Review whether the laws and regulations framed by the regulatory authorities (Central Bank, BSEC and other bodies) and internal regulations approved by the Board are being complied with. Other Responsibilities  Place compliance report before the Board on quarterly basis regarding regularization of the errors & omissions, frauds and forgeries and other irregularities as detected by the internal and external auditors and inspectors of the regulatory authorities.  Perform other oversight functions as requested by the Board and evaluated the committee’s own performance on a regular basis. Meeting of the Committee The Audit Committee of the Board of Directors conducted 12 (Twelve) meeting in 2017. Managing Director, Head of IC & CD, Head of Investment and Chief Financial Officer (CFO) were invited to attend the meeting as and when the committee deemed their presence necessary. The Committee had another meeting dated 25 April 2018 to deal with the Auditors’ Report and Financial Statements of 2017, wherein external auditors of the Bank were also present. Shahjalal Islami Bank Limited Annual Report 2017 147
  150. Activities in 2017 During the year under review , the committee, inter alia, focused on the following activities:  Review the internal audit plan for the year 2017 along with its implementation.  Review of significant internal audit report of different branches and divisions/departments of head office and compliance thereof by management.  Review the status of classified investment of the bank and monitor the status of top defaulters.  Review the external auditors’ report and their Management letter and compliance thereof by Management.  Review of the quarterly & half-yearly financial statements for the year 2017 before submission to the Board for approval.  Review of Anti Money Laundering Rating of all branches for the year 2017.  Review of the Quarterly Self-Assessment of Anti-Fraud Internal Controls.  Review of the Bangladesh Bank Comprehensive Inspection Report on Bank. Review of Financial Statements of 2017 The Audit Committee reviewed and examined the Financial Statements for the year ended 31 December, 2017 prepared by management and audited by the external auditors, M/s Hoda Vasi Chowdhury & Co, Chartered Accountants, and recommended it to place the same before the Board for approval and the Board on its 263rd meeting held on 25 April 2018 approved the same. Acknowledgement The members of the Audit Committee express their gratitude and thanks to the Board of Directors, Management and Auditors for their cooperation while performing its duties and responsibilities. On behalf of the Audit Committee Mosharraf Hossain Chowdhury Chairman Board Audit Committee 148 Shahjalal Islami Bank Limited Annual Report 2017
  151. Report of the Board Risk Management Committee Risk management activities of the Bank are being developed in the light of Bangladesh Bank regulations . In compliance with the sub-section (3) of Section of 15Kha of Bank Company (Amended) Act, 2013 and subsequent BRPD circular no. 11 dated October 27, 2013 issued by Bangladesh Bank, the Board of Directors of Shahjalal Islami Bank Limited (SJIBL) formed a committee named as “Board Risk Management Committee (BRMC)”to play an effective role in mitigating impending risks arising out from strategies and policies formulated by the Board and to carry out the assigned roles and responsibilities efficiently. The committee oversee whether appropriate risk management measures are being put in place and applied and whether adequate capital and provision is being maintained against the different risk factors such as Investment (credit) Risk, Foreign Exchange Risk, Internal Control and Compliance Risk, Money Laundering Risk, Information and Communication Risk, Profit Risk, Liquidity Risk etc. after being identified and assessed by the Bank Management properly and competently. Terms of Reference The terms of reference (TOR) of the BRMC are defined as per the Guidelines/Circulars of Bangladesh Bank issued and in-force from time to time. According to the TOR, the committee has a specified role to ensure effective prevention and control measures for the different risk of the Bank. Composition and Status The Board of Directors of Shahjalal Islami Bank Limited (SJIBL) has nominated (5) five person as member of the BRMC. The composition and status of the member of BRMC are mentioned below: Sl. Name Status with the Bank Status with the Committee 1. Mohammed Younus Director Chairman 2. Anwer Hossain Khan Director Member 3. Md. Abdul Barek Director Member 4. Khorshed Alam Khan Director Member 5. Md. Moshiur Rahman Chamak Director Member The company Secretary acts as Secretary of the Broad Risk Management Committee. Role of the Board Risk Management Committee (BRMC) The BRMC plays a significant role in proper functioning of the Bank, some of which are as follows:  Monitoring risk management policies & methods.  Risk assessment and control strategy.  Review of risk policy and its approval.  The committee reviews, at least annually, different risk management policies and Guidelines of the Bank as per Bangladesh Bank Guidelines.  Monitoring implementation of overall risk management policies to mitigate risk including Investment risk, Market risk and Management risk etc. Meeting of the Board Risk Management Committee (BRMC) Bangladesh Bank advised to hold at least 4 meetings in a year. The Board Risk Management Committee of SJIBL held 7 (Seven) meetings and 50 (fifty) memos were placed before the committee in the year 2017. Shahjalal Islami Bank Limited Annual Report 2017 149
  152. Activities of the Board Risk Management Committee in the year 2017 The major activities of the Board Risk Management Committee (BRMC) in the year 2017 were as follows: a) b) c) d) e) f) g) h) i) j) k) l) m) n) o) p) q) r) s) t) Reviewed the Bank’s Risk Management Guidelines and recommended thereon. Reviewed all Core Risk Management Guidelines of the Bank. Reviewed the Internal Capital Adequacy Assessment Process (ICAAP) Manual/ Guidelines of the Bank. Reviewed the Internal Capital Adequacy Assessment Process (ICAAP) report of the Bank. Reviewed the Environment & Social Risk Management (ESRM) activities of the Bank. Reviewed the Capital to Risk Weighted Assets Ratio (CRAR) of the Bank from time to time against Minimum Capital Requirement (MCR). Reviewed the Risk Appetite Statement of the Bank. Reviewed the Delegation of Power (Business Discretionary Power) for the Bank. Evaluated the Stress Testing Result as per requirement of Pillar-2 of Basel-III periodically. Evaluated the Risk Based Capital Adequacy (Basel-III) Report as per Pillar-1 of Basel-III periodically. Evaluated the Monthly Risk Management Report (MRMR) and Comprehensive Risk Management Report (CRMR) of the Bank periodically. Evaluated the implementation status of the decisions taken in the management level Risk Management Committee (RMC) meetings time to time. Reviewed the Management Action Triggers (MAT) with Supplementary Documents of ICAAP under Pillar-2 of Basel-III. Reviewed the status of Bank’s Recovery, Classification, Legal position and Written off accounts periodically. Reviewed the Bank’s overall collateral securities and advised the management to obtain additional securities from the large borrowers on best effort basis to reduce additional capital charge of the Bank. Evaluated the concentration of Investment portfolio of Bank and advised the management to diversify investment portfolio as far as possible and practicable. Reviewed the Bank’s overall rated investment clients and advised the management to improve the number of rated investment clients by pursuing the existing Corporate and SME investment clients to reduce the Risk Weighted Assets (RWA) as well as to reduce additional capital charge on the Bank. Reviewed the Bank’s Top-100 Defaulter Clients and the status thereof. Reviewed the status of the large investments of the Bank and advised the management to closely monitor such investments for further improvement. Reviewed the CAMELS rating and Comprehensive Risk Management Ratings of the Bank and advised the management for further improvement. The Minutes of the RMC meetings with suggestions were placed for implementation and to the Board of Directors for subsequent approval. Reporting to the Board The decisions and recommendations of the Board Risk Management Committee were submitted before the Board of Directors for reviewing and the Board closely reviewed and approved the same as placed. Acknowledgement The members of the Board Risk Management Committee (BRMC) express their gratitude and thanks to the Board of Directors, Management and Risk Management Team of the Bank for their cooperation while performing its duties and responsibilities. 150 Mohammed Younus Chairman Board Risk Management Committee Shahjalal Islami Bank Limited Annual Report 2017
  153. CEO /CFO’s Declaration to the Board 25 April, 2018 The Board of Directors Shahjalal Islami Bank Limited Shahjalal Islami Bank Tower Plot No. 04, Block. CWN(C) Gulshan Avenue, Dhaka-1212 Sub: CEO/CFO’s Declaration to the Board The following is provided to the Board of Directors of Shahjalal Islami Bank Limited in our capacity as the persons responsible for performing the functions of Managing Director & CEO and Chief Financial Officer of the Bank. In accordance with the notification of Bangladesh Securities and Exchange Commission No. SEC/CMRRCD/2006-158/134/ Admin/44 dated 7th August 2012; we declared that for the financial year ended 31 December, 2017: i) ii) We have reviewed the financial statements for the year and that to the best of our knowledge and belief: a) These statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading; b) These statements together present a true and fair view of the company’s affairs and are in compliance with existing accounting standards and applicable laws; There are, to the best of knowledge and belief, no transactions entered into by the Bank during the year which are fraudulent, illegal or violation of the Bank’s code of conduct. Md. Jafar Sadeq FCA Chief Financial Officer Shahjalal Islami Bank Limited Annual Report 2017 Farman R. Chowdhury Managing Director & CEO 151
  154. Evaluation of Quarterly Financials by the Audit Committee & Board Every listed company is required to prepare and publish quarterly financial statements for the first quarter (Q-1), first half-year (Q-2) and third quarter (Q-3) as per requirement of Bangladesh Securities and Exchange Commission (BSEC). SJIBL prepares quarterly financial statements as per requirement of Bangladesh Securities and Exchange Commission (BSEC) and in accordance with Bangladesh Accounting Standard (BAS)-34: “Interim Financial Reporting”. Key highlights of interim results of the bank is stated below: (Amount in million) Balance Sheet Placement with other Banks & FI’s 31 Dec 17 31 Dec 16 30 Sep 17 30 Sep 16 30 Jun 17 30 Jun 16 31 Mar 17 31 Mar 16 6,661.71 7,861.78 6,661.71 9,771.78 7,781.71 12,192.93 7,381.71 11,002.93 10,526.26 7,593.13 10,066.94 7,411.22 8,006.00 5,767.39 7,561.20 5,705.48 158,668.16 122,998.38 146,654.78 109,433.83 140,160.13 109,915.13 129,309.84 100,296.44 29,621.69 16,235.54 23,545.03 7,436.61 20,521.86 10,088.17 14,510.51 7,754.01 145,382.48 124,409.83 136,353.17 121,469.27 135,307.78 120,257.72 132,431.91 112,219.99 7,714.23 7,346.88 7,714.23 7,346.88 7,346.88 7,346.88 7,346.88 7,346.88 13,317.78 12,856.58 13,031.61 12,192.33 13,497.04 11,887.23 13,153.21 12,519.69 207,886.37 167,244.76 193,228.32 156,207.07 188,422.34 156,682.55 174,368.20 146,540.52 89,225.56 63,325.73 83,060.72 58,423.38 76,020.77 56,805.53 69,490.36 50,084.03 Profit and Loss Account 01 Jan 17 to 31 Dec 17 01 Jan 16 to 31 Dec 16 01 Jan 17 to 30 Sep 17 01 Jan 16 to 30 Sep 16 01 Jan 17 to 30 Jun 17 01 Jan 16 to 30 Jun 16 01 Jan 17 to 31 Mar 17 01 Jan 16 to 31 Mar 16 Net Investment Income 4,441.06 4,167.85 3,216.03 3,059.89 2,108.40 2,046.47 967.89 967.77 Non Investment Income 2,428.73 1,810.31 1,710.09 1,260.00 1034.49 863.38 456.70 365.35 Operating Expenses 3,541.88 2,998.96 2,357.49 2,021.05 1,449.61 1,311.92 648.55 574.69 Operating Profit 3,327.92 2,979.21 2,568.63 2,298.85 1,693.27 1,597.93 776.05 758.43 Net Profit After Taxation 1,195.90 1,557.37 909.72 893.12 640.46 588.02 296.63 265.39 Earnings per share (EPS) [Restated] 1.55 2.02 1.18 1.16 0.83 0.76 0.38 0.34 Inv in Shares & Securities Investment Placement from other Banks & FI’s Deposit & Other accounts Paid up Capital Total Shareholder’s equity Total Assets Off Balance Items Other Information Net Asset Value (NAV) per share [Restated] NOCFPS [Restated] 31 Dec 17 31 Dec 16 30 Sep 17 30 Sep 16 30 Jun 17 30 Jun 16 31 Mar 17 31 Mar 16 17.26 16.67 16.89 15.80 17.50 15.41 17.05 16.23 3.26 5.02 (0.38) 5.62 (0.32) 3.50 1.55 3.56 The interim result is reviewed by the Audit Committee of the Board before publishing and then referred it to the Board of Directors for its approval. After being approved by the Board of Directors, the interim financial statements are submitted to the Bangladesh Securities and Exchange Commission (BSEC), Dhaka Stock Exchange (DSE) Ltd. and Chittagong Stock Exchange (CSE) Ltd. and then published in two daily newspapers (Bangla and English). The report is also available in the Bank’s official website at www.sjiblbd.com. 152 Shahjalal Islami Bank Limited Annual Report 2017
  155. Sustainability Report Sustainability for Shahjalal Islami Bank Limited (SJIBL) means carrying out its business continuously to contribute in economic and social wellbeing of the community in which we operate. In order to meet expectation of stakeholders we must make our business sustainable. The work we are doing on sustainability is an integral part of the business, contributing to the long-term performance of the Bank and the return to ongoing profitability, steering the Bank towards its corporate targets with a direction of growth that meets expectation of shareholders and above all the community we operate in. Our stakeholder engagement approach allows us to understand the issues that matter most to those who have an interest in our business: treating customers fairly, being good employer, keeping customers’ money and data safe. It is necessary to have a solid business model capable of generating recurring and stable revenue, delighted customers, disciplined use of capital, rationalization of cost, prudent risk management, and strength of Brand to become sustainable corporate house. Sustainable also means taking responsible decisions in context of ethical, social and environmental issues as well as long term welfare of the community. Approach to Sustainability SJIBL is firmly committed to being good corporate citizen and to helping clients and other key stakeholders to achieve sustainable success. Our approach to sustainability lies on:  Adaptability with our long term vision challenging the changes in natural and economic environment.  Integration of ethical, social and environmental criteria into the business decision making process.  Adherence to compliance, transparency, and corporate governance.  Contribution to social and economic progress in the communities where the bank is doing business.  Continuation of stable and lasting relationships with all related stakeholders including employees of the bank. Sustainable Activities Customer Satisfaction A satisfied customer is the key driver/core element to the success of any organization. SJIBL truly respects its business partners, thereby ensuring that it exceeds the expectation of its customers. To encourage people from all economic categories for becoming bank’s customer, to ensure improved customer service, to help them run business efficiently, to encourage them in following Islamic principles in their business entities and to make them real partners of the Bank, the Bank takes various initiatives:  Every branch of the Bank keeps a ‘Complaint Box ‘ to facilitate the customers, lodging complaints against services of the Bank or against particular employee(s). A “Customers Complaint Cell” has been formed. All the complaints since received duly verified and resolved meticulously.  Regular meetings are held with the selected customers in different level of Management to discuss on their business issues and to suggest them for further improvement.  The Bank observes “Service week/fortnight month” every year. During the period, several customer-gatherings are organized in the branches which bring a cluster of customers face to face with the Bank Management. These meetings make the Management experienced with customers’ views, aspirations and suggestions for improvement of Bank’s services. Bank employees also pay visit to the customers’ establishments. This program strengthens the bond of relationship between the Bank and Customers. Shahjalal Islami Bank Limited Annual Report 2017 153
  156. Products and Services of SJIBL SJIBL offers cost effective and sustainable products and services to meet customers ’ need. These products and Services are not offered solely on financial considerations but also to incorporate ethical, social and environmental aspects. Environmental and Social Risk Management SJIBL takes into account and assesses social and environmental aspects in the credit risk analysis and decision-making processes for its financing operations. SJIBL also follows the minimum regulatory requirement for assessment of Environmental Risk Rating. SJIBL also recognizes its responsibility to carry out procurement activities in an environmentally and socially responsible manner. In accordance with Bank’s ‘Corporate Procurement Strategy’, it strives to incorporate environmental and social considerations into the procurement process to minimize negative environmental and social effects associated with the products and services procured from suppliers. Promoting Sustainable Finance Our main impact on people and the environment stems from the business activities we finance. We work closely with our clients and customers to manage potential environmental and social risks associated with our financing decisions and to identify opportunities to finance cleaner technologies. Employee Engagement SJIBL has succeeded to develop a team of highly motivated professionals, working for the benefit of the people, based upon accountability, transparency and integrity. The Bank always aware of continuous development of knowledge, competencies and attitude of the employees; comfortable and modern working environment as well as justified and competitive compensation packages for them. Bank premises are taken with adequate space and interior decorations are made to keep the office environment healthy and congenial for smooth working. Female employees are also provided with comfortable working environment along with other required facilities. Safe drinking water is supplied to the employees in the office premises. Fire fighting equipments are also available in all offices. To develop professional knowledge, skill and attitude of the employees, the employees of the Bank attended training program/seminar, workshop both at home and abroad. The Training Academy of the bank arranged various courses, workshops and seminars on important aspects of Banking throughout the year on regular interval. We invite experts of Banking Sector for imparting training to our employees to meet the above challenges. To keep the employees motivated, incentives, performance reward, promotion and accelerated promotion etc. are given on a regular basis. The Bank has developed a complete pay-scale for the employees, which is upgraded and adjusted with the prevailing market on a regular intervals. Giving due attention to the lower level employees, the ratio of the pay between highest and lowest level in the pay-scale has been maintained. Financial Inclusion Lending activities are done to support job creation and economic development of the country. We are also committed to extending access to finance for more individuals small and corporate businesses. We are committed to microfinance as a means of poverty alleviation. We have partnered with a good numbers of MFIs to disburse small investments to primary agriculture, solar home systems, and other rural economic activities. Shariah Compliance SJIBL has been operated as the Shariah compliant Bank in the country. Shariah Council of the Bank has been contributing their best towards invention of the ways and means to overcome the problems being faced by the bank in complying shariah principles time to time and to introduce new products which is based on Shariah principles. The Bank is also complied all the laws/regulations and instructions of the regulatory authorities of the country. 154 Shahjalal Islami Bank Limited Annual Report 2017
  157. Corporate Governance Good governance contributes to the long-term success of a company , creating trust and engagement between the company and its stakeholders. The right culture, behavior and values have been established and promoted at all levels of the bank. The Bank is committed to ensure the highest standard of corporate governance and effective application of its principles as well as upholding the best banking practices as a part of discharging its responsibilities to safeguard the interest of shareholders. Corporate Social Responsibility At SJIBL, we believe that the most rewarding investment is investing for the society. We are driven by our purpose to sustain and ensure growth by making profit for people and not over them. We believe in creating lasting value for our clientele, shareholders, and employees and above all for the community we operate in. We recognize that we have some definite responsibilities to our customers, employees, government, environment, and to the communities at large. A detail report on CSR has been presented separately in the Annual Report. Environmental and Social Obligations Shahjalal Islami Bank Ltd. (SJIBL) undertakes its responsibility to be recognized as an organization that is aware of both its social and environmental obligation. SJIBL has engaged itself to influence its customers to operate responsibly and minimize impacts on climate change issues, hazardous waste disposal, and depletion of non-renewable natural resources. The key areas that the Bank focuses upon are to provide a safe and healthy workplace, protect the environment and conserve energy through use of appropriate technology and management practices. SJIBL believes in nurturing the talent of the individuals of the communities in which it operates. By initiating numerous projects and services that facilitate in a socially responsible way, SJIBL ensures sustainability of the greater environment and social well-being. Environmental and Social Initiatives SJIBL strives to meet and exceed the social and environmental expectations beyond the minimum regulatory requirements. Integration of ethical, social and environmental criteria in business decision making process was our core initiatives in 2017. Some notable initiatives are given below:  Educating the employees in ‘Green Banking’ and encouraging them to ingrain the practices in their daily activities. With the initiatives for creation of a paperless office, all the officials of the bank are given computer with e-mail facilities to reduce dependencies on paper and table stationeries.  Employees are encouraged to minimize the environmental impact of business operations, by working to reduce the wastage of all resources.  SJIBL is especially concerned about the impact of bank’s financed projects on environment. An environmental policy has been formulated in accordance with guideline issued by the government. As per policy, environmental impacts are duly considered during new project investment appraisal and also during the continuation of the projects.  To ensure green industrialization, clearance is taken from the department of environment of the government before giving sanction to any new project. All possible cares are taken to protect environmental pollution by bank’s sanctioned projects. In this regard, clients are encouraged to establish E.T.P to the projects like dyeing, printing, 120 feet chimney for the brick fields etc. NOC from various authorities such as, Explosive Department, Fire Services Department, Rupantorito Prakritic Gas (CNG) Company etc. are also obtained for setting up gasoline/ CNG filling station.  SJIBL extended investments to different industrial customers for establishing Effluent Treatment Plant (ETP). Shahjalal Islami Bank Limited Annual Report 2017 155
  158.  Due to quick urbanization in the country, forest and agricultural land is becoming squeeze which hampers ecological balance severely. In view to improve ecological harmony, the bank takes a campaign program of “one man one plant” among the employees and the customers. It observes ‘plantation week’ during the rainy season every year.  Respect for people by honoring the culture, customs, history and laws of Bangladesh. Constantly search for safer, cleaner and superior practices that satisfy the evolving needs of the society.  Promote and engage in social welfare activities that help strengthen communities and contribute to the enrichment of society. Ecology and Green Banking Green Bank is simply with social awareness. SJIBL insists on going green to help the environment that promote its online banking, Mobile Banking or the idea of socially responsible investment funds for sustainable project finance activities. An important and easy aspect of green banking is online and investment in eco-friendly business projects. A truly green bank will reduce its carbon footprint by building more efficient premises, branches, implementing more efficient operational procedures promoting sustainable banking and increasing their investments in environmentsensitive industries. Green Banking practices in SJIBL are connected with both internal operation and product ecology. Product ecology is concerned with the impacts of the bank’s on the environment used by the clients. Green banking engaged in creating socially responsible investment funds and sustainable project finance activities. SJIBL is concerned with the well-being of its employees and customers satisfaction, benefits, wages and the banks environmental standing. The bank is putting a combined effort on switching to more environment –friendly practices i.e. online banking, reducing wastage of paper and electricity, using solar power and energy saving light bulbs, saving day light during office hours and being more conscious about employee travel policies. Benefits of online banking include less paperwork, less mail etc., which all have a positive impact on the environment. The environment and the banking industry both are benefited when bank customers start using the online banking, SMS banking and mobile banking services. SJIBL aims at introducing changes in operational areas in future to adopt more environment–friendly procedures. The progression of our current banking system towards a fully electronic and online banking will further reduce cost and will be beneficial for our customers. Ethical Banking Banks and the policies they pursue have an impact on the community around them. Their impact has two dimensions: the way they operate i.e. internal operations and the types of companies they help finance. SJIBL takes care of both the dimensions in its operation. Many ethical issues such as the environmental conduct of business customers are now part of standard risk assessment and prudent banking. It is becoming increasingly common practice for banks to have established guidelines for their staff on the major ethical issues covered. SJIBL has been trying to follow the Equator Principles, a set of guidelines developed by the banks for managing social and environmental issues related to the financing of development projects. Our investment is based on Islamic values as defined by the principles of Shariah (Islamic law). The Islamic Shariah attempts to maximize social welfare. Consequently Islamic investment involves the screening out of those companies whose primary business does not conform with the shariah principles. Integrated Reporting The primary purpose of an integrated report is to explain to providers of financial capital how an organization creates value over time. However, an integrated report benefits all stakeholders interested in an organization’s ability to create 156 Shahjalal Islami Bank Limited Annual Report 2017
  159. value over time , including employees, customers, suppliers, business partners, local communities, legislators, regulators and policymakers. An integrated report aims to provide insight about the resources and relationships used and affected by an organizationcollectively referred to as ‘the capitals’. It seeks to explain how the organization interacts with the external environment and the capitals to create value over the short, medium and long term. The capitals are categorized in the international framework as financial, manufactured, intellectual, human, social & relationship and natural capital. Value Added Statement The value added statement for the Bank shows how the value is created and distributed among different stakeholders of the Bank. Value Added Statement for the year ended 31 December 2017 Particulars 2017 (Taka) % 2016 (Taka) Income From Banking Services 15,288,772,460 12,964,667,474 Less: Cost of services & supplies 9,606,461,787 7,960,852,955 Value added by the Banking services 5,682,310,673 5,003,814,518 - - Loan & Other Provisions (1,249,400,000) (673,126,000) Total value added 4,432,910,673 4,330,688,518 Non-banking income % Distribution of added value To Employess as salaries & allowances 2,226,323,444 50.22% 1,902,508,561 43.93% To Government as Income Tax 882,620,568 19.91% 748,711,021 17.29% To Statutory Reserve 415,703,308 9.38% 461,216,247 10.65% To Expansion & growth 908,263,352 20.49% 1,218,252,689 28.13% Retained earnings 780,192,665 1,096,153,968 Depreciation 128,070,687 122,098,721 4,432,910,673 100% 4,330,688,518 100% Distribution of Added Value FY 2017 FY 2016 20.49% 28.13% 43.93% 50.22% 9.38% 10.65% 19.91% 17.29% Employees Salaries & allowances Government as Income Tax Employees Salaries & allowances Government as Income Tax Statutory Reserve Expansion & Growth Statutory Reserve Expansion & Growth Shahjalal Islami Bank Limited Annual Report 2017 157
  160. Economic Value Added Statement Economic Value Addition (EVA) indicates the true economic profit of the company. EVA is an estimate of the amount by which earnings exceed or fall short of required minimum return for shareholders at comparable risks. Economic Value Added Statement for the year ended 31 December 2017 Taka in Million Particulars 2017 2016 Total Revenue 15,288.77 12,964.67 Expenses 11,960.86 9,985.46 882.62 748.71 1,517.14 1,185.41 928.15 1,045.09 Corporate Tax Capital Charges Economic Value Added Economic Value Addition FY 2017 FY 2016 6.07% 8.06% 9.92% 9.14% 5.77% 5.78% 78.23% 77.02% Expenses Corporate Tax Expenses Corporate Tax Capital Charges Economic Value Added Capital Charges Economic Value Added Market Value Added Statement Market Value Added Statement reflects the company’s performance evaluated by the market through the share price. This amount is derived from the difference between market capitalization and book value of the shares outstanding. It signifies the enhancement of financial solvency as perceived by the market. 158 Shahjalal Islami Bank Limited Annual Report 2017
  161. Market Value Added Statement for the year ended 31 December 2017 Taka in Million Particulars 2017 2016 Face value per share (Tk.) 10.00 10.00 Market Value per Share (Tk.) 33.00 15.00 Number of Shares outstanding 771,422,539 734,688,133 25,456.94 11,020.32 7,714.22 7,346.88 17,742.72 3,673.44 Total market capitalization Book value of paid up capital Market Value Addition Market Value Added Statement (million Taka) 17,742.72 3,673.44 2017 2016 Year Shahjalal Islami Bank Limited Annual Report 2017 159
  162. Corporate Social Responsibility The concept of Corporate Social Responsibility (CSR) is based on the idea that not only Government policy but also companies have obligation to benefit the society. CSR is seen as a concept in which companies voluntarily integrate social and environmental concerns into their business operations and into the interaction with their stakeholders. As a matter of fact, over the last few decades, corporations in the developed economics have moved to ‘Social Responsibility Approach’ from classical ‘Profit Maximizing Approach’ where businesses are not only responsible to its stakeholders but also to the society as a whole in a broader inclusive sense. The idea of being a socially responsible company means doing more than complying with the legal and regulatory requirments. Shahjalal Islami Bank Limited (SJIBL) being one of the best corporate citizen of the country, has been discharging its responsibilities for the well-being of the community where the bank is doing its business directly through its banking activities and through Shahjalal Islami Bank Foundation, since its inception. The theme of such responsibility has been envisaged in the mission of the Bank since the day of establishment. SHAHJALAL ISLAMI BANK FOUNDATION Corporate Social Responsibility (CSR) is a form of corporate self-regulation integrated into a business model. CSR policy functions as a built-in, self-regulating mechanism whereby business monitors and ensures its active compliance with the spirit of the law, ethical standards and international norms. The goal of CSR is to embrace responsibility for the company’s actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere. With a view to and also for the welfare of the community, to this perspective, Bank has established “Shahjalal Islami Bank Foundation”. The main objectives of Shahjalal Islami Bank foundation are:  To provide health-care to poor and distressed peoples.  To provide education support to meritorious but poor students through scholarship award.  To provide financial assistance to people afected by flood, cyclone or disaster.  To support humanitarian.  To provide financial assistance to develop culture and sports of the country.  To participate in social and environmental activities. RESPONSIBILITY TOWARDS COMMUNITY The Bank is very much conscious regarding its responsibility towards the communities within which it operates. The most important contribution of the Bank in this regard is the creation of employment opportunities in its financed projects as well as in its own organization. At present about 2,402 employees are working in the bank. Apart from this, it takes several programs in order to improve the lives of the people especially to the less fortunate segments of the community. Bank’s strategy towards discharging community responsibility focuses on: (1) Health, (2) Education, (3) Sports, Arts & Culture, (4) Women Empowerment and (5) Humanitarian Assistance etc. 160 Shahjalal Islami Bank Limited Annual Report 2017
  163. Health Health is one of the prime parameters to achieve Millennium Development Goal (MDG). The need for health care is increasing everyday due to rapid growth of population. Shahjalal Islami Bank Limited has always been involved in projects for improvement in health sector. SJIBL has been contributing by donating different health care institutions, fianancial assistance to underprivileged & poor people, health & well being of the women and children and adoption and maintenance of healthy lifestyle etc. As a good corporate citizen we always feel it is our duty to stand by the people who are suffering or in difficulties. SJIBL extended financial support to the distressed people of the country during the year 2017 by donating Tk. 2.36 million for their medical treatment. Education Education is a pre-requisite for the overall development of the country. Keeping the views in mind, Shahjalal Islami Bank Limited has long been practicing CSR in education. Awarding scholarship to meritorious students in need of financial aid, helping development of educational infrastructural facilities, providing essential educational equipment etc. are some of the aspects included in the program. The Bank has distributed scholarship amounting to Tk. 12.95 million in the year 2017 to poor but meritorious student with outstanding result in secondary school and higher secondary examinations to facilitate them for pursuing their further studies without hindrance. The program of this education award will continue every year. Despite scholarship, the Bank also extended financial support and donation during the year 2017 valuing Tk 20.25 million for the development and establishment of Educational Institutions and also for the establishment of Computer Lab with a view to built digtal Bangladesh in line with Vision 2021 of Bangladesh Government. Sports, Arts & Culture Over the years, Shahjalal Islami Bank Limited has been contributing for the development of sports, arts and culture in Bangladesh which includes donation to different cultural institutions, financial assistance to talents, promoting cultural activities etc. As part ot the Bank’s CSR activities, Shahjalal Islami Bank Limited donated Tk 1.15 million to Bangladesh Volleyball Fedaration during the year 2017 for National Volleyball Championship-2017. Women Empowerment SJIBL is very much conscious about the prevailing conditions of the women in our society. Keeping this in view it takes various programs for empowering the women like awareness building, training, financing etc. Humanitarian Assistance Shahjalal Islami Bank Limited seeks to demonstrate firm commitment towards the community by being vigilant towards identifying and supporting causes that will facilitate the upliftment/betterment of the society. The primary focus of the Bank is towards communities where public and private sector services are inadequate as a result of geographical or social isolation or because of insufficient demand levels. In the year 2017, SJIBL took different initiatives to create effective intervention and mitigation of disaster in Bangladesh by distributing relief materials valuing Tk 6.62 Million to the distress people and valuing Tk 8.11 Million among Rohinga Refugees. The bank also donated Tk 50 million for Rohinga Refugees, Tk 27.5 million as financial assistance and Tk 30 million for flood affected people during the year 2017. Like earlier, the Bank distributed 88,930 pcs Blanket valuing Tk 30.4 million to cold striken people throughout the country during the year 2017. This year Bank has also donated handsome amount to two affected families of BDR tragedy, as part of its commitment. Shahjalal Islami Bank Limited Annual Report 2017 161
  164. RESPONSIBILITY TOWARDS ENVIRONMENT The main theme of environmental responsibility is to create ‘No Harm’ to the environment in view to remain it healthy for future generation. Recently, the issue of climatic change is being addressed seriously all over the world. It is identified that Bangladesh being a southern delta is under serious threat of natural disaster. In view of the above, the corporations are recommended to pay due attention to the followings:  To reduce the use of non-renewable energy & materials (electricity, gas, fuel, paper, stationeries etc.) and to increase use of renewable or recyclable energy & materials (solar power, bio-gas, electronic media of communication etc.)  Reduction of the emission of industrial carbon.  Scrutiny of negative impacts of the corporations on environment and taking necessary mitigating measures there against. SJIBL, being a responsible Bank, has taken numerous initiatives in this regard. Contribution to national exchequer Being a responsible and tax abiding corporate citizen, Shahjalal Islami Bank Limited regularly pays corporate tax on time, sometime even before it falls due as required and asked by the tax authority. We also deposit excise duty, withholding tax and VAT to Government Exchequer on time that deducted from employees’ salary as well as payments to customers and vendors. FUTURE PLAN Shahjalal Islami Bank Limited is committed to undertake more welfare activities for the society and people of Bangladesh in the days to come. Shahjalal Islami Bank Foundation has a planning to establish the following projects and programs:  Shahjalal Islami Bank International School & College.  Shahjalal Islami Bank Hospital. 162 Shahjalal Islami Bank Limited Annual Report 2017
  165.     Shahjalal Islami Bank Limited Annual Report 2017 163
  166. Report on Risk Management Risk is inherent in any walk of life in general and in financial sectors in particular . But of late, banks are exposed to same competition and hence are competed to encounter different types of financial and non-financial risks. Risks and uncertainties form an integral part of banking which by nature entails taking risks. Risk management is a discipline at the core of every banking company and encompasses all activities that affect its risk profile. Bank should attach considerable importance to improve the ability to identify measure, monitor and control the overall risks assumed. Risk Management is the identification, analysis and economic control of risks which threaten the assets or earning capacity of a bank. The objective of risk management is to identify and analyze risks and manage their consequences. Development Process- Risk Management Framework Know your Business Rank Portfolio of Risks Quantify Risk Appetite Merge Risk Blueprint with Organizational Strategy Established Governance and Management Structures, Build Systems and Infrastructure, Develop Policies and Procedures Shahjalal Islami Bank Limited has always been in the forefront of implementing different risk management tools and techniques. Its risk management approach is emphasized not only for regulatory purpose but also to improve operational and financial performance of the Bank. The prime objective of the risk management is that the Bank takes well calculated business risks while safeguarding the Bank’s assets and its profitability from different risks. Risk management process consists of: i.Identification: A Bank’s risks have to be identified before they can be measured and managed. ii.Measurement: The consistent assessment of the different identified risks is an essential prerequisite for successful risk management. iii.Aggregation: SJIBL closely monitors aggregate risk in order to minimize its exposure to adverse financial developments such as an investment (credit) crunch or event in solvency arising from counterparty or client. iv. Planning and Controlling: SJIBL takes into consideration the business strategy while planning and setting control for mitigating risk. v.Monitoring: Risk monitoring is the most challenging task in the whole risk management cycle as monitoring helps the Bank to identify earlier any probable risk that may take in place in many cases. 164 Identification Measurement Aggregation Planning and Controlling Monitoring Shahjalal Islami Bank Limited Annual Report 2017
  167. Risk Governance Structure The Bank has established a different tiered risk governance structure to support effective risk management throughout the organization covering all key business activities . The integrated risk management structure has been established in a manner that the ‘risk monitoring’ activities are independent from the ‘risk assuming’ activities. The Bank has clearly defined the authority and accountability of each official to clearly demarcate his/her roles and responsibilities. The entire risk management structure is clearly connected to the Board Risk Management Committee and with the Board of Directors to facilitate a consolidated view of the organization based on risk perspective. The Board of Directors is assisted by the committees listed in the table below effectively deploying the Bank’s risk management framework and capabilities to achieve its strategic objectives: Committee Key Objectives Board Audit Committee Independently monitors all activities of banking relating to operational risks through Internal Control & Compliance Division (IC&CD) of the Bank. Review the financial reporting process, the system of internal control and management of financial risks, the audit process and the Bank’s process for monitoring compliance with laws and regulations and our own code of business conduct. Board Executive Committee To review and approve proposals and transactions related to Investments within the limits of delegated authority. Review and approve Bank-wide investment policy and strategy in line with the directives from Board of Directors. Board Risk Management Committee To identify and measure different kinds of risks including core risks of the Bank and to maintain adequate capital and provision to reduce the risks associated with the Bank as per Bangladesh Bank Guidelines. Management Committee (MANCOM) To approve and review different policies/procedures to ensure that the entire day to day affairs of the Bank are properly managed within the broad strategies of the Bank. Asset Liability Committee (ALCO) To review the overall economic & investment, cost of fund, investment pricing, liquidity contingency plan for the bank and took timely decisions on effective utilization & management of assets & liabilities of the Bank towards profit maximizing and rationalization of expenditure. Supervisory Review Process (SRP) Team To oversee the Capital Adequacy of the bank, this is known as Internal Capital Adequacy Assesment Process (ICAAP) by evaluation and dialogue between SREP of Bangladesh Bank and SRP team of the Bank. Investment Committee (IC) To review investment proposals, both new & renewal, in line with Bank’s investment policies/regulations and recommend the proposals to the concerned authority for approval. To develop and update Investment Policy and give proper guidance to the branches. Risk Management Committee (RMC) To monitor the activities of all Core Risk in banking in regards to policy issued by regulator time to time. Decisions of RMC i.e Minutes are disseminated to the Members of the Committee and respective Divisional Heads for implementation. In addition to this, Monthly and Comprehensive Risk Management Report and various risk issues are being placed regularly to Board Risk Management Committee and Board of Directors for their information and perusal. Shahjalal Islami Bank Limited Annual Report 2017 165
  168. Few Taxonomy of Risks Investment Concentration Default Market Operational Profit Rate Process People Foreign Exchange Rate Liquidity Recovery Equity Price Systems External events Compliance Legal Strategic Settlement Commodity Price Reputational Risk Appetite Risk appetite is the level and type of risk that a Bank is able and willing to accept or tolerate considering its exposures and business activities . Bank has developed a comprehensive risk appetite, which also accompanied Management Action Trigger (MAT) for ensuring meticulous effectiveness of risk appetite of the Bank. Risk appetite of the Bank covers different material risk areas related to Investment Risk, Capital Management Risk and Liquidity Risk. Bank has developed and set out the risk appetite of different Investment limits such as Portfolio wise, Industry and Area wise, Top-20 Borrower, Off-balance sheet exposure, annual growth rate of investment etc. approved by the Board of Directors. Investment (Credit) Risk Investment (Credit) risk is the risk of financial loss arising from the breach of commitment by an investment clients or obligor. It arises not only from the balance sheet items but also off-balance items such as Letter of Guarantees, Acceptances and Endorsement, Bills for collection and Letter of Credit etc. As per Bangladesh Bank Guidelines, any Investment if not repaid within the fixed expiry date will be treated as Past Due/Overdue, and this will include Special Mentioned Account (SMA), Sub Standard (SS), Doubtful (DF) and Bad/Loss (BL). Investment risk is one of the major risk. Investment (Credit) Risk Profile In appraising Investment, the following risk profile is considered and analyzed in depth and mitigating factors are suggested: Business/ Industry Risk i. Business size ii. Business Age iii. Business Outlook iv. Industry Growth v. Market Competition vi. Business Barriers Financial Risk i. Leverage ii. Liquidity iii. Profitability iv. Coverage 166 Management Risk i. Experience ii. Succession iii. Team Work Investment (Credit) Risk Profile Security Risk i. Security coverage ii. Collateral coverage iii. Support Relationship Risk i. Account Conduct ii. Limit Utilization iii. Compliance of Conditions iv. Personal Deposits Shahjalal Islami Bank Limited Annual Report 2017
  169. Investment (Credit) Risk Appetite Investment (Credit) Risk Appetite and the ‘Risk Acceptance Criteria’ of the Bank are clearly defined in the investment Guidelines of the Bank set by the Board of the Directors of the Bank. Investment Risk Exposures of the Bank Major investment exposures of the Bank are generated from investment to Corporate, SME & Agri/Retail investment/ Placements with other banks and financial institutions/Bills purchase and negotiations etc. Investment exposures are divided on Balance Sheet exposures such as Investments, Inland Documentary Bill Purchases etc. and Off-Balance Sheet items such as Letters of Guarantee, Letters of Credit, Acceptance, Bills for Collection etc. As per Investment Policy of the Bank, no investment exposure is created in the Bank without a thorough investment (credit) risk assessment and obtaining approval of the competent authority of the Bank. The graphical presentations depict the analysis of the Bank’s overall investment risk exposure as at December 31, 2017 based on Basel-III as guided by the Bangladesh Bank. Compostion of Claims on Corporate & SME (solo) 17.63% 30.88% 1.26% BB RATING-1 3.41% 1.07% 0.36% Dhaka Division 2.70% Chittagong Division BB RATING-2 Sylhet Division BB RATING-3 & 4 Rajshahi Division UNRATED Rangpur 29.81% 21.67% Geographical Distribution of Investment as on 31.12.2017 Khulna Division 16.95% 74.25% Barisal Division Movement of Non-Performing Investment 7.87% 6.47% 6.47% 4.70% 2013 2014 2015 2016 NPI% 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% 3.97% 2017 Year Investment (Credit) Risk Management The goal of investment risk management is to maximize a bank’s risk adjusted rate of return by maintaining investment risk exposure within acceptable limits. The effective management of investment risk is a critical component of a comprehensive approach to risk management and essential to the long-term success of any banking organization. That is why a risk based asset review framework has also been put in place wherein the frequency of asset review would be higher for high exposure cases and/or poor credit rating. Sound practices that the Bank is trying to ensure are:      Establishing an appropriate investment risk environment; Operating under a sound investment granting process; Maintaining an appropriate investment administration; Measurement and monitoring process; Ensuring adequate controls over investment risk. Shahjalal Islami Bank Limited Annual Report 2017 167
  170. Improvement Process for Asset Quality To achieve the Bank ’s goal through wealth maximization and protect the interest of the depositors as well as shareholders by improving asset quality, Bank will abide by but will not be confined to the following investment principles, which should guide our behavior in our investment decisions:  Quality of investment is more important than exploiting new opportunities.  Assessment of the customer’s character, integrity and willingness to repay.  Customers having capacity and ability to repay shall only be financed.  The purpose of investment should contain the basis of its repayment.  Risk and reward to be optimized.  Investment decision should not be made until receipt of all the relevant facts.  Assessing management quality of the organization when extending investment.  Collateral security should not be a substitute for repayment.  Bank monitors where the bank’s money is going.  Prevention of extending investment facilities to the CIB black listed persons/entities. Investment Risk Mitigation and Control The Bank obtains collateral against its Investment exposure wherever possible as secondary recourse to the borrowers while primary recourse being the cash flows of the business. These are carefully assessed in the light of issues such as legal certainty and enforceability, market valuation, possession and counterparty risk of the guarantor. Sufficient collateral is held to mitigate investment risk exposures and risk mitigation policies determine the eligible of collateral types. Collateral types that are eligible for risk mitigation include: Cash and Bank deposit, residential, commercial as well as industrial property, fixed assets such as motor vehicles, machinery, marketable securities, guarantees etc. Regular valuation of collateral is a continuous process. Value of collateral is determined as per Bank’s valuation policy. Approach for Calculating Risk Weighted Assets for Investment Risk The Bank follows the standardized approach for assessing the investment risk as per Risk Based Capital Adequeacy Guidelines issued by Bangladesh Bank. According to the aforesaid Guidelines the risk weight categories are 20%, 40%, 50%, 60%, 75%, 80%, 100%, 120%, 125% and 150%. Risk weight wise investment exposure of the Bank is as under: Risk Weight Wise Exposure 0.00% 6.91% 0.07% 19.58% 0.29% 30.87% 18.16% 0.46% 0.79% 20% 40% 50% 60% 75% 80% 100% 120% 125% 150% 22.88% 168 Shahjalal Islami Bank Limited Annual Report 2017
  171. The Risk Weighted Assets of Investment risk is as under : ( Amount in Crore) Particulars 31.12.2017 31.12.2016 On-Balance sheet 12,040.49 9,359.58 Off-Balance sheet 2,597.86 1,822.34 14,638.35 11,181.92 Investment Risk: Total Environmental & Social Risk Management (ESRM) Environmental & Social Risk may be defined as an actual or potential threat of adverse effects on living organisms and environment as well as in society by effluents, emissions, wastes, resource depletion, anti social activities etc., arising out of an organization’s activities. These affects increase the risks as they bring an element of uncertainty or possibility of loss in the context of a financing transaction. Environmental & Social Risk Management is the process of identification, analysis, assessment, control and avoidance, minimization or elimination of unacceptable environmental and social risks. SJIBL has incorporated Environmental & Social Risk Management Guidelines into Investment Risk Management (IRM) Guidelines as instructed by the Bangladesh Bank. If the ESR is high, then the proposal for investment will have to be approved by the Board or its Executive Committee. Time-bound action plan to mitigate Environmental & Social Risk will form part of approval conditions or will be mentioned as special condition of Sanction Advice. If there are any conditions to be fulfilled as part of approval, Investment Committee (IC) will check for the same before disbursing. If the ESR is moderate, then the financing decision can be undertaken on the basis of the usual Investment Risk Management (IRM) Guidelines. However, Time-bound action plan to mitigate Environmental & Social Risk will form part of approval conditions. But if the ESR is low, no Time-bound action plan to mitigate Environmental & Social Risk is required. ESDD Check list is to be completed by Relationship Officer, approved by concerned official(s) in head office/branch and processed as per normal investment process for both existing and new clients. In short, Decision making process on investment approval of the Bank will go through the Escalation Matrix as recommended by ESRM Guideline of Bangladesh Bank. Asset Liability Management Risk Asset Liability Management (ALM) is considered as a key Balance Sheet Risk Management discipline which mainly focuses on Profit Rate Risk, Exchange Rate Risk and Liquidity Risk of the Bank. As per Bangladesh Bank Guidelines, SJIBL has a fully functional Asset Liability Committee (ALCO) for prudent Balance Sheet Risk Management. To address and mitigate different risks involved in the business, ALM desk of the SJIBL Treasury prepares Asset Liability Committee (ALCO) paper as per the Guidelines of Bangladesh Bank in each month and conduct monthly ALM meeting where global & economic outlooks as well as financial fundamentals of the Bank are highlighted. Market Risk Market Risk is the risk of potential losses in the on balance sheet and off-balance sheet positions arising from adverse movements in market rates or prices i.e profit rate, equity prices, foreign exchange rate etc. Shahjalal Islami Bank Limited Annual Report 2017 169
  172. Profit (Interest) Rate Risk Market Risk Equity Risk Foreign Exchange Risk Market Risk of the Bank arises from deposit received from the depositors and granting investment as well as from trading activities. The primary objective of Market Risk Management is to ensure that Bank’s activities which are exposed to different market risks are generating optimum return and downside risks are in control and within the limit of agreed appetite. Profit (Interest) Rate Risk Profit Rate Risk is the risk to earnings or capital of Bank arising from movement of profit rates. It arises from differences between the timing of rate changes and the timing of cash flows (Re-pricing Risk), from changing rate relationships among yields curves that affect bank activities (Basis Risk), from changing rate relationships across the range of maturities (Yield Curve Risk) and from profit-rate-related options embedded in Bank products (Option Risk). Rate Sensitive (RS) Gap Analysis Maturity/re-pricing schedules are used to generate simple indicators of the profit rate risk sensitivity of both earnings and economic value to changing profit rates. This approach is known as Gap analysis. To evaluate earnings on exposure, Profit Rate Sensitive Liabilities (RSL) in each time bucket are subtracted from the corresponding Profit Rate Sensitive Assets (RSA) to produce a re-pricing “gap” for that time bucket. A negative or liability sensitive gap occurs when RSL exceed RSA in a given time bucket. This gap implies that an increase in market profit rates could cause a decline in net profit income. In this situation, a decrease in profit rates should improve the net profit rate spread in the short term, as deposits are rolled over at lower rates before the corresponding assets. An increase in profit rates lowers earnings by narrowing or eliminating the profit spread. Conversely, a positive or asset-sensitive gap occurs when RSA exceeds RSL in a given time bucket. This gap implies that a decrease in market rates could cause a decline in net profit income. In this situation, a decline in profit rates should lower or eliminate the net profit rate spread in the short term, as assets are rolled over at lower rates before the equivalent liabilities. An increase in profit rates should increase the net spread. According to the Gap analysis, SJIBL computes the following two ratios to know the relative exposure on profit rate: 1. Relative RS Gap for a respective time band = RS Gap/Bank’s Total Asset 2. Profit Sensitive ratio for a respective time band = RSA/RSL of that band From Gap schedules mentioned above, the Bank also computes an estimate of changes in Bank’s Net Profit (interest) Income (NII) given changes in profit rates. The gap for particular time band can be multiplied by a hypothetical change in profit rate to obtain an approximate change in net profit income. Result of Gap analysis as on December 31, 2017 is presented below: (Amount in Crore) Particular Below 3 Months 3-6 Months 6-12 Months Rate Sensitive Assets (A) 7,991.37 2,328.13 4,656.26 Rate Sensitive Liabilities (B) GAP (C=A-B) Cumulative Gap (D) Assumed 1% Change in Profit Rate (E) Net Profit Income Impact (F=C*E) Cumulative Net Profit Income Impact (G) 7,017.17 974.20 974.20 1% 9.74 9.74 1,669.81 658.32 1,632.52 1% 6.58 16.32 3,339.62 1,316.64 2,949.16 1% 13.17 29.49 170 Shahjalal Islami Bank Limited Annual Report 2017
  173. Equity Risk Equity Risk is defined as losses due to changes in market price of equity held by the Bank . To measure and identify the risk, mark to market valuations of the share investment portfolios are done. Mark to market valuation is done against a predetermined limit. Equity Risk of the Bank is also monitored through analysis of own investment on shares by subsidiaries, margin investment against investment in share by subsidiaries and investment statement against shares. From an accounting perspective, equity risk in Bangladesh is one sided-it must be held at the lower of cost or market value. If market value falls below the cost, Bank is required to maintain provision against unrealized loses. However, if market value rise above cost, there is no corresponding income recorded unless the security is sold. SJIBL has been maintained sufficient proviosions against its investment in share market unrealized losses. Foreign Exchange Risk Foreign Exchange Risk is the current or prospective risk to earnings and capital arising from adverse movements in currency exchange rates. Foreign Exchange Risk may also arise as a result of exposures of Bank to profit rate risk arising from the maturity mismatches of foreign currency positions. Foreign Exchange Risk Management As per Exchange Risk Management Guidelines of Bangladesh Bank, SJIBL has Board approved different risk tolerance limits for foreign exchange dealing operations and generally, all the deals are done meticulously within Board approved tolerance limits in order to ensure that any adverse exchange rate movements on the results of the Bank due to unhedged foreign exchange positions are managed within acceptable parameters. SJIBL has a well-defined internal approval and reporting procedures to report on foreign exchange business activities on a regular basis to the senior management. Bank’s exposure to Foreign Exchange Risk is managed by computing foreign exchange transaction and translation risks and their impact to the P&L of the Bank. The impact of the foreign exchange transaction risk is identified by providing exchange rate shocks to the net open position of the Bank. Market Risk Indicators With a view to maintain the Bank’s exposure against the following types of market risk at a reasonable level, Key Risk Indicators are identified, assessed and periodically monitored by the competent authority of the Bank. The Bank’s overall risk appetite and the Board approved risk tolerance limits have been disseminated to the Treasury Dealers. The adherence to these exposure limits are monitored by Middle Office of the Bank. Key Market Risk Indicators have been established under each of the following major market risk exposures. Market Risk Mitigation  Trading-related market risk mitigation is mainly through policies, limits and control measures which seek to reduce risk within or across the desks. ALM Policy and the FX Policy of the Bank set out the Guidelines and limits pertaining to Market Risk-related activities in detail.  The objective of a limit is to ensure that the negative earnings and impact of price risks are within the market risk appetite of the Bank. The nature of limits could typically include position limits, gap limits, tenor and duration limits, stop loss limits etc. These limits are appropriately selected for the relevant portfolios. Shahjalal Islami Bank Limited Annual Report 2017 171
  174. Market Risk Appetite  The Market Risk Management process of the Bank broadly involves risk identification, assessment and establishment of tolerance limits for risk exposures and overall risk monitoring and control.  The Treasury limits are reviewed by the Assets Liabilities Committee of the Bank and approved by the Board of Directors on an annual basis. The Treasury Mid-Office, an independent unit, monitors and reports the limit utilizations as per documented procedures.  The non-trading activities related-market risk is mainly managed through ALM (Assets & Liabilities Management) process of the Bank and the Board approved limits set out the risk appetite of the Bank. Approach for Calculating Capital Charge for Market Risk The Bank adopted the standardized approach and follows the Risk Based Capital Adequacy Guidelines issued by Bangladesh Bank for calculating capital charge against Market Risk. The capital charge against Market Risk is mentioned below: (Amount in Crore) Particulars Market Risk 31.12.2017 31.12.2016 31.11 44.47 Liquidity Risk Liquidity Risk is the risk that the Bank cannot promptly fulfill its payment obligations due to unforeseen factors or be forced to placement funds on unfavorable terms. In-addition to the more traditional Static Liquidity Gap Report (prepared with certain assumptions to classify non maturing assets and non maturing liabilities). Dynamic Liquidity Gap Reports which incorporate all contacted as well as anticipated inflows and outflows are regularly discussed at ALCO to ascertain real cash flow mismatches. Appropriate measures are then initiated to ensure that the Bank’s overall liquidity risk is maintained at a moderate level. As per Basel-III as well as regulatory requirement of Bangladesh Bank, SJIBL is being maintained the following key liquidity ratios: Name of the Ratio Cash Reserve Ratio (CRR) Statutory Liquidity Requirement (SLR) Liquidity Coverage Ratio (LCR) Net Stable Funding Ratio (NSFR) Maximum Cumulative Outflow(MCO) Standard Ratio 6.50% 5.50% ≥100% ≥100% <19% SJIBL’s Scenario 8.09% 8.23% 100.57% 118.97% 18.45% Liquidity Risk for Lack of Non-Structured Islamic Financial Market Since, Islamic Financial Market in Bangladesh is not strong enough and there is inadequate Islamic Financial Instruments, SJIBL has limited scope for placement of fund with the desired return from the market at the time of surplus liquidity and similarly limited scope in receiving fund complying Shariah’s rules at the time of liquidity crisis. Liquidity and funding Risk Indicator The Bank identified the following key liquidity risk indicators to assess and monitor the liquidity risk exposure: 1. Liquidity Gap Reports. 2. Net Investment to deposits ratio. 3. Liquid assets ratio. 4. Funding concentration in BDT and foreign currencies. 172 Shahjalal Islami Bank Limited Annual Report 2017
  175. 5 . Duration analysis on investment portfolio.  Bank’s Treasury had been maintaining a positive/negative gap in the short term tenor during the year 2017 as a business strategy with a view to maximizing opportunities to derive higher returns from the increasing profit rate scenario in the market.  These gaps were maintained within the internally approved limits while having surplus liquid marketable securities in the longer tenor to meet any unforeseen situations. Internal Control and Compliance Risk Management Internal Control and Compliance is a management process designed to acheieve effectiveness and efficiency of operations, reliable financial reporting and compliance with laws and regulations. SJIBL has a structured Internal Control & Compliance Division (IC & CD) with three distint following units headed by a senior level executive. Internal Control & Compliance Division Audit & Inspection Unit Compliance Unit Monitoring Unit Audit & Inspection Unit conducts internal audit in all Branches/Divisions of SJIBL to identify lapses/irregularities related to general banking, investment, foreign exchange and other related issues and to build up the knowledge about AML issues/matters and forwards those to concerned Unit for compliance and monitoring purpose. Money Laundering Risk Management Money Laundering is the process of transforming the proceeds of crime into legitimate money or other assets. The prevention of laundering the proceeds of crime has become a priority for all jurisdictions from which financial activities are carried out. Both money laundering and terrorist financing can weaken individual financial institution and they are also threats to a country’s overall financial sector reputation. Combating money laundering and terrorist financing is, therefore, a key element in promoting a strong, sound and stable financial sector. SJIBL is committed to prevent money laundering and combating financing of terrorism at all stages of our Banking activities. SJIBL treats the Money Laundering and Terrorist Financing issues as vital part of its Core Risk Management strategies. The Bank complies meticulously with the Money Laundering Prevention (Amendment) Act, 2015 and Anti Terrorism (Amendment) Act, 2013 to prevent money laundering and combating terrorism financing. The Bank always pursues a policy of strict adherence to all regulatory instructions and follows good corporate governance in all its activities. In order to mitigate Money Laundering Risk as well as Regulatory Compliance, SJIBL has taken the following measures: i. A Central Compliance Committee (CCC) has been formed which is headed by a Deputy Managing Director who is the Chief Anti Money Laundering Compliance Officer (CAMLCO). ii. “Guidelines on Prevention of Money Laundering and Terrorist Financing” has been reviewed & updated and disseminated to all branches of the Bank in the year 2017 which was duly approved by the Board of Directors of the Bank. iii. Inclusion of Trade Based Money Laundering (TBML) in the AML/CFT Guidelines; iv. Updating Customer Acceptance Policy (CAP) of the Bank. v. Formation of the Risk Register and circulated it to all branches of the Bank. Shahjalal Islami Bank Limited Annual Report 2017 173
  176. vi . goAML software has been implemented to monitor account activities and for auto reporting of Cash Transaction Reports (CTR) and Suspicious Transaction Repot (STR)/ Suspicious Activity Report (SAR). vii. Introduction of automated sanction screening software. viii. Extensive training on AML/CFT issues is being arranged for new entrant and the refreshers in 2017. ix. Conducting Special Inspection on AML/CFT issues in all Branches of the Bank. x. Arranging zone-wise AML Awareness Development Programs for creating awareness and to be vigilant about Money Laundering & Terrorist Financing. xi. SJIBL has direct access to Election Commission (EC) database, so that the authenticity of the NID card of the account holder can be checked. Information and Communication Technology (ICT) Risk Management In a very short space of time, Banks have become more dependent on information and communication technology such as internet, computer and other electronic data to run their daily operations. There are certain risks involved in the use of information and communication technology. This risk may arise from malfunction of system, failure of network, lack of knowledge about the use of technology, virus attack, hacking, cyber attacks etc. In this regard, SJIBL has continued to deepen their technology risk management capabilities and is ready to handle IT security incidents and system failures. An integral part of SJIBL’s risk management endeavor is its strong “IT Security Policy” and its adeherence to these principles. These policies define responsibilities and requirements for protecting information and information systems. Cyber Security Management Constant change, unpredictability and uncertainty has made cyber security everyone’s responsibility. Therefore, continuous awareness program for everyone, employees and clients about cyber security goes round the years in SJIBL. The Bank reminds the employees about security in every possible ways as a continuous process. Cyber security has become imperative to our business process. Practice in building walls in an attempt to block all malicious attack and making organization cyber-resilient is going on side by side. In practice, a handful of initiatives including firewalls, perimeter security, vulnerability testing and intrusion-prevention is in place to check and strengthen the preventive measures against cyber-attacks. State of the Rated Three (3) Compliance Data Centre As apart of effective risk management, a state of the rated three (3) compliance data centre has been established at SJIBL’s own premise at “Shahjalal Islami Bank Tower” while the previous Data Centre located at Uday Sanz, Gulshan has been shifted to the aforesaid location. This Data Centre is equipped with sophisticated data replication technology to protect loss of customer sensitive information and their transaction incase of failure of primary data centre due to any disaster. Vulnerability Test Apart from strengthening ICT infrastructure platform, the Bank also focused on identifying its security risks by conducting penetration and vulnerability tests on its existing services. This will restrict the internal users from visiting the suspicious and harmful websites and the incoming emails for spam and scam links. Disaster Recovery Site Data is protected and secured in various ways. Data is kept in secured place prescribed by the Bank’s policy. The Bank implemented a disaster recovery site that would be activated in case of disaster, which brought and restored data in authenticated way. 174 Shahjalal Islami Bank Limited Annual Report 2017
  177. IT Audit Team SJIBL has formed a dedicated IT Audit Team under the IC & CD as per the Bangladesh Bank’s Guideline. The team members audit the Branches and Divisions. They follow the prescribed Guideline, solve the unsettled issue and also suggests to the higher Management for needful action. Operational Risk Operational Risk is the potential loss arising from breakdown in Bank’s Systems & procedures and corporate governance practices that results in human error, fraud, failure, damage of reputation, delay to perform or compromise of the Bank’s interest by employees. Approach for Calculating Capital Charge for Operational Risk  The Bank maintains 15% capital allocation under Basic Indicator Approach of Risk Based Capital Adequacy Guidelines (Basel-III) of average gross income for the last three years of the Bank.  The Bank use Basic Indicator Approach for calculating capital charge against Operational Risk. The capital charge against operational risk is mentioned below: (Amount in Crore) Particulars Operational Risk 31.12.2017 31.12.2016 94.42 84.38 Policies and Process for Mitigating Operational Risk Operational Risk results from inadequate or failed internal process, people and system or from external events. Within the Bank, Operational Risk may arise from negligence and dishonesty of the employees, lack of management supervision, inadequate operational control, lack of physical security, poor technology, lack of automation, non-compliance of regularity requirements, internal and external fraud etc. Operational Risk Management Framework has been designed to provide a sound and well controlled operational environment and thereby mitigate the degree of operational risk. Reputation Risk Reputation Risk is the current or prospective indirect risk to earnings and capital arising from adverse perception of the image of the financial institution on the part of Customers, Shareholders, Investors, Counterparties, Business Partners, Credit Rating Agencies, Regulators, and General Public. Reputation Risk may originate from the lack of compliance with industry service standards, failure to deliver on commitments, lack of customer-friendly service and fair market practices, low or inferior service quality, unreasonably high costs, a service style that does not harmonize with market benchmarks or customer expectations, inappropriate business conduct or unfavorable authority opinion and actions. Residual Risk Residual Risk arises mainly from error in Documentation and error in valuation of collateral, lack of required and duly filled-up documents and erroneous or fake or forged documents will lead to the amplification of overall risk aspects of Investment portfolio and the reduction in the strength of legal Shield that slacks the ownership of the Bank on collateral and consequently hinders the recovery of investment. On the other hand, as institutions mitigate risks by way of collaterals, the collaterals can pose additional risks (legal and documentation risks), which may deteriorate the impact of risk mitigation. For example: The liquidation procedure of the collateral is difficult & time consuming, and the valuation of the collateral is inappropriate (e.g. overvaluation). The Banks should have appropriate governing and control systems, valuation procedures, internal regulations and responsible individuals assigned for the prudent handling of risks. Shahjalal Islami Bank Limited Annual Report 2017 175
  178. Settlement Risk Settlement Risk arises when an executed transaction is not settled as the standard settlement system . Settlement Risk addresses to the investment (credit) risk and liquidity risk elements. Treasury transactions, trading book items (deals) and capital market dealings concluded as part of investment services convey a settlement risk that is a specific mix of investment (credit) and liquidity risk. The Banks pose to the risk when it fulfills its contractual obligations (payment or delivery), but the counterparty fails or defaults to do the same. Strategic Risk Strategic Risk means the current of prospective risk to earnings and capital arising from imperfection in business strategy formulation, inefficiencies in implementing business strategy, non-adaptability/less adaptability with the changes in the business environment and adverse business decisions. Strategic Risk induces operational loss that consequentially hampers the capital base. Implementation of Basel III in line with Bangladesh Bank Guidelines Basel III reforms are the response of Basel Committee on Banking Supervision (BCBS) to improve the banking sector’s ability to absorb shocks arising from financial and economic stress, whatever the source, thus reducing the risk of spillover from the financial sector to the real economy. “Basel III: A global regulatory framework for more resilient Banks and Banking systems” (known as Basel III capital regulations) in December 2010. Basel III reforms strengthen the Bank-level i.e. micro prudential regulation, with the intention to raise the resilience of individual banking institutions in periods of stress. Besides, the reforms have a macro prudential focus also, addressing system wide risks, which can build up across the banking sector, as well as the procyclical amplification of these risks over time. These new global regulatory and supervisory standards mainly addressed the following areas:  Raise the quality and level of capital to ensure Banks are better able to absorb losses on both a going concern and a gone concern basis;  Increase the risk coverage of the capital framework;  Introduce leverage ratio to serve as a backstop to the risk-based capital measure;  Raise the standards for the supervisory review process (Pillar-2); and  Public disclosures (Pillar-3) etc. The macro prudential aspects of Basel III are largely enshrined in the capital buffers. Both the buffers i.e. the capital conservation buffer and the countercyclical buffer are intended to protect the banking sector from periods of excess credit growth. To ensure smooth transition to Basel III, appropriate transitional arrangements have been provided for meeting the minimum Basel III capital ratios, full regulatory adjustments to the components of capital etc. SJIBL maintained the following Capital to Risk-weighted Assets Ratio against minimum capital requirement of 10.00% under Risk Based Capital Adequacy Guidelines (Basel III). Particulars Total Regulatory Capital Total Risk Weighted Assets (RWA) Capital to Risk Weighted Assets Ratio (CRAR) 31.12.2017 1,937.60 15,893.65 12.19% (Amount in Crore) 31.12.2016 1,438.61 12,470.38 11.54% Composition of Supervisory Review Process (SRP) Team Under Pillar-2 of Basel-III, all Banks are required to design their own Supervisory Review Process to ensure maintenance of sufficient capital to fully cover all risk exposures. As per Guidelines on Supervisory Review Evaluation Process, the level of Capital Adequacy will be determined after evaluation and dialogue between Bangladesh Bank and the Supervisory Review Process Team of the Bank. The assessment of capital adequacy to be the outcome of a dialogue 176 Shahjalal Islami Bank Limited Annual Report 2017
  179. between the Bank ’s own SRP Team and Bangladesh Bank’s Supervisory Review Evaluation Process (SREP) Team. In this context, SJIBL has a separate SRP team to review Internal Capital Adequacy Assessment Process (ICAAP) for determining capital requirement against all risks including those risks not captured in the process of determining Minimum Capital Requirement (MCR). SJIBL has completed review process to determine additional capital requirement against residual risk which is the first step towards implementation of Pillar-2 of Risk Based Capital Adequacy (RBCA) Framework. Besides this, a representative team of SJIBL SRP Team dialogue with Bangladesh Bank in each year. SJIBL has a well-designated SRP Team, which will aid to adopt Basel-III Capital Accord successfully. SRP Team of SJIBL has been formed comprising of the following executives: SL No. Name Position 1 Farman R. Chowdhury Managing Director & Head of SRP Team 2 M. Shahidul Islam AMD & Member 3 Md. Shahjahan Shiraj DMD & Member 4 M. Akhter Hossain DMD & Member 5 Mustaque Ahmed DMD & Member 6 Mian Quamrul Hasan Chowdhury DMD & Member 7 Md. Nazimuddoula SEVP & Member 8 Md. Mahmudul Haque SEVP & Member 9 Md. Rafiqul Islam SEVP & Member 10 Md. Monzurul Alam Chowdhury EVP & Member 11 Mohammed Ashfaqul Hoque, FCA, FCS 12 Md. Bahar Mahmud SVP & Member 13 Jahangir Javed SVP & Member 14 Md. Jafar Sadeq, FCA VP & Member 15 Mohammad Abdul Majid EVP & Member Secretary SAVP & Member Basel III: SRP–SREP Dialogue on Capital Adequacy In addition to, computing MCR, Bank has calculated Adequate Capital on the basis of bank’s own Supervisory Review Process (SRP). Under the SRP, adequate capital is determined on the basis of comprehensive risk management of the bank. Bank has an exclusive SRP team and a process document called as Internal Capital Adequacy Assessment Process (ICAAP). The areas that covered by the process document are reviewed of risk management and planning for adequate capital against comprehensive risk profile including investment, market, operational and all other risks which are not captured in the process of determining Minimum Capital Requirement (MCR). That is along with Investment, Market, Operational risks; Bank is maintained capital against other risks which are not captured in calculating Minimum Capital Requirement (MCR). Some of these risks are namely residual risk, concentration risk, profit rate risk, liquidity risk, reputation risk, strategic risk, settlement risk etc. The objective of the dialogue is to determine the adequate level of capital needed for a Bank beyond minimum capital by reviewing the Internal Capital Adequacy Assessment Process (ICAAP). In other words, the dialogue target to review the process by which a Bank assesses its level of risk management and capital adequacy and quality of capital held. Comprehensive Risk Management Report (CRMR) and Meeting of Risk Management Committee (RMC) For practicing sound risk management in the Bank, SJIBL followed the prescribed formats of Risk Management Papers now it is known as Comprehensive Risk Management Report (CRMR) are provided by the Bangladesh Bank as per DOS Shahjalal Islami Bank Limited Annual Report 2017 177
  180. Circular letter no . 13 dated September 9, 2015 are preparing on monthly and half yearly basis and regularly placed to the Risk Management Committee of the Bank. It had regular monthly meeting to assess risk management status of various Divisions and operations. The Risk Management Division (RMD) coordinated different risk management activities of the Bank and provided Guidelines to concerned Divisions in this respect. The activities, observations and recommendations of Risk Management Committee (RMC) are being regularly reported to the Board Risk Management Committee, Board of Directors and Bangladesh Bank. Stress Testing as a forward-looking tool for Risk Management Stress testing, as defined by BIS, is a risk management technique used to evaluate the potential effects on an institution’s financial condition of a specific events and/or movement in a set of financial variables. It refers to the process to cover multiple risk measures across categories and complements traditional risk models. It is also an integral part of the BIS Capital Adequecy framework. In general framework, Stress testing process includes: i. Identification of specific vulnerabilities or areas of concern; ii. Construction of a scenario; iii. Performing the numerical analysis; iv. Considering the numerical analysis and v. Summarizing and interpreting the results. This process finally produces a numarical estimate of the change in value of risk exposed positions. Stress testing framework as provided by Bangladesh Bank assesses the impact on Capital to Risk Weighted Assets Ratio (CRAR) due to minor, moderate and major level of shock in terms of credit risk, exchange rate risk, liquidity risk, equity price risk and interest rate risk. Stress testing for credit risk assesses the impact of increase in the level of Non-Performing Investments (NPIs) of the Bank. The Bank conduct periodic reviews of its risk management process to ensure its integrity, accuracy and reasonableness through stress testing. Stress testing as tool of forward looking risk management is an integral part of SRP. On the basis of findings of stress test, Bank maintains some provision proactively in addition to adequate capital. Bangladesh Bank evaluates all these issues through the methods of SRP-SREP dialogue. Stress testing is done on a Quarterly basis & Shock Absorption Ability Stress testing has been carried out as per Bangladesh Bank Guidelines regularly during 2017on quarterly intervals. The findings were reported to Bangladesh Bank, Board Risk Management Committee and Board of Directors of the Bank for compliance and guidance. Findings of stress testing and guidance from Bangladesh Bank, Board Risk Management Committee and Board of Directors are taken into account for assessing potential risks, mitigation of such risks as well as current and future capital requirement of the Bank. Beside the plan to the path of success, SJIBL also prepares for the worst case events by conducting some sensitivity analysis on its capital. Stress testing has been used, as suggested by Bangladesh Bank for an estimation of adverse pressure on the capital of the Bank in different challenging condition with different magnitudes. CRAR After Shocks Existing CRAR (%) Minor Moderate Major Negative Shift in NPIs Categories 12.19 11.84 11.51 10.86 Decrease in FSV of the Collateral 12.19 11.87 11.56 10.91 Increase in NPIs 12.19 10.89 7.78 3.11 Interest Rate 12.19 12.19 12.19 12.19 FEX: Currency Appreciation 12.19 12.17 12.15 12.13 Equity Shock 12.19 12.03 11.87 11.55 Different Shocks 178 Shahjalal Islami Bank Limited Annual Report 2017
  181. Report of Chief Risk Officer And he said , “ ‘O’ my sons, do not enter (the city) all of you from the same gate, rather, enter from different gates. And I cannot help you in any way against (the will of) Allah. Sovereignty belongs to none but Allah. On Him I place my trust and on Him should trust those who trust”. (Surah Yusuf: Verse 67) Prophet (s.a.w) once asked a Bedouin who had left his camel untied, “Why do you not tie your camel?” The Bedouin answered, “I put my trust on God.” The Prophet (s.a.w) then said, “tie up your camel first then put your trust on God.” (Zame’ At-Tirmiji) “Risk is like fire: if controlled, it will help you; if uncontrolled, it will rise up and destroy you” -Theodore Roosevelt In last couple of years, banking sector has travelled through a journey where the sector has experienced several ups and downs. Various reforms measures have been taken by the Bangladesh Bank like increasing the Capital Adequacy of banks, streamlining Guidelines for Rescheduling of Investment, tightening Provisions for Non-Performing Investment, strengthening Disclosure requirements, improving Accounting System & providing Comprehensive Risk Management Framework etc. These have undoubtedly improved the soundness of the sector over the years as a result; Risk Management in Banks has also changed substantially in recent years. The key performance indicators in banking sector such as Asset Quality, Capital to Risk Weighted Asset Ratio (CRAR) and Profitability witnessed some improvements in the year of 2017. However, the banking system faced some liquidity pressures, as investment growth exceeded deposit growth and the net sale of foreign exchange absorbed some liquidity. In this circumstance, it was a challenge for the Bank to achieve its goal. CONCEPT OF RISK IN BANK Risks are future events that could adversely influence the achievement of the Bank objectives, including strategic, operational and financial and compliance. Shahjalal Islami Bank Limited Annual Report 2017 179
  182. Adverse Future Events may include but not limited to :  Failure of an investment client to repay a financing in time  Fluctuation of foreign exchange rates  Failure of Information Technology on compliance, operational and financial issues  Failure or less effectiveness of Internal Control and Compliance  Possibility of mismatches between the assets and liabilities of the Bank  Money Laundering and Terrorist Financing  Fraud, incomplete security documentations etc.  Non-compliance with Shariah law and principles  Any other events that may result in a loss of money or reputation to the Bank UNIQUE RISK FOR ISLAMI BANKS A Bank is to take calculated risks for its business. As such, SJIBL always try to optimize the risk reward equation. As an Islamic Bank, SJIBL has to face the following specific risks: Types of Risks When and how it arises Shariah Non-compliance Risk Risk arises from the failure of compliance with the Shariah rules and principles Rate of Return Risk The potential impact on the returns caused by unexpected change in the rate of returns Displaced Commercial Risk The risk that the bank may confront commercial pressure to pay returns that exceeds the rate that has been earned on its assets. The bank foregoes part or its entire share of profit in order to retain its fund providers and dissuade them from withdrawing their funds. Equity Investment Risk The risk arising from entering into a partnership for the purpose of undertaking or participating in a particular financing or general business activity as described in the contract and in which the provider of finance shares in the business risk. This risk is relevant under Mudarabah and Musharakah contracts. RISK MANAGEMENT IN BANK Risk Management is a discipline at the core of each bank that encompasses all the activities which affect its risk profile. It includes the process of identification, measurement, monitoring and controlling the Risks which threaten the assets or earning capacity of the Bank. RISK MANAGEMENT FRAMEWORK The risk management framework of the Shahjalal Islami Bank Limited has duly articulated the approach of implementing enterprise wide risk management. The framework has duly defined the responsibilities of each stakeholder from respective position. To support this strategic risk management, Bank has put in place a risk management framework, which consists of four key components: 1. Risk Appetite: The Risk Appetite Statements (RAS) defines the maximum risk exposure that is prepared in order to attain the objectives of the Bank. The Risk Appetite Statements (RAS) have been developed by the Bank to adapt with the changing economic and regulatory environment in order to manage the risk and duly approved by the Board of Directors. 180 Shahjalal Islami Bank Limited Annual Report 2017
  183. 2 .Governance: The role of the Board, Board Risk Management Committee (BRMC), management level Risk Management Committee (RMC) and other risk management committees are delineated. 3. Risk Management Policies: Risk management policies have been established for the management of each risk type and are subject to annual Board of Directors review and approval. 4. Management Information Systems (MIS): MIS is produced so that each types of risk can be monitored. 01 02 Risk Appetite Statments (RAS) (Board, BRMC, RMC) Governance Risk Management Framework 04 Management Information Syestem (MIS) 03 Risk Management Policies SIGNIFICANT RISK CULTURES UPDATED IN 2017 1 The Bank has introduced a wide, integrated and prudential Risk Management Guidelines for strengthening the risk management activities of the Bank. 2 Reviewed the core risk management guidelines on Investment Risk Management (IRM), Asset Liability Management (ALM), Internal Control and Compliance (ICC), Foreign Exchange Risk Management (FEX), Information and Communication Technology (ICT) and Prevention on Money Laundering and Terrorist Financing annually. 3 Improved the each Core Risk evaluation methodology for self assesment. 4 Improve the Management Action Trigger (MATs) in various risk level with designated key responsible persons/level. 5 The Bank has developed a well established framework for Risk Appetite Statement (RAS). 6 Updated the existing risk management framework to include a more comprehensive approach to more risk coverage. 7 Enhanced capacity of Basel Unit (BU) supported by a working group, tasked with improving and formalizing the process and methodology for Basel-III implementation. Shahjalal Islami Bank Limited Annual Report 2017 181
  184. KEY RISK INDICATORS OF THE BANK The performance of SJIBL against key risk standards set by Bangladesh Bank was strong throughout the year of 2017 . The comparative analysis of the leading risk indicators with supporting commentary are outlined below in the table: Sl Key Indicators Regulatory Requirement SJIBL Maintained Comments 1 CET-1 Ratio Plus Buffer (%) 5.75% 8.38% 2.63% surplus Graph 5.75% BB Std. CRAR Plus Buffer (%) 2 11.25% 12.19% 0.94% surplus 11.25% BB Std. 3 LCR (%) 100% 100.57% 0.57% surplus 100% BB Std. 4 NSFR (%) 100% 118.97% 18.97% surplus 100% BB Std. 5 Leverage Ratio (%) 6 NPI (%) 3% 5.51% 2016 2017 4.70% 3.97% 2.51% higher 0.73% downsized 3% 8.38% SJIBL 12.19% SJIBL 100.57% SJIBL 118.97% SJIBL 5.51% BB Std. SJIBL 4.70% 3.97% BB Std. SJIBL HIGHLIGHTS OF RISK PORTFOLIO Shahjalal Islami Bank Limited is committed to its stakeholders to attain a sustainable business growth commensurate with appropriate risk strategies through implementation of a robust risk management framework across the organization and its subsidiaries. 1. Capital Adequacy SJIBL has maintained the Capital to Risk Weighted Assets Ratio (CRAR) 12.19% against the regulatory requirements of 11.25% as per Basel-III Guidelines. 2. Investment Quality In the year 2017, SJIBL has able to downsize the NPI Ratio to 3.97% which was 4.70% in 2016. 3.Recovery SJIBL has recovered and regularized 75.68% against the Recovery Target in the year-2017. 4. Investment Concentration Total large Investment exposure of SJIBL was 34.75% of total Investment as of December 31, 2017 against the ceiling of 56% as per Bangladesh Bank Guidelines. 182 Shahjalal Islami Bank Limited Annual Report 2017
  185. 5 . Collateral Coverage SJIBL always try to take highest amount of collateral against the Investments. The Investments Portfolio of SJIBL covered by eligible collateral security was 87.88% as at December 31, 2017. 6. Market Risk Market Risk in the SJIBL includes the equity price movement of Investment of Shares and Securities and exchange rate fluctuation of foreign currency transaction. 7. Liquidity Risk During the year 2017, SJIBL maintains all regulatory requirements related to Liquidity of the Bank like CRR, SLR, ID Ratio, LCR, NSFR, and MCO etc. and there was no shortfall in any of above. 8. Operational Risk SJIBL has not incurred any losses due to internal & external frauds, employment practices, clients, products and business, disaster and IT failures during the last year. 9. Compliance Risk SJIBL is strongly committed to compliance of internal, external regulatory compliances including AML and TF. 10. Reputational Risk The reputation of SJIBL is being increased due to its cordial service, strong regulatory compliance and maintaining its commitment. STRATEGIES FOR RISK MANAGEMENT Shahjalal Islami Bank Limited has grown in different sectors with good quality assets, however, it has experienced that some large delinquencies in some industries contributed to increase in Bank’s overall non-performing investment. In this view, SJIBL has established the following strategy to minimize the risk.  Proper evaluation and due diligence to arrest the non-performing investment.  Emphasis on collateral based investment.  Increased the rated investment clients for better asset quality.  Improved RWAs to lessen the pressure on capital.  Initiative for installation of anti-skimming device for preventing card frauds.  Adaption of ESDD checklist for Environmental and Social Risk Management.  Concentrated on IT Security as per to the Bangladesh Bank ICT Security Guidelines.  Implement Risk based Audit functions.  Conduct all Core Risk Audits.  Implementation IT system audits on Branches and Divisions.  E-learning Training Program, surprise audits & Independent testing on AML/CFT compliance. In fine, Shahjalal Islami Bank Limited always strives for excellence in all its endeavors to manage risks effectively. Identifying and addressing various kinds of risks is a continuous process. The Bank has established an effective framework to revise its Risk Manage System as and when required. The combination of all risk factors may pose imperative challenge for risk management in coming years. Our commitment is to be a fully shariah compliant, transparent, resilient and sustainable Bank in the country. Shahjalal Islami Bank Limited Annual Report 2017 Md. Shahjahan Shiraj Deputy Managing Director & Chief Risk Officer 183
  186. Market Discipline Disclosures on Risk Based Capital (Pillar-3 of Basel-III) For the year ended 31 December 2017 Background The disclosure of prudential information is a most important component of Basel Committee on Banking Supervision’s framework of capital measurement and capital adequacy, known as Basel III. Bangladesh Bank has specified the standard of qualitative and quantitative disclosures through Guidelines on Risk Based Capital Adequacy (Revised Regulatory Capital Framework for Banks in line with Basel III) on December 2014 with effect from January 2015. Purpose  To complement the Minimum Capital Requirement (MCR) under Pillar-1 and the Supervisory Review Process (SRP) under Pillar-2 of Basel-III;  To establish more transparent and more disciplined financial market so that stakeholders can assess the position of a bank regarding holding of assets and  To identify the risks relating to the assets and capital adequacy to meet probable loss of assets. Relations with Accounting Disclosures  The disclosure framework does not conflict with requirements under accounting standards as set by Bangladesh Bank from time to time.  Under Minimum Capital Requirement (MCR), Bank use specified approaches/methodologies for measuring the various risks.  The disclosures should be subject to adequate validation. Since information in the annual financial statements would generally be audited, the additionally published with such statements must be consistent with the audited statements. Disclosure Framework Bangladesh Bank set out the following components in the disclosures under Pillar-3 of Basel framework. 1. Scope of Application 2. Capital Structure 3. Capital Adequacy 4. Investment (Credit) Risk 5. Equities: Disclosures for Banking Book Positions 6. Profit (Interest) Rate Risk in the Banking Book (PRRBB) 7. Market Risk 8. Operational Risk 9. Liquidity Ratio 10. Leverage Ratio 11. Remuneration This “Disclosures on Risk Based Capital (Basel-III)” is prepared for the year ended 31 December 2017 as per Bangladesh Bank’s Guideline. 1. Scope of Application Qualitative Disclosures (a) 184 The name of the top corporate Shahjalal Islami Bank Limited (SJIBL) entity in the group to which this guidelines applies: Shahjalal Islami Bank Limited Annual Report 2017
  187. b ) An outline of differences in the basis of consolidation for accounting and regulatory purposes, with a brief description of the entities within the group (a) that are fully consolidated; (b) that are given a deduction treatment; and (c) that are neither consolidated nor deducted (e.g. where the investment is risk - weighted). The Consolidated Financial Statements of the Bank include the financial statements of (i) Shahjalal Islami Bank Limited including Off-Shore Banking Unit (OBU) and (ii) Shahjalal Islami Bank Securities Limited. A brief description of the Bank including OBU (Main Operation) and its subsidiary are given below: Shahjalal Islami Bank Limited Shahjalal Islami Bank Limited (hereinafter called ‘the Bank’-‘SJIBL’) was established as a Public Limited Company (Banking Company) as on the 1st day of April 2001 under the Companies Act 1994 as interest free Islamic Shari’ah based commercial bank and commenced its operation on the 10 May 2001 with the permission of Bangladesh Bank. Presently the Bank is operating its business through Corporate Head Office having 113 Branches, Central Processing Center (CPC), Off-shore Banking Unit (OBU), 73 own ATM booths all over Bangladesh. The Bank is listed with both the Stock Exchanges of the country, i.e. Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited. The principal activities of the Bank are to provide all kinds of commercial banking services to its customers through its branches following the provisions of the Bank Companies Act 2013 (Amended), Bangladesh Bank’s Directives and the principles of the Islamic Shariah. Off-shore Banking Unit (OBU) Off-shore Banking Unit is a separate business unit governed by the applicable rules & regulations and guidelines of Bangladesh Bank. The Bank obtained the permission for conducting the operations of OBU from Bangladesh Bank vide letter no. BRPD (P-3)744(99)/2008-2800 dated 24 July 2008. The Bank opened its Off-shore Banking Unit on 21 December, 2008 and the unit is located at Shahjalal Islami Bank Tower, Plot-4, BlockCWN(C), Gulshan Avenue, Gulshan, Dhaka-1212. Shahjalal Islami Bank Securities Limited (SJIBSL) Shahjalal Islami Bank Securities Limited is a subsidiary company of Shahjalal Islami Bank Limited (SJIBL) incorporated as a public limited company under the Companies Act 1994 vides certification of incorporation no. C 86917/10 dated 06 September 2010 and commenced its operation on 25 May 2011. The main objective of the company is to carry on business of stock broker/dealers in relation to shares and securities dealings and other services as mentioned in the Memorandum and Articles of Association of the Company. It has corporate membership of Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited. c) Any restrictions, or other major impediments, on transfer of funds or regulatory capital within the group Not applicable. Quantitative Disclosures d) The aggregate amount of capital deficiencies in all subsidiaries not included in the consolidation i.e. that are deducted and name(s) of such subsidiaries. Shahjalal Islami Bank Limited Annual Report 2017 Not applicable. 185
  188. 2 . Capital Structure Qualitative Disclosures a) Summary information on the terms and conditions of the main features of all capital instruments, especially in the case of capital instruments eligible for inclusion in Common Equity Tier-1, Additional Tier-1 or Tier -2. As per the Guidelines on Risk Based Capital Adequacy of Bangladesh Bank, the regulatory capital of Bank is classified into two tiers which will consist of sum of the following categories: i. Tier-1 Capital (going-concern capital) a) Common Equity Tier-1 capital of SJIBL consists of Paid-up Capital, Statutory Reserve, Retained Earnings and Minority Interest in Subsidiaries. b) Additional Tier-1 capital (There are no such capital components in the capital portfolio of SJIBL since the Bank did not issue any instrument that meets the qualifying criteria for Additional Tier-1 Capital). ii. Tier-2 Capital (gone-concern capital) of SJIBL consists of General Provisions and Mudaraba Subordinated Bond/Debt issued by the Bank that meets the qualifying criteria for Tier-2 Capital. Quantitative Disclosures b) The Amount of Tier 1 Capital with break-up Particulars A. Common Equity Tier (CET1) Capital: i. Fully paid-up capital ii. Statutory reserve iii. Non-repayable share premium account iv. General reserve v. Retained earnings vi. Dividend equalization account vii. Minority interest in subsidiaries viii. Others (if any item approved by Bangladesh Bank) (A) Sub-Total of CET1 Capital (i to viii) B. Additional Tier 1 (AT1) Capital i. Non-cumulative irredeemable preference shares ii. Instruments issued by the bank that meet the qualifying criteria for AT1 iii. Others (if any item approved by Bangladesh Bank) (B) Sub-Total of AT1 Capital (i to iii) C. Total Tier 1 Capital (Going-Concern Capital) (A+B) D. i. Tier 2 Capital (Gone-Concern Capital) General provision against unclassified investments/loans and off balance sheet exposures (including OBU) ii. Subordinated debt iii. Others (if any item approved by Bangladesh Bank) (D) Sub-Total of Tier 2 Capital (i to iii) E. Regulatory Adjustments/Deductions from Capital i. Shortfall in provision against NPIs and Investments ii. Revaluation reserve for fixed assets, securities & equity securities iii. Others (E) Sub-Total of Regulatory Deductions (i to iii) F. Total Eligible Capital (C+D-E) 186 Solo Taka in Million Consolidated 7,714.23 4,819.26 784.29 13,317.78 13,317.78 7,714.23 4,819.26 1,079.87 251.44 13,864.80 13,864.80 2,058.20 2,481.82 4,000.00 6,058.20 4,000.00 6,481.82 19,375.98 20,346.62 Shahjalal Islami Bank Limited Annual Report 2017
  189. 3 . Capital Adequacy Qualitative Disclosures a) A summary discussion of the bank’s approach to assess the adequacy of its capital to support current and future activities. Quantitative Disclosures The Bank has adopted Standardized Approach (SA) for computation of capital charge for investment risk and market risk, and Basic Indicator Approach (BIA) for operational risk. Assessment of capital adequacy is carried out in conjunction with the capital adequacy reporting to the Bangladesh Bank. The Bank has maintained Capital to Risk Weighted Assets (RWA) Ratio at 12.44% & 12.19% on the basis of “Consolidated” and “Solo” respectively as against the minimum regulatory requirement of 10% plus capital conservation buffer of 1.25% totaling of 11.25%. Common Equity Tier-I Capital to RWA Ratio under “Consolidated” basis is 8.48% which “Solo” basis is 8.38% as against the minimum regulatory requirement of 6.00%. The Bank’s policy is to manage and maintain strong Capital to RWA Ratio with high rating grade of investment clients. The Bank maintains adequate capital that is sufficient to absorb all material risks associated with the Bank. The Bank also ensures that the levels of capital comply with regulatory requirements and satisfy the external rating agencies and other all stakeholders including depositors. Taka in Million Particulars Solo Consolidated b) Capital requirements for Investment (Credit) Risk: 14,638.36 14,879.91 c) Capital requirements for Market Risk 311.06 491.19 d) Capital requirements for Operational Risk 944.23 986.45 Minimum Capital Requirement (b+c+d) 15,893.65 16,357.55 Total Regulatory Capital 19,375.98 20,346.62 Total Risk Weighted Assets (RWA) 158,936.53 163,575.51 e) Capital to Risk-weighted Assets ratio (CRAR) (iii to iv) 12.19% 12.44% i. CET 1 capital ratio 8.38% 8.48% ii. AT 1 capital ratio iii. Total Tier 1 capital ratio (i to ii) 8.38% 8.48% iv. Tier-2 capital ratio 3.81% 3.96% f) Capital Conservation Buffer 1,986.71 2,044.69 g) Available Capital under Pillar 2 Requirement* 1,495.62 1,944.44 *After deduction of Minimum Capital Requirement and Capital Conservation Buffer form Total Regulatory Capital. 4. Investment (Credit) Risk Qualitative Disclosures a) The general qualitative disclosure requirement with respect to investment risk, including: i) Definitions of past due and As per Bangladesh Bank guidelines, any Investment if not repaid within impaired (for accounting purposes) the fixed expiry date will be treated as Past Due/Overdue. Shahjalal Islami Bank Limited Annual Report 2017 187
  190. Bangladesh Bank issued Circulars from time to time for strengthening Investment (Credit) discipline and brings provisioning. All Investments/ loans & advances will be grouped in to 4 (four) categories for the purpose of classification, namely (a) Continuous Investment (Loan): The Investment (Loan) accounts in which transactions may be made within certain limit and have an expiry date for full adjustment will be treated as Continuous Investment (Loan). Examples are: Cash Credit, Overdraft, etc. (b) Demand Investment (Loan): The Investments (Loans) that become repayable on demand by the bank will be treated as Demand Investment. If any contingent or any other liabilities are turned to forced investment (i.e. without any prior approval as regular investment) those too will be treated as Demand Investment (Loan). Such as: Forced Loan against Imported Merchandise, Payment Against Document, Foreign Bill Purchased and Inland Bill Purchased, etc. (c) Fixed Term Investment (Loan): The Investments (Loans), which are repayable within a specific time period under a specific repayment schedule, will be treated as Fixed Term Investment (Loan). (d) Short term Agricultural & Micro Investment (Loan): Shortterm Agricultural Investment (Credit) will include the short-term credits as listed under the Annual Credit Programme issued by the Agricultural Credit and Financial Inclusion Department (ACFID) of Bangladesh Bank. Credits in the agricultural sector repayable within 12 (twelve) months will also be included herein. Short-term MicroCredit will include any micro-credits not exceeding an amount determined by the ACFID of Bangladesh Bank from time to time and repayable within 12 (twelve) months, be those termed in any names such as Non-agricultural credit, Self-reliant Credit, Weaver’s Credit or Bank’s individual project credit. The above Investments (Loans) are classified as follows: Continuous and demand Investment(Loan) are classified as: i.Sub-standard: if it is past due/overdue for 03 (three) months or beyond but less than 06 (six) months; ii.Doubtful: if it is past due/overdue for 06 (six) months or beyond but less than 09 (nine) months; iii. Bad & Loss: if it is past due/overdue for 09 months or beyond from the date of expiry or claim by the bank or from the date of creation of forced loan. Fixed Term Investment (Loan) is classified as: (A) In case of any installment(s) or part of installment(s) of a Fixed Term Investment (Loan) amounting upto Tk. 10.00 Lac is not repaid within the due date, the amount of unpaid installment(s) will be termed as ‘past due or overdue installment’. In case of such types of Fixed Term Loans: - 188 Shahjalal Islami Bank Limited Annual Report 2017
  191. i .Sub-standard: if the amount of ‘past due installment is equal to or more than the amount of installment(s) due within 6 (six) months, the entire Investment (loan) will be classified as “Sub-standard”; ii.Doubtful: if the amount of past due installment is equal to or more than the amount of installment(s) due within 9 (Nine) months. the entire Investment (loan) will be classified as “Doubtful”; iii. Bad & Loss: if the amount of past due installment is equal to or more than the amount of installment(s) due within 12(Twelve) months, the entire Investment/loan will be classified as “Bad & Loss”. (B) In case of any installment(s) or part of installment(s) of a Fixed Term Investment (Loan) amounting more than Tk. 10.00 Lac is not repaid within the due date, the amount of unpaid installment(s) will be termed as ‘past due or overdue installment’. In case of such types of Fixed Term Investment (Loans): i.Sub-Standard: If the amount of past due installment is equal to or more than the amount of installment(s) due within 03 (three) months, the entire Investment (loan) will be classified as ‘’Substandard’’. ii.Doubtful: If the amount of past due installment is equal to or more than the amount of installment(s) due within 06 (six) months, the entire Invesment(loan) will be classified as ‘’Doubtful”. iii. Bad & Loss: If the amount of past due installment is equal to or more than the amount of installment(s) due within 09 (nine) months, the entire Investment (loan) will be classified as ‘’Bad & Loss’’. Explanation: If any Fixed Term Investment (Loan) is repayable on monthly installment basis, the amount of installment(s) due within 06 (six) months will be equal to the sum of 06 monthly installments. Similarly, if the Investment (loan) is repayable on quarterly installment basis, the amount of installment(s) due within 06 (six) months will be equal to the sum of 2 quarterly installments.” Short-term Agricultural and Micro-Investment are classified as: If not repaid within the due date as stipulated in the Investment (Loan) agreement. i.Sub-Standard: If the said irregular status continues, the Investment (Loan) will be classified as ‘Substandard’ after a period of 12 months. ii.Doubtful: if the irregular status continues after a period of 36 (thirty-six) months, the Credits are classified as “Doubtful”. iii. Bad & Loss: if the irregular status continues after a period of 60 (sixty) months, the credits are classified as “Bad &Loss” from the stipulated due date as per Investment (loan) agreement’. A continuous Investment, Demand or a Term Investment which will remain overdue for a period of 02 (two) months or more will be put into the “Special Mention Account (SMA)”. Shahjalal Islami Bank Limited Annual Report 2017 189
  192. ii ) Description of approaches followed The Bank is following the general and specific provision for investments for specific and general allowances on the basis of Bangladesh Bank guidelines issued from time to time. and statistical methods; Rates of provision are noted below: a) General Provision: The Bank maintains General Provision in the following way: 1) @ 0.25% against all unclassified Investment of Small and Medium Enterprise (SME) as defined by the SME & Special Program Department of Bangladesh Bank from time to time and @1% against all unclassified Investments (other than Investments/ loans under Consumer Financing, Investment to Brokerage House, Merchant Banks, Stock dealers etc’’ Special Mention Account as well as SME Financing’). 2) @ 5% on the unclassified amount for Consumer Financing where as it has to be maintained @ 1% on the unclassified amount for (i) Housing Finance and (ii) Investments (Loans) for Professionals-to set up business under Consumer Financing Scheme. 3) @ 2% on the unclassified amount for Investments (Loans) to Brokerage House, Merchant Banks, Stock dealers etc. 4) Rate of provision on the outstanding amount of Investments kept in the ‘Special Mention Account’ will be same as the rates stated in (1), (2), (3). 5) a) @1% on the off-balance sheet exposures. (Provision will be held on the total exposure and amount of cash margin or value of eligible collateral will not be deducted while computing Off -balance sheet exposure.) b) c) iii) 190 Specific Provision: Bank will maintain provision at the following rates in respect of classified Continuous, Demand and Fixed Term Investments (Loans): (i)Sub-standard: 20% (ii)Doubtful: 50% (iii) 100% Bad & Loss: Provision for Short-term Agricultural and Micro-Investments: (i) All unclassified Investment (irregular and regular): 1% (ii) Sub-standard & DF: 5% (iii) Bad & Loss: 100% Discussion of the Bank’s investment The Board approved the Investment Risk Manual (IRM) keeping in view risk management policy relevant Bangladesh Bank guidelines to ensure best practice in investment risk management and maintain quality of assets. Authorities are properly delegated ensuring check and balance in investment operation at every stage i.e. screening, assessing risk, identification, management and mitigation of investment risk as well as monitoring, supervision and recovery of investments with provision for Early Warning System (EWS). Shahjalal Islami Bank Limited Annual Report 2017
  193. There is a separate Investment Risk Management (IRM) under the Chief Risk Officer (CRO) for mitigation of investment risk, separate Investment Administration Division (IAD) for ensuring perfection of securities and Recovery Unit for monitoring and recovery of irregular investments. Internal Control & Compliance Division (IC&CD) independently assess quality of investments and compliance status of investments during their audit at least once in a year. Adequate provision is maintained against classified investments as per Bangladesh Bank guidelines. Status of investments is reported periodically to the Risk Management Committee (RMC)/Executive Committee (EC) of the Board by the concerned Division. Quantitative Disclosures a) Total gross investment risk Total gross Investment risk exposures broken down by major types of exposures broken down by major Investment exposure of the Bank are as under: types of investment exposures. Particulars Taka in million Murabaha 14,197.54 Bi-Muazzal 86,302.58 Hire Purchase under Shirkatul Meelk 35,159.20 Ijara 1,288.40 Bi-Salam 3,504.01 Quard 70.85 Investment for EDF 7,847.21 General Investment 0.41 Bills Purchased and Discounted Total 10,303.97 158,668.16 b)Geographical distribution of Geographical distribution of exposures, broken down in significant areas exposures, broken down in by major types of investment exposure of the Bank are as under: significant areas by major types of Particulars Taka in million investment exposure. i.Area-wise: Urban Rural Outside Bangladesh Total ii. 10,462.73 0.00 158,668.16 Division- wise: Dhaka Chittagong 117,797.82 26,888.85 Sylhet 2,002.44 Rajshahi 4,738.58 Khulna 5,417.49 Barisal 572.20 Rangpur Total Shahjalal Islami Bank Limited Annual Report 2017 148,205.43 1,250.78 158,668.16 191
  194. c ) Industry or counterparty type Industry or counterparty type distribution of exposures, broken down by distribution of exposures, broken major types of investment exposure of the Bank are as under: down by major types of investment Particulars Taka in million exposure. i.Industry-wise: Agriculture & Fishing 5,234.40 Cotton & Textile 13,742.25 Garments 19,129.24 Cement 1,292.70 Pharmaceuticals & Chemicals 2,169.87 Real Estate 8,074.51 Transport 2,581.48 Information Technology 399.68 Non Banking Financial Institutions 2,404.26 Steel & Engineering 9,085.34 Food Processing & Beverage 11,229.54 Power & Energy 4,349.75 Paper & Paper Products 1,927.73 Plastic & Plastic Products 3,690.07 Electronics 4,022.94 Services Industries 5,414.80 Trading 26,668.70 Import Financing 7,060.70 Consumer Financing 420.50 Share business 1,042.01 Staff Investment 1,460.30 Others 27,267.39 Total 158,668.16 ii.Counterparty-wise: Investments to allied concern of Directors Investments to Executive/Officers 1,460.30 Investments to Customer Groups 97,186.42 Industrial Investment 57,764.63 Others 1,913.71 Total d) 158,668.16 Residual contractual maturity Residual contractual maturity break down of the whole portfolios, broken breakdown of the whole portfolio, down by major types of investment exposure of the Bank are as under: broken down by major types of Particulars Taka in million investment exposure. Repayable on Demand 30,781.62 Over 1 month but not more than 3 months 52,535.03 Over 3 month but not more than 1 year 48,457.25 Over 1 year but not more than5 years 20,547.53 Over 5 years Total 192 343.10 6,346.73 158,668.16 Shahjalal Islami Bank Limited Annual Report 2017
  195. e ) By major industry or counterparty i. Amount of impaired investments and if available, past due type: investments, provided separately Particulars Taka in million Past Due Special Mention Account (SMA) 1,567.89 Sub Standard 549.66 Doubtful 211.76 Bad & Loss 5,539.08 Total 7,868.39 ii. Specific and general provisions Unclassified Investment 1,165.90 Classified Investment 1,415.06 Off-Balance Sheet Exposure Total 892.30 3,473.26 iii. Charges for specific allowances during the period Provision on Unclassified Investment 269.70 Provision on Classified Investment 664.80 Provision on Off-Balance Sheet Exposure 259.00 Total f) Gross Non Performing (NPAs) Assets i. 1,193.50 Non Performing Assets (NPAs) to outstanding Investments 3.97% ii. Movement of Non Performing Assets (NPAs) Particulars Opening Balance Additions Reductions Closing Balance Taka in million 5,781.70 518.80 0.00 6,300.50 iii. Movement of specific provisions for NPAs Opening Balance Recovery amount previously written-off 1,431.47 18.60 Provisions made during the period 664.80 Fully provided Investment write-off (773.14) Adjustment and Provision transferred Closing Balance 73.33 1,415.06 5. Equities: Disclosures for Banking Book Position Qualitative Disclosures a) The general qualitative disclosures requirement with respect to equity risk, including: Differentiation between holdings on Investment in equity securities are broadly categorized into two parts: which capital gains are expected and i) Quoted Securities that are traded in the secondary market (Trading those taken under other objectives Book Assets). including for relationship and strategic reasons; and Shahjalal Islami Bank Limited Annual Report 2017 193
  196. ii ) Discussion of important policies covering the valuation and accounting of equity holdings in the banking book. This includes the accounting techniques and valuation methodologies used, including key assumptions and practices affecting valuation as well as significant changes in these practices Unquoted securities are categorized as banking book equity exposures which are further sub-divided into two groups: unquoted securities which are invested without any expectation that these will be quoted in near future i.e. Held to Maturity (HTM). And securities those are acquired under private placement or IPO and are going to be traded in the secondary market after completing required formalities. Unquoted securities are valued at cost. The primary objective is to invest in equity securities for the purpose of capital gain by selling them in future or held for dividend income. Dividends received from these equity securities are accounted for as and when received and right to receive when established. Both Quoted and Un-Quoted equity securities are valued at cost and necessary provisions are maintained time to time as per instruction of Bangladesh Bank if the prices fall below the cost price. Quantitative Disclosures Taka in million Particulars Solo Consolidated b) Value disclosed in the balance sheet of investments, as well 1,233.54 2,134.18 as the fair value of those investments; for quoted securities, a comparison to publicly quoted share values where the share price is materially different from fair value. c) The cumulative realized gains (losses) arising from sales and 60.83 170.57 liquidations in the reporting period. d) Total un-realised gains (losses) (465.16) (477.58) Total latent revaluation gains (losses) Any amounts of the above included in Tier – 2 capital. e) Capital requirements broken down by appropriate equity groupings, consistent with the bank’s methodology, as well as the aggregate amounts and the type of equity investments subject to any supervisory provisions regarding regulatory capital requirements.  Specific Market Risk 1,233.54 2,134.18  General Market Risk 1,233.54 2,134.18 6. Profit (Interest) Rate Risk in the Banking Book (PRRBB) Qualitative disclosures a) 194 The general qualitative disclosure requirement including the nature of PRRBB and key assumptions, including assumptions regarding investment prepayments and behavior of non-maturity deposits, and frequency of PRRBB measurement. Profit rate risk is the risk where changes in market profit rates might adversely affect bank’s financial condition. Changes in profit rates affect both the current earnings (earnings perspective) as well as the net worth of the bank (economic value perspective). Re-pricing risk is often the most apparent source of profit rate risk for a bank and is often gauged by comparing the volume of a bank’s assets that mature or re-price within a given time period with the volume of liabilities that do so. The short term impact of changes in profit rates is on the bank’s Net Interest (Profit) Income (NII). In a longer term, changes in profit rates impact the cash flows on the assets, liabilities and off-balance sheet items, giving rise to a risk to the net worth of the bank arising out of all re-pricing mismatches and other profit rate sensitive position. Shahjalal Islami Bank Limited Annual Report 2017
  197. Profit Rate Risk Analysis Quantitative Disclosures b ) The increase (decrease) in earnings or economic value (or relevant measure used by management) for upward and downward rate shocks according to management’s method for measuring PRRBB, broken down by currency (as relevant). Quantitative Disclosures Particular Taka in million 1-90 Days 91-180 Days 181-365 Days Above 1 Year Rate Sensitive Assets (A) 79,913.69 23,281.30 46,562.60 37,273.49 Rate Sensitive Liabilities (B) 70,171.65 16,698.11 33,396.21 30,462.96 GAP (A-B) 9,742.04 6,583.19 13,166.39 6,810.53 Cumulative Gap 9,742.04 16,325.24 29,491.62 36,302.15 1% 1% 1% 1% Quarterly Earning Impact (GAP x PRC) 24.36 16.46 32.92 17.03 Cumulative Earning Impact 24.36 40.81 73.73 90.76 Profit Rate Change (PRC)* *Assuming 1% rise in interest rates for both asset and liability portfolio of the Bank. 7. Market risk Qualitative disclosures Particulars a) i) Views of BOD on trading / investment activities The Board approves all policies related to market risk, setting of limits and review on Core Risk compliance on a regular basis. The objective is to provide cost effective funding to finance asset growth and trade related transactions. ii) Methods used to measure Market risk Standardized approach has been used to measure the Market Risk. The total capital requirement in respect of market risk is the aggregate capital requirement calculated for each of the risk sub-categories. For each risk category minimum capital requirement is measured in terms of two separately calculated capital charges for “specific risk” and “general market risk”. iii) Market Risk Management system The Treasury Division manage market risk covering liquidity, profit rate and foreign exchange risks with oversight from Asset-Liability Management Committee (ALCO) comprising senior executives of the Bank. ALCO is chaired by the Managing Director. ALCO meets at least once in a month. iv) Policies and processes for mitigating market risk There are approved limits for Investment (credit) to deposit ratio, liquid assets to total assets ratio, maturity mismatch, commitments for both onbalance sheet and off-balance sheet items and borrowing from money market and foreign exchange position. The limits are monitored and enforced on a regular basis to protect the market risks. The exchange rate of the Bank is monitored regularly and reviews the prevailing market condition, exchange rate, foreign exchange position and transactions to mitigate foreign exchange risks. Shahjalal Islami Bank Limited Annual Report 2017 195
  198. Quantitative Disclosures b ) The capital requirements for Taka in million Particulars Solo Consolidated Profit rate risk Equity position risk Foreign Exchange risk and - - 246.71 426.84 64.35 64.35 - - 311.06 491.19 Commodity risk Total Capital Requirement 8. Operational risk Qualitative disclosures i) Views of BOD on system to reduce Operational risk is the risk of loss or harm resulting from inadequate Operational Risk or failed of internal processes, people and systems or from external events. Capability to carry out a large number of transactions effectively and accurately while complying with applicable laws and regulations constitute operational risk management activities of the bank. The policy for operational risks including internal control & compliance risk is approved by the Board taking into account relevant guidelines of Bangladesh Bank. Audit Committee of the Board directly oversees the activities of Internal Control & Compliance to protect against all operational risk. ii) Performance gap of executives and Performance of employees is the most important factor to achieve staffs organizational goals. Bank has put in place a well defined performance management process which aims to clarify what is expected from its different level of employees as well as how it is to be achieved. At the beginning of a year’s objectives is communicated to the employees who includes what are expected from him/her during the ensuring period through their direct reporting heads. A yearly performance appraisal practice is in place to review achievements based on which rewards and recognition decisions are made. Bank has a special focus on:  Ensuring a balanced diversity,  Promoting human capital development,  Providing competitive compensation and benefits,  Protecting human rights,  Ensuring workplace health and safety,  Ensuring equal opportunity. SJIBL’s strong brand image also plays an important role in employee motivation. 196 Shahjalal Islami Bank Limited Annual Report 2017
  199. iii ) Potential external events By its nature, Operational Risk cannot be totally eliminated. Like other banks, SJIBL also operates its business with few potential external events that may significantly affect the bank into operational risks are as follows:  General business and political condition, Inflation, iv)Policies and processes mitigating operational risk v)  Changes in taxation rules,  The risk of litigation process,  Changes in investment quality of borrowers,  Damage of physical asset,  Volatility in equity market,  Digital security,  External fraud,  Business disruption and system failure etc. for To mitigate the day to day Operations Manual including internal control & compliance risk Manual is approved by the Board taking into account relevant guidelines of Bangladesh Bank. On the basis of routine audit, branches are rated according to their risk grading/ scoring audit procedure and required frequent audit to the Branches are operating by Audit & Inspection Unit of IC & CD. Bank’s Anti - Money laundering activities are headed by CAMLCO and their activities are devoted to protect against all money laundering and terrorist finance related activities. Apart from that, there is adequate check & balance at every stage of operation, authorities are properly segregated and there is at least dual control on every transaction to protect against operational risk. Approach for calculating capital Basic Indicator Approach (BIA) was used for calculating of capital charge for operational risk as per Guidelines on Risk Based Capital Adequacy of charge for operational risk Bangladesh Bank. Under BIA, the capital charge for operational risk is a fixed percentage, denoted by α (alpha) of average positive annual gross income of the bank over past three years. Figures for any year in which annual gross income is negative or zero, should be excluded from both the numerator and denominator when calculating the average. Quantitative Disclosures b) The capital requirements for : Taka in million Particular Operational risk Solo Consolidated 944.23 986.45 9. Liquidity Ratio Qualitative disclosures Liquidity Risk Shahjalal Islami Bank Limited Annual Report 2017 Liquidity risk is the risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss (or make the required profit) or when a bank is unable to fulfill its commitments. Thus, liquidity risk can be of two types: (i) Funding liquidity risk and (ii) Market liquidity risk. 197
  200. Views of Board of Directors on system to Shahjalal Islami Bank Limited maintains diversified and stable funding reduce liquidity Risk base comprising of core retail , corporate and institutional deposits to manage liquiduty risk. The responsibility of managing the liquidity risk of the bank lies with Treasury Front Office. Different key ratios including LCR and NSFR are regularly discussed in monthly meeting of ALCO. The committee meets at least once in a month to review Asset-Liability and Liquidity position of the Bank. Treasury maintains liquidity based on current liquidity position, anticipated future funding requirement, sources of fund, options for reducing funding needs and ALCO monitors present and anticipated asset quality, present and future earning capacity, present and planned capital position, etc. Methods used to measure Liquidity Risk A sound liquidity risk management employed in measuring, monitoring and controlling liquidity risk is critical to the viability of the bank. The measurement tools those are used to assess liquidity risks are: i. Cash Reserve Requirement (CRR); ii. Statutory Liquidity Ratio (SLR); iii. Investment to Deposit Ratio (IDR); iv. Structural Liquidity Profile (SLP); v. Maximum Cumulative Outflow (MCO); vi. Liquidity Coverage Ratio (LCR); vii. Net Stable Funding Ratio (NSFR); viii. Volatile Liability Dependency Ratio; Liquidity risk management system ix. Liquid Asset to Total Deposit Ratio; x. Liquid Asset to Short Term Liabilities etc. The Asset Liability Committee (ALCO) meets at least once in a month to discuss and monitor overall position of the Bank including Liquidity. Treasury closely monitors liquidity requirements on daily basis by appropriate coordination among funding activities. Besides, monthly fund flow projection is reviewed in ALCO meeting regularly in order to manage liquidity risk of the bank. Policies and processes for mitigating In order to develop comprehensive liquidity risk management framework, liquidity risk the Bank has Board approved Contingency Funding Plan (CFP), a set of policies and procedures that serves as a blueprint for the bank, to meet its funding needs in a planned manner at reasonable cost. Thus, CFP is an extension of ongoing liquidity management that formalizes the objectives of liquidity management by ensuring: a) Reasonable liquid assets being maintained; b) Measurement and projection of funding requirements during various scenarios; and c) Management of access to sources of fund. Maturity ladder of cash inflows and outflows are effective tool to determine the bank’s cash position. A maturity ladder estimates a bank’s cash inflows and outflows and thus net deficit or surplus (GAP) on a day to day basis in different time buckets (e.g. call, 2-7 days, 1 month, 1-3 months, 3-12 months, 1-5 years, over 5 years). 198 Shahjalal Islami Bank Limited Annual Report 2017
  201. Quantitative Disclosures Liquidity Coverage Ratio (LCR) Liquidity Coverage Ratio aims to ensure that a bank maintains an adequate level of unencumbered, high-quality liquid assets that can be converted into cash to meet its liquidity needs for 30 calendar days. LCR= Stock of High Quality Liquid Assets Total net cash outflows over the next 30 calendar days x 100 The minimum standard for LCR is greater than or equal to 100%. However, the bank’s status as on 31 December 2017 in this ratio is as follows: LCR= Tk.21,044.59 Million Tk.20,925.32 Million x 100 LCR = 100.57% Net Stable Funding Ratio (NSFR) Net Stable Funding Ratio is another new liquidity standard introduced by the Basel Committee. The NSFR aims to limit over-reliance on shortterm wholesale funding during times of abundant market liquidity and encourages better assessment of liquidity risk across all on and offbalance sheet items. NSFR= Available amount of stable funding (ASF) Required amount of stable funding (RSF) x 100 The minimum acceptable value of this ratio is 100 percent, indicating that available stable funding (ASF) should be at least equal to required stable funding (RSF). However, the bank’s status as on 31 December 2017 in this ratio is as follows: NSFR= Tk.157,694.47 Million Tk.132,554.54 Million x 100 NSFR = 118.97% 10. Leverage Ratio Qualitative disclosures Views of Board of Directors on system to The responsibility of monitoring excessive leverage of the Bank lies with the Concerned Divisions under the guidance of the Board of Directors of reduce excessive leverage the bank. The Board delivers policies and processes from time to time for managing the Bank’s leverage ratio up to the mark. Policies and processes for managing The leverage ratio was introduced into the Basel III framework as a nonexcessive on and off–balance sheet risk based backstop limit, to supplement risk-based capital requirements. In order to avoid building-up excessive on and off-balance sheet leverage leverage in the banking system, a simple, transparent, non-risk based leverage ratio has been introduced by the Bangladesh Bank. The leverage ratio is calibrated to act as a credible supplementary measure to the risk based capital requirements. The leverage ratio is intended to achieve the following objectives: Shahjalal Islami Bank Limited Annual Report 2017  Constrain the build-up of leverage in the banking sector which can damage the broader financial system and the economy; and  Reinforce the risk based requirements with an easy to understand and a non-risk based measure. 199
  202. Approaches for calculating exposure The exposure mesure for the leverage ratio generally follows the accounting measure of exposure . In order to measure the exposure consistently with financial accounts, the following approaches are applied by the bank: i. On balance sheet, non-derivative exposures are being net of specific provisions and valuation adjustments (e.g. surplus/ deficit on Available for sale (AFS)/ Held-for-trading (HFT) positions). ii. Physical or financial collateral, guarantee or investment risk mitigation purchased is not allowed to reduce on-balance sheet exposure. iii. Netting of investments and deposits is not allowed. The Bank has calculated the regulatory leverage ratio as per the guideline of Basel III. The numerator, capital measure is calculated using the new definition of Common Equity Tier I capital applicable from 01 January 2015. Quantitative Disclosures Leverage Ratio A minimum Tier 1 leverage ratio of 3% is being prescribed by Bangladesh Bank both at solo and consolidated basis. The bank maintains leverage ratio on quarterly basis. The status of leverage ratio at the end of each calendar quarter is submitted to Bangladesh Bank. The formula of Leverage Ratio is as under: Leverage Ratio= Tier 1 Capital (after related deductions) Total Exposure (after related deductions) Taka in million Particular Common Equity Tier 1 Capital* Solo Consolidated 13,317.78 13,864.80 On Balance Sheet Exposure* 206,471.31 209,581.63 Off-Balance Sheet Exposure* 35,406.93 35,406.93 Total Exposure 241,878.24 244,988.56 Leverage Ratio 5.51% 5.66% * Considering all regulatory adjustments 11. Remuneration Qualitative disclosures a) Information relating to the bodies that oversee remuneration. i. Name, composition and mandate Human Resources Division of the Bank deals with the remuneration of the main body overseeing related issues of employees with the assistance of Financial Administration remuneration. Division as per specific provisions laid down in the Employees’ Service Rules of the Bank and Pay structure duly approved by the Board of Directors, while the same is governed and oversight by the Managing Director, Management Committee and Head of Human Resourse Division. 200 Shahjalal Islami Bank Limited Annual Report 2017
  203. The Bank has a well defined Employees ’ Service Rules approved by the Board of Directors, which includes remuneration/compensation packages, retirement benefits of regular employees and incentive schemes etc. The Board has also approved a very competitive and rewarding scale of pay for the Employees. The Service Rules and Remuneration policies/Pay Structure is reviewed and revised from time to time by the management constituting high powered committee and got approved by the Board. While reshuffling the pay structure/compensation packages, the inflation & price hike of commodities, industry best practices and peer banks’ status etc. are taken into consideration. ii. External consultants whose advice has been sought, the body by which they were commissioned, and in what areas of the remuneration process. Bank does not seek advice from any external consultant in any step of remuneration process and therefore, no commission is paid to this effect. The bank does not make any differentiation in offering compensation/ salary & allowance. iii. A description of the scope of the bank’s remuneration policy (eg by regions, business lines), including the extent to which it is applicable to foreign subsidiaries and branches. SJIBL follows the uniform remuneration policy. However, management ensures extremely fair and performance based compensation to all employees. Further, the remuneration of higher Management, Consultants and contractual appointments are determined and oversight by the Board of Directors on case to case basis and as per requirement. iv. A description of the types of employees considered as material risk takers and as senior managers, including the number of employees in each group. The Bank has not categorized any group or grade of employees as material risk taker. The risks in different operational events of the bank are borne by the concerned employees of those particular areas as a team. However, the members of senior management, senior most branch managers and Head of the functional division at Head Office are considered as senior managers. As such, a number of 62 Executives of the Bank up to the rank of Vice President as on 31 December 2017 has been considered as senior managers as follows: As on 31 December 2017, the Bank had no foreign subsidiaries and branches outside Bangladesh. Designation Number Managing Director 1 Additional Managing Director 1 Deputy Managing Director 4 Senior Executive Vice President 9 Executive Vice President 9 Senior Vice President 13 Vice President 25 Total 62 b) Information relating to design and structure of remuneration process. i. An overview of the key features The bank has a well structured, competitive and rewarding scale of pay and objectives of remuneration for the regular employees of the bank duly approved by the board of policy. Directors. The pay package of all employees other than Managing Director and Contractual Employees are determined by the management in accordance with the approved scale of pay. Shahjalal Islami Bank Limited Annual Report 2017 201
  204. The compensation package of Managing Director is determined by the Board of Directors and subject to the subsequent approval of the Central Bank , i.e. Bangladesh Bank. Remuneration Package of Contractual Employees, as and when required, are determined and approved by Board of Directors on case to case basis prior to appointment. The annual increment and incentive bonuses for the eligible employees are paid on the basis of performances under the purview of Board approved policies in this regard. The main objective of the remuneration policy of the bank is to retain the existing human resources, attract/hire the talented & experienced professionals and to motivate the workforce to put their best efforts for sustainable growth of the Bank. The remuneration includes basic pay, house rent, medical allowance, conveyance allowance etc. The basic pay & other allowances like house rent, medical allowance are increased at a fixed rate annually subject to satisfactory performance of past year. The employees are also rewarded by way of special promotion, increment for their outstanding performance. Other than monthly remuneration bank offers a number of facilities/ benefits like Leave Fare Assistance (LFA); Executive Car Facility; Corporate Mobile Phone facility, Maternity benefits for employees; Employees’ House Building Investment Facility; Employees’ House building Safety Scheme; House Furnishing Allowance, Disability & Death benefits etc. Besides, a very attractive retirement/separation benefit is paid in the form of Gratuity; Contributory Provident Fund; Leave encashment, Social Security Super Annuaton Fund. The employees are paid two festival bonus and boishaki bonus per year. Incentive bonus is also paid on the basis of performance for annual profit of the bank. ii.Whether the remuneration committee reviewed the firm’s remuneration policy during the past year, and if so, an overview of any changes that were made. The remuneration policy and pay structure for the employees of the Bank is reviewed and revised/reshuffled from time to time by management and subsequently got approved by the Board of Directors. The remuneration is reviewed and changed during the year. iii. A discussion of how the bank ensures that risk and compliance employees are remunerated independently of the businesses they oversee. The officials working in the Risk and Compliance areas have got their specific job descriptions & job allocations like professionals of other functional areas and performing their responsibilities independently as per standing guidelines of the regulators as well as the bank management. Their service and remuneration are governed under the approved Employees’ Service Rules of the Bank and pay structure and there is no differentiation with other employees of the Bank. c) Description of the ways in which current and future risks are taken into account in the remuneration process. i. An overview of the key risks that The remuneration is measured taking into consideration of the following the bank takes into account when two risk factors: implementing remuneration  Financial risks and measures.  Compliance risk. If the financial losses is made for non-compliance of any of that rules & regulations by any employee the bonus, increment etc. are held. 202 Shahjalal Islami Bank Limited Annual Report 2017
  205. ii . An overview of the nature and type of the key measures used to take account of these risks, including risks difficult to measure. SJIBL follows financial capacity of the bank to measure remuneration packages. Besides, it considers operational impacts, cost of living adjustments, relevants compliances, industry-competitives remuneration in relation to the market reputation and other effective risk-adjusted measures in determing remuneration. iii. A discussion of the ways in SJIBL approaches the employee’s remuneration arrangements, especially which these measures affect periodic fixed remuneration enhancements and variable compensation remuneration. through an integrated risk, finance, compensation and performance management framework. Annual salary increment and potential variable benefits are rewarded at the end of each year. iv. A discussion of how the nature and type of these measures has changed over the past year and reasons for the change, as well as the impact of changes on remuneration. The realistic grounds has considered by the Bank’s management to revise and measure the remuneration arrangement from time to time in order to ensure risk adjusted business operations and employee satisfaction simultaneously. d) Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration. i. An overview of main performance metrics for bank, top-level business lines and individuals.  Net Profit (Income) Margin (NIM)  Return on Investment (ROI)  Return on Assets (ROA)  Return on Equity (ROE)  RAROC (Risk adjusted Return on Capital)  Classified Investment Ratio  Earning Per Share (EPS)  Capital to Risk-weighted Asset Ratio (CRAR)  Operating Efficiency (cost control) ii. A discussion of how amounts Annual performance bonus, salary increment and promotion are directly of individual remuneration are linked with employee’s individual performance. linked to bank-wide and individual performance. iii. A discussion of the measures the bank will in general implement to adjust remuneration in the event that performance metrics are weak. Not Applicable e) Description of the ways in which the Bank seeks to adjust remuneration to take account of longer-term performance. i. A discussion of the bank’s policy on deferral and vesting of variable remuneration and, if the fraction of variable remuneration that is deferred differs across employees or groups of employees, a description of the factors that determine the fraction and their relative impotance. Shahjalal Islami Bank Limited Annual Report 2017 Currently SJIBL does not offer any variable remuneration that may be deferred or vested either in the form of cash, shares or share-linked instruments. However, employees are eligible for variable remuneration arrangement in the form of Incentive Bonus (non-deferred cash awards), applicable to their positions. 203
  206. ii . A discussion of the bank’s policy and criteria for adjusting deferred remuneration before vesting and (if permitted by national law) after vesting through clawback arrangements. Not Applicable f) Description of the different forms variable remuneration that the bank utilizes and the rationale for using these different forms. i. An overview of the forms of variable remuneration offered (i.e. cash, share and share-linked instrument and other forms. ii. A discussion of the use of the The following variable remunerations are provided by the Bank on the different forms of variable basis of employee’s individual performance. remuneration and, if the mix  Annual performance bonus and of different forms of variable Salary increment. remuneration differs across  employees or groups of employees), a description the factors that dermine the mix and their relative importance. The structure of remuneration arrangements for all employees primarily consists of a fixed remuneration component, which is made up of basic salary, allowances and other benefits. Employees are also eligible for variable remuneration arrangements applicable to their position. Variable remuneration consists of Incentive Bonus (cash awards) for most of SJIBL’s employees. Quantitative Disclosures g) Number of meetings held by the main body overseeing remuneration during the financial year and remuneration paid to its member. Not Applicable h)i.Number of employees having received a variable remuneration award during the financial year. Not Applicable h)ii.Number and total amount of guaranteed bonuses awarded during the financial year. No. of Guaranteed Bonus Total Amount (Tk. in Million) 3 festival bonuses 161.24 h)iii.Number and total amount of signon awards made during the financial year. Not Applicable h)iv. Number and total amount of severance payments made during the financial year. Not Applicable i) i.Total amount of outstanding deferred remuneration, split into cash, shares and share-linked instruments and other forms. Not Applicable 204 Shahjalal Islami Bank Limited Annual Report 2017
  207. i ) ii. Total amount of deferred remuneration paid out in the financial year. j)Breakdown of amount remuneration awards for financial year to show: i. Fixed and variable; ii. Deferred and non-deferred; Not Applicable of the iii. Different forms used (cash, shares and share linked instruments, other forms). Sl. Particulars i) Fixed and variable ii) Deferred and non-deferred iii) Different forms used 2,065.09 k)i. Total amount of outstanding deferred remuneration and retained remuneration exposed to ex post explicit and/or implicit adjustments. Not Applicable k)ii.Total amount of reductions during the financial year due to ex post explicit adjustments. Not Applicable k)iii. Total amount of reductions during the financial year due to ex post implicit adjustments. Not Applicable Shahjalal Islami Bank Limited Annual Report 2017 Total Amount (Tk. in million) Nil Cash 205
  208. Annual Report of Shariah Supervisory Committee-2017 All praises be to Almighty Allah , the Lord of the Universe and peace and blessings of Allah be upon the Prophet Mohammad (Sm.) and his all other descendants and companions. The Honorable Members of Shariah Supervisory Committee met in 04 (four) Supervisory Committee Meetings and 1 (one) Sub Committee Meeting in the year-2017 to review and confer decision on the matters referred by the Board of Directors and the Management of the Bank. The Shariah Supervisory Committee gave necessary instructions and guidelines to the management from time to time to operate the Banking transactions according to the principles of Islamic Shariah. Members of Shariah Supervisory Committee delivered valuable speech and suggestions at the Shariah workshops and seminars arranged by the management of the Bank for the Bank officials. Shariah Inspection reports of the Branches are submitted to Shariah Supervisory Committee Secretariat by Shariah Inspection and Compliance Division to review. After reviewing the reports and the performance of transactions of Shahjalal Islami Bank Limited, the Shariah Supervisory Committee gives their opinions and suggests as following:  Shariah awareness has been developed during the year compared to previous ones due to motivation and other measures taken;  Distribution of profit among the various Mudarabah depositors have been made as far as possible in accordance with the principle of Islamic Shariah;  The Management of the Bank should remain more careful to operate all its Banking transactions as per Shariah principles by implementing suggestions given by Shariah Supervisory Committee from time to time;  Besides existing investment schemes, some new small investment schemes specially for the development of agriculture sector are to be introduced to uplift socio-economic condition and welfare of the distressed humanities;  The Management has to be more cautious to ensure buy-sale with supporting necessary documents in all cases, especially in case of Bai-Muajjal and Bai-Murabaha investment. Also pro-active initiatives should be taken for implementation of Mudaraba and Musharaka mode of investment in its operations gradually;  Shariah audit should be conducted in all Branches more frequently to verify/rectify Banking transactions to comply with Shariah;  To ensure effective compliance of Shariah principles; Bank Management should be more vigilant to continue implementation of suggestions given from Shariah Supervisory Committee time to time;  “More meetings, seminars, workshop, symposiums and get-together” should be organized centrally and at branch level to develop awareness among the valued clients as well as employees of the Bank about Islamic Banking and its benefits. May Allah (SWT), the Lord of the Universe, grant us the strength and courage to establish Islamic society on the soil of Bangladesh through Islamic Banking. Aa-meen! Mufti Abdul Halim Bukharee Chairman, Shariah Supervisory Committee 206 Shahjalal Islami Bank Limited Annual Report 2017
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  210. Allah will destroy Riba (usury) and will give increase for Sadaqaat (deeds of charity, alms, etc.) And Allah likes not the disbelievers, sinners. Surah Al-Baquarah, verse - 276 208 Shahjalal Islami Bank Limited Annual Report 2017
  211.   Shahjalal Islami Bank Limited Annual Report 2017 209
  212. Independent Auditors ’ Report to the Shareholders of Shahjalal Islami Bank Limited We have audited the accompanying consolidated financial statements of Shahjalal Islami Bank Limited and its subsidiary (together referred to as the “Group”) as well as the separate financial statements of Shahjalal Islami Bank Limited (the “Bank”) which comprise the consolidated and separate Balance Sheets as at 31 December 2017, consolidated and separate Profit and Loss Accounts, consolidated and separate Statements of Changes in Equity and Cash Flow Statements for the year then ended, and a summary of significant accounting policies and other explanatory information. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements of the Group and also separate financial statements of the Bank that give a true and fair view in accordance with Bangladesh Financial Reporting Standards (BFRSs) as explained in Note 2 and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements of the Group and also separate financial statements of the Bank that are free from material misstatement, whether due to fraud or error. The Banking Companies Act, 1991 (amended up to 2013) and the central bank (Bangladesh Bank) regulations require the management to ensure effective internal audit, internal control and risk management functions of the Bank. The management is also required to make a self-assessment on the effectiveness of anti-fraud internal controls and report to Bangladesh Bank on instances of fraud and forgeries. Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated financial statements of the Group and the separate financial statements of the Bank based on our audit. We conducted our audit in accordance with Bangladesh Standards on Auditing (BSAs). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements of the Group and the separate financial statements of the Bank are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements of the Group and separate financial statements of the Bank. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements of the Group and the separate financial statements of the Bank, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of consolidated financial statements of the Group and separate financial statements of the Bank that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements of the Group and the separate financial statements of the Bank. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements of the Group and also separate financial statements of the Bank give a true and fair view of the consolidated financial position of the Group and the separate financial position of the Bank as at 31 December 2017, and of its consolidated and separate financial performance and cash flows for the year then ended in accordance with Bangladesh Financial Reporting Standards (BFRS) as explained in note 2. 210 Shahjalal Islami Bank Limited Annual Report 2017
  213. Report on Other Legal and Regulatory Requirements In accordance with the Companies Act , 1994, Securities and Exchange Rules 1987, the Banking Companies Act, 1991 (amended up to 2013) and the rules and regulations issued by Bangladesh Bank, we also report that: (i) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit and made due verification thereof; (ii) to the extent noted during the course of our audit work performed on the basis stated under the Auditors’ Responsibility section in forming the above opinion on the consolidated financial statements of the Group and the separate financial statements of the Bank and considering the reports of the Management to Bangladesh bank on anti-fraud internal controls and instances of fraud and forgeries as stated under the Management’s Responsibility for the Financial Statements and Internal Control: (a) internal audit, internal control and risk management arrangements of the Bank as disclosed in note 2.2 of the financial statements appeared to be materially adequate; (b) nothing has come to our attention regarding material instances of forgery or irregularity or administrative error and exception or anything detrimental committed by employees of the Bank and its related entities other than matters disclosed in note 2.2.f). iii of the financial statements; (iii) financial statements of the subsidiary of the Bank have been audited by other auditor and have been properly reflected in the consolidated financial statements; (iv) in our opinion, proper books of account as required by law have been kept by the Bank so far as it appeared from our examination of those books and proper returns adequate for the purpose of our audit have been received from branches not visited by us; (v) the balance sheet and profit and loss account of the Bank together with the annexed notes dealt with by the report are in agreement with the books of account and returns; (vi) the expenditures incurred was for the purpose of the Bank’s business; (vii) the financial statements of the Bank have been drawn up in conformity with prevailing rules, regulations and accounting standards as well as related guidance issued by Bangladesh Bank; (viii) as mentioned in note 8a.8 adequate provisions have been made for investments and other assets of the Bank which are in our opinion, doubtful of recovery; (ix) the records and statements submitted by the branches have been properly maintained and consolidated in the financial statements of the Bank; (x) the information and explanations required by us have been received and found satisfactory; (xi) we have reviewed over 80% of the risk weighted assets of the Bank and spending over 3,650 person hours; and (xii) Capital to Risk Weighted Assets Ratio (CRAR) as required by the Bangladesh Bank has been maintained by the Bank. Hoda Vasi Chowdhury & Co Chartered Accountants Dhaka, 25 April 2018 Shahjalal Islami Bank Limited Annual Report 2017 211
  214. Shahjalal Islami Bank Limited and its Subsidiary Consolidated Balance Sheet As at 31 December 2017 Property and Assets Cash Cash in hand (Including Foreign Currencies) Balance with Bangladesh Bank & Sonali Bank Ltd (Including Foreign Currencies) Notes 1,529,754,123 1,179,754,405 4 11,659,462,711 13,189,216,833 8,398,144,743 9,577,899,148 6 592,284,487 427,070,723 1,019,355,210 6,661,710,616 1,948,192,572 472,970,179 2,421,162,751 7,861,781,566 7 7,200,000,000 4,759,206,718 11,959,206,718 5,500,000,000 3,964,312,892 9,464,312,892 151,382,986,852 10,303,967,071 161,686,953,924 4,008,163,873 12,383,173,681 88,909,355 210,996,690,210 115,618,153,110 10,478,684,675 126,096,837,785 3,474,011,723 12,005,895,988 51,078,968 170,952,980,821 12 30,176,688,291 17,239,879,460 13 14 18,280,590,909 64,248,150,845 41,684,900,658 18,281,980,348 2,493,444,313 144,989,067,073 4,000,000,000 18,510,981,952 44,923,686,220 44,393,859,970 14,492,841,209 1,712,398,926 124,033,768,277 - 15 16 17,828,131,108 137,999,259 197,131,885,731 16,340,159,954 95,464,963 157,709,272,654 17 18 19 7,714,225,390 4,819,264,987 1,079,870,794 13,613,361,171 7,346,881,330 4,403,561,679 1,254,951,378 13,005,394,387 17.7 251,443,308 210,996,690,210 238,313,780 170,952,980,821 Investments General Investment etc. Bills Purchased and Discounted Fixed Assets Including Premises Other Assets Non Banking Assets Total Property and Assets Liabilities and Capital Liabilities Placement from other Banks & Financial Institutions Deposits and Other Accounts Mudaraba Savings Deposits Mudaraba Term Deposits Other Mudaraba Deposits Al-Wadeeah Current & Other Deposit Accounts Bills Payable Mudaraba Subordinated Bond Other Liabilities Deferred Tax Liabilities Total Liabilities Capital/Shareholders’ Equity Paid-up Capital Statutory Reserve Retained Earnings Total Shareholders’ Equity Non-controlling Interest Total Liabilities & Shareholders’ Equity 212 31.12.2016 Taka 3 Balance with other Banks and Financial Institutions Inside Bangladesh Outside Bangladesh Placement with other Banks & Financial Institutions Investments in Shares & Securities Government Others 31.12.2017 Taka 8 9 10 11 Shahjalal Islami Bank Limited Annual Report 2017
  215. Shahjalal Islami Bank Limited and its Subsidiary Consolidated Off-balance Sheet Items As at 31 December 2017 Notes Contingent Liabilities Acceptances & endorsements Letters of guarantee Irrevocable letters of credit Bills for collection Other contingent liabilities Total 20 21 31.12.2017 Taka 31.12.2016 Taka 28,368,741,403 19,322,482,514 27,569,640,596 13,964,695,831 89,225,560,344 23,719,133,589 11,956,867,945 18,421,361,635 9,228,367,132 63,325,730,301 - - 89,225,560,344 63,325,730,301 Other Commitments Documentary credits, short term and trade related transactions Forward assets purchased and forward deposits placed Undrawn note issuance, revolving and underwriting facilities Undrawn formal standby facilities, credit lines and other commitments Total Total off-balance sheet items including contingent liabilities The annexed notes form an integral part of these consolidated financial statements Chairman Director Director Managing Director This is the consolidated balance sheet referred to in our separate report of even date Dhaka, 25 April 2018 Shahjalal Islami Bank Limited Annual Report 2017 Hoda Vasi Chowdhury & Co Chartered Accountants 213
  216. Shahjalal Islami Bank Limited and its Subsidiary Consolidated Profit and Loss Account For the year ended 31 December 2017 Operating Income Notes 2017 Taka 2016 Taka Investment Income Less : Profit paid on Deposits Net Investment Income 23 24 13,096,852,776 8,472,962,487 4,623,890,289 11,334,017,520 7,103,095,818 4,230,921,702 Income from Investment in Shares/Securities Commission, Exchange and Brokerage Other Operating Income 25 26 27 340,261,100 1,819,506,815 522,154,261 2,681,922,177 7,305,812,466 242,461,114 1,342,881,837 457,549,789 2,042,892,740 6,273,814,442 Operating Expenses Salaries and Allowances Rent, Taxes, Insurances, Electricity etc. Legal Expenses Postage, Stamps, Telecommunication etc. Stationery, Printings, Advertisements etc. Chief Executive’s Salary & Fees Directors’ Fees & Expenses Shariah Supervisory Committee’s Fees & Expenses Auditors’ Fees Depreciation & Repairs of Bank’s Assets Zakat Expenses Other Expenses Total Operating Expenses 28 29 30 31 32 33 34 35 26 37 38 39 2,261,600,628 471,706,816 1,447,687 41,123,776 85,955,155 14,217,000 7,287,728 830,543 489,500 158,135,282 113,717,689 567,458,210 3,723,970,014 1,926,661,314 438,994,609 1,052,709 37,365,945 80,268,567 13,430,500 6,259,712 559,816 639,500 145,424,652 101,969,969 395,760,970 3,148,388,263 Profit / (Loss) before Provision 22 3,581,842,451 3,125,426,179 664,800,000 269,700,000 259,000,000 37,400,000 18,500,000 1,249,400,000 2,332,442,451 356,500,000 115,200,000 197,900,000 3,526,000 673,126,000 2,452,300,179 42,534,296 922,873,710 965,408,006 1,367,034,446 (8,746,257) 791,864,614 783,118,357 1,669,181,821 1,342,654,918 24,379,528 1,367,034,446 1,660,000,188 9,181,634 1,669,181,821 Total Operating Income Specific provision for Classified Investment General Provision for Unclassified Investment General Provision for Off-Balance Sheet Items Provision for deminution in value of Investments in Shares Provision for Other Assets Total Provision Total Profit / (Loss) before taxes 40 Provision for taxation Deferred tax Current tax Net Profit / (Loss) after Tax Net profit after tax attributable to: Equity holders of SJIBL Non-controlling interest 214 41 41a Shahjalal Islami Bank Limited Annual Report 2017
  217. Shahjalal Islami Bank Limited and its Subsidiary Consolidated Profit and Loss Account For the year ended 31 December 2017 Notes Retained earnings from previous year Add : Net profit after tax (attributable to equity holders of SJIBL) Profit available for appropriation Appropriation: Statutory reserve Dividend Retained earnings 18 19 Consolidated Earnings Per Share (EPS) [Restated] 2017 Taka 2016 Taka 1,254,951,378 1,342,654,918 2,597,606,295 1,011,262,010 1,660,000,188 2,671,262,198 415,703,308 1,102,032,193 1,079,870,794 2,597,606,295 461,216,247 955,094,573 1,254,951,378 2,671,262,198 1.74 2.15 42 The annexed notes form an integral part of these consolidated financial statements. Chairman Director Director Managing Director This is the consolidated profit and loss account referred to in our separate report of even date. Dhaka, 25 April 2018 Shahjalal Islami Bank Limited Annual Report 2017 Hoda Vasi Chowdhury & Co Chartered Accountants 215
  218. Shahjalal Islami Bank Limited and its Subsidiary Consolidated Cash Flow Statement For the year ended 31 December 2017 Cash flows from operating activities Notes Investment income receipt in cash 43 Profit paid on deposits 44 Dividend receipts Fees & commission receipt in cash Recoveries on investment previously written off Cash payments to employees Cash payments to suppliers Income tax paid Receipts from other operating activities 45 Payment for other operating activities 46 (i) Operating profit before changes in operating assets & liabilities Changes in operating assets and liabilities (Increase)/decrease in investment to customers (Increase)/decrease in other assets 47 (Increase)/decrease of placement with other banks & financial institutions Increase/(decrease) in deposits from other banks Increase/(decrease) of placement from other banks & financial institutions Increase/(decrease) in deposits received from customers Increase/(decrease) in other liabilities on account of customers Increase/(decrease) in other liabilities 48 (ii) Cash flows from operating assets and liabilities Net cash flows from operating activities (A)=(i+ii) Cash flows from investing activities Proceeds from sale of securities Payment for purchases of securities Proceeds from sale of fixed assets Payment for purchases of property, plant & equipments Purchase/sale of subsidiaries Net cash used in investing activities (B) Cash flows from financing activities Receipts from issue of debt instruments Receipts from issuance of Mudaraba Subordinated Bond Payments for redemption of debt instruments Receipts from issue of ordinary shares Dividend paid to ordinary share holder Net cash used in financing activities (C) Net increase/(decrease) in cash & cash equivalents (A+B+C) Add: Effect of exchange rate changes on cash & cash equivalents Add: Cash and cash equivalents at the beginning of the year Cash & cash equivalents at the end of the year 49 2017 Taka 2016 Taka 13,466,681,750 (8,450,003,205) 57,924,937 1,819,506,815 18,605,000 (2,275,817,628) (85,955,155) (955,522,789) 525,868,709 (1,227,432,624) 2,893,855,811 11,670,404,910 (7,429,829,009) 62,426,658 1,342,881,837 22,583,982 (1,940,091,814) (80,268,567) (644,006,097) 459,444,812 (999,335,958) 2,464,210,755 (36,457,754,995) 837,296,311 1,200,070,950 (1,351,082,714) 12,936,808,831 22,306,381,510 (172,989,703) (73,719,311) (774,989,122) 2,118,866,689 (27,846,228,421) (10,738,761) 796,216,405 (1,301,116,591) 13,348,968,035 16,228,090,481 (19,963,183) 286,439,794 1,481,667,758 3,945,878,513 1,998,232,027 (4,493,125,853) 594,784,543 (1,263,309,130) (3,163,418,412) 989,951,210 (2,477,177,329) 2,321,270 (263,581,780) (1,748,486,628) 4,000,000,000 (745,938,133) 3,254,061,867 2,209,510,144 11,999,061,899 14,208,572,043 (955,094,573) (955,094,573) 1,242,297,312 10,756,764,587 11,999,061,899 The annexed notes form an integral part of these consolidated financial statements. Chairman Director Director Managing Director Dhaka, 25 April 2018 216 Shahjalal Islami Bank Limited Annual Report 2017
  219. Shahjalal Islami Bank Limited Annual Report 2017 217 Chairman Dhaka , 25 April 2018 Director Director Statutory Paid-up Capital Reserve 7,346,881,330 3,942,345,432 461,216,247 7,346,881,330 4,403,561,679 - Statutory Paid-up Capital Reserve 7,346,881,330 4,403,561,679 367,344,060 415,703,308 7,714,225,390 4,819,264,987 - The annexed notes form an integral part of these consolidated financial statements. Balance as at 01 January 2016 Cash dividend paid for the year 2015 Net profit during the year Total Shareholders’ Equity as at 31 December 2016 Non-controlling interest Add: General Provision for Unclassified Investment & Off-Balance Sheet Items Total Eligible Regulatory Capital as at 31 December 2016 Particulars For the year ended 31 December 2016 Balance as at 01 January 2017 15 % Dividend paid (10% Cash & 5% Stock) for the year 2016 Net profit during the year Total Shareholders’ Equity as at 31 December 2017 Non-controlling interest Add: General Provision for Unclassified Investment & Off-Balance Sheet Items Add: Mudaraba Subordinated Bond Total Eligible Regulatory Capital as at 31 December 2017 Particulars For the year ended 31 December 2017 and its Subsidiary Consolidated Statement of Changes in Equity 12,300,488,772 (955,094,573) 1,660,000,188 13,005,394,387 238,313,780 1,953,120,900 15,196,829,067 Total (Amount in taka) 13,005,394,387 (734,688,133) 1,342,654,918 13,613,361,171 251,443,308 2,481,820,900 4,000,000,000 20,346,625,379 Total (Amount in taka) Managing Director Non-controlling Retained Interest Earnings 1,011,262,010 (955,094,573) 1,198,783,941 - 1,254,951,378 238,313,780 - Non-controlling Retained Interest Earnings 1,254,951,378 - (1,102,032,193) 926,951,610 - 1,079,870,794 251,443,308 - Shahjalal Islami Bank Limited
  220. Shahjalal Islami Bank Limited Balance Sheet As at 31 December 2017 Property and Assets Cash Cash in hand (Including Foreign Currencies) Balance with Bangladesh Bank & Sonali Bank Ltd (Including Foreign Currencies) Notes 1,529,754,123 1,179,754,405 4a 11,659,462,711 13,189,216,833 8,398,144,743 9,577,899,148 5a 6a 572,698,313 427,070,723 999,769,036 6,661,710,616 1,943,033,831 472,970,179 2,416,004,010 7,861,781,566 7a 7,200,000,000 3,326,258,238 10,526,258,238 5,500,000,000 2,093,131,998 7,593,131,998 8a 9a 148,364,190,304 10,303,967,071 158,668,157,376 3,957,117,768 112,519,695,669 10,478,684,675 122,998,380,344 3,433,039,043 10a 11 13,795,235,456 88,909,355 207,886,374,678 13,313,448,521 51,078,968 167,244,763,598 12a 29,621,688,291 16,235,542,799 18,280,590,909 64,248,150,845 42,078,308,773 18,281,980,348 2,493,444,313 145,382,475,188 4,000,000,000 15,426,428,189 137,999,259 194,568,590,927 18,510,981,952 44,923,686,220 44,769,922,395 14,492,841,209 1,712,398,926 124,409,830,702 13,647,349,223 95,464,963 154,388,187,687 7,714,225,390 4,819,264,987 784,293,374 7,346,881,330 4,403,561,679 1,106,132,902 13,317,783,751 207,886,374,678 12,856,575,911 167,244,763,598 Investments in Shares & Securities Government Others Investments General Investment etc. Bills Purchased and Discounted Fixed Assets Including Premises Other Assets Non Banking Assets Total Property and Assets Liabilities and Capital Liabilities Placement from other Banks & Financial Institutions Deposits and Other Accounts Mudaraba Savings Deposits Mudaraba Term Deposits Other Mudaraba Deposits Al-Wadeeah Current & Other Deposit Accounts Bills Payable 13a Mudaraba Subordinated Bond Other Liabilities Deferred Tax Liabilities Total Liabilities Capital/Shareholders’ Equity Paid-up Capital Statutory Reserve Retained Earnings Total Shareholders’ Equity Total Liabilities & Shareholders’ Equity 218 31.12.2016 Taka 3a Balance with other Banks and Financial Institutions Inside Bangladesh Outside Bangladesh Placement with other Banks & Financial Institutions 31.12.2017 Taka 15a 16a 17 18 19a Shahjalal Islami Bank Limited Annual Report 2017
  221. Shahjalal Islami Bank Limited Off-balance Sheet Items As at 31 December 2017 Contingent Liabilities Notes Acceptances & endorsements Letters of guarantee Irrevocable letters of credit Bills for collection Other contingent liabilities Total 20 21 31.12.2017 Taka 31.12.2016 Taka 28,368,741,403 19,322,482,514 27,569,640,596 13,964,695,831 89,225,560,344 23,719,133,589 11,956,867,945 18,421,361,635 9,228,367,132 63,325,730,301 - - 89,225,560,344 63,325,730,301 Other Commitments Documentary credits, short term and trade related transactions Forward assets purchased and forward deposits placed Undrawn note issuance, revolving and underwriting facilities Undrawn formal standby facilities, credit lines and other commitments Total Total off-balance sheet items including contingent liabilities The annexed notes form an integral part of these financial statements Chairman Director Director Managing Director This is the balance sheet referred to in our separate report of even date Dhaka, 25 April 2018 Shahjalal Islami Bank Limited Annual Report 2017 Hoda Vasi Chowdhury & Co Chartered Accountants 219
  222. Shahjalal Islami Bank Limited Profit and Loss Account For the year ended 31 December 2017 Notes 2017 Taka 2016 Taka Operating Income Investment Income Less : Profit paid on Deposits Net Investment Income 23a 24a 12,860,038,254 8,418,975,877 4,441,062,377 11,154,356,257 6,986,501,525 4,167,854,732 Income from Investment in Shares/securities Commission, Exchange and Brokerage Other Operating Income 25a 26a 27a 299,298,822 1,614,174,600 515,260,783 2,428,734,206 6,869,796,583 136,077,151 1,222,560,456 451,673,610 1,810,311,217 5,978,165,949 Operating expenses Salaries and Allowances Rent, Taxes, Insurances, Electricity etc. Legal Expenses Postage, Stamps, Telecommunication etc. Stationery, Printings, Advertisements etc. Chief Executive’s Salary & Fees Directors’ Fees & Expenses Shariah Supervisory Committee’s Fees & Expenses Auditors’ Fees Depreciation & Repairs of Bank’s Assets Zakat Expenses Other Expenses Total Operating Expenses 28a 29a 30a 31a 32a 33 34 35 36a 37a 38 39a 2,212,106,444 454,172,110 1,440,212 38,552,845 84,545,709 14,217,000 7,287,728 830,543 450,000 150,876,935 113,717,689 463,682,826 3,541,880,041 1,889,078,061 423,595,761 728,459 34,794,548 78,884,275 13,430,500 6,259,712 559,816 600,000 138,680,426 101,969,969 310,377,186 2,998,958,713 Profit / (Loss) before Provision 22a 3,327,916,541 2,979,207,236 40a 664,800,000 269,700,000 259,000,000 37,400,000 18,500,000 1,249,400,000 356,500,000 115,200,000 197,900,000 3,526,000 673,126,000 2,078,516,541 2,306,081,236 Net Profit after Taxation 42,534,296 840,086,272 882,620,568 1,195,895,973 (8,746,257) 757,457,278 748,711,021 1,557,370,215 Retained Earnings from previous year Add: Net Profit after Tax Profit available for appropriation 1,106,132,902 1,195,895,973 2,302,028,875 965,073,507 1,557,370,215 2,522,443,722 Total Operating Income Specific provision for Classified Investment General Provision for Unclassified Investment General Provision for Off-Balance Sheet Items Provision for deminution in value of Investments in Shares Provision for Other Assets Total Provision Total Profit / (Loss) before taxes Provision for taxation Deferred tax Current tax 220 41 41b Shahjalal Islami Bank Limited Annual Report 2017
  223. Shahjalal Islami Bank Limited Profit and Loss Account For the year ended 31 December 2017 2017 Taka Notes Appropriation Statutory Reserve Dividend Retained Earnings 19a Earnings Per Share (EPS) [Restated] 42a 18 2016 Taka 415,703,308 1,102,032,193 784,293,374 2,302,028,875 461,216,247 955,094,573 1,106,132,902 2,522,443,722 1.55 2.02 The annexed notes form an integral part of these financial statements. Chairman Director Director Managing Director This is the profit and loss account referred to in our separate report of even date. Dhaka, 25 April 2018 Shahjalal Islami Bank Limited Annual Report 2017 Hoda Vasi Chowdhury & Co Chartered Accountants 221
  224. Shahjalal Islami Bank Limited Cash Flow Statement For the year ended 31 December 2017 Cash flows from operating activities Notes Investment income receipt 43a Profit paid on deposits 44a Dividend receipts Fees & commission receipt Recoveries on investment previously written off Cash payments to employees Cash payments to suppliers Income tax paid Receipts from other operating activities 45a Payments for other operating activities 46a (i) Operating Profit before changes in operating assets & liabilities Changes in operating assets and liabilities (Increase)/decrease in investment to customers (Increase)/decrease of other assets 47a (Increase)/decrease of Placement with other Banks & Financial Institutions Increase/(decrease) of deposits from other banks Increase/(decrease) of Placement from other Banks & Financial Institutions Increase/(decrease) of deposits received from customers Increase/(decrease) of other liabilities on account of customers Increase/(decrease) of other liabilities 48a (ii) Cash flows from operating assets and liabilities Net cash flows from operating activities (A)=(i+ii) Cash flows from investing activities Proceeds from sale of securities Payment for purchases of securities Proceeds from sale of fixed assets Payment for purchases of property, plant & equipments Purchase/sale of subsidiaries Net cash used in investing activities (B) Cash flows from financing activities Receipts from issue of debt instruments Receipts from issuance of Mudaraba Subordinated Bond Payments for redemption of debt instruments Receipts from issue of ordinary shares Dividend paid to ordinary shareholders Net cash used in financing activities (C) Net Increase/(decrease) in cash & cash equivalents (A+B+C) Add: Effect of exchange rate changes on cash & cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 49a 2017 Taka 2016 Taka 13,016,610,923 (8,035,292,617) 183,674,937 1,614,174,600 18,605,000 (2,226,323,444) (84,545,709) (911,423,624) 514,868,613 (1,102,940,201) 2,987,408,479 11,275,216,925 (7,085,259,948) 62,426,658 1,222,560,456 22,583,982 (1,902,508,561) (78,884,275) (586,051,379) 451,673,505 (895,467,156) 2,486,290,208 (36,537,415,888) 388,687,904 1,200,070,950 (1,351,082,714) 13,386,145,492 22,323,727,200 (172,989,703) 290,102,606 (472,754,154) 2,514,654,325 (27,102,407,455) (671,323,245) 796,216,405 (1,301,116,591) 13,284,631,374 16,452,226,926 (19,963,183) (50,122,802) 1,388,141,428 3,874,431,636 880,752,031 (3,813,878,271) 594,784,543 (1,246,541,785) (3,584,883,481) 466,338,218 (1,875,753,853) 2,321,270 (258,066,897) (1,665,161,261) 4,000,000,000 (734,688,133) 3,265,311,867 2,195,082,711 11,993,903,158 14,188,985,869 (955,094,573) (955,094,573) 1,254,175,802 10,739,727,356 11,993,903,158 The annexed notes form an integral part of these financial statements. Chairman Director Director Managing Director Dhaka, 25 April 2018 222 Shahjalal Islami Bank Limited Annual Report 2017
  225. Shahjalal Islami Bank Limited Annual Report 2017 223 Dhaka , 25 April 2018 Chairman Director The annexed notes form an integral part of these financial statements. Total Equity for the purpose of Capital Adequacy Equity as per above Add: General Provision for Unclassified Investment & Off-Balance Sheet items Total Eligible Regulatory Capital as at 31 December 2016 Balance as at 01 January 2016 Cash dividend paid for the year 2015 Net profit during the year Total Shareholders’ Equity as at 31 December 2016 Particulars Director Statutory Reserve 3,942,345,432 461,216,247 4,403,561,679 12,856,575,911 1,529,500,000 14,386,075,911 12,254,300,269 (955,094,573) 1,557,370,215 12,856,575,911 Total Managing Director Retained Earnings 965,073,507 (955,094,573) 1,096,153,968 1,106,132,902 12,856,575,911 (734,688,133) 1,195,895,973 13,317,783,751 Total (Amount in taka) Paid-up Capital 7,346,881,330 7,346,881,330 Retained Earnings 1,106,132,902 (1,102,032,193) 780,192,665 784,293,374 For the year ended 31 December 2016 Statutory Reserve 4,403,561,679 415,703,308 4,819,264,987 13,317,783,751 2,058,200,000 4,000,000,000 19,375,983,751 Paid-up Capital 7,346,881,330 367,344,060 7,714,225,390 (Amount in taka) Total Equity for the purpose of Capital Adequacy Equity as per above Add: General Provision for Unclassified Investment & Off-Balance Sheet items Add: Mudaraba Subordinated Bond Total Eligible Regulatory Capital as at 31 December 2017 Balance as at 01 January 2017 15 % Dividend paid (10% Cash & 5% Stock) for the year 2016 Net profit during the year Total Shareholders’ Equity as at 31 December 2017 Particulars For the year ended 31 December 2017 Statement of Changes in Equity Shahjalal Islami Bank Limited
  226. 224 Shahjalal Islami Bank Limited Annual Report 2017 Shahjalal Islami Bank Limited 971 ,570,604 4,350,000,000 2,400,000,000 42,983,203,833 19,679,716 402,095,755 51,126,549,908 1,529,754,123 2,502,520,113 1,300,000,000 3,546,258,238 32,876,042,208 9,839,858 426,482,418 42,190,896,957 13,867,455,556 27,623,270,730 692,646,626 42,183,372,912 7,524,046 Liabilities Placement from other Banks & Financial Institutions Deposits and other accounts Mudaraba Subordinated Bond Other liabilities Deferred tax Liabilities Total Liabilities (ii) Net Liquidity Gap (i-ii) Dhaka, 25 April 2018 Chairman Director The annexed notes form an integral part of these financial statements. 12,448,873,853 36,638,919,257 1,957,613,737 51,045,406,847 81,143,061 01-03 Months Upto 01 Month Particulars Assets Cash in hand Balance with other Banks and Financial Institutions Placement with other Banks & Financial Institutions Investment in Shares & Securities Investments Fixed Assets including premises Other Assets Non-banking Assets Total assets (i) 311,710,616 760,000,000 35,192,597,306 485,878,943 8,785,469,784 01-05 Years 40,102,844,713 1,600,000,000 3,005,068,211 44,707,912,924 827,743,726 45,535,656,650 Director 3,305,358,882 34,816,158,456 2,241,460,016 40,362,977,354 2,768,484,394 43,131,461,748 700,000,000 3,020,000,000 37,763,021,455 88,558,722 1,559,881,571 03-12 Months Liquidity Statement, Assets and Liabilities Maturity Analysis As at 31 December 2017 29,621,688,291 145,382,475,188 4,000,000,000 15,426,428,189 137,999,259 194,568,590,927 13,317,783,751 1,529,754,123 12,659,231,746 6,661,710,616 10,526,258,238 158,668,157,376 3,957,117,768 13,795,235,456 88,909,355 207,886,374,678 Managing Director 6,201,282,032 2,400,000,000 7,529,639,599 137,999,259 16,268,920,890 9,632,888,524 9,185,141,030 800,000,000 9,853,292,573 3,353,160,528 2,621,305,928 88,909,355 25,901,809,414 More than 05 years (Amount in Taka) Total
  227. Shahjalal Islami Bank Limited and its Subsidiary Notes to the Consolidated and Separate Financial Statements For the year ended 31 December 2017 1 . Status of the Bank 1.1 Legal Form of the Bank Shahjalal Islami Bank Limited (hereinafter called ‘the Bank’-‘SJIBL’) was established as a Public Limited Company (Banking Company) as on the 1 April 2001 under the Companies Act 1994 as interest free Islamic Shariah based commercial bank and commenced its operation on 10 May 2001 with the permission of Bangladesh Bank. Presently the Bank is operating its business through head office having 113 branches, 73 (Seventy Three) ATM booths and 2,402 employees all over Bangladesh. The Bank has also a subsidiary company named ‘Shahjalal Islami Bank Securities Limited’ and an Off-shore Banking Unit. The Bank is listed with both the Stock Exchanges of the country, i.e. Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited. The registered office of the Bank is located at Shahjalal Islami Bank Tower, Plot#4, Block-CWN(C), Gulshan Avenue, Gulshan, Dhaka-1212. 1.2 Nature of Business The Bank offers all kinds of shariah based commercial banking services to its customers through its branches following the provisions of the Bank Companies Act 1991 (as amended up to 2013), Bangladesh Bank’s Directives and directives of other regulatory authorities and the principles of the Islamic Shariah. 1.3 Shahjalal Islami Bank Securities Limited Shahjalal Islami Bank Securities Limited is a subsidiary company of Shahjalal Islami Bank Limited incorporated as a public limited company under the Companies Act 1994 vide certification of incorporation no. C - 86917/10 dated 06 September 2010 and commenced its operation on the 25 May 2011. The main objective of the company is to carry on business of stock broker/dealers in relation to shares and securities dealings and other services as mentioned in the Memorandum and Articles of Association of the Company. It has corporate membership of Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited. Shahjalal Islami Bank Limited hold 91.79% shares of Shahjalal Islami Bank Securities Limited. 1.4 Off-shore Banking Unit Off-shore Banking Unit (OBU) is a separate business unit of Shahjalal Islami Bank Limited, governed under the rules and Guidelines of Bangladesh Bank. The Bank obtained the Off-shore Banking Unit permission from Bangladesh Bank vide letter no. BRPD (P-3)744(99)/2008-2800 dated 24 July 2008. The Bank opened its Off-shore Banking Unit on 21 December 2008. The unit is located at Shahjalal Islami Bank Tower, Plot#4, Block-CWN(C), Gulshan Avenue, Gulshan, Dhaka-1212. Separate Financial Statements of Off-shore Banking Unit are also presented. 2. Significant Accounting Policies 2.1 Basis of preparation of the Financial Statements The Bank and its subsidiary are being operated in strict compliance with the rules of Islamic Shari’ah. The consolidated and separate financial statements of the Bank have been prepared under the historical cost convention consistently with those of previous year and as per provisions of the “Guidelines for Islamic Banking” issued by Bangladesh Bank through BRPD Circular No. 15 dated 09.11.2009 with reference to the provisions of the Bank Companies Act, 1991 (as amended up to 2013), BRPD Circular No.14 dated 25.06.2003 & Bangladesh Bank’s other circulars/instructions and in accordance with International Financial Reporting Standards (IFRSs) and Shahjalal Islami Bank Limited Annual Report 2017 225
  228. International Accounting Standards (IASs) as adopted by the Institute of Chartered Accountants of Bangladesh (ICAB); the Companies Act, 1994; the Securities and Exchange Rules, 1987; Dhaka and Chittagong Stock Exchanges (Listing) Regulations, 2015, Financial Reporting Act 2015 and other laws and rules applicable in Bangladesh and Standards issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), as a member of that organization. In case any requirement of the Bank Companies Act, 1991 (as amended up to 2013) and provisions and circulars issued by Bangladesh Bank differ with those of IFRSs & IASs as adopted, the requirements of the Bank Companies Act 1991, and provisions and circulars issued by Bangladesh Bank will prevail. Material departures from the requirements of BFRS are as follows: i) Investment in shares and securities BFRS: As per requirements of BAS 39 “Financial Instruments: Recognition and Measurement” investment in shares and securities generally falls either under “at fair value through profit and loss account” or under “available for sale” where any change in the fair value (as measured in accordance with BFRS 13) at the yearend is taken to profit and loss account or revaluation reserve respectively. Bangladesh Bank: As per BRPD circular no. 14 dated 25 June 2003 investments in quoted shares and unquoted shares are revalued at the year end at market price and as per book value of last audited balance sheet respectively. Provision should be made for any loss arising from diminution in value of investment; otherwise investments are recognised at cost. ii) Revaluation gains/losses on Government securities BFRS: As per requirement of BAS 39 “Financial Instruments: Recognition and Measurement” where securities will fall under the category of Held for Trading (HFT), any change in the fair value of held for trading assets is recognised through profit and loss account. Securities designated as Held to Maturity (HTM) are measured at amortized cost method and interest income is recognized through the profit and loss account. Bangladesh Bank: HFT securities are revalued on the basis of mark to market and at year end any gains on revaluation of securities which have not matured as at the balance sheet date are recognized in other reserves as a part of equity and any losses on revaluation of securities which have not matured as at the balance sheet date are charged in the profit and loss account. HTM securities which have not matured as at the balance sheet date are amortized at the year end and gains or losses on amortization are recognized in other reserve as a part of equity. iii) Provision on investments and off-balance sheet exposure BFRS: As per BAS 39 “Financial Instruments: Recognition and Measurement” an entity should start the impairment assessment by considering whether objective evidence of impairment exists for financial assets that are individually significant. For financial assets that are not individually significant, the assessment can be performed on an individual or collective (portfolio) basis. Bangladesh Bank: As per BRPD circular No.14 (23 September 2012), BRPD circular No. 19 (27 December 2012), BRPD circular No. 05 (29 May 2014), BRPD circular No. 16 (18 November 2014), BRPD Circular No. 15 (27 September 2017) and BRPD Circular No. 01 (20 February 2018) a general provision at 0.25% to 5% under different categories of unclassified loans (good/standard loans) has to be maintained regardless of objective evidence of impairment. Also provision for sub-standard loans, doubtful loans and bad losses has to be provided at 20%, 50% and 100% respectively (except short-term agricultural and micro-credits where 5% for sub-standard and doubtful investments and 100% for bad & loss investments) for loans and advances depending on the duration of overdue. Again as per BRPD circular no. 10 dated 18 September 2007 and BRPD circular no. 14 dated 23 September 2012, a general provision at 1% is required to be provided for all off-balance sheet exposures. Such provision policies are not specifically in line with those prescribed by BAS 39 “Financial Instruments: Recognition and Measurement”. 226 Shahjalal Islami Bank Limited Annual Report 2017
  229. iv ) Recognition of investment income in suspense BFRS: Investment to customers are generally classified as ‘loans and receivables’ as per BAS 39 “Financial Instruments: Recognition and Measurement” and investment income is recognised through effective interest rate method over the term of the loan. Once an investment (loan) is impaired, investment income is recognised in profit and loss account on the same basis based on revised carrying amount. Bangladesh Bank: As per BRPD circular no. 14 dated 23 September 2012, once an investment (loan) is classified, investment income on such investments are not allowed to be recognised as income, rather the corresponding amount needs to be credited to an investment income in suspense account, which is presented as liability in the balance sheet. v) Other comprehensive income BFRS: As per BAS 1 “Presentation of Financial Statements”, Other Comprehensive Income (OCI) is a component of financial statements or the elements of OCI are to be included in a single Other Comprehensive Income statement. Bangladesh Bank: Bangladesh Bank has issued templates for financial statements which will strictly be followed by all banks. The templates of financial statements issued by Bangladesh Bank do not include Other Comprehensive Income nor are the elements of Other Comprehensive Income allowed to be included in a single Other Comprehensive Income (OCI) Statement. As such the Bank does not prepare the other comprehensive income statement. vi) Financial instruments – presentation and disclosure In several cases Bangladesh Bank guidelines categorise, recognise, measure and present financial instruments differently from those prescribed in BAS 39 “Financial Instruments: Recognition and Measurement”. As such full disclosure and presentation requirements of BFRS 7 “Financial Instruments: Disclosures” and BAS 32 “Financial Instruments: Presentation” cannot be made in the financial statements. vii) Financial guarantees BFRS: As per BAS 39 “Financial Instruments: Recognition and Measurement”, financial guarantees are contracts that require an entity to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantee liabilities are recognised initially at their fair value, and the initial fair value is amortised over the life of the financial guarantee. The financial guarantee liability is subsequently carried at the higher of this amortised amount and the present value of any expected payment when a payment under the guarantee has become probable. Financial guarantees are included within other liabilities. Bangladesh Bank: As per BRPD 14 dated 25 June 2003, financial guarantees such as letter of credit, letter of guarantee will be treated as off-balance sheet items. No liability is recognised for the guarantee except the cash margin. viii) Cash and cash equivalent BFRS: Cash and cash equivalent items should be reported as cash items as per BAS 7 “Statement of Cash Flows”. Bangladesh Bank: Some cash and cash equivalent items such as ‘money at call on short notice’, treasury bills, Bangladesh Bank bills and prize bond are not shown as cash and cash equivalents. Money at call and on short notice presented on the balance sheet, and treasury bills, prize bonds are shown in investments. ix) Non-banking assets BFRS: No indication of Non-banking asset is found in any BFRS. Bangladesh Bank: As per BRPD 14 dated 25 June 2003 and BRPD 15 dated 09 November 2009, there must exists a face items named Non-banking asset. Shahjalal Islami Bank Limited Annual Report 2017 227
  230. x ) Cash flow statement BFRS: The Cash flow statement can be prepared using either the direct method or the indirect method. The presentation is selected to present these cash flows in a manner that is most appropriate for the business or industry. The method selected is applied consistently. Bangladesh Bank: As per BRPD 14 dated 25 June 2003 and BRPD 15 dated 09 November 2009, cash flow is the mixture of direct and indirect methods. xi) Balance with Bangladesh Bank: (Cash Reserve Requirement) BFRS: Balance with Bangladesh Bank should be treated as other asset as it is not available for use in day to day operations as per BAS 7 “Statement of Cash Flows”. Bangladesh Bank: Balance with Bangladesh Bank is treated as cash and cash equivalents. xii) Presentation of intangible asset BFRS: An intangible asset must be identified and recognised, and the disclosure must be given as per BAS 38 “Intangible Assets”. Bangladesh Bank: There is no regulation for intangible assets in BRPD 14 dated 25 June 2003 and BRPD 15 dated 09 November 2009. xiii) Off-balance sheet items BFRS: There is no concept of off-balance sheet items in any BFRS; hence there is no requirement for disclosure of off-balance sheet items on the face of the balance sheet. Bangladesh Bank: As per BRPD 14 dated 25 June 2003 and BRPD 15 dated 09 November 2009, off balance sheet items (e.g. Letter of credit, Letter of guarantee etc.) must be disclosed separately on the face of the balance sheet. xiv) Investments net off provision BFRS: Loans and advances/Investments should be presented net off provision. Bangladesh Bank: As per BRPD 14 dated 25 June 2003 and BRPD 15 dated 09 November 2009, provision on loans and investments are presented separately as liability and cannot be net-off against loans and advances. xv)Revenue As per BAS 18 “Revenue”, revenue should be recognized on accrual basis but due to the unique nature of Islamic Banks, income from investment under Murabaha, Bi-Muazzal, HPSM, Ijara, Bi-Salam Quard, IDBP and FDBP modes is accounted for on realization basis as per AAOIFI and Bangladesh Bank guidelines. 2.2 The Bank’s compliance with related pronouncement of Bangladesh Bank: i. Risk Management Department of Off-site Supervision (DOS) of Bangladesh Bank issued Circular No.-02 dated 15 February 2012 under section 45 of the Bank Companies Act 1991 on Risk Management Guidelines for Banks and instructed all scheduled banks operating in Bangladesh to follow this Guidelines for managing various risks which have been compiled by the Bank. In addition, the Bank is also following relevant Bangladesh Bank guidelines on risk based capital adequacy, supervisory review process, stress testing and managing the banking risks in other core risk areas. The risk of a bank is defined as the possibility of losses, financial or otherwise. The Risk Management of the Bank covers 6 (six) Core Risk Areas of Banking industry i.e. i) Internal Control and Compliance Risk; ii) Foreign Exchange Risk; iii) Investment (Credit) Risk; iv) Asset Liability Management Risk; v) Money Laundering Risk; and vi) Information & Communication Technology Security Risk. The risk management procedures in the core risk areas have been devised in line with the core risk management guidelines of Bangladesh Bank. 228 Shahjalal Islami Bank Limited Annual Report 2017
  231. Core Risk Management Guidelines are periodically reviewed by the Bank and Bangladesh Bank periodically inspects the implementation status of these guidelines and as per the reports of Bangladesh Bank and Shahjalal Islami Bank Ltd . is well compliant in Core Risk Management activities. In line with instruction of Bangladesh Bank, SJIBL formed a Risk Management Division (RMD) to formulate risk assessment and management policies, methodologies, guidelines and procedures for risk identification, risk measurement, risk monitoring, deciding acceptable level of risk and risk controlling by taking mitigating steps, Comprehensive Risk Management Report (CRMP), conducting monthly risk management meeting, stress testing and reporting the competent authority from time to time. It also reports to Bangladesh Bank on quarterly basis along with the CRMR, minutes of the monthly meeting and all other required supporting papers. Moreover, in compliance with the “Bank Company Act 1991 as amended”, Section 15 (Kha) and BRPD Circular No. 11 dated 27 October, 2013 of Bangladesh Bank, the Bank has constituted a Risk Management Committee comprising of 5 (five) directors from the Board to formulate risk management policies, procedures and oversee the risk management activities of the Bank. The prime objective of the Risk Management is that the Bank takes well calculative Business Risk Policy for safeguarding the Bank’s capital, its financial resources and profitability from various risks. In this context, the Bank implemented all the guidelines of Bangladesh Bank as under: a) Investment (Credit) Risk The Management of specific investment risk is developed according to associated risk with individual business units. The investment risk management function ensures that appropriate policies are established and ensures compliance with the related sanction, monitoring procedures and controls at the business unit level. Investment exposures are aggregated from individual business units and are monitored on a regular basis. Investment involved risks may be summarized as under: yy yy yy yy yy yy yy Difficulty in choosing core business. Failure in business of the customer. Encompassing a blend of banking and non-banking service. Investment either too liquid or of questionable quality. Competition from other commercial banks. Security Control Risk. Market volatility both local and global. Portfolio monitoring is carried out by asset quality, background of the customer, soundness and viability of his/her business and cash flow etc, sector of the economy, cost of long-term financing to match with the return on long-term investment. The Bank pays adequate emphasis on business risk than analysis of security risk because the security reduces the risk but does not always improve the quality of investment. Besides, the Bank addresses the Investment (Credit) risk guideline cited by the Bangladesh Bank. As regards to other parts of the banking business, the control staffs follow a pragmatic program of regular monitoring and follow-up. b) Foreign Exchange Risk Management The Financial Institutions’ performance is directly related to Foreign Exchange Market. To ensure effective Foreign Exchange Risk Management, the Bank has wide scope in establishing organizational structure and formulating Manual as per Guidelines of Bangladesh Bank. However, the bank has already formulated a comprehensive manual. Bank maintains various NOSTRO accounts in order to conduct operations in different currencies including BDT. The senior management of the bank set limits for handling NOSTRO accounts transactions that include time and amount limits. As per guidelines of Bangladesh Bank the Foreign Exchange business should be audited internally to review the key control issues such as various limits, compliance requirements and statutory management. Shahjalal Islami Bank Limited Annual Report 2017 229
  232. c ) Asset Liability Risk Management The Asset Liability Management Committee (ALCO) that is formed with the senior executives headed by Managing Director conducted 12 meetings in 2017. The key agenda of the meetings were liquidity position, pricing, risk related to the Balance Sheet, maintaining CRR & SLR, Economic outlook & Market Status and rate of profit (interest). For managing Balance Sheet risk properly, the bank has already prepared a Manual of The Asset Liability Management according to the guidelines of Bangladesh Bank. d) Money Laundering Risk Management Shahjalal Islami Bank limited is taking preventive measures against money laundering and terrorist financing in line with the amended Money Laundering Prevention Act 2012, amended Anti Terrorism Act 2013 and guidelines issued by the Bangladesh Bank from time to time. Shahjalal Islami Bank applies risk sensitive customer due diligence measures, monitor business relationship and record in line with regulations. Regularly collect the correct and full documentation of Know Your Customer (KYC) which enables the prudential prevention of money laundering. Shahjalal Islami Bank has formed a committee of Anti Money Laundering headed by the Deputy Managing Director as Chief Anti-Money Laundering Compliance Officer & the committee regularly monitors and ensures the compliance of issues relating to Money Laundering through the trained personnel of head office & branches. e) Internal Control & Compliance Risk Internal control is the process, effected by a company’s board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the effectiveness and efficiency of operations, the reliability of financial reporting and compliance with applicable laws, regulations, and internal policies. Banking has a diversified and complex financial activity, which involves high risk in different modes. Consequently, the issues of internal control system have become most significant in banking industry through which bank identifies its weakness and takes appropriate measures to overcome the same. In order to have efficient and effective internal control system, Shahjalal Islami Bank Limited Ltd has strengthened and segregated its Internal Control and Compliance Division into three separate units based on the relative guidelines framed by Bangladesh Bank: 1. Audit and Inspection; 2. Compliance; and 3. Monitoring. Shahjalal Islami Bank Limited has an Internal Control and Compliance Manual, which, among others, includes the following: yy Objective of Internal Control yy Authorities of the Internal Control and Compliance Environment yy Organizational Structure of the Division and yy Policy Guidelines for Internal Control Risk Recognition & Assessment and mitigation there against as per Regulatory Guidelines. f) Information and Communication Technology Security Risk According to BRPD Circular No. 14 dated 23 October 2005 regarding “Guideline on Information and Communication Technology for Scheduled Banks”, BRPD Circular No. 21 dated 20 May 2010 and BRPD Circular No. 09 dated 17 September 2015, The Bank has followed IT Manual which deals operational risk, physical security control, potential for wide area disaster, data center disaster, recovery plan and backup/ 230 Shahjalal Islami Bank Limited Annual Report 2017
  233. restore plan . The customers of SJIBL are enjoying 24 hours remote banking facilities through using SWIFT, REUTERS, SJIBL Visa Debit Card, Push-Pull Services & SMS banking facilities. The Bank joined Q-Cash consortium which ATM and POS services are being offered to its customers to meet the demand of time. Moreover, The Bank is running on technology-based total banking solution module, i.e. core banking software. ii. Internal Audit The internal audit function, which is centrally controlled, monitors compliance with policies and standards and the effectiveness of internal control structure of the Bank. Internal control & Compliance Division of the Bank carried out Internal Audit with a view to enrich the compliance culture and full control on the exertion of the Banking Operations. The division directly report simultaneously to the Board Audit Committee and Managing Director. Sometimes internal audit team conducts surprise visit to the branches. Monitoring is being done a regular basis to ensure the effectiveness of policies, rules and regulations (internal and external), other directives etc. from controlling authority. iii. Fraud and Forgeries The Bank is operating its business by the public money. As a custodian of such money, Bank have to set up strong internal control structure, introduced corporate governance, practicing ethical standards in the Bank for safeguard & interest of the Stakeholders. Public confidence has been shaken when different types of malpractice, fraud and forgeries occurred in the Bank. Shahjalal Islami Bank Limited is fully aware of its responsibility towards stakeholders specially depositors. Shahjajal Islami Bank Limited follows a stringent screening process while recruiting officers and staff. The prospective employee’s family background/employment history/ association are checked/cross checked in terms of integrity, attitude and behavioral pattern. The Bank has started to collect Police Clearance to know if the candidate had ever engaged in anti-social or anti state or detrimental/subversive activities. Check with Bangladesh Bank’s Corporate Memory Management Systems for background check of experienced bankers, Financial Institution`s employees and verify National ID on-line. As a result, the Bank since its inception has seen comparatively very few cases of fraud and forgeries. Moreover, the Internal Control and Compliance Division (IC & CD) have been strengthened to remain ever vigilant. These have reduced the chances of fraudulent activities in Shahjajal Islami Bank Limited. Further, the number of fraud cases in Shahjajal Islami Bank Limited is at a minimal level. However, in the year 2017, 1 (one) case of fraud and forgery was identified. Total embezzled amount involved in the fraud case was Tk. 14,27,000/= (Taka fourteen lac twenty seven thousand) only and the embezzled amounts have been realized in full. Alleged delinquent Officer was dismissed for his gross misconduct. Other related Officials, considering the gravity of misdeed and depth of involvement, have been punished as per Bank’s Employees’ Service Rules-2007. IC & CD of Head Office has also reported the same to Bangladesh Bank in compliance with the Department of Banking Inspection Instruction No. DBI-1 (Nothi)/1025/2012-41 dated February 07, 2012 and the Department of Off-site Supervision (DOS) Circular Letter No. 17 dated November 07, 2012 of Bangladesh Bank. 2.3Consolidation The consolidated Financial Statements include the Financial Statements of Shahjalal Islami Bank Limited including Off-shore Banking Unit and the Financial Statements of its subsidiary named Shahjalal Islami Bank Securities Limited made up to the end of the financial year. The consolidated Financial Statements have been prepared in accordance with BFRS 10. ‘Consolidated Financial Statements’. The consolidated Financial Statements are prepared to a common financial year ending 31 December 2017. Shahjalal Islami Bank Limited Annual Report 2017 231
  234. 2 .4Subsidiary Subsidiary is that enterprise which is controlled by the Bank. Control exists when the Bank has the power, directly or indirectly, to govern the financial and operating policies of an enterprise to obtain benefits from its activities from the date that control commences until the date that control ceases. The Financial Statements of subsidiary are included in the consolidated Financial Statements from the date that control effectively commences until the date the control effectively ceases. 2.5 Transactions Eliminated on Consolidation All intra-group transactions, balances, income and expenses are eliminated on consolidation. Profit & Loss resulting from transaction between groups are also eliminated on consolidation. 2.6 Use of estimates and judgments The preparation of Financial Statements requires the Bank to make certain estimates and to form judgments about the application of accounting policies which may affects the reported amounts of assets, liabilities, income and expenses; due to that actual results may differ to reasonable extent. Estimates and underlying assumptions are reviewed on an ongoing basis and recognized its effects on present and future financial positions. The most significant areas where estimates and judgments have been made are on provision for investments, Income Taxes, Deferred Taxation & liquidity Statement. 2.7 Revenue Recognition The revenue is recognized as follows complying the conditions of revenue recognition as provided in IAS-18. i) Income from Investments has been accounted for on accrual basis. ii) Income from Investment in Securities is recognized at the time of sale. iii) Dividend income on Investment is Subsidiary is accounted for when the right to receive payment is established. iv) Profit on Investment in Bangladesh Government Islamic Investment Bond (Islamic Bond) is recognized on accrual basis. v) Income from bills purchased and discounted is recognized at the time of realization. vi) Fees and commission income are recognized when earned. vii) Profit paid to mudaraba depositors is recognized on accrual basis as per provisional rate. The final profit is determined and to be paid to the depositors. viii) The proposed dividend for the year 2017 has not been recognized as a liability in the balance sheet in accordance with the BAS-10: Events After the Balance Sheet Date. 2.8 Profit Suspense /Compensation Account & Shariah non-compliance Income Profit/Compensation accrued on classified investments is suspended and accounted for as per Circulars issued by the Bangladesh Bank. Moreover, incomes which are irregular (doubtful) as per Shariah are also not included in the distributable income of the Bank. Bank charges compensation on unclassified overdue investments. Such compensation is not permissible as regular income of the Bank as per Shariah. Interest received from the balances held with Foreign Banks abroad and from Foreign Currency Clearing Account with the Bangladesh Bank and also other interest based banks are also not credited to regular income since it is not permissible as per Shariah. Such doubtful income is being appropriated for charitable purpose through Shahjalal Islami Bank Foundation (a separate organization). 2.9 Investment and Provisions Investments are stated in the Balance Sheet net-off unearned income. Provision on Investment (Loans & Advances) is made on the basis of period end review by the management and as per instructions contained in Bangladesh Bank BRPD Circular No. 14 dated 23 September 2012, BRPD Circular No. 19 dated 27 December 2012, BRPD Circular No. 5 dated 29 May 2014, BRPD Circular No. 15 dated 27 September 2017 and BRPD Circular No. 232 Shahjalal Islami Bank Limited Annual Report 2017
  235. 01 dated 20 February 2018 . Provision against Off-Balance Sheet exposures in addition to existing provisioning arrangement is made as per BRPD Circular No.10 dated 18 September 2007. Provision for Short-term Agricultural and Micro-Credits: BRPD Circular No- 15 dated 27 September, 2017. The rates of provision are given below: Particulars 2017 2016 Classification/Percentage (%) of provision requirement SMA SS DF BL UC SMA SS DF UC Small and Medium 0.25% 0.25% Enterprise (SME) Financing Investment to 2% 2% Professional Investment for 1% 2% Consumer House Building Other than House Building 5% 5% & Professional All Other (Except Short-term 1% 1% Agricultural and Micro-Credits) Short-term Agricultural and 1% Micro-Credits Investment to Stock Dealers 2% & Stock Broker Off Balance Sheet exposures BL 20% 50% 100% 0.25% 0.25% 20% 50% 100% 20% 50% 100% 2% 2% 20% 50% 100% 20% 50% 100% 2% 2% 20% 50% 100% 20% 50% 100% 5% 5% 20% 50% 100% 20% 50% 100% 1% 1% 20% 50% 100% 5% 20% 50% 100% 2.50% 100% 2% 1% 5% 20% 100% 50% 100% 1% 2.10 Provision for Nostro Accounts According to Foreign Exchange Policy Department of Bangladesh Bank vide the circular letter No. (FEPD)/01/2005677 dated 13 September 2005, Bank is not required to make provision regarding the unreconciled debit balance of nostro account as on the reporting date in these financials. There are no unreconciled outstanding entries which are more than three months. 2.11 Sharing of Investment Income The Investment income earned through deployment of Mudaraba Fund is shared among the Mudaraba Depositors at the ratio as determined by the Bank, but not less than 65% of the total shared investment income. In 2017, the sharing ratio among the Mudaraba fund providing were 79.53% which is more than the committed ratio of 65%. 2.12 Investment in Securities Islamic Investment Bond (Islami Bond) Investment in Bangladesh Government Islamic Investment Bond (Islami bond) is reported at cost price. Investment in Shares and Securities These Shares and Securities are brought and held primarily for the purpose of selling them in future or held for dividend income. These are reported at cost. Provisions are made for any loss arising from diminution in value of investments. Derivative Investments The Bank has no investments during the year in any derivative investments. Investment in Subsidiary Investment in Subsidiary is accounted for under cost method of accounting in the Bank’s Financial Statements in accordance with Bangladesh Accounting Standard 27.’ Consolidated and Separate Financial Statements’. Shahjalal Islami Bank Limited Annual Report 2017 233
  236. 2 .13 Fixed Assets and Depreciation i) All Fixed Assets are stated at cost less accumulated depreciation as per BAS-16 “Property, Plant and Equipment”. ii) Depreciation has been charged at the following rates: 2017 2016 Rates of Dep. Method of Dep. Rates of Dep. Method of Dep. Building Reducing balance Reducing balance 2.25 2.25 Furniture & Fixtures other than residence Reducing balance Reducing balance 10 10 Furniture & Fixtures- residence Straight line Straight line 20 20 Office Equipment Reducing balance Reducing balance 20 20 Computer & Network Equipment Straight line 20 Vehicles Straight line Straight line 20 20 Books Straight line Reducing balance 20 20 Name of the Assets iii) For addition during the year, depreciation is charged for the remaining days of the year and for disposal depreciation is charged up to the date of disposal. iv) Sale price of fixed assets are determined on the basis of fair value of the assets. Gain or loss on assets are recognized in profit & loss account. sale of 2.14 Intangible Assets Intangible asset is an identifiable monetary asset without physical substance. An intangible asset is recognized if it is probable that the future economic benefits that are attributable to the assets will flow to the entity and the cost of the asset can be measured reliably in accordance with BAS 38 “Intangible Assets”. Subsequent expenditure on intangible asset is capitalized only when it increase the future economic benefits embodied in the specific assets to which it relates. All other been expensed as incurred. The software used by Shahjalal Islami Bank Ltd. represents the value of computer application software licensed for the use of the bank. Software is carried at cost less accumulated amortization and any impairment losses. Initial cost comprises license fees paid at the time of purchase and other directly attributable expenditure that are carried in customizing the software for its intended use. Software is amortized using the straight line method @ 20% per annum. 2.15 Impairment of Assets An asset is impaired when its carrying amount exceeds its recoverable amount as per BAS 36 “Impairment of Assets”. The Bank assesses at the end of each reporting period whether there is any indication that an asset may be impaired and/or whenever events or changes in circumstances indicate that the carrying value of the asset may not be recovered. If any such indication exists, the Bank makes an estimate of the recoverable amount of the assets. The carrying amount of the asset is reduced to its recoverable amount, if the recoverable amount is less than its carrying amount and impairment losses are recognized in the profit and loss account. However, impairment of financial assets is guided by the relevant Bangladesh Bank Circulars/Instructions and BAS 39. 2.16 Foreign Currency Translations The transactions in foreign currencies are converted into equivalent Taka currency using the ruling exchange rates on the dates of such transactions. At the Balance Sheet date related assets and liabilities are converted to Taka using exchange rates prevailing on that date. 2.17 Earnings Per Share This has been calculated by dividing the basic earnings by the weighted average number of ordinary shares outstanding during the period as per IAS - 33 “Earnings Per Share”. Diluted Earnings per Share is not required to be calculated for the year, as there exist no dilution possibilities during the year. 234 Shahjalal Islami Bank Limited Annual Report 2017
  237. 2 .18 Statement of liquidity The liquidity statement of assets and liabilities as on the reporting date has been prepared on residual maturity term as per following basis: a) Balance and placement with other Banks and Financial Institutions are on the basis of their maturity term. b) Investment in share and securities are on the basis of their residual maturity term. c) Investments are on the basis of their repayment/ maturity schedule. d) Fixed assets are on the basis of their useful life. e) Other assets are on the basis of their adjustment. f) Placement from other banks & FI as per their maturity/repayment term. g) Deposit and other accounts are on the basis of their maturity term, demand & time liability related guidelines of Bangladesh Bank and behavioral trend of encashment. h) Other long-term liability on the basis of their maturity term. i) Provisions and other liabilities are on the basis of their expected settlement. 2.19 Cash Flow Statement Cash flow statement is prepared principally in accordance with IAS 7 “Cash Flow Statement”; and as prescribed by BRPD Circular No. 14 dated 25 June 2003 & guideline for Islamic Banking issued by Bangladesh Bank vide BRPD Circular No.15 dated November 2009. 2.20 Off Balance Sheet Items Under general banking transactions, liabilities against acceptance, endorsement and other obligations and bills against which acceptances have been given and claims exist there against, have been shown as Off Balance Sheet items. 2.21Taxation Current Tax Provision for current income tax has been made @ 40.00% as prescribed in the Finance Act, 2017 on the accounting profit made by the Bank after considering some of the add backs to income and disallowances of expenditure & provisions as per Income Tax Ordinance 1984 in compliance with BAS-12 “ Income Taxes”. Deferred tax The Bank has adopted deferred tax accounting policy as per Bangladesh Accounting Standard (BAS) 12. Accordingly deferred tax liability/asset is accounted for all temporary timing differences arising between the tax base of the assets and liabilities and their carrying value for financial reporting purpose. Deferred tax is computed at the prevailing tax rate as per Finance Act 2017. 2.22 Reporting Period The Financial Statements cover one calendar year from 01 January to 31 December 2017. 2.23Offsetting Financial assets and financial liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously. 2.24 Statutory Reserve The statutory reserve has been maintained @ 20% of profit before tax in accordance with provisions of section 24 of Bank Companies Act 1991 until such reserve equal to its paid up capital together with amount in the share premium account. 2.25Zakat Zakat is paid by the Bank at the rate of 2.58% (instead of 2.50% as the Bank maintains its Accounts following Gregorian Year) on the closing balances of Statutory Reserve, General Reserve (Retained Earning). Shahjalal Islami Bank Limited Annual Report 2017 235
  238. Zakat is chargeable in the profit & Loss account of the Bank as per “ Guidelines for Islamic Banking” issued by Bangladesh Bank through BRPD Circular No.15 dated 09.11.2009 2.26 Employee benefits Provident Fund (Defined Contribution Plan) A “Defined Contribution Plan” is a post employment benefit plan under which an entity pays fixed contribution into a separate entity and will have no legal constructive obligation to pay further amounts. Provident fund benefit is given to the eligible staffs of the Bank in accordance with the rules of the provident fund duly recognized by the National Board of Revenue of Bangladesh. The Fund is administered by the Board of Trustees and is funded by fixed contributions equally from the employees and the bank. The fund is managed separately from the bank’s assets, as per rules of the fund & section 399 of the Companies Act 1994. Gratuity Fund (Define Benefit Plan) Gratuity benefits are given to the staff of the Bank in accordance with the approved Gratuity Fund Rules. National Board of Revenue has approved the gratuity fund as a recognized gratuity fund and the fund is operated by a separate Board of Trustees. Employees are entitled to get the benefit after completion of minimum 05 (five) years of service in the Bank. The gratuity is calculated on the basis of last basic pay of every employee in service as per BAS-19 “Employee Benefits”. Gratuity fund is a “Defined Benefit Plan” and payable as per the modalities of the rules. Gratuity so calculated is transferred to the fund and charged to expenses of the Bank. Other Employee Benefits Superannuation Fund “Shahjalal Islami Bank Limited Empoyees’ Social Security- Superannuation Fund” commenced with effect from 1st January 2008. The purpose of the fund is to provide medical and death cum survival benefit in lieu of group insurance (death cum endowment). The fund shall be subscribed by the employees on monthly basis and with the contribution of the Bank. Benevolent Fund The Benevolent Fund for the regular and confirmed employee’s of Shahjalal Islami Bank Limited was established in the year 2007. This fund is mainly used for payment of scholarship to the meritorious students among the children of SJIBL’s officers and sub-staff, to allow short-term quard/grant for the unexpected and certain needs of the staff of SJIBL and their family like accident, clinical treatment, marriage ceremony, etc. Incentive Bonus The Bank usually paid incentive bonus among its employees. The Payment of incentive Bonus does not exceed 10% of disclosed net profit of the bank as per section 30(j) of Income tax Ordinance, 1984. This bonus amount is distributed among the employees on annual basis considering specific terms & regulations. 2.27 Reconciliation of books of Accounts Books of Account in regard to inter-Bank are reconciled and un-reconciled entries in case of inter-branch transactions on the reporting date are not mentionable, which are, due to the time-gap before finalizing the same. Inter-branch outstanding entries are less than 03 month, detail of which are disclosed in Note 15a.3 2.28 Related Party Transactions The Bank entered into transactions with the related parties complying with the requirements of Section 27(1) of the Bank Companies (Amendment) Act 2013. All the related party transactions have been accounted for, the detail of which are disclosed in Note 52. 2.29 Corporate Governance The Bank has given the priority to the compliance of the rules, regulations and guidelines of Bangladesh Bank, National Board of Revenue & Bangladesh Securities and Exchange Commission (BSEC). The Bank has also complied with all related accounting standards adopted by the Institute of Chartered Accountants of Bangladesh (ICAB). 2.30 General Information i) Figures appearing in these Financial Statements have been rounded off to the nearest Taka. ii) Figures of previous year have been rearranged whenever necessary to conform to current year’s presentation. 236 Shahjalal Islami Bank Limited Annual Report 2017
  239. 2 .31 Compliance with Financial Reporting Standards as applicable in Bangladesh The Financial Reporting Act 2015 (FRA) was enacted in 2015. Under the FRA, the Financial Reporting Council (FRC) is to be formed and it is to issue financial reporting standards for public interest entities such as banks. The Bank Companies Act 1991 has been amended to require banks to prepare their financial statements under such financial reporting standards. The FRC has been formed but yet to issue any financial reporting standards as per the provisions of the FRA and hence Bangladesh Financial Reporting Standards (BFRS) as issued by the Institute of Chartered Accountants of Bangladesh (ICAB) are still applicable. Accordingly, the financial statements of the Bank continue to be prepared in accordance with Bangladesh Financial Reporting Standards (BFRS) and the requirements of the Bank Companies Act 1991, the rules and regulations issued by Bangladesh Bank, the Companies Act 1994. In case any requirement of the Bank Companies Act 1991, and provisions and circulars issued by Bangladesh Bank differ with those of BFRS, the requirements of the Bank Companies Act 1991, and provisions and circulars issued by Bangladesh Bank shall prevail. Material deviations from the requirements of BFRS are as follows: Sl. No. BAS No. 1 1 2 2 3 7 4 8 5 10 6 11 7 12 8 16 9 17 10 18 11 19 12 20 13 21 14 23 15 24 16 26 17 27 18 28 19 31 20 32 21 33 22 34 23 36 24 37 25 38 26 39 27 40 28 41 BAS Title Presentation of Financial Statements Inventories Statement of Cash Flows Accounting Policies, Changes in Accounting Estimates and Errors Events after Reporting Period Construction Contracts Income Taxes Property, Plant & Equipment Leases Revenue Employee Benefits Accounting for Government Grants and Discloser of Government Assistance The Effects of Changes in Foreign Exchanges Rates Borrowing Costs Related Party Disclosures Accounting and Reporting by Retirement Benefit Plans Consolidated and Separate Financial Statements Investment in Associates Interest in Joint Venture Financial Instruments: Presentation Earnings per Share Interim Financial Reporting Impairment of Assets Provisions, Contingent liabilities and Contingent Assets Intangible Assets Financial Instruments: Recognition and Measurement Investment Property Agriculture Compliance Status Complied * Not Applicable Complied * Complied Complied Not Applicable Complied Complied Complied Complied Complied Not Applicable Complied Not Applicable Complied Not Applicable Complied Not Applicable Not Applicable Complied * Complied Complied Complied Complied * Complied Complied * Not Applicable Not Applicable Sl. No. BFRS No. 1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8 BFRS Title First-time Adoption of Bangladesh Financial Reporting Standards Share-based Payment Business Combinations Insurance contracts Non-Current Assets Held for Sale and Discontinued Operations Exploration for and Evaluation of Mineral Financial Instruments: Disclosures Operating Segments Compliance Status Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Complied * Complied Shahjalal Islami Bank Limited Annual Report 2017 237
  240. Sl . No. BFRS No. 9 10 10 11 11 12 12 13 13 14 14 15 BFRS Title Consolidated Financial Statements Joint Arrangements Disclosure of Interest in other Entities Fair Value Measurement Regulatory Deferral Accounts Revenue from Contract with Customers Compliance Status Complied Not Applicable Not Applicable Complied Not Applicable Not Applicable * Subject to departure disclosed in note no. 2.1. New accounting standards not yet adopted: The Bank has consistently applied the accounting policies as set out in Note 2 to all periods presented in these financial statements. The various amendments to standards, including any consequential amendments to other standards, with the date of initial application of 1 January 2017 have been considered. However, these amendments have no material impact on the financial statements of the Bank. In December 2017, ICAB has decided to adopt IFRS replacing BFRS effective for annual periods beginning on or after 1 January 2018. However, since currently issued BFRS have been adopted from IFRS without any major modification, such changes would not have any material impact on financial statements. A number of standards and amendments to standards are effective for annual periods beginning after 1 January 2017 and earlier application is permitted. However, the Bank has not early applied the following new standards in preparing these financial statements. a. BFRS 9 Financial Instruments (to be adopted as IFRS 9) BFRS 9, published in July 2014, replaces the existing guidance in BAS 39 Financial Instruments: Recognition and Measurement. BFRS 9 includes revised guidance on the classification and measurement of the financial instruments, a new expected credit loss model for calculating impairment of financial assets, and the new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from BAS 39. BFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. As per the Bank’s assessment, any material impact of BFRS 9 would be primarily on calculation of impairment provision. However, as Bangladesh Bank has not issued any circular to revise its current impairment, classification and measurement policies to align with BFRS 9 the Bank is unable to quantify any potential impact on its financial statements. b. BFRS 15 Revenue from Contracts with Customers (to be adopted as IFRS 15) BFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing recognition guidance, including BAS 18 Revenue, BAS 11 Construction Contracts and BFRI 13 Customer Loyalty Programmes. BFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. Based on preliminary assessment the Bank has determined that BFRS 15 has no material impact on its financial statements. c. IFRS 16 Leases IFRS 16, issued in January 2016 replaces existing leases guidance and effective for reporting period beginning on or after 1 January 2019. It will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases. The accounting for lessors will not significantly change. The Bank has not yet assessed any potential impact of IFRS 16 on its financial statements. d. IFRS 17 Insurance Contracts IFRS 17 was issued in May 2017 and applies to annual reporting periods beginning on or after 1 January 2021. IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts within the scope of the standard. The objective of IFRS 17 is to ensure that an entity provides relevant information that faithfully represents those contracts. The Bank has not yet assessed in potential impact of IFRS 17 on its financial statements. There are no other standards that are not yet effective and that would be expected to have a material impact on the Bank in the current or future reporting periods and on foreseeable future transactions. 238 Shahjalal Islami Bank Limited Annual Report 2017
  241. 3 Consolidated Cash in hand (Including foreign currencies) Shahjalal Islami Bank Ltd (Note-3a) Shahjalal Islami Bank Securities Ltd 3a Cash in hand of the Bank (Including foreign currencies) In local currency In foreign currencies (Note-3a.1) 3a.1 In Foreign Currency Foreign Currency Amount in FC Exchange Rate US Dollar 129,923.35 82.700 Great Britain Pound Euro 4 Consolidated Balance with Bangladesh Bank and it’s agent bank(s) Shahjalal Islami Bank Ltd (Note-4a) Shahjalal Islami Bank Securities Ltd 4a Balance with Bangladesh Bank and it’s agent bank(s) (Including foreign currencies) In local currency In foreign currencies Balance with Sonali Bank Ltd. as agent of Bangladesh Bank In local currency In foreign currencies 31.12.2017 Taka 31.12.2016 Taka 1,529,754,123 1,529,754,123 1,179,754,405 1,179,754,405 1,519,009,461 10,744,661 1,529,754,123 1,174,258,047 5,496,358 1,179,754,405 10,744,661 10,744,661 4,954,768 275,010 266,579 5,496,358 11,659,462,711 11,659,462,711 8,398,144,743 8,398,144,743 11,429,273,893 76,951,616 11,506,225,509 8,191,357,896 24,364,878 8,215,722,774 153,237,202 153,237,202 11,659,462,711 182,421,969 182,421,969 8,398,144,743 4a.1 Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) have been calculated and maintained in accordance with the Section 33 of the Bank Company Act, 1991 and subsequent BCD Circular No.13 dated May 24, 1992; BRPD Circular No. 12 dated September 20, 1999; BRPD Circular No. 22 dated November 6, 2003, BRPD Circular No. 12 dated August 25, 2005; DOS Circular No.01 dated March 03, 2009 and MPD Circular No. 04 & 05 dated December 01, 2010; MPD Circular No. 02 dated December 10, 2013 and Circular No. 01 dated June 23, 2014. 4a.2 Cash Reserve Ratio (CRR): 6.5% of Average Demand and Time Liabilities Required Reserve 9,185,141,030 Actual Reserve held with Bangladesh Bank (In local currency)* 11,428,484,990 CRR Surplus 2,243,343,960 Maintained (%) 8.09% 7,816,547,070 8,192,127,709 375,580,639 6.81% * Actual Reserve held with Bangladesh Bank (In local currency) reported as per Statement of Bangladesh Bank. 4a.3 Statutory Liquidity Ratio (SLR): 5.50% of Average Demand and Time Liabilities Required Reserve 7,772,042,410 Actual Reserve held (Note-4a.4) 11,626,335,284 SLR Surplus 3,854,292,874 Maintained (%) 8.23% Shahjalal Islami Bank Limited Annual Report 2017 6,614,001,360 7,737,757,013 1,123,755,653 6.43% 239
  242. 31 .12.2017 Taka 4a.4 Held for Statutory Liquidity Ratio Cash in hand (Note-3a) Balance with Bangladesh Bank and its agents (Note-4a) (excluding Bangladesh Bank local currency account) Excess CRR (Note-4a.2) Bangladesh Bank Islami Investment Bond (Note-7a) Refinance Fund (with Bangladesh Bank) (Note-6a.1) 5 Consolidated Balance with Other Banks and Financial Institutions Inside Bangladesh Shahjalal Islami Bank Ltd (Note-5a.1) Shahjalal Islami Bank Securities Ltd Less: Inter Company Transaction Outside Bangladesh Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd (Note-5a.2) 5a Balance with Other Banks and Financial Institutions of the Bank (Other than mudaraba Fund) Inside Bangladesh (Note-5a.1) Outside Bangladesh (Note-5a.2) 5a.1 Inside Bangladesh Current Account Sonali Bank Limited (Other than as agent of Bangladesh Bank) National Bank Limited, Narayangonj Branch Standard Chartered Bank, Motijheel Branch Islami Bank Bangladesh Limited Agrani Bank Limited (Islami Banking Wing) Janata Bank Limited, Dinajpur Branch Off-Shore Banking Unit Less: Off-Shore Banking Unit Mudaraba Special Notice Deposit Export Import Bank of Bangladesh Limited Trust Bank Limited, Dilkusha Corporate Branch Prime Bank Limited, Islami Banking Branch Social Islami Bank Limited Agrani Bank-Corporate Branch (Islami Banking Wing) AB Bank Limited, Islami Banking Branch Jamuna Bank Limited, Naya Bazar Islami Banking Branch Bank Al Falah, Islami Banking Branch Al-Arafah Islami Bank Limited Southeast Bank Limited, Islami Banking Branch The City Bank - Islamic Banking Branch 240 31.12.2016 Taka 1,529,754,123 153,237,202 1,179,754,405 182,421,969 2,243,343,960 7,200,000,000 500,000,000 11,626,335,284 375,580,639 5,500,000,000 500,000,000 7,737,757,013 572,698,313 412,994,289 985,692,602 393,408,115 592,284,487 1,943,033,831 381,221,166 2,324,254,997 376,062,425 1,948,192,572 427,070,723 427,070,723 1,019,355,210 472,970,179 472,970,179 2,421,162,751 572,698,313 427,070,723 999,769,036 1,943,033,831 472,970,179 2,416,004,010 55,411 6,629 8,516,092 141,613 19,433,760 3,832 675,807,255 703,964,592 675,807,255 28,157,338 11,987,444 10,049 4,847,809 142,913 25,994,369 3,832 379,276,662 422,263,078 379,276,662 42,986,416 10,742,745 3,912,191 478,798 11,896,798 135,577,152 4,987,513 322,940 2,350,244 372,205,092 438,532 1,172,370 544,084,373 6,472,756 6,614,831 363,293 20,883 6,768,483 29,818,711 163,730 109,533,015 1,657,770,078 292,161 1,158,007 1,818,975,950 Shahjalal Islami Bank Limited Annual Report 2017
  243. 31 .12.2017 Taka Mudaraba Saving Deposit Social Islami Bank Limited Al-Arafah Islami Bank Limited Islami Bank Bangladesh Limited Export Import Bank of Bangladesh Limited First Security Islami Bank Limited Dhaka Bank Limited, Islami Banking Branch 5a.2 Outside Bangladesh (NOSTRO Account) [as on 31 December 2017] Current Account Currency F.C. Amount Standard Chartered Bank NY USD 555,995.45 Mashreq Bank psc, NY USD 944,028.96 Standard Chartered Bank, Mumbai USD 222,198.53 Habib American Bank, USA USD 307,016.90 ICICI Bank, Hong Kong USD 152,133.52 WACHOVIA BANK, NY, USA USD 1,028,893.30 Commerzbank AG Frankfrut USD 151,518.47 Bank Aljazira USD 563,077.06 UBAF Hong Kong Limited USD 2.73 AB Bank Ltd. Mumbai ACUD 161,598.53 IFIC Bank Ltd., Karachi ACUD 8,641.29 Standard Chartered Bank, Mumbai ACUD 21,725.07 Nepal Bangladesh Bank, Nepal ACUD 27,454.25 Standard Chartered Bank, Colombo ACUD 5,154.98 ICICI Bank, Mumbai ACUD 6,797.78 Habib Metropoliton Bank Ltd. ACUD 105,782.76 United Bank of India, Kolkata ACUD 156,937.46 Sonali Bank Ltd ACU, Kolkata ACUD 4,057.73 Bank of Bhutan Ltd. Main Branch ACUD 47,816.83 AXIS Bank Ltd. India ACUD 176,952.33 Standard Chartered Bank, Frankfurt EURO 12,511.37 Mashreq Bank, London EURO 8,697.01 COMMERZBANK AG EURO 86,164.24 Wells Fargo Bank, N. A. London, UK EURO 207,746.19 Standard Chartered Bank,Tokyo YEN 869,483.99 BCP - Geneva, Switzerland CHF 6,395.43 Habib Bank AG Zurich CHF 2,466.85 Bank Aljazira, KSA SAR 203,786.81 Standard Chartered Bank London GBP 51,271.68 Shahjalal Islami Bank Limited Annual Report 2017 31.12.2016 Taka 244,727 20,008 98,485 93,381 456,602 572,698,313 2,379,777 19,870 7,342,738 70,801,131 20,173 507,776 81,071,465 1,943,033,831 Rate 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 98.7521 98.7521 98.7521 98.7521 0.7326 84.4826 84.4826 22.0533 111.1819 Taka 45,980,824 78,071,195 18,375,818 25,390,298 12,581,442 85,089,476 12,530,577 46,566,473 226 13,364,198 714,635 1,796,663 2,270,466 426,317 562,176 8,748,234 12,978,728 335,575 3,954,452 14,633,958 1,235,524 858,848 8,508,900 20,515,373 636,984 540,303 208,406 4,494,172 5,700,483 427,070,723 241
  244. 31 .12.2017 Taka Currency wise Distribution: Foreign Currency USD ACUD EURO GBP SAR CHF YEN BDT 324,586,329 59,785,402 31,118,644 5,700,483 4,494,172 748,708 636,984 427,070,723 31.12.2016 Taka Composition 76.00% 14.00% 7.29% 1.33% 1.05% 0.18% 0.15% 100% For details comparative statement of 2017 & 2016 of foreign currency amount and rate thereof please see “Annexure-C” 5a.3 In accordance with Bangladesh Bank Foreign Exchange Policy Department, Circular FEPD/FEMO/18/2007-265 dated 17 December 2007, the quarterly review of NOSTRO Accounts for the quarter ended 31 December 2017 reflect the true state of the NOSTRO Account entries recorded correctly and after review a separate audit certificate have also been given by the auditor. The status of all outstanding unmatched entires are given below: As on 31 December 2017 Amount in US$ As per Bank’s Book As per Correspondents’ Book Debit entries Credit entries Debit entries Credit entries No. Amount No. Amount No. Amount No. Amount Up to 3 months 16 1,791,340.06 201 6,604,564.27 63 1,713,703.15 242 4,698,437.64 More than 03 months but less than 06 months More than 06 months but less than 09 months More than 09 months but less than 12 months More than 12 months 16 1,791,340.06 201 6,604,564.27 63 1,713,703.15 242 4,698,437.64 As on 31 December 2016 Amount in US$ As per Bank’s Book As per Correspondents’ Book Debit entries Credit entries Debit entries Credit entries No. Amount No. Amount No. Amount No. Amount Up to 3 months 21 4,421,508.73 142 8,253,684.10 67 2,833,844.42 183 7,882,025.43 More than 03 months but less than 06 months More than 06 months but less than 09 months More than 09 months but less than 12 months More than 12 months 21 4,421,508.73 142 8,253,684.10 67 2,833,844.42 183 7,882,025.43 242 Shahjalal Islami Bank Limited Annual Report 2017
  245. 31 .12.2017 Taka 5a.4 Maturity-wise groupings of balance with other banks and financial institutions On Demand Not more than 3 months More than 3 months but less than 1 year More than 1 year but less than 5 years More than 5 years 6 Consolidated Placement with other Banks & Financial Institutions Shahjalal Islami Bank Ltd (Note-6a) Shahjalal Islami Bank Securities Ltd Less: Inter Company Transaction 6a Placement with other Banks & Financial Institutions of the Bank Placement with other Banks (Note-6a.1) Placement with Financial Institutions (Note-6a.2) 6a.1 Mudaraba Term Deposits-other Banks ICB Islamic Bank Limited Social Islami Bank Limited Southeast Bank Ltd, Islami Banking Branch Bangladesh Bank (Refinance Fund) 6a.2 Mudaraba Term Deposits-Financial Institutions Hajj Finance Company Limited Lanka Bangla Finance Limited Industrial and Infrastructure Development Finance Company Ltd Union Capital Limited Phoenix Finance & Investments Limited National Finance Limited Midas Financing Limited Premier Leasing International Limited United Finance Ltd. National Housing Finance and Investment Ltd. Industrial Promotion and Development Company of Bangladesh Limited GSP Finance Ltd. Prime Finance & Investment Limited Fareast Finance & Investment Limited Delta Brac Housing Finance Corporation IDLC Finance Limited Islamic Finance Investment Ltd. Shahjalal Islami Bank Limited Annual Report 2017 31.12.2016 Taka 28,198,432 971,570,604 999,769,036 667,273,562 1,748,730,448 2,416,004,010 6,661,710,616 6,661,710,616 6,661,710,616 7,861,781,566 7,861,781,566 7,861,781,566 811,710,616 5,850,000,000 6,661,710,616 1,111,781,566 6,750,000,000 7,861,781,566 311,710,616 500,000,000 811,710,616 311,781,566 300,000,000 500,000,000 1,111,781,566 250,000,000 1,500,000,000 1,200,000,000 200,000,000 400,000,000 100,000,000 300,000,000 300,000,000 500,000,000 100,000,000 800,000,000 200,000,000 5,850,000,000 6,661,710,616 200,000,000 800,000,000 350,000,000 300,000,000 400,000,000 300,000,000 300,000,000 300,000,000 800,000,000 200,000,000 300,000,000 50,000,000 100,000,000 1,000,000,000 1,250,000,000 100,000,000 6,750,000,000 7,861,781,566 243
  246. 31 .12.2017 Taka 31.12.2016 Taka 5,650,000,000 700,000,000 311,710,616 6,661,710,616 6,250,000,000 1,300,000,000 311,781,566 7,861,781,566 (Note-7a) 7,200,000,000 7,200,000,000 5,500,000,000 5,500,000,000 (Note-7a) 3,326,258,238 1,432,948,480 4,759,206,718 11,959,206,718 2,093,131,998 1,871,180,894 3,964,312,892 9,464,312,892 (Note-7a.2) 7,200,000,000 7,200,000,000 5,500,000,000 5,500,000,000 47,550,542 1,580,000,000 1,698,707,696 3,326,258,238 10,526,258,238 47,550,542 100,000,000 1,945,581,457 2,093,131,998 7,593,131,998 5,946,258,238 3,020,000,000 1,560,000,000 10,526,258,238 6,191,131,998 1,400,000,000 2,000,000 7,593,131,998 6a.3 Maturity-wise groupings of placement with other Banks and Financial Institutions On Demand Not more than 3 months More than 3 months but not more than 1 year More than 1 year but not more than 5 years More than 5 years 7 Consolidated Investment in Shares & Securities Government Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd Others Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd 7a Investment in Shares & Securities of the Bank Government Government Bond (Islamic Investment Bond) Others Mudaraba Perpetual Bond, Islami Bank Bangladesh Ltd. Mudaraba Subordinated Bond Investment in Shares (Note-7a.3) 7a.1 Maturity-wise Grouping of Investment in Securities: On demand Not more than 3 months More than 3 months but less than 1 year More than 1 year but less than 5 years More than 5 years 7a.2 Bangladesh Bank has introduced Mudaraba Bond named “Bangladesh Government Islamic Investment Bond (Islamic Bond)” in September 2004 on behalf of the Government to facilitate Islamic Banks and Financial Institutions, investment in this funds is considered as a component of Statutory Liquidity Ratio (SLR). The mobilized fund from Islamic Bond is invested by Bangladesh Bank and a portion of realized profit distributes among the bond holders as per mudaraba principle of Islamic Shariah on the basis of the tenor of the bond. So the rate of return from Islamic Bond is depended on fund deployment of Bangladesh Bank which is not prefixed. 244 Shahjalal Islami Bank Limited Annual Report 2017
  247. 31 .12.2017 Taka 7a.3 Investment in shares (at cost) Quoted The ACME Laboratories Limited Active Fine Chemicals Ltd. Aftab Automobiles Limited Agricultural Marketing Company Ltd – AMCL (PRAN) AIBL 1st Islamic Mutual Fund Apex Footwear Limited Beacon Pharmaceuticles Limited Beximco Limited Dhaka Electric Supply Company Ltd. Eastern Housing Limited Envoy Textiles Ltd. Export Import Bank of Bangladesh Limited Familytex (BD) Ltd. Fareast Islami Life Insurance Co. Ltd. Generation Next Fashions Limited M.I. Cement Factory Ltd Makson Spinning Mills Limited Meghna Petroleum Limited Metro Spinning Mills Limited Orion Pharma Ltd. RAK Ceramics (Bangladesh) Limited Square Textile Ltd The Dacca Dyeing & Mfg. Co. Limited Titas Gas Transmission And Distribution Co. Ltd Unique Hotel and Resorts Ltd Bangladesh Steel Re-Rolling Mills Limited Prime Islami Life Insurance Ltd. Bangladesh Submarine Cable Company Limited Lafarge Surma Cement Ltd. Nahee Aluminum Composite Panel Ltd. Oimex Electrode Limited Premier Cement Mills Limited Shahjibazar Power Co. Ltd. Singer Bangladesh Limited Al-Arafah Islami Bank Limited Appollo Ispat Complex Limited Central Pharmaceuticals Ltd. Fine Foods Limited First Security Islami Bank Ltd. Islami Bank Bangladesh Limited Islami Insurance Bangladesh Limited Jamuna Oil Company Limited Padma Islami Life Insurance Limited Salvo Chemical Industry Ltd. Shinepukur Ceramics Limited Social Islami Bank Ltd. Square Pharmaceuticles Limited MJL Bangladesh Limited Shahjalal Islami Bank Limited Annual Report 2017 59,175,008 39,430,643 61,605,088 9,958,704 67,402,716 10,953,975 87,734,854 85,339,733 69,126,961 166,063,283 42,402,697 56,153,581 47,453,468 65,297,780 25,741,813 41,501,769 63,955,630 75,607,343 65,855,505 62,359,551 34,139,452 34,785,789 160,115,520 78,349,510 31,110,235 9,744,380 3,720,371 2,342,003 42,489,421 63,882 66,310 18,441,295 8,890,774 60,778,950 - 31.12.2016 Taka 56,206,552 40,367,121 35,738,559 9,958,704 73,298,207 7,510,020 39,266,541 53,917,267 40,103,115 166,063,283 42,402,697 128,470,525 47,453,468 35,899,637 25,741,813 58,102,477 63,955,630 75,607,343 65,855,505 44,129,226 6,778,747 61,222,988 160,115,520 78,349,510 22,403,867 80,277,378 1,900,315 6,731,215 85,826,584 39,956,268 32,559,062 3,527,898 67,733,293 5,702,545 3,201,604 6,006,606 80,932,934 33,600,877 21,706,557 245
  248. Un-Quoted Lanka Bangla Securities Ltd Market Stabilization Fund , Asset Management Co. Ltd Aman Cotton Fibrous Limited Aamra Networks Limited Pacific Denims Limited 31.12.2017 Taka 31.12.2016 Taka 5,000,000 2,000,000 1,260,400 2,289,302 1,698,707,696 5,000,000 2,000,000 30,000,000 1,945,581,457 See Annexure-A for details regarding unrealised gain/(loss) & provision. 8 Consolidated Investments Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd (Note-8a) 148,364,190,304 3,269,416,687 151,633,606,991 250,620,139 151,382,986,852 112,519,695,669 3,755,495,358 116,275,191,027 657,037,917 115,618,153,110 (Note-8a) 10,303,967,071 10,303,967,071 161,686,953,924 10,478,684,675 10,478,684,675 126,096,837,785 157,680,334,330 9,316,144,025 120,543,732,798 8,024,037,129 148,364,190,304 10,303,967,071 158,668,157,376 112,519,695,669 10,478,684,675 122,998,380,344 32,876,042,208 42,983,203,833 37,763,021,455 35,192,597,306 9,853,292,573 158,668,157,376 23,861,685,787 40,724,763,732 37,563,705,357 15,928,290,255 4,919,935,214 122,998,380,344 3,792,715,364 6,743,135,868 10,535,851,231 231,884,160 10,303,967,071 4,266,972,740 6,460,677,058 10,727,649,799 248,965,124 10,478,684,675 Less: Inter Company Transaction Bills Purchased and Discounted : Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd 8a Investments of the Bank Country-wise Classification of Investments: Inside Bangladesh Gross Murabaha, Bai-Muajjal etc Less: Profit receivable on Murabaha, Bai-Muajjal etc (Mark-up profit on unearned income) Net Murabaha, Bai-Muajjal etc Bills purchased and discounted-net (Note-8a.2) Outside Bangladesh 8a.1 Maturity wise Classification of Investments: With a residual maturity of Re-payable on Demand Not more than 3 months Over 3 months but not more than 1 year Over 1 year but not more than 5 years Over 5 years 8a.2 Bills Purchased and Discounted : Payable inside Bangladesh Payable outside Bangladesh Gross Bills Purchased and Discounted Less: Profit receivable on Bills Purchased and Discounted Net Bills Purchased and Discounted 246 Shahjalal Islami Bank Limited Annual Report 2017
  249. 8a .3 Maturity wise Classification of Bills Purchased and Discounted: Re-payable:Within 1 month Over 1 month but less than 3 months Over 3 months but less than 6 months 6 months or more 8a.4 Investments on the basis of significant concentration: Investments to allied concern of Directors (Note-51.5) Investments to Executives/Officers Investments to Customer Groups Industrial Investment Others 31.12.2017 Taka 31.12.2016 Taka 2,988,150,451 2,395,672,344 960,329,731 3,959,814,546 10,303,967,071 3,038,818,556 2,436,294,187 976,613,412 4,026,958,520 10,478,684,675 343,104,090 1,460,297,464 97,186,422,645 57,764,626,705 1,913,706,472 158,668,157,376 757,475,970 1,294,754,280 61,267,816,917 57,764,626,705 1,913,706,472 122,998,380,344 Investments allowed to individual customer exceeding 10% of Bank’s total capital: Total outstanding amount to such customers at end of the year Number of such types of customers Amount of Classified Investments thereon Measures taken for recovery : : : : 63,128.38 million 23 Nil Not applicable 53,220.43 million 24 Nil Not applicable The amount represents the sum of total Investments (both Funded and Non-Funded) to each customer exceeding Tk. 1,937.60 million which is computed @ 10% of total capital of the bank i.e. Tk.19,375.98 million (Note # 17.5.c) as at 31 December 2017. For details please refer to Annexure-D 8a.5 Sector-wise Classification of Investments: As at 31 December 2017 As at 31 December 2016 Sector Amount Composition Amount Composition Agriculture & Fishing 5,234,400,000 3.30% 5,981,900,000 4.86% Cotton & Textile 13,742,251,934 8.66% 9,619,751,093 7.82% Garments 19,129,243,625 12.06% 14,473,178,563 11.77% Cement 1,292,695,437 0.81% 1,289,007,293 1.05% Pharmaceuticals & Chemicals 2,169,869,073 1.37% 2,344,897,625 1.91% Real Estate 8,074,515,859 5.09% 8,326,122,594 6.77% Transport 2,581,481,659 1.63% 2,640,289,561 2.15% Information Technology 399,684,889 0.25% 340,719,652 0.28% Non Banking Financial Institutions 2,404,260,444 1.52% 2,554,048,699 2.08% Steel & Engineering 9,085,343,269 5.73% 5,783,370,534 4.70% Food Processing & Beverage 11,229,536,145 7.08% 9,320,064,390 7.58% Power & Energy 4,349,746,142 2.74% 3,029,215,963 2.46% Paper & Paper Products 1,927,725,308 1.21% 1,531,737,680 1.25% Plastic & Plastic Product 3,690,074,916 2.33% 2,934,818,886 2.39% Electronics 4,022,935,777 2.54% 2,797,082,706 2.27% Services Industries 5,414,797,241 3.41% 3,425,274,067 2.78% Trading 26,668,700,000 16.81% 20,317,300,000 16.52% Import Financing 7,060,700,000 4.45% 3,811,500,000 3.10% Consumer Financing 420,500,000 0.27% 181,600,000 0.15% Share business 1,042,005,526 0.66% 1,448,703,721 1.18% Staff Investment 1,460,297,464 0.92% 1,294,754,280 1.05% Others 27,267,392,670 17.19% 19,553,043,035 15.90% Total 158,668,157,376 100.00% 122,998,380,344 100.00% Shahjalal Islami Bank Limited Annual Report 2017 247
  250. 31 .12.2017 Taka 31.12.2016 Taka 8a.6 Geographical Location-wise Investments: Area As at 31 December 2017 As at 31 December 2016 i) Inside Bangladesh (note-8a.6.1) Amount Composition Amount Composition a) In Rural Areas 10,462,731,660 6.59% 7,391,491,073 6.01% b) In Urban Areas 148,205,425,716 93.41% 115,606,889,271 93.99% Sub-total 158,668,157,376 100% 122,998,380,344 100% ii) Outside Bangladesh Total 158,668,157,376 100% 122,998,380,344 100% 8a.6.1 Inside Bangladesh Division Dhaka Chittagong Sylhet Rajshahi Rangpur Khulna Barisal Total As at 31 December 2017 As at 31 December 2016 Amount Composition Amount Composition 117,797,816,096 74.24% 93,240,838,454 75.81% 26,888,848,733 16.95% 20,012,231,565 16.27% 2,002,443,636 1.26% 1,454,734,295 1.18% 4,738,580,804 2.99% 2,753,438,031 2.24% 1,250,781,893 0.79% 1,118,640,665 0.91% 5,417,489,836 3.41% 4,062,593,748 3.30% 572,196,377 0.36% 355,903,585 0.29% 158,668,157,376 100.00% 122,998,380,344 100.00% 8a.7 Grouping of Investments as per Classification Rules of Bangladesh Bank: As at 30 December 2017 As at 31 December 2016 Status Amount Composition Amount Composition Unclassified (including staff lnvestment) 150,799,767,001 95.04% 115,852,194,622 94.19% Special Mention Account (SMA) 1,567,888,214 0.99% 1,364,486,682 1.11% Substandard 549,660,286 0.35% 246,017,213 0.20% Doubtful 211,763,683 0.13% 272,959,898 0.22% Bad or loss 5,539,078,192 3.49% 5,262,721,929 4.28% Total 158,668,157,376 100.00% 122,998,380,344 100.00% 8a.8 Particulars of provision for Investments: Rate Standard Unclassified (excluding staff lnvestments) Staff Investments Consumer Financing (Other than HF & LP) Small & Medium Enterprise Housing Finance(HF) Loan for professionals (LP) Share Business Short Term Agri Credit SMA 1% 0% 5% 0.25% 1% 2% 2% 1% 90,000,924,440 1,460,297,464 357,122,138 55,538,220,222 2,753,619,265 27,743,720 656,134,920 5,704,833 1,455,345,012 20% & 5% (Agri) 50% & 5% (Agri) 100% 324,563,441 36,638,200 1,332,348,478 Substandard Doubtful Bad or loss Required provision for Investments Total provision maintained {note # 14a.1(a) & (b)} Surplus Provision 248 Basis for Provision Status 31.12.2017 Taka 947,509,244 17,856,107 138,845,551 27,536,193 554,874 13,122,698 57,048 11,972,146 1,157,453,862 64,805,599 17,704,624 1,332,348,478 1,414,858,701 2,572,312,562 2,580,964,133 8,651,571 31.12.2016 Taka 711,790,772 10,784,171 112,101,479 30,255,532 296,383 20,612,463 346,735 9,329,375 895,516,910 28,165,829 57,847,913 1,345,111,251 1,431,124,993 2,326,641,903 2,327,667,602 1,025,699 Shahjalal Islami Bank Limited Annual Report 2017
  251. 31 .12.2017 Taka 31.12.2016 Taka The Bank has maintained provision for unclassified Investment amounting to Tk. 1,165,900,000 (note # 14a.1.b) and for classified Investment Tk. 1,415,064,133 (note # 14a.1.a) totaling Tk. 2,580,964,133. As per instruction letter no. DBI-4/42(3)/2018-752 dated 16 April 2018 of Bangladesh Bank, the Bank has maintained the minimum required provision as at 31 December 2017. 31.12.2017 Taka 8a.9 Particulars of provision for Off-Balance Sheet Status Basis for Provision 31.12.2016 Taka Rate 1% 283,687,414 193,224,825 275,696,406 139,646,958 892,255,603 892,300,000 44,397 Rate 1% 237,191,336 119,568,679 184,213,616 92,283,671 633,257,303 633,300,000 42,697 131,261,253,856 102,131,219,008 (ii) Debts considered good for which the banking company holds no other security than the debtor’s personal security 25,323,437,917 19,630,541,503 (iii) Debts considered good and secured by personal security of one or more parties in addition to the personal security of the debtors 2,083,465,603 1,236,619,832 158,668,157,376 122,998,380,344 (v) Debts due by directors or officers of the banking company or any of them either severally or jointly with any other person 1,460,297,464 1,294,754,280 (vi) Debts due by companies or firms in which the directors of the banking company are interested as directors, partners or managing agents or, in the case of private companies as members (Note 51.5). 343,104,090 757,475,970 (vii) Maximum total amount of investments, including temporary investments made at any time during the period to directors or managers or officers of the banking company or any of them either severally or jointly with any other persons. 1,460,297,464 1,294,754,280 (viii) Maximum total amount of advances including temporary advances granted during the period to the companies or firms in which the directors of the banking company are interested as directors, partners or managing agents or in the case of private companies as members 343,104,090 757,475,970 - - 6,300,502,160 5,781,699,039 Acceptances & endorsements Letters of Guarantees Irrevocable Letters of Credit Bills for collection Required provision for Off Balance Sheet Items Provision maintained {note # 14a.1(c)} Surplus Provision 28,368,741,403 19,322,482,514 27,569,640,596 13,964,695,831 89,225,560,344 8a.10 Particulars of Investments: (i) Debts considered good in respect of which the banking company is fully secured (iv) Debts considered bad or doubtful not provided for (ix) Due from Banking Companies (x) Total amount of advance on which Profit is not credited: Shahjalal Islami Bank Limited Annual Report 2017 249
  252. 31 .12.2017 Taka 31.12.2016 Taka 5,781,699,039 518,803,121 6,300,502,160 6,261,012,660 (479,313,621) 5,781,699,039 (16,403,469) (418,593,398) 982,130,507 1,070,014,659 18,605,000 22,583,982 1,415,064,133 519,917,285 1,431,467,602 621,893,107 3,481,540,205 982,130,507 4,463,670,712 2,411,525,546 1,070,014,659 3,481,540,205 (Note-9a) 4,855,255,914 93,557,289 4,948,813,203 4,299,782,666 76,789,944 4,376,572,610 (Note-9a) 898,138,146 42,511,184 940,649,330 4,008,163,873 866,743,623 35,817,264 902,560,887 3,474,011,723 4,169,882,223 1,237,886,785 5,407,769,008 691,068,537 4,716,700,471 3,991,969,098 257,000,459 4,248,969,557 11,802,321 4,237,167,236 799,152,843 114,299,641 913,452,484 96,676,164 816,776,320 3,899,924,150 723,286,212 116,105,451 839,391,663 9,481,156 829,910,507 3,407,256,729 a. Movement of Classified Investments: Opening Balance Increase/ (Decrease) during the year i) (Decrease)/Increase of specific provison ii) Amount of written off investment during the year against which fully provided iii) Amount recovered against the investment which was previously written off b. Amount of provision kept against classified Investment as bad or Loss on the reporting day of Balance Sheet c. Amount of Profit charged in suspense Account (xi) Cumulative amount of written off Investments Opening Balance Amount written off during the year Total amount of written off investment 9 Consolidated Fixed Assets including Premises, Furnitures & Fixtures Cost Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd Accumulated Depreciation Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd Written Down Value 9a Fixed Assets including Premises, Furnitures & Fixtures of the Bank Cost Opening balance Addition during the year Less: Disposal during the year Accumulated Depreciation Opening balance Addition during the year Less: Adjustment on disposal during the year Written Down Value 250 Shahjalal Islami Bank Limited Annual Report 2017
  253. 31 .12.2017 Taka 31.12.2016 Taka Intangible assets Cost Opening balance Addition during the year 129,900,443 8,655,000 138,555,443 138,555,443 61,548,992 1,066,438 62,615,430 62,615,430 67,590,780 13,771,046 81,361,826 81,361,826 57,193,617 30,839,845 5,993,271 36,833,116 36,833,116 25,782,314 3,957,117,768 3,433,039,043 (Note-10a) 13,795,235,456 2,166,544,118 15,961,779,574 3,578,605,893 12,383,173,681 13,313,448,521 2,570,816,907 15,884,265,428 3,878,369,440 12,005,895,988 (Note-10a.4) 9,611,807,185 227,658,946 9,839,466,131 8,700,383,562 183,559,781 8,883,943,343 18,814,345 165,849,238 101,552,665 237,370,413 39,944,523 1,063,059,276 2,515,000,000 21,700,000 16,820,000 9,611,807,185 3,317,812 13,795,235,456 17,164,051 122,989,589 55,747,673 278,319,197 218,968,790 1,362,959,318 2,515,000,000 35,880 16,087,656 8,700,383,562 3,889,647 21,903,158 13,313,448,521 Less: Disposal during the year Amortization Opening balance Addition during the year Less: Adjustment on disposal during the year Written Down Value Total Written Down Value For details please refer to Annexure-B 10 Consolidated Others Assets Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd Less: Inter Company transaction 10.1 Consolidated advance tax Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd 10a Others Assets of the Bank Stock of Stationery, Stamps and printing materials etc. (valued at cost) Advance rent and security deposit Suspense Account (Note-10a.1) Profit receivable (Note-10a.2) Other Prepayments Receivable from Shahjalal Islami Bank Securities Limited Shahjalal Islami Bank Securities Ltd (Note-10a.3) Advance Insurance premium Advance for new Branches Advance tax paid (Note-10a.4) Other Receivables SJIBL General Account-Net (Note-10a.5) Shahjalal Islami Bank Limited Annual Report 2017 251
  254. 31 .12.2017 Taka 10a.1 Suspense Account Sundry Debtors Excise duty on MTDR Advance against TA/DA Advance against Petty Cash Law charges Stamp Others 59,091,692 1,001,347 269,338 497,000 36,612,627 113,045 3,967,616 101,552,665 31.12.2016 Taka 7,301,848 11,869,247 290,800 345,000 32,213,964 61,525 3,665,289 55,747,673 The detail breakup of unadjusted suspense accounts are given below: Sl 1 2 3 4 5 Breakup Sundry Debtors Advance against TA/DA Advance against Petty Cash Legal expenses Others Grand Total (Amount in ‘000) 03 months to 06 months to 09 months to Less than 03 12 months less than 06 less than 09 less than 12 months and above months months months 57,078 1,861 65 88 269 492 5 2,603 3,399 1,529 2,035 27,047 3,336 492 242 517 494 63,778 5,752 1,771 2,617 27,634 31.12.2017 Taka 10a.2 Profit Receivable Placement to Other Bank-MTDR Placement to Financial Institutions-MTDR Placement to Islamic Investment Bond Profit on Investment against MSD On Investments 17,727,063 49,230,069 102,388,221 19,243,161 48,781,899 237,370,413 31.12.2016 Taka 23,185,396 81,708,861 121,791,884 28,309,417 23,323,639 278,319,197 10a.3 Shahjalal Islami Bank Limited invested Tk. 251.50 crore in its Subsidiary Company named ‘Shahjalal Islami Bank Securities Limited’ as per approval of competent authority. The subsidiary commenced its operation from 25th May 2011. The total Paid-up Capital of the subsidiary company is Tk. 274.00 crore divided into 27,40,00,000 ordinary shares @ Tk. 10 each and bank hold 91.79% of its paid-up capital. 10a.4 Advance tax paid Balance at the beginning of the year Paid during the year 11 Non-Banking Assets Shahjalal Islami Bank Ltd 8,700,383,562 911,423,624 9,611,807,185 8,114,332,183 586,051,379 8,700,383,562 88,909,355 51,078,968 The Bank was awarded absolute ownership on few mortgaged properties through the verdict of Honorable court under section 33(7) of the Artharin Adalat Act 2003. These were recorded as non banking assets as per valuation report submitted by professional surveyor. Value of the assets was recorded in equivalent to the client’s adjustable outstanding. 252 Shahjalal Islami Bank Limited Annual Report 2017
  255. 31 .12.2017 Taka Following are the details: SL Name of Parties i) Haque Steel & Re-Rolling Industries Pvt. Ltd. ii) M/S Noor Mohammad Iron Store iii) M/s Khizir Trading iv) Md. Mehedul Islam v) Sohel Enterprise Assets details i) 26 (twenty six) decimals land situated at Savar, Mouza: Boroboreshi ii) 160.50 decimals land together with building structures standing and / or existing therein and appurtenance thereto situated at Narayangonj, Mouza: Dapa Idrakpur. Carrying value of which was BDT 1741.59 Lac (Market Value). Entitlement Date: 12.10.14 6.25 (six point two five) decimals land situated at Bashundhara River View Project at Block - A, Plot # 532, Keranigonj, Dhaka, Mouza - Naiyatola. Carrying value of which was BDT 47.34 Lac (Market Value). Entitlement Date: 14.05.15 13.83 (thirteen point eight three) decimals land situated at Khulshi, Mouza: Pahatali. Carrying value of which was BDT 356.81 Lac (Market Value). Entitlement Date: 05.11.17 i) 4 (four) decimals land situated at Dinajpur, Kotwali, Mouza: Majipara ii) 13 (thirteen) decimals land situated at Dinajpur, Fulbari, Mouza: Rashidpur. Carrying value of which was BDT 48.50 Lac (Market Value). Entitlement Date: 04.04.17 i) 8 (eight) decimals land situated at Rangpur, Kotwali, Mouza: Taluk Dharmadash ii) 4 (four) decimals land situated at Rangpur, Kotwali, Mouza: Alamnagar iii) 3 (three) decimals land situated at Rangpur, Kotwali, Mouza: Taluk Dharmadash. Carrying value of which was BDT 34.50 Lac (Market Value). Entitlement Date: 29.11.17 Total Shahjalal Islami Bank Limited Annual Report 2017 31.12.2016 Taka 47,064,331 47,064,331 4,014,637 4,014,637 31,468,345 - 3,380,238 - 2,981,804 - 88,909,355 51,078,968 253
  256. 12 Consolidated Placement from other Banks & Financial Institutions Shahjalal Islami Bank Ltd (Note-12a) Shahjalal Islami Bank Securities Ltd Less: Inter Company transaction 12a Placement from other Banks & Financial Institutions of the Bank Islami Investment Bond from Bangladesh Bank Islamic Refinance Fund - Bangladesh Bank Mudaraba FC A/C-Bangladesh Bank (EDF) Mudaraba Term Deposit from other Banks (Note-12a.1) Borrowing from Offshore Banking Unit (OBU) Less: Off-Shore Banking Units 12a.1 Mudaraba Term Deposit from other Banks Islami Bank Bangladesh Limited Bank Asia Limited, Islami Banking Branch Al-Arafah Islami Bank Limited United Commercial Bank Limited Export Import Bank of Bangladesh Limited Sonali Bank Limited Agrani Bank Limited AB Bank Limited Pubali Bank Limited Bank Alfalah Limited Janata Bank Limited United Bank Ltd., UAE Bank Muscat SAOG United Bank UK JS Bank Ltd., Bahrain Fund Placement Received from ICD Southeast Bank Limited Uttara Bank Limited, Islami Banking Branch Trust Bank Limited, Islami Banking Branch 31.12.2017 Taka 31.12.2016 Taka 29,621,688,291 805,000,000 30,426,688,291 250,000,000 30,176,688,291 16,235,542,799 1,654,336,661 17,889,879,460 650,000,000 17,239,879,460 7,000,000,000 158,129,367 7,341,588,824 15,121,970,100 663,175,441 30,284,863,732 663,175,441 29,621,688,291 4,000,000,000 114,829,758 4,420,713,041 7,700,000,000 346,203,974 16,581,746,773 346,203,974 16,235,542,799 2,950,000,000 1,750,000,000 500,000,000 1,490,000,000 500,000,000 1,305,000,000 2,115,400,000 400,000,000 600,000,000 290,000,000 1,000,000,000 94,691,500 825,594,100 292,344,500 16,540,000 827,000,000 165,400,000 15,121,970,100 4,950,000,000 1,500,000,000 1,000,000,000 250,000,000 7,700,000,000 13 Consolidated Deposits and Other Accounts 254 Al-Wadiah Current Deposit & Other Accounts Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd (Note-13a) 18,281,980,348 18,281,980,348 14,492,841,209 14,492,841,209 Bills Payable Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd (Note-13a) 2,493,444,313 2,493,444,313 1,712,398,926 1,712,398,926 Shahjalal Islami Bank Limited Annual Report 2017
  257. 31 .12.2017 Taka 31.12.2016 Taka Mudaraba Savings Deposits Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd (Note-13a) 18,280,590,909 18,280,590,909 18,510,981,952 18,510,981,952 Mudaraba Term Deposits Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd (Note-13a) 64,248,150,845 64,248,150,845 44,923,686,220 44,923,686,220 Other Mudaraba Deposits Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd (Note-13a) 42,078,308,773 42,078,308,773 393,408,115 41,684,900,658 144,989,067,073 44,769,922,395 44,769,922,395 376,062,425 44,393,859,970 124,033,768,277 7,416,177,866 1,504,968,625 42,683,935 9,330,781,735 18,294,612,162 12,631,814 18,281,980,348 6,036,580,692 1,335,942,205 17,288,357 7,136,102,644 14,525,913,897 33,072,688 14,492,841,209 2,475,250,322 16,664,720 20,000 215 64,405 1,444,651 2,493,444,313 2,493,444,313 1,674,654,110 36,541,571 122,000 40 96,051 985,154 1,712,398,926 1,712,398,926 18,180,901,845 99,689,065 18,280,590,909 18,415,338,671 95,643,282 18,510,981,952 64,248,150,845 64,248,150,845 44,923,686,220 44,923,686,220 4,956,740,274 37,121,568,499 42,078,308,773 145,382,475,188 5,776,579,363 38,993,343,032 44,769,922,395 124,409,830,702 Less: Inter Company transaction Total 13a Deposits and Other Accounts of the Bank Al-Wadiah Current Deposit & Other Accounts: Al-Wadiah Current Deposit Foreign Currency Deposits Non-Resident Taka Account Sundry Deposits Less: Off-Shore Banking Units Bills Payable: Payable inside Bangladesh Payment Order Issued Demand Draft Payable Instant Cash Payable Bank Cheque Issued Turbo Cash Payable Electronic Fund Transfer Payable outside Bangladesh Mudaraba Savings Deposits: General Deposits Deposit from Other Banks Mudaraba Term Deposits: General Deposits Other Mudaraba Deposits: Mudaraba Short Notice Deposits Mudaraba Scheme Deposit Shahjalal Islami Bank Limited Annual Report 2017 (Note-13a.1) 255
  258. 13a .1 Mudaraba Scheme Deposits: Millionaire Scheme Multiple Benefit Scheme Monthly Income Scheme Monthly Deposit Scheme Hajj Deposit Scheme Cash Waqf Housing Deposit Scheme Lakhpoti Deposit Scheme Mohor Deposit Scheme Education Deposit Scheme Marriage Deposit Scheme 13a.2 Deposits and Other Accounts: General Deposits Deposits from Other Banks (Note- 13a.3) 13a.3 Deposit from Other Banks Mudaraba Special Notice Deposit: Export Import Bank of Bangladesh Limited AB Bank Limited Jamuna Bank Limited Al -Arafah Islami Bank Ltd Social Islami Bank Limited National Credit and Commerce Bank Ltd ICB Islami Bank Limited Mudaraba Savings Deposit: ICB Islami Bank Limited Export Import Bank of Bangladesh Ltd Al -Arafah Islami Bank Ltd Islami Bank Bangladesh Limited 13a.4 Maturity wise classification of Deposits are as under With a residual maturity of Repayable on demand Within 1 month Over 1 months but not more than 6 months Over 6 months but not more than 1 year Over 1 year but not more than 5 years Over 5 years 14 Mudaraba Subordinated Bond Mudaraba Subordinated Bond 256 31.12.2017 Taka 31.12.2016 Taka 7,449,249,554 10,078,713,634 6,216,900,665 13,006,388,879 196,577,715 4,096,213 6,330,790 11,685,869 16,377,257 72,483,174 62,764,749 37,121,568,499 6,565,794,023 10,361,326,476 9,467,995,680 12,257,733,032 166,765,525 3,857,143 14,401,616 16,751,462 19,565,789 63,576,614 55,575,672 38,993,343,032 144,847,765,327 534,709,861 145,382,475,188 122,524,038,127 1,885,792,575 124,409,830,702 3,288,246 431,470 17,817,227 404,769,982 8,104,069 599,069 10,732 435,020,796 94,395,393 388,393 2,833,478 1,674,420,558 17,528,255 583,216 1,790,149,293 7,427,931 124 92,261,009 99,689,065 534,709,861 11,663 7,170,660 120 88,460,838 95,643,282 1,885,792,575 13,893,504,094 18,287,889,650 47,826,358,862 17,620,038,865 22,152,319,249 25,602,364,468 145,382,475,188 12,300,731,982 16,172,162,576 41,003,720,752 15,011,864,959 18,603,961,494 21,317,388,939 124,409,830,702 4,000,000,000 - Shahjalal Islami Bank Limited Annual Report 2017
  259. 31 .12.2017 Taka 31.12.2016 Taka The Bank issued floating rate non-convertible Mudaraba Subordinated Bonds of BDT 400.00 crore on 15 June 2017 after obtaining approval from Bangladesh Securities and Exchange Commission (BSEC) vide their letter ref no. BSEC/CI/DS-56/2014/65 Dated: 09 February 2017 and Bangladesh Bank (BB) vide their letter ref no. BRPD (BFIS) 661/14 B(P)/2017-2617, Dated: 30 April 2017. The bond was mainly issued to support and strengthen the capital base of the bank under Tier-II, supplementary capital of Basel-III. The features of the bond is enumerated below: Features of SJIBL Mudaraba Sub-Ordinated Bond: Issuer Shahjalal Islami Bank Limited Lead Arranger Standard Chartered Bank Trustee Green Delta Insurance Company Limited Tenure of Bond 7 (Seven) Years Total Face Value BDT 400 Crore (Four Hundred Crore) Number of Bonds 4,000 (Four Thousand) Profit Rate Prevailing highest Mudaraba Term Deposit profit rate in 6-12 months tenor plus an additional profit rate of 2% Repayment / Redemption 20% of the Total Bond Value to be Redeemed at the end of each year Starting from year 3 (Three) at Face Value. List of of Investors: Name of the Investor No. of Bonds EXIM Bank Limited Pubali Bank Limited Rupali Bank Limited Uttara Bank Limited Southeast Bank Limited Total 1,750 700 700 500 350 4,000 Bond Issued (Taka) 1,750,000,000 700,000,000 700,000,000 500,000,000 350,000,000 4,000,000,000 Outsatnding (as on 31 December 2017) 1,750,000,000 700,000,000 700,000,000 500,000,000 350,000,000 4,000,000,000 31.12.2017 Taka 31.12.2016 Taka (Note-15a) 15,426,428,189 3,465,928,951 18,892,357,140 1,064,226,032 17,828,131,108 13,647,349,223 4,063,218,088 17,710,567,311 1,370,407,357 16,340,159,954 15.1 Consolidated Provision for Current Tax Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd (Note-15a.2) 9,404,688,518 293,833,926 9,698,522,444 8,564,602,247 211,046,488 8,775,648,735 15.2 Consolidated current tax expenses Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd (Note-15a.2) 840,086,272 82,787,438 922,873,710 757,457,278 34,407,336 791,864,614 15 Consolidated Other Liabilities Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Limited Less: Inter Company transaction Shahjalal Islami Bank Limited Annual Report 2017 257
  260. 31 .12.2017 Taka 31.12.2016 Taka 15.3 Provision against entries of NOSTRO Account No provision is required as per Circular Letter No. FEPD(FEMO)/01/2005-677 dated 13 September 2005 for unreconciled NOSTRO debit entries as there is no outstanding entry over 3 months (note:5a.3). 15a Other Liabilities of the Bank Profit Payable on Deposits Provision for Investment Provision for Off-Balance Sheet items Provision for others Provisions for Investment in Securities Provision for Taxation Profit Suspense Account Compensation Realisable & Suspense Account Compensation Realised Account Other Payable Outstanding Expenses Unearned Income on Quard SJIBL General Account 988,333,737 2,580,964,133 892,300,000 37,765,000 458,400,000 9,404,688,518 297,822,172 329,821,760 44,789,360 232,216,169 60,072,420 1,125,051 98,129,869 15,426,428,189 604,650,477 2,327,667,602 633,300,000 19,265,000 601,000,000 8,564,602,247 374,952,054 363,730,920 56,740,020 51,652,328 47,645,633 2,142,943 13,647,349,223 (a) Provision on Classified Investment: Provision held at the beginning of the year Provision transferred from Provision for Investment in Securities Amount transferred to Compensation Realised A/C Written Off Recovery Net charge to Profit & Loss Account Adjustment of Reactivated Accounts Fully provided investment written off during the year Provision held at the end of the year 1,431,467,602 180,000,000 (50,000,000) 18,605,000 664,800,000 (56,668,714) (773,139,755) 1,415,064,133 1,850,061,000 141,000,000 22,583,982 356,500,000 (938,677,380) 1,431,467,602 (b) General Provision on Unclassified Investment: Provision held at the beginning of the year Addition during the year Balance at the end of the year Total Provision for Investments (a+b) 896,200,000 269,700,000 1,165,900,000 2,580,964,133 781,000,000 115,200,000 896,200,000 2,327,667,602 (c) General Provision on Off-Balance Sheet items: Provision held at the beginning of the year Addition during the year Balance at the end of the year Total Provision for Investments & Off-Balance Sheet (a+b+c) 633,300,000 259,000,000 892,300,000 3,473,264,133 435,400,000 197,900,000 633,300,000 2,960,967,602 19,265,000 18,500,000 37,765,000 15,739,000 3,526,000 19,265,000 {note 15a.1 (a) & (b)} {note 15a.1 (c)} {note 15a.1(d)} {note 15a.1(e)} (Note 15a.2) {note 15(a).1 (f)} {note 15(a).1 (g)} {note 15(a).1 (h)} 15a.1 Provision for Investment: (d) Provision for other Assets: Provision held at the beginning of the year Addition during the year Balance at the end of the year 258 Shahjalal Islami Bank Limited Annual Report 2017
  261. 31 .12.2017 Taka 31.12.2016 Taka (e) Provision for Investment in Securities: Provision held at the beginning of the year Provision transferred to provision on Classified Investment Addition during the year Balance at the end of the year 601,000,000 (180,000,000) 37,400,000 458,400,000 742,000,000 (141,000,000) 601,000,000 (f ) Profit Suspense Account: Balance at the beginning of the year Amount transferred to suspense account during the year Amount recovered from suspense account during the year Amount written off/ waived during the year Balance at the end of the year 374,952,054 853,599,741 (915,533,383) (15,196,241) 297,822,172 357,897,397 1,126,168,236 (1,072,054,012) (37,059,567) 374,952,054 (g ) Compensation Realisable & Suspense Account: Balance at the beginning of the year Addition during the year Amount recovered during the year Amount written off/ waived during the year Balance at the end of the year 363,730,920 214,084,337 (38,049,340) (209,944,157) 329,821,760 431,245,625 132,984,531 (71,496,865) (129,002,371) 363,730,920 (h ) Compensation Realised Account: Balance at the beginning of the year Addition during the year Fund transfer to expended for charitable activities Amount transferred from provision for Classified Investment Balance at the end of the year 56,740,020 38,049,340 (100,000,000) 50,000,000 44,789,360 26,243,155 71,496,865 (41,000,000) 56,740,020 8,564,602,247 840,086,272 9,404,688,518 7,807,144,969 757,457,278 8,564,602,247 15a.2 Provision for Taxation Provision for Current tax Balance at the beginning of the year Add: Provision made during the year Balance at the end of the year The Bank has challenged some disputed income tax assessments which are pending at various appeal stages (i.e. appellate tribunal, High Court Division). The Bank is confident that once these appeals are finally disposed of, there should not be any additional tax demand against the Bank and hence no further provision is required. 15a.2(a) Provision for Current Tax made during the year Income tax @ 40.00% on estimated taxable Business Profit Income tax @ 20.00% on Dividend Income Income tax @ 10% on Capital Gain on sale of Shares Estimated total provision required Computation of Taxable Business Profit Profit before Tax Add: Inadmissible expenditures Less: Allowable Expenditure & Separate consideration Estimated Taxable Business Profit for the year Shahjalal Islami Bank Limited Annual Report 2017 797,268,571 36,734,987 6,082,713 840,086,272 740,477,735 12,485,332 4,494,211 757,457,278 2,078,516,541 1,209,445,816 1,294,790,930 1,993,171,428 2,306,081,236 689,255,269 1,144,142,167 1,851,194,338 259
  262. 31 .12.2017 Taka 31.12.2016 Taka 15a.3 SJIBL General Account represents outstanding Inter-Branch and Head Office transactions (Net) originated but yet to be responded at the Balance Sheet date. The break-up of SJIBL general account are given below: Debit Up to 3 months Over 3 Months but within 6 months Over 6 Months but within 1 year Over 1 year but witin 5 years No. of entry 549 549 Amount 148,465,068 . 148,465,068 Net unreconcile amount Credit No. of entry Amount 601 246,594,937 601 246,594,937 (98,129,869) There is no outstanding unreconciled entries more than 1 month. However, outstanding entries on Balance Sheet date are subsequently reconciled. 31.12.2017 Taka 16 Consolidated Deferred Tax Liability Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Limited (Note-16a) 16a Deferred Tax Liability of the Bank Balance at the beginning of the year Add: Provision made during the year 31.12.2016 Taka 137,999,259 137,999,259 95,464,963 95,464,963 95,464,963 42,534,296 137,999,259 104,211,220 (8,746,257) 95,464,963 10,000,000,000 10,000,000,000 17 Capital 17.1 Authorized Capital: 100,00,00,000 ordinary shares of Tk. 10 each The shareholders of the Bank in its 11th Extra Ordinary General Meeting (EGM) held on 4 June 2013 approved to increase the Authorised capital of the Bank to Tk. 1000,00,00,000 from Tk. 600,00,00,000. 17.2 Issued, Subscribed and Paid up Capital 771,422,539 Ordinary Shares of Tk 10 each 7,714,225,390 7,346,881,330 Issued for cash: 18,46,02,500 shares of Tk. 10 each Issued other than cash: 586,820,039 bonus shares of Tk 10 each 1,846,025,000 5,868,200,390 7,714,225,390 1,846,025,000 5,500,856,330 7,346,881,330 3,420,670,510 1,494,171,050 2,799,383,830 7,714,225,390 3,015,164,370 2,489,408,100 1,842,308,860 7,346,881,330 Holding Sponsor Shareholders Group Financial Institutes Group General Shareholders Group 260 In year 2017: 44.34%; 2016: 41.04% In year 2017: 19.37%; 2016: 33.88% In year 2017: 36.29%; 2016: 25.08% Shahjalal Islami Bank Limited Annual Report 2017
  263. 31 .12.2017 Taka 31.12.2016 Taka Classification of Shareholders by number of holding: As at 31 December 2017 Range of Share Holding Upto 500 501-5,000 5,001-10,000 10,001-20,000 20,001-30,000 30,001-40,000 40,001-50,000 50,001-1,00,000 1,00,001-10,00,000 Over 10,00,000 Total No. of Shareholders 18,970 16,911 1,358 732 241 90 78 153 164 85 38,782 No. of shares 2,580,622 30,261,311 9,699,175 10,180,603 5,741,515 3,150,861 3,563,722 11,612,744 52,573,018 642,058,968 771,422,539 Percentage of holding shares 0.33% 3.92% 1.26% 1.32% 0.74% 0.41% 0.46% 1.51% 6.82% 83.23% 100.00% As at 31 December 2016 Range of Share Holding Upto 500 501-5,000 5,001-10,000 10,001-20,000 20,001-30,000 30,001-40,000 40,001-50,000 50,001-1,00,000 1,00,001-10,00,000 Over 10,00,000 Total No. of Shareholders 24,553 23,632 2,126 1,153 388 175 108 199 208 72 52,614 No. of shares 3,460,661 42,356,959 15,192,569 16,108,793 9,221,752 6,072,914 4,948,259 14,628,240 58,612,103 564,085,883 734,688,133 31.12.2017 Taka Percentage of holding shares 0.47% 5.77% 2.07% 2.19% 1.26% 0.83% 0.67% 1.99% 7.98% 76.78% 100.00% 31.12.2016 Taka 17.3 Consolidated Capital to Risk Weighted Assets Ratio (CRAR) Under Basel-III: a) Going Concern Capital (Tier-l): Common Equity Tire-l Capital (CET-l) i) Paid-up Capital ii) Statutory Reserve iii) Retained Earnings iv) Non-controlling Interest Additional Tire-1 Capital (AT-1) b) Gone Concern Capital (Tier-ll): i) General Provision ii) Mudaraba Subordinated Bond Shahjalal Islami Bank Limited Annual Report 2017 (Note -18) (Note -19) 7,714,225,390 4,819,264,987 1,079,870,794 251,443,308 13,864,804,479 7,346,881,330 4,403,561,679 1,254,951,378 238,313,780 13,243,708,167 13,864,804,479 13,243,708,167 2,481,820,900 4,000,000,000 6,481,820,900 1,953,120,900 1,953,120,900 261
  264. 31 .12.2017 Taka 31.12.2016 Taka 20,346,625,379 15,196,829,067 163,575,511,374 130,144,271,335 e) Minimum Required Capital ( 10% of risk weighted assets) 16,357,551,137 13,014,427,133 f) Minimum Required Capital (in 2017: 11.25%; in 2016: 10.625% of risk weighted assets) including conservation buffer g) Total Capital Surplus (c-e) 18,402,245,030 13,827,828,829 3,989,074,242 2,182,401,933 h) Total Capital Surplus considering conservation buffer (c-f) 1,944,380,350 1,369,000,237 c) Total Eligible Regulatory Capital (a +b) d) Consolidated Total Risk Weighted Assets Consolidated Capital to Risk Weighted Assets Ratio: 2017 Particulars Requirement Going Concern Capital: (Tier-l) Common Equity Tier-l Capital: (CET-l) CET-l Plus Conservation Buffer Gone Concern Capital: (Tier-ll) CRAR CRAR including Conservation Buffer 5.50% 4.50% 5.75% 10.00% 11.25% 2016 Capital Maintained 8.48% 8.48% 8.48% 3.96% 12.44% 12.44% Requirement 5.50% 4.50% 5.13% 10.00% 10.63% Capital Maintained 10.18% 10.18% 10.18% 1.50% 11.68% 11.68% 31.12.2017 Taka 31.12.2016 Taka 122,820,442,470 25,978,679,141 4,911,905,746 9,864,484,018 163,575,511,374 96,202,383,006 18,223,421,382 7,003,266,947 8,715,200,000 130,144,271,335 17.4 Consolidated Risk Weighted Assets (RWA) for 1. Investment (Credit) Risk On-Balance Sheet Off-Balance Sheet 2. Market Risk 3. Operational Risk Consolidated Total Risk Weighted Assets (1+2+3) 17.5 Capital to Risk Weighted Assets Ratio (CRAR) Under Basel-III of the Bank: a) Going Concern Capital (Tier-l): Common Equity Tire-l Capital (CET-l) i) Paid-up Capital ii) Statutory Reserve iii) Retained Earnings Additional Tire-l Capital (AT-l) 262 (Note-18) {Note-19(a)} 7,714,225,390 4,819,264,987 784,293,374 13,317,783,751 7,346,881,330 4,403,561,679 1,106,132,902 12,856,575,911 13,317,783,751 12,856,575,911 Shahjalal Islami Bank Limited Annual Report 2017
  265. 31 .12.2017 Taka 31.12.2016 Taka 2,058,200,000 4,000,000,000 6,058,200,000 19,375,983,751 1,529,500,000 1,529,500,000 14,386,075,911 158,936,534,268 124,703,796,335 e) Minimum Required Capital ( 10% of risk weighted assets) 15,893,653,427 12,470,379,633 f) Minimum Required Capital (in 2017: 11.25%; in 2016: 10.625% of risk weighted assets) including conservation buffer 17,880,360,105 13,249,778,361 g) Total Capital Surplus (c-e) 3,482,330,324 1,915,696,277 h) Total Capital Surplus considering conservation buffer (c-f) 1,495,623,646 1,136,297,550 b) Gone Concern Capital (Tier-ll): i) General Provision ii) Mudaraba Subordinated Bond {Note 15.1(b+c)} (Note-14) c) Total Eligible Regulatory Capital (a +b) d) Total Risk Weighted Assets Capital Adequacy Ratio: 2017 Particulars Requirement Going Concern Capital: (Tier-l) Common Equity Tier-l Capital: (CET-l) CET-l Plus Conservation Buffer Gone Concern Capital: (Tier-ll) CRAR CRAR including Conservation Buffer 5.50% 4.50% 5.750% 10.00% 11.250% 2016 Capital Maintained 8.38% 8.38% 8.38% 3.81% 12.19% 12.19% Requirement 5.50% 4.50% 5.125% 10.00% 10.625% Capital Maintained 10.31% 10.31% 10.31% 1.23% 11.54% 11.54% 31.12.2017 Taka 31.12.2016 Taka 120,404,876,160 25,978,679,141 3,110,633,156 9,442,345,812 158,936,534,268 93,595,758,006 18,223,421,382 4,446,666,947 8,437,950,000 124,703,796,335 238,313,780 (11,250,000) 24,379,528 251,443,308 230,290,713 (1,158,567) 9,181,634 238,313,780 17.6 Risk Weighted Assets (RWA) for 1. Investment (Credit) Risk On-Balance Sheet Off-Balance Sheet 2. Market Risk 3. Operational Risk Total Risk Weighted Assets (1+2+3) 17.7 Non-controlling Interest Opening balance Dividend paid to non-controlling shareholder Adjustment for changing of holding position Share of current year’s profit Shahjalal Islami Bank Limited Annual Report 2017 263
  266. 31 .12.2017 Taka 31.12.2016 Taka 4,403,561,679 415,703,308 4,819,264,987 3,942,345,432 461,216,247 4,403,561,679 (Note-19a) 784,293,374 322,020,728 1,106,314,102 26,443,308 1,079,870,794 1,106,132,902 162,132,256 1,268,265,158 13,313,780 1,254,951,378 (Note-19a) 780,192,665 296,888,472 1,077,081,137 24,379,528 1,052,701,609 1,096,153,968 111,811,607 1,207,965,574 9,181,634 1,198,783,941 1,106,132,902 1,102,032,193 780,192,665 784,293,374 965,073,507 955,094,573 1,096,153,968 1,106,132,902 19,013,732,296 308,606,416 143,802 19,322,482,514 11,690,983,683 262,554,861 3,329,401 11,956,867,945 19,322,482,514 19,322,482,514 11,956,867,945 11,956,867,945 27,569,640,596 27,569,640,596 18,421,361,635 18,421,361,635 18 Statutory Reserve Opening balance Add: Addition during the year 19 Consolidated Retained Earnings Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd Less: Non-controlling Interest 19.1 Consolidated Current year Retained Earnings Current Year Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd Less: Non-Controlling Interest 19a Retained Earnings of the Bank Opening balance Less: Payment of Dividend Add: Transfer from Profit & Loss Account 20 Letters of Guarantees Letters of Guarantees (Local) Letters of Guarantees (Foreign) Back to Back (a) (b) Claims against the Bank not acknowledged as debts Money for which the Bank is contingently liable in respect of guarantees given favoring: Directors or Officers Government Banks and other financial institutions Others 21 Irrevocable Letters of Credit Letter of credit 264 Shahjalal Islami Bank Limited Annual Report 2017
  267. 22 Consolidated Income Statement Income : Profit on Investment Income from Investment in securities Dividend income Commission, Exchange and Brokerage Gains less losses arising from investment securities Other operating income Expenses: Profit paid on Deposits Administrative expenses Other operating expenses Depreciation on banking assets 2017 Taka 2016 Taka 13,096,852,776 95,759,031 183,674,937 1,819,506,815 60,827,132 522,154,261 15,778,774,953 11,334,017,520 135,092,346 62,426,658 1,342,881,837 44,942,109 457,549,789 13,376,910,260 (Note-24) 8,472,962,487 3,021,182,770 567,458,210 135,329,034 12,196,932,501 3,581,842,451 7,103,095,818 2,612,850,130 406,695,185 128,842,947 10,251,484,081 3,125,426,179 (Note-23a) (Note-25a) (Note-25a) (Note-26a) (Note-25a) (Note-27a) 12,860,038,254 54,796,753 183,674,937 1,614,174,600 60,827,132 515,260,783 15,288,772,460 11,154,356,257 28,708,383 62,426,658 1,222,560,456 44,942,109 451,673,610 12,964,667,474 (Note-24a) 8,418,975,877 2,950,126,528 463,682,826 128,070,687 11,960,855,918 3,327,916,541 6,986,501,525 2,555,548,590 321,311,401 122,098,721 9,985,460,238 2,979,207,236 (Note-23a) 12,860,038,254 283,358,549 13,143,396,803 46,544,027 13,096,852,776 11,154,356,257 288,804,022 11,443,160,279 109,142,759 11,334,017,520 (Note-23a.1) 12,325,493,831 534,544,423 12,860,038,254 10,372,893,219 781,463,038 11,154,356,257 (Note-23) (Note-25) (Note-25) (Note-26) (Note-27) Income over expenditure 22a Income Statement of the Bank Income: Profit on Investment Income from Investment in securities Dividend income Commission, Exchange and Brokerage Gains less losses arising from investment securities Other operating income Expenses: Profit paid on Deposits Administrative expenses Other operating expenses Depreciation on banking assets Income over expenditure 23 Consolidated Profit on Investment Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd Less: Inter company Transaction 23a Profit on Investment of the Bank Profit on Investment Profit on placement with other Banks & FIs Shahjalal Islami Bank Limited Annual Report 2017 265
  268. 2017 Taka 2016 Taka 982 ,426,414 7,608,932,964 2,437,497,668 71,303,018 118,409,507 304,768,699 7,782,813 15,830 13,766 6,884 9,136 18,793,630 439,337,410 3,775 280,917,317 55,275,002 12,325,493,831 12,325,493,831 795,328,943 6,303,798,823 2,012,552,354 55,656,061 112,684,647 355,669,452 281,692,115 32,000 205,635 37,704 6,336 27,576,226 96,429,692 300,488,425 31,447,852 10,373,606,265 713,047 10,372,893,219 9,294,654,898 3,030,838,933 12,325,493,831 12,325,493,831 8,917,576,300 1,455,316,919 10,372,893,219 10,372,893,219 23a.1 Profit on Investment Profit on Murabaha Profit on Bi-Muazzal Profit on Hire-Purchase Profit on Ijara Profit on Bi-Salam Profit on Inland Document Bill Purchased Profit on Foreign Document Bill Purchased Profit on Investment against Scheme Deposit Profit on Investment against Mudaraba Term Deposit Profit on Investment against Mudaraba Savings Deposit Profit on Investment against Mudaraba Deposit Scheme Profit on Investment against EDF Profit on Mudaraba Profit on Istisnaa Profit Received From Resheduled Investment - Rent Mode Profit on Murabaha Import Bill (UPAS) Less: Rebate for Good Borrower 23a.2 Investment income derived from the fund deployed Inside Bangladesh i) Mudaraba deposits ii) Other deposits/Fund Outside Bangladesh 23a.3 Geographical Location-wise Profit on Investments Area i) Inside Bangladesh (note-22a.3.1) a) In Rural Areas b) In Urban Areas Sub-total ii) Outside Bangladesh Total 266 2017 Amount Composition 955,665,419 7.75% 11,369,828,411 92.25% 12,325,493,831 100.00% 12,325,493,831 100.00% 2016 Amount Composition 828,281,296 7.99% 9,544,611,923 92.01% 10,372,893,219 100.00% 10,372,893,219 100.00% Shahjalal Islami Bank Limited Annual Report 2017
  269. 2017 Taka 2016 Taka 23a .3.1 Inside Bangladesh Division Dhaka Chittagong Sylhet Rajshahi Rangpur Khulna Barisal Total 2017 Amount Composition 9,097,965,000 73.81% 2,018,737,822 16.38% 155,943,832 1.27% 386,993,432 3.14% 109,121,519 0.89% 507,161,901 4.11% 49,570,325 0.40% 12,325,493,831 100.00% 2016 Amount Composition 7,766,155,391 74.87% 1,717,167,177 16.55% 121,362,353 1.17% 255,592,650 2.46% 85,588,271 0.83% 396,112,646 3.82% 30,914,730 0.30% 10,372,893,219 100.00% 2017 Taka 24 Consolidated Profit paid on Deposits Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd (Note-24a) Less: Inter Company Transaction 24a Profit paid on Deposits of the Bank Profit on deposits Profit paid on borrowings 25 Consolidated Income from Investment in Shares/Securities Shahjalal Islami Bank Ltd (Note-25a) Shahjalal Islami Bank Securities Ltd Less: Dividend from Subsidiary 25a Income from Investment in Shares/Securities of the Bank Income from Investment in Islami Bond Income from Investment in Shares (Note-25a.1) Dividend Income Income from Investment in Mudaraba Perpetual Bond (MPB) Income from Investment in Sub-Ordinated Bond 2016 Taka 8,418,975,877 104,637,255 8,523,613,132 50,650,645 8,472,962,487 6,986,501,525 227,632,180 7,214,133,705 111,037,887 7,103,095,818 8,021,471,540 397,504,337 8,418,975,877 6,864,836,114 121,665,411 6,986,501,525 299,298,822 166,712,278 466,011,100 125,750,000 340,261,100 136,077,151 106,383,963 242,461,114 242,461,114 60,827,132 183,674,937 4,470,000 50,326,753 299,298,822 14,890,000 44,942,109 62,426,658 5,170,000 8,648,383 136,077,151 25a.1 Income from investment in Shares arises through sale of listed shares in the Stock Exchanges. 26 Consolidated Commission, Exchange & Brokerage Shahjalal Islami Bank Ltd (Note-26a) Shahjalal Islami Bank Securities Ltd 26a Commission, Exchange & Brokerage of the Bank Other commission Exchange earnings Shahjalal Islami Bank Limited Annual Report 2017 1,614,174,600 205,332,215 1,819,506,815 1,222,560,456 120,321,381 1,342,881,837 898,892,670 715,281,930 1,614,174,600 658,111,778 564,448,678 1,222,560,456 267
  270. 2017 Taka 27 Consolidated Other Operating Income Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd (Note-27a) Less: Inter Company Transaction 27a Other Operating Income of the Bank Postage, Telex, SWIFT & REUTERS Incidental Charge Supervision & Monitoring Charge Other charges (Note-27a.1) 27a.1 Other Charges Rent receipts Charges on A/C closing Charges on clearing returned Cheque processing charge Service charges on Ijara Service charges on scheme investment Service charges on Quard Passport endorsement charge PO/DD Cancellation charge Branch banking services Account maintenance fee Recoveries from cheque issue Income from sale of forms Service charge on SJIBL VISA Card Management Fees Banker to the Issue Commission Notice pay earnings Rebate on Trade Finance Discrepency Fee Profit on sale of Bank’s Assets Miscellaneous income 28 Consolidated Salary & Allowances Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd 28a Salary & Allowances of the Bank Basic Salary Allowances Bonus Bank’s Contribution to Provident fund Leave Encashment 268 (Note- 28a) 2016 Taka 515,260,783 11,000,096 526,260,879 4,106,618 522,154,261 451,673,610 7,771,307 459,444,917 1,895,128 457,549,789 91,680,468 1,731 2,017,114 421,561,470 515,260,783 80,712,392 1,919,510 369,041,708 451,673,610 3,343,991 478,683 2,595,845 2,358,238 43,160 3,275,540 4,891,847 31,845 86,915 17,311,381 74,059,854 4,943,841 4,207,397 26,977,655 890,749 63,977 3,034,765 65,209,464 108,820,463 392,170 98,543,692 421,561,470 3,041,224 670,508 2,432,841 1,331,688 89,000 1,311,750 22,529,543 50,160 126,125 15,613,003 64,247,338 3,480,368 3,215,958 23,228,746 605,700 115,939 3,636,557 57,769,448 86,287,542 106 79,258,163 369,041,708 2,212,106,444 49,494,184 2,261,600,628 1,889,078,061 37,583,253 1,926,661,314 917,303,697 803,782,013 395,060,241 83,437,386 12,523,107 2,212,106,444 750,822,458 719,624,919 335,232,756 72,463,714 10,934,215 1,889,078,061 Shahjalal Islami Bank Limited Annual Report 2017
  271. 2017 Taka 29 Consolidated Rent , Taxes, Insurance, Electricity etc. Shahjalal Islami Bank Ltd (Note- 29a) Shahjalal Islami Bank Securities Ltd 29a Rent, Taxes, Insurance, Electricity etc of the Bank Rent, Rates & Taxes Insurance Electricity & Lighting 30 Consolidated legal Expenses Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd (Note- 30a) 30a Legal Expenses of the Bank Legal Fees & Charge Other Legal Expenses 31 Consolidated Postage, Stamps, Telecommunication etc Shahjalal Islami Bank Ltd (Note- 31a) Shahjalal Islami Bank Securities Ltd 31a Postage, Stamps, Telecommunication etc of the Bank Postage Leased line Telegram, Fax, Telex & Internet charge Telephone charges Mobile phone charges 32 Consolidated Stationery, Printing, Advertisements etc Shahjalal Islami Bank Ltd (Note- 32a) Shahjalal Islami Bank Securities Ltd 32a Stationery, Printing, Advertisements etc of the Bank Table Stationery Printing Stationery Security Stationery Computer Stationery Advertisement Shahjalal Islami Bank Limited Annual Report 2017 2016 Taka 454,172,110 17,534,706 471,706,816 423,595,761 15,398,848 438,994,609 283,621,744 106,686,438 63,863,927 454,172,110 271,201,602 95,421,525 56,972,635 423,595,761 1,440,212 7,475 1,447,687 728,459 324,250 1,052,709 116,507 1,323,705 1,440,212 183,692 544,767 728,459 38,552,845 2,570,931 41,123,776 34,794,548 2,571,397 37,365,945 1,254,632 22,039,505 4,557,474 4,931,990 5,769,244 38,552,845 1,246,543 18,713,119 7,118,415 4,753,257 2,963,214 34,794,548 84,545,709 1,409,446 85,955,155 78,884,275 1,384,292 80,268,567 10,055,295 7,059,616 2,830,249 29,456,215 35,144,334 84,545,709 9,330,097 7,878,288 3,159,493 28,978,186 29,538,211 78,884,275 269
  272. 33 Chief Executive ’s Salary & Fees of the Bank Basic Salary Allowances Bonus Bank’s Contribution to Provident Fund 34 Directors’ Fees & Expenses of the Bank Directors Fee Meeting Expenses 35 Shariah Supervisory Committee’s Fees & Expenses of the Bank Shariah Council Meeting Expenses 36 Consolidated auditors’ Fees Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd (Note-36a) 36a Auditors’ Fees of the Bank Auditors Fees 37 Consolidated depreciation and Repair of Assets Shahjalal Islami Bank Ltd (Note-37a) Shahjalal Islami Bank Securities Ltd 37a Depreciation and Repair of Bank’s Assets a) Depreciation of Bank’s Assets (Annexure B) Land & Building Furniture & Fixtures Office Equipment Computer & Network Equipment Vehicles Books b) Amortization of Bank’s Assets (Annexure B) Software-Core Banking Software-Others c) Repair on Bank’s Assets Office Premises Office Equipment Office Furniture & Fixtures Vehicles Procurement of Parts, Spares & Others 38 Zakat Expenses of the Bank Zakat Expenses 270 2017 Taka 2016 Taka 7,260,000 3,900,000 2,331,000 726,000 14,217,000 6,655,000 3,900,000 2,210,000 665,500 13,430,500 4,730,000 2,557,728 7,287,728 4,357,600 1,902,112 6,259,712 830,543 830,543 559,816 559,816 450,000 39,500 489,500 600,000 39,500 639,500 450,000 600,000 150,876,935 7,258,347 158,135,282 138,680,426 6,744,226 145,424,652 8,374,980 44,097,127 28,611,941 23,426,097 9,710,172 79,325 9,111,941 40,399,545 25,106,090 23,010,995 9,604,598 82,195 5,150,818 8,620,228 128,070,687 5,993,271 8,790,087 122,098,721 4,490,707 8,824,112 863,734 2,108,359 6,519,335 22,806,248 150,876,935 1,328,253 8,135,417 753,114 2,026,092 4,338,829 16,581,704 138,680,426 113,717,689 113,717,689 101,969,969 101,969,969 Shahjalal Islami Bank Limited Annual Report 2017
  273. 2017 Taka 39 Consolidated Other Expenses Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd (Note-39a) 39a Other Expenses of the Bank Petrol, Oil and Lubricants Entertainment Donation and Subscription Traveling and Conveyance Training Expenses Car expenses Gratuity expenses Papers & Periodicals Utility Uniform & Liveries Bank Charges Business development & Promotion Upkeep and cleaning of office premises Security Service- Out-sourcing Branch Opening Expenses Credit Rating fee SJIBL Card expenses AGM & Meeting expenses Capital Enhancement Fees Contribution to Social Security Super Annuation Fund Laundry and Washing Crockeries, Kettle and others Photograph and Photocopy Award Expenses Brokarage House Expenses Maintenance of Head Office (New Premises) Building Loss on Disposal of Fixed Assets Miscellaneous Expenses 40 Consolidated Provision against Investment, Off-Balance Sheet & Others Shahjalal Islami Bank Ltd (Note-40a) Shahjalal Islami Bank Securities Ltd 40a Provision against Investment, Off-Balance Sheet & Others of the Bank Provision on unclassified investment Provision on classified investment Provision on Off-Balance Sheet Provisions on Investment in Securities Provision on Other Assets 41 Deferred Tax Expenses/(Income) of the Bank Closing deferred tax liability Opening deferred tax liability Deferred tax expense/(Income) Shahjalal Islami Bank Limited Annual Report 2017 2016 Taka 463,682,826 103,775,384 567,458,210 310,377,186 85,383,784 395,760,970 5,973,006 44,882,020 4,448,626 25,884,336 5,719,138 129,856,541 31,000,000 685,605 4,844,886 3,974,787 723,069 18,893,106 10,486,196 52,730,847 2,858,427 200,285 9,829,068 6,520,016 32,706,475 1,000,000 222,148 417,417 473,947 770,058 210,023 9,968,810 50,975,129 7,428,859 463,682,826 5,311,084 34,589,152 3,742,332 20,556,706 4,514,622 108,979,104 24,069,000 502,475 5,116,845 1,989,011 1,102,227 19,612,344 8,590,086 37,016,531 1,490,810 430,000 5,231,102 5,074,711 730,141 1,000,000 163,410 269,263 506,148 1,630,800 106,000 5,458,114 1,930,548 10,664,621 310,377,186 1,249,400,000 1,249,400,000 673,126,000 673,126,000 269,700,000 664,800,000 259,000,000 37,400,000 18,500,000 1,249,400,000 115,200,000 356,500,000 197,900,000 3,526,000 673,126,000 137,999,259 95,464,963 42,534,296 95,464,963 104,211,220 (8,746,257) 271
  274. 2017 Taka 41a Consolidated Tax Expenses of the Bank Current tax Deferred tax 41b Tax Expenses of the Bank Current tax Deferred tax 42 Consolidated Earnings Per Share (EPS) Calculation of Earnings Per Share (Note- 2.17) Net Profit after Tax Number of Ordinary Shares outstanding (Denominator) 42a Earnings Per Share of the Bank (EPS) Calculation of Earnings Per Share (Note- 2.17) Net Profit after Tax Number of Ordinary Shares outstanding (Denominator) 2016 Taka 922,873,710 42,534,296 965,408,006 791,864,614 (8,746,257) 783,118,357 840,086,272 42,534,296 882,620,568 757,457,278 (8,746,257) 748,711,021 1,342,654,918 771,422,539 1.74 1,660,000,188 771,422,539 2.15 1,195,895,973 771,422,539 1.55 1,557,370,215 771,422,539 2.02 Earnings per share has been calculated in accordance with BAS - 33: “Earnings Per Share (EPS)”. 43 Consolidated investment income receipt in cash Shahjalal Islami Bank Ltd (Note-43a) Shahjalal Islami Bank Securities Ltd 13,016,610,923 450,070,827 13,466,681,750 11,275,216,925 395,187,985 11,670,404,910 12,975,662,139 278,319,197 237,370,413 13,016,610,923 11,228,006,749 325,529,373 278,319,197 11,275,216,925 (Note-44a) 8,035,292,617 414,710,588 8,450,003,205 7,085,259,948 344,569,061 7,429,829,009 (Note-24a) (Note-15a) (Note-15a) 8,418,975,877 604,650,477 988,333,737 8,035,292,617 6,986,501,525 703,408,900 604,650,477 7,085,259,948 514,868,613 11,000,096 525,868,709 451,673,505 7,771,307 459,444,812 43a Investment income receipt of the Bank Investment income receipt (Excluding Dividend Income) (Note 23a & 25a) Add: Opening profit Receivable (Note-10a.2) Less: Closing profit receivable (Note-10a.2) 44 Consolidated Profit Paid on Deposits Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd 44a Profit Paid on Deposits of the Bank Profit Paid on Deposits Add: Opening profit payable on deposit Less: Closing profit payable on deposit 45 Consolidated Cash Receipt from other Operating activities (Note-26) Shahjalal Islami Bank Ltd (Note-45a) Shahjalal Islami Bank Securities Ltd 272 Shahjalal Islami Bank Limited Annual Report 2017
  275. 2017 Taka 45a Cash Receipt from other Operating activities of the Bank (Note-26a) Postage & Telex Charge Recovery Incidental Charge Supervision & Monitoring Charge Other charges ( except income from sale of fixed assets) 46 Consolidated Cash Payment for other Operating activities Shahjalal Islami Bank Ltd (Note-46a) Shahjalal Islami Bank Securities Ltd 46a Cash Payment for other Operating activities of the Bank Rent, Taxes, Insurance, Lighting etc. (Note-29a) Legal Expenses (Note-30a) Postage, Stamp, Telegram & Telephone (Note-31a) Directors’ Fee & Expenses (Note-34) Shariah Supervisory Committee’s Fees & Expenses (Note-35) Auditors’ Fee (Note-36a) Repair, Maintenance of Bank’s Assets (Note-37a.c) Zakat Expenses (Note-38) Other Expenses (Note-39a) 47 Cash Increase/ Decrease in Consolidated Other Assets (Note-10) Shahjalal Islami Bank Ltd (Note-47a) Shahjalal Islami Bank Securities Ltd Less: Cash Increase/ (Decrease) through Inter Company transaction Cash (Increase)/ Decrease in Other Assets 47a Cash Increase/ Decrease in Other Assets of the Bank (Note-10a) Stock of Stationery and Stamps Advance deposits and rent Suspense Account Other Prepayments Receivable from Shahjalal Islami Bank Securities Limited Shahjalal Islami Bank Securities Ltd (Note 10a.3) Advance for new Branches Advance Insurance premium Other Receivables SJIBL General Account-Net Cash (Increase)/ Decrease in Other Assets Shahjalal Islami Bank Limited Annual Report 2017 2016 Taka 91,680,468 1,731 2,017,114 421,169,300 514,868,613 80,712,392 1,919,510 369,041,602 451,673,505 1,102,940,201 124,492,423 1,227,432,624 895,467,156 103,868,802 999,335,958 454,172,110 1,440,212 38,552,845 7,287,728 830,543 450,000 22,806,248 113,717,689 463,682,826 1,102,940,201 423,595,761 728,459 34,794,548 6,259,712 559,816 600,000 16,581,704 101,969,969 310,377,186 895,467,156 3,946,057,858 1,938,885,172 5,884,943,030 3,400,673,904 2,484,269,126 837,296,311 4,334,745,762 2,387,257,126 6,722,002,888 3,400,437,451 3,321,565,437 (10,738,761) 18,814,345 165,849,238 101,552,665 39,944,523 1,063,059,276 2,515,000,000 16,820,000 21,700,000 3,317,812 3,946,057,858 388,687,904 17,164,051 122,989,589 55,747,673 218,968,790 1,362,959,318 2,515,000,000 16,087,656 35,880 3,889,647 21,903,158 4,334,745,762 (671,323,245) 273
  276. 2017 Taka 48 Cash Increase / Decrease in Consolidated Other Liabilities (Note-14) Shahjalal Islami Bank Ltd (Note- 48a) Shahjalal Islami Bank Securities Ltd 589,946,937 2,475,526,279 3,065,473,216 886,294,043 2,179,179,173 (73,719,311) 299,844,331 2,845,529,521 3,145,373,852 892,475,368 2,252,898,484 286,439,794 232,216,169 198,403,428 60,072,420 1,125,051 98,129,869 589,946,937 290,102,606 51,652,328 198,403,428 47,645,633 2,142,943 299,844,331 (50,122,802) 14,188,985,869 412,994,289 14,601,980,158 393,408,115 14,208,572,043 11,993,903,158 381,221,166 12,375,124,324 376,062,425 11,999,061,899 1,529,754,123 11,659,462,711 999,769,036 14,188,985,869 1,179,754,405 8,398,144,743 2,416,004,010 11,993,903,158 Less: Cash Increase/ (Decrease) through Inter Company transaction Cash Increase/ (Decrease) in Other Liabilities 48a Cash Increase/ Decrease in Other Liabilities of the Bank (Note-14a) Other Payable Taxation on other income & prior years Outstanding Expenses Unearned Income on Quard SJIBL General Account Cash Increase/ (Decrease) in Other Liabilities 49 Consolidated Cash and Cash Equivalent Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd (Note-49a) Less: Cash Increase/ (Decrease) through Inter Company transaction 49a Cash and Cash Equivalent of the Bank Cash in Hand Balance with Bangladesh Bank & Sonali Bank Ltd (as agent of Bangladesh Bank) Balance with Other Banks & Financial Institutions 2016 Taka 50 Number of Employees of the Bank The number of employees engaged for the whole period or part thereof who received a total remuneration of Tk.36,000 or above were 2,402. 51 Audit Committee of the Bank a) Particulars of Audit Committee Pursuant to the BRPD Circular no. 11 dated 27 October, 2013 the Board of Director’s of the Bank formed a five members [including 2 (two) independent Director] Audit Committee called “Board Audit Committee”. The Board of Directors in its Meeting No. 262 held on 28-03-2018 reconstituted the Committee by the following members:Name Mosharraf Hossain Chowdhury Farida Parvin Nuru Khorshed Alam Khan (Rep. of Daffodils Trading International) Md. Moshiur Rahman Chamak (Rep. of Fresh Export Import Ltd.) Abdul Halim Independent Director Independent Director Status with the Committee Chairman Member Educational Qualification Masters Masters Director Member B.Com. Director Member MBA Director Member BA Status with the Bank The members of the Board Audit Committee are all having good exposure in the banking business. They are all playing active role in the Board Meeting. 274 Shahjalal Islami Bank Limited Annual Report 2017
  277. 2017 Taka 2016 Taka b ) Meeting of Audit Committee During 1 January to 31 December 2017, the Audit Committee of the Board conducted 12 (Twelve) meetings in which among others, the following issues were discussed:i) The duties and responsibilities of the Committee as stated in BRPD Circular no. 11 dated 27 October 2013. ii) Regular review of the Internal and External (including Bangladesh Bank) Inspection & Audit Report with a view to implementing the suggestion of Internal and External Auditors in respect of Internal Control structure and techniques. iii) Minimization of expenditure in all operational activities where possible. iv) Reviewing the Accounting procedure with a view to ascertain that the International Financial Reporting Standard (IFRS) has been applied in maintaining books and records of the Bank. 52 Related Party Disclosures of the Bank 52.1 Name of the Directors and their interest in different entities: Name of Director Status with The Bank Akkas Uddin Mollah Chairman Mohammed Golam Quddus (Rep. of Anwer Khan Modern Hospital Ltd.) Khandaker Sakib Ahmed Vice Chairman Anwer Hossain Khan Director Engr. Md. Towhidur Rahman Director Shahjalal Islami Bank Limited Annual Report 2017 Vice Chairman Name of the firms/companies in which they have interest i) Russel Garments ii) Russel Apperals iii) Ekram Sweaters Ltd. iv) PNR Industries Ltd. v) Tania Cotton Mills Ltd. vi) Russel Washing Plant vii) Russel Spinning Mills Ltd. viii) Goodman Pharmaceuticals Ltd. ix) Shahjalal Islami Bank Securities Ltd. N/A i) Khandaker Poultry & Fisheries ii) AIBL Securities Ltd. iii) Shahjalal Islami Bank Securities Ltd. i) Anwer Khan Modern Medical College & Hospital ii) Modern Diagnostic Center Ltd. iii) Anwer Khan Modern Nursing College iv) Hazi Sakawat Anwara Modern Eye Hospital Ltd. v) Modern Diabetic Centre Ltd. vi) Fareast Stocks & Bonds Ltd. vii) Shahjalal Islami Bank Securities Ltd. viii) Anwer Khan Modern University i) Fresh Foods Ltd. ii) Sea Fresh Ltd. iii) Libas Textiles Ltd iv) Fresh Knitwear Ltd. v) Fresh Properties Ltd. vi) Hettich (Joint Venture Co. with Germany) vii) Shahjalal Islami Bank Securities Ltd. viii) Prime University 275
  278. Name of Director 276 Status with The Bank A . K. Azad Director Mohammed Younus Director Name of the firms/companies in which they have interest i) Ha-Meem Denim Ltd. ii) Ha-Meem Apparels Ltd. iii) Ha-Meem Spinning Mills Ltd. iv) Ha-Meem Design Ltd. v) That’s It Sweater Ltd. vi) That’s It Sportswear Ltd. vii) That’s It Garments Ltd. viii) That’s It Knit Ltd. ix) Sajid Washing & Dyeing Ltd. x) Nishat Jute Mills Ltd. xi) Refat Garments ltd. xii) Refat Packaging & Printing Industries Ltd. xiii) Sakib Poly Industries Ltd. xiv) Apparel Galary Ltd. xv) Artistic Design Ltd. xvi) Creative Collections Ltd. xvii) Express Washing & Dyeing Ltd. xviii) Times Media Ltd. [Channel 24 & The Daily Samakal] xix) Shahjalal Islami Bank Securities Ltd. i) Sonali Papers and Board Mills Ltd. ii) Galaxy Flying Academy Ltd. iii) Younus Newsprint Mills Ltd. iv) Younus Offset Paper Mills Ltd. v) Younus Fine Paper Mills Ltd. vi) Younus Paper Mills Ltd. vii) Ananta Paper Mills Ltd. viii) Universal Paper & Board Mills Ltd. ix) Younus Spinning Mills Ltd. x) Sobhan Ice & Cold Storage Ltd. xi) Younus Specialized Cold Storage Ltd. xii) Younus Cold Storage Ltd. xiii) Sharif Cold Storage Ltd. xiv) Nowpara Cold Storage (Pvt.) Ltd. xv) Garib-E-Newaj Cold Storage Ltd. xvi) Siddheswari Cold Storage Ltd. xvii) Europa Cold Storage Ltd. xviii) Akco Industries & Cold Storage Ltd. xviv) Combined Food & Cold Storage Ltd. xx) A. Kader & Sons Himagar Ltd. xxi) Wadud & Aysha Cold Store Ltd. xxii) Bikrampur Potato Flakes Inds. Ltd. xxiii) United Traders xxiv) Sonali Dredger Ltd. xxv) Sonali Rubber Garden xxvi) Sonali Agro xxvii) Sonali Abason Ltd. xxviii) Sonali News.Com xxix) Sonali IT xxx) Wordbridge School xxxi) International Television Channel Ltd. (NTV) xxxii) Express Insurance Ltd. xxxiii) Athena Venture & Equitties Ltd. xxxiv) Shahjalal Islami Bank Securities Ltd. xxxv) Fareast International University Shahjalal Islami Bank Limited Annual Report 2017
  279. Name of Director Status with The Bank Shams Uddin Khan (Rep. of Shamsuddin Khan & Harun Miah Ltd.) Director Md. Sanaullah Shahid (Rep. of Electra International Ltd.) Director Md. Abdul Barek Director Abdul Halim Director Mohiuddin Ahmed Director Fakir Akhtaruzzaman Director Khorshed Alam Khan (Rep. of Director Daffodils Trading International) Md. Moshiur Rahman Chamak Director (Rep. of Fresh Export Import Ltd.) Mrs. Shahan Ara Begum Director Mosharraf Hossain Chowdhury Independent Director Farida Parvin Nuru Independent Director Name of the firms/companies in which they have interest i) Shamsuddin Khan & Harun Miah Ltd. (UK) ii) Taj Tea & Trading Co. Ltd. iii) Mathiura Tea Co. Ltd. iv) Shahjalal Islami Bank Securities Ltd. i) Electra International Ltd. ii) Electra Consumer Electronics & Investment Ltd. iii) Federal Securities & Invst. Ltd. iv) Electra International v) Kashmir Chemical Co. vi) Sazawa Brothers vii) Electra Furniture viii) Shahjalal Islami Bank Securities Ltd. i) Arju Electronics ii) Jony Electronics iii) Rony Electronics iv) Shahjalal Islami Bank Securities Ltd. i) Abdul Halim & Brothers ii) Excellent Ceramic Industries Ltd. iii) Excellent Motors Ltd. iv) Islamic Insurance Bangladesh Ltd. v) Shahjalal Islami Bank Securities Ltd. i) Rupsha Trading Corporation ii) Mohiuddin Auto House iii) Pacific Automobile iv) Shahjalal Islami Bank Securities Ltd. Fakir Knitwears Ltd. i) Daffodils Trading International ii) Daffodil Color Lab & Studio i) Fresh Export Import Ltd. ii) Libas Textiles Ltd. iii) Fresh Knitwear Ltd. iv) Moshiur Infrastructure Ltd. i) Russel Spinning Mills Ltd. ii) PNR Industries Ltd. iii) Ekram Sweaters Ltd. iv) Tania Cotton Mills Ltd. v) Goodman Pharmaceuticals Ltd. N/A i) Viceroy Group of Restaurant ii) Property Management Ltd. (UK) 52.2 Significant Contracts where Bank is a party and wherein Directors have interest: Nil 52.3 Shares issued to Directors & Executives without consideration or exercise at discount: Nil 52.4 Lending Policies to related parties: Lending to related parties are effected as per requirements of Section 27(1) of the Bank Companies (Amendment) Act, 2013 Shahjalal Islami Bank Limited Annual Report 2017 277
  280. 52 .5 Investment (Loan and Advances) to Directors and their related Concern (Note # 8(a).4): SL Name of the Party Related By i) M/s. Rony Electronics Md. Abdul Barek ii) M/s. Rupsha Trading Corporation Alhaj Md. Mohiu ddin Ahmed iii) Excellent Ceramic Ind. Ltd. Alhaj Abdul Halim iv) M/s. Exclusive Motors Alhaj Abdul Halim v) Shahjalal Islami Bank Securities Ltd. Subsidiary Nature of Investment Amount in Tk. Status Bai-Muajjal/ Murabaha LC/MPI-TR 5,039,144 Regular L/C /MPI-TR/BaiMuajjal 29,999,067 Regular Murabaha local/L/C / MPI-TR/Bai-Muajjal 674,731 Regular Murabaha local/L/C / MPI-TR/Bai-Muajjal 56,771,009 Regular Bai-Muajjal 250,620,139 Regular 343,104,090 52.6 Business other than Banking business with any related concern of the Directors as per Section 18 (2) of the Bank Companies Act 1991 NIL 52.7 Investments in Securities of Directors and their related concern: NIL 53 Events After Reporting Period The Board of Directors of the Bank at it’s 263rd meeting held on 25 April 2018 has recommended 10% stock dividend for the year 2017. This dividend is subject to the final approval by the shareholders at the forthcoming Annual General Meeting (AGM) of the Bank. Chairman Director Director Managing Director Dhaka, 25 April 2018 278 Shahjalal Islami Bank Limited Annual Report 2017
  281. Annexure-A Shahjalal Islami Bank Limited Investment in Shares & Securities (listed with Stock Exchanges) As at December 31, 2017 Sl No Name of Company No. of Shares/ Securities Market Cost price 31 Market value price per December, 31 Dec, 2017 share 2017 Unrealised Gain/(loss) Quoted 1 The ACME Laboratories Limited 2 Active Fine Chemicals Ltd. 3 Aftab Automobiles Limited 4 Agricultural Marketing Company Ltd – AMCL (PRAN) 5 AIBL 1st Islamic Mutual Fund 6 Apex Footwear Limited 7 Beacon Pharmaceuticles Limited 8 Beximco Limited 9 Dhaka Electric Supply Company Ltd. 10 Eastern Housing Limited 11 Envoy Textiles Ltd. 12 Export Import Bank of Bangladesh Limited 13 Familytex (BD) Ltd. 14 Fareast Islami Life Insurance Co. Ltd. 15 Generation Next Fashions Limited 16 M.I. Cement Factory Ltd 17 Makson Spinning Mills Limited 18 Meghna Petroleum Limited 19 Metro Spinning Mills Limited 500,000 114.00 57,000,000 59,175,008 (2,175,008) 1,000,000 35.20 35,200,000 39,430,643 (4,230,643) 816,854 64.20 52,442,027 61,605,088 (9,163,061) 50,000 222.00 11,100,000 9,958,704 1,141,296 7,500,000 8.00 60,000,000 67,402,716 (7,402,716) 30000 328.6 9,858,000 10953974.66 (1,095,975) 2,988,625 21.30 63,657,713 87,734,854 (24,077,142) 2,940,000 27.00 79,380,000 85,339,733 (5,959,733) 1,200,000 45.40 54,480,000 69,126,961 (14,646,961) 2,145,258 49.20 105,546,694 166,063,283 (60,516,589) 1,081,500 34.80 37,636,200 42,402,697 (4,766,497) 3,000,000 17.20 51,600,000 56,153,581 (4,553,581) 2,061,675 7.60 15,668,730 47,453,468 (31,784,738) 958,000 71.50 68,497,000 65,297,780 3,199,220 1,808,950 9.40 17,004,130 25,741,813 (8,737,683) 500,000 84.70 42,350,000 41,501,769 848,231 1,388,042 10.10 14,019,224 63,955,630 (49,936,406) 350,000 188.90 66,115,000 75,607,343 (9,492,343) 1,188,697 11.50 13,670,016 65,855,505 (52,185,489) 20 Orion Pharma Ltd. 21 RAK Ceramics (Bangladesh) Limited 1,082,759 48.70 52,730,363 62,359,551 (9,629,188) 525,000 59.9 31,447,500 34,139,452.3 (2,691,952) 22 Square Textile Ltd 23 The Dacca Dyeing & Mfg. Co. Limited 525,000 64.00 33,600,000 34,785,789 (1,185,789) 5,106,079 8.90 45,444,103 160,115,520 (114,671,417) 1,000,000 44.20 44,200,000 78,349,510 (34,149,510) 504,300 56.80 28,644,240 31,110,235 (2,465,995) 100,000 78.50 7,850,000 9,744,380 (1,894,380) 67,341 54.9 3,697,021 3,720,371.13 (23,350) 20,000 103.1 2,062,000 2,342,003.24 (280,003) 500,000 69.9 34,950,000 42,489,420.8 (7,539,421) 24 Titas Gas Transmission And Distribution Co. Ltd 25 Unique Hotel and Resorts Ltd 26 Bangladesh Steel Re-Rolling Mills Limited 27 Prime Islami Life Insurance Ltd. 28 Bangladesh Submarine Cable Company Limited 29 LAFARGE SURMA CEMENT LTD. Shahjalal Islami Bank Limited Annual Report 2017 279
  282. Sl No No . of Shares/ Securities Name of Company 30 Nahee Aluminum Composite Panel Ltd. 31 Oimex Electrode Limited Market Cost price 31 Market value price per December, 31 Dec, 2017 share 2017 Unrealised Gain/(loss) 6,847 73.4 502,570 63,882.42 438,687 7,129 65.2 464,811 66,310.12 398,501 32 Premier Cement Mills Limited 33 Shahjibazar Power Co. Ltd. 200,000 87.7 17,540,000 18,441,295.18 (901,295) 68,400 116.1 7,941,240 8,890,773.53 (949,534) 34 Singer Bangladesh Limited 290,000 195.5 56,695,000 60,778,950.14 (4,083,950) Un-Quoted 1 Lanka Bangla Securiries Ltd - - 5,000,000 5,000,000 - 2 Market Stabilization Fund, Asset Management Co. Ltd - - 2,000,000 2,000,000 - 3 Aman Cotton Fibrous Limited - - 1,260,400 1,260,400 - 4 Aamra Networks Limited - - 2,289,302 1,233,543,283 2,289,302 1,698,707,696 (465,164,414) Total As per DOS Circular Letter no. 3; dated 12 March 2015, no provision is required for investment in AIBL 1st Mutual Fund. As a result required provision for investment in shares stood at Taka 4,583.71 Lac instead of 4,651.61 Lac. 280 Shahjalal Islami Bank Limited Annual Report 2017
  283. Shahjalal Islami Bank Limited Annual Report 2017 281 301 ,496,389 Office Equipment 129,900,443 4,299,782,666 Total 67,285,013 Software-Others Sub-total 62,615,430 4,169,882,223 923,989 67,878,948 Software-Core Banking Software-Amortization Sub-total Books Vehicles Equipment 311,804,317 628,508,057 Furniture & Fixtures Computer & Network 520,270,279 462,275,894 1,876,724,350 Balance as on 01.01.2017 under construction Head Office Building Building Land Particulars - 1,246,541,785 8,655,000 8,655,000 - 1,237,886,785 118,678 12,829,300 84,083,717 102,225,320 88,998,499 506,673,849 442,957,423 Additions during the period Cost 691,068,537 - - - 691,068,537 - - 46,549,158 8,327,372 97,935,688 538,256,319 - - Adjustment during the period 4,855,255,914 138,555,443 75,940,013 62,615,430 4,716,700,471 1,042,667 80,708,248 349,338,876 395,394,337 619,570,868 488,687,809 905,233,317 1,876,724,350 Balance as on 31.12.2017 - 67,257,163 - Balance as on 01.01.2017 20% 20% 20% 20% 20% 20% 866,743,623 67,590,780 30,757,663 36,833,116 799,152,843 551,672 43,606,119 210,883,279 191,888,167 10%-20% 284,966,443 2.25% - Rate Schedule of Fixed Assets As on 31 December 2017 96,676,164 - - - 96,676,164 - - 36,889,139 6,868,417 52,918,608 - - - Adjustment during the period 128,070,687 13,771,046 8,620,228 5,150,818 114,299,641 79,325 9,710,172 23,426,097 28,611,941 44,097,127 - 8,374,980 - Charged during the period Depreciation Shahjalal Islami Bank Limited 898,138,146 81,361,826 39,377,891 41,983,934 816,776,320 630,998 53,316,290 197,420,237 213,631,691 276,144,962 - 75,632,142 - Balance as on 31.12.2017 3,957,117,768 57,193,617 36,562,121 20,631,496 3,899,924,150 411,669 27,391,958 151,918,638 181,762,646 343,425,907 488,687,809 829,601,174 1,876,724,350 As on 31.12.2017 3,433,039,043 62,309,663 36,527,349 25,782,314 3,370,729,380 372,317 24,272,829 100,921,038 109,608,222 343,541,614 520,270,279 395,018,731 1,876,724,350 As on 31.12.2016 Written Down Value (Amount in Taka) Annexure-B
  284. 282 Shahjalal Islami Bank Limited Annual Report 2017 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 SL No . Standard Chartered Bank NY Mashreq Bank psc, NY Standard Chartered Bank, Mumbai Habib American Bank, USA ICICI Bank, Hong Kong WACHOVIA BANK, NY, USA Commerzbank AG Frankfrut Bank Aljazira UBAF Hong Kong Limited Sonali Bank (UK) Ltd (USD) AB Bank Ltd. Mumbai IFIC Bank Ltd., Karachi Standard Chartered Bank, Mumbai Nepal Bangladesh Bank, Nepal Standard Chartered Bank, Colombo ICICI Bank, Mumbai Habib Metropoliton Bank Ltd. United Bank of India, Kolkata Sonali Bank Ltd ACU, Kolkata Bank of Bhutan Ltd. Main Branch AXIS Bank Ltd. India Standard Chartered Bank, Frankfurt Mashreq Bank, London COMMERZBANK AG Wells Fargo Bank, N. A. London, UK Sonali Bank (UK) Ltd Standard Chartered Bank,Tokyo BCP - Geneva, Switzerland Habib Bank AG Zurich Bank Aljazira, KSA Standard Chartered Bank London Sonali Bank (UK) Ltd Name of the Banks Total [Referred to Note 5a.2 of these financial statements] USD USD USD USD USD USD USD USD USD USD ACUD ACUD ACUD ACUD ACUD ACUD ACUD ACUD ACUD ACUD ACUD EURO EURO EURO EURO EURO YEN CHF CHF SAR GBP GBP Currency Name Amount in Foreign Currency 555,995.45 944,028.96 222,198.53 307,016.90 152,133.52 1,028,893.30 151,518.47 563,077.06 2.73 161,598.53 8,641.29 21,725.07 27,454.25 5,154.98 6,797.78 105,782.76 156,937.46 4,057.73 47,816.83 176,952.33 12,511.37 8,697.01 86,164.24 207,746.19 869,483.99 6,395.43 2,466.85 203,786.81 51,271.68 - 2017 Conversion rate per unit F.C. 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 82.7000 98.7520 98.7520 98.7520 98.7520 0.7326 84.4826 84.4826 22.0533 111.1819 Amount in BDT. 45,980,823.72 78,071,194.99 18,375,818.43 25,390,297.63 12,581,442.10 85,089,475.91 12,530,577.47 46,566,472.86 226.11 13,364,198.43 714,634.68 1,796,663.29 2,270,466.48 426,316.85 562,176.41 8,748,234.25 12,978,727.94 335,574.62 3,954,451.84 14,633,957.69 1,235,524.06 858,848.00 8,508,899.64 20,515,372.53 636,983.97 540,302.55 208,405.90 4,494,171.66 5,700,482.80 427,070,722.81 As at 31 December 2017 Balance with Other Banks in Foreign Currency Shahjalal Islami Bank Limited Amount in Foreign Currency 2,023,450.21 1,908,781.88 222,198.53 55,051.56 49,864.86 65,819.88 9,692.08 157,746.72 18,379.78 125,490.48 1,648.99 523,273.57 20,986.62 12,573.89 96,695.42 17,847.78 75,438.71 43,504.90 55,911.38 71,052.80 2,785.28 1,794.55 4,370.27 70,723.91 580.00 564,688.00 1,650.43 515.10 1,211,174.25 31,015.69 1,910.02 2016 Conversion rate per unit F.C. 78.7000 78.7000 78.7000 78.7000 78.7000 78.7000 78.7000 78.7000 78.7000 78.7000 78.7000 78.7000 78.7000 78.7000 78.7000 78.7000 78.7000 78.7000 78.7000 78.7000 82.2890 82.2890 82.2890 82.2890 82.2890 0.6700 76.5560 76.5560 20.9830 96.6040 105.3770 Amount in BDT. 159,245,531.53 150,221,133.96 17,487,024.31 4,332,557.77 3,924,364.48 5,180,024.56 762,766.70 12,414,666.86 1,446,488.69 9,876,100.78 129,775.51 41,181,629.96 1,651,646.99 989,565.14 7,609,929.55 1,404,620.29 5,937,026.48 3,423,835.63 4,400,225.61 5,591,855.36 229,197.07 147,671.19 359,623.84 5,819,778.61 47,727.45 378,397.43 126,350.98 39,434.20 25,413,705.94 2,996,249.02 201,273.13 472,970,179.02 Annexure-C
  285. Annexure-D DETAILS OF INFORMATION ON INVESTMENTS EXCEEDING 10 % OF BANKS TOTAL ELIGIBLE REGULATORY CAPITAL (FUNDED & NON-FUNDED) As at 31 December 2017 SL. No. 1 2 3 4 5 6 Name of client Logos Apparels Ltd. Rahmat Sweater (BD) Ltd. Belkuchi Spinning Mills Ltd. M/S SHAHI PRODUCTS Group-total Moonlight Garments Ltd. Ehsan Garments Ltd. Nourish Poultry & Hatchery Ltd. Nourish Agro Ltd. Telnet Communication Ltd. Ehsan Packaging & Printing Ltd. Group-total Nassa Basics Ltd. Nassa Spinning Ltd. Nassa Basic Wash Ltd. NASSA HI TECH WASH LTD Nassa Taipei Textile Mills ltd. Group-total Sinha Dyeing & Finishing Ltd. Sinha Yarn Dyeing & Fabrics Ltd. Pritha Fashions Ltd. Sinha Washing Plant Ltd. Opex Industries Ltd. Sinha Apparels Accessories Ltd. Shikharaa Developments Ltd. Best Fried Chicken Group-total Gazi Tank & Allied Concern Group-total Chittagong Denim Mills Ltd Smart Jeans Ltd Smart Jacket Ltd. Shehan Textile Ltd. Smart Bio-Inception Ltd Apparel Promoters Limited BM Cotainer (BD)Ltd. BM Energy (BD) Ltd. Group-total Shahjalal Islami Bank Limited Annual Report 2017 Funded 1,298 8,632 2,698 12,628 326 635 10,013 10,318 60 81 21,433 7,310 8,159 1,271 59 10,678 27,476 2,301 5,987 3,929 89 3,056 15,362 19,212 19,212 1,239 1,259 363 19 1,165 286 360 4,690 Outstanding Non-funded 10,281 1,337 502 12,120 1,311 4,530 19 10,908 2 33 16,803 10,618 3,808 14,427 654 5,331 96 9,165 15,246 11,877 11,877 3,085 2,377 3,038 29 381 3,053 16,205 28,167 Total 11,580 1,337 9,134 2,698 24,748 1,637 5,164 10,032 21,226 62 115 38,236 17,928 8,159 1,271 59 14,486 41,902 2,956 11,317 96 13,094 89 3,056 30,608 31,089 31,089 4,323 3,635 3,401 48 381 4,218 286 16,565 32,857 (Tk. In lac) % of Investments to Total Capital Funded Non-funded Total 6.52% 6.26% 12.77% 11.06% 8.67% 19.73% 14.18% 7.45% 21.63% 7.93% 7.87% 15.80% 9.92% 6.13% 16.04% 2.42% 14.54% 16.96% 283
  286. SL . No. 7 8 9 10 11 12 13 14 284 Name of client Shah Cement Ind. Ltd. Abul Khair Melting Ind Ltd Abul Khair Strip Processing Abul Khair Steel Product Ltd Group-total Sena Kallayan Sangstha Group-total Super Oil Refinery Ltd. Multi Oil Refibnery Ltd Super Board Mills Limited Super Formica & Lamination Ltd. T.K. Chemical Complex Ltd Group-total Amber Denim Ltd. Partex Rotor Spinning Mills Ltd. Partex Rotor Mills Ltd. Amber Cotton Mills Ltd. Amber Super Yarn Ltd. Group-total Karim Spinning Mills Ltd. Purbani Rotor Spinning Ltd. Shohagpur Textile Mills Ltd. Purbani Yarn Dying Ltd Purbani Fabrics LTD Karim Textiles Ltd. Group-total Mymensingh Agro Ltd Banga Building Materials Ltd. Habigonj textiles ltd RFL Plastic Ltd. Group-total Bangla Trac Limited Bangla Trac Limited Bangla Trac Power Ltd. Bangla Trac Miaki Green Power Ltd B. Tac Engineering Group-total Incepta Pharmacuticals Ltd. Impress Aviation Limited Next Spaces Ltd Infratrade Limited Group-total Funded 2,410 16,614 548 7,226 26,799 22,886 22,886 3,455 7,899 11,354 4,353 892 2,636 8,160 3,123 19,165 3,234 6,500 7,262 597 245 222 18,060 9,650 4,104 332 14,086 11,261 2,183 13,444 9,221 2,079 749 12,049 Outstanding Non-funded 2,705 2,172 4,877 7,361 11 5,702 1,831 14,906 1,428 675 123 2,482 4,708 111 360 2,026 1,007 437 3,941 4,386 960 3,651 8,996 13,952 528 487 14,967 7,443 48 6,599 55 14,145 Total 5,115 18,786 548 7,226 31,676 22,886 22,886 7,361 11 9,157 9,730 26,260 5,781 1,567 2,759 10,642 3,123 23,873 3,345 6,861 9,288 597 1,251 659 22,001 14,035 5,063 3,983 23,081 13,952 11,789 2,670 28,411 16,665 48 8,678 804 26,194 (Tk. In lac) % of Investments to Total Capital Funded Non-funded Total 13.83% 2.52% 16.35% 11.81% 0.00% 11.81% 5.86% 7.69% 13.55% 9.89% 2.43% 12.32% 9.32% 2.03% 11.35% 7.27% 4.64% 11.91% 6.94% 7.72% 14.66% 6.22% 7.30% 13.52% Shahjalal Islami Bank Limited Annual Report 2017
  287. SL . No. 15 16 17 18 19 20 21 22 23 Name of client Abdul Monem Ltd. Group-total Mir Akter Hossain Ltd. Mir Cement Ltd Mir Akhter Hossain Ltd Group-total Dhaly Construction Ltd. Group-total KABIR STEEL RE-ROLLING MILLS LTD KSRM Billet Industries Limited Kabir Steel Ltd. KSRM Steel Plant Ltd. Group-total Provita Feed Ltd Galaxy Trading Corporation Mohammed Nurun Nobi alias Md. Nurun Nobi Bhuiyan Mahmud Denim Ltd Mahmud Trading Corporation Group-total Energypac Engyneering Ltd. Energypac Fashions Limited Group-total Bangladesh Foundry & Engineering Works Ltd. Group-total MSA Textiles Limited Group-total Sinha Peoples Energy Ltd. Venture Energy Limited Sinha Power Generation Com. Ltd Group-total Total Funded 15,283 15,283 677 243 11,725 12,644 21,600 21,600 19,958 6 328 20,292 593 2,564 Outstanding Non-funded 7,519 7,519 652 133 14,837 15,622 12,683 12,683 10,651 - Total 22,802 22,802 1,329 377 26,561 28,267 34,283 34,283 19,958 6 328 20,292 11,244 2,564 1,151 28 3,969 8,304 4,297 2,930 7,227 59 3,593 14,303 19,085 5,243 24,327 1,151 87 7,561 22,607 23,382 8,172 31,554 15,666 15,666 14,504 14,504 6,160 7,706 10,888 24,755 4,783 4,783 5,785 5,785 1,121 1,042 2,163 20,449 20,449 20,289 20,289 7,281 7,706 11,931 26,917 378,919 252,365 631,284 (Tk. In lac) % of Investments to Total Capital Funded Non-funded Total 7.89% 3.88% 11.77% 6.53% 8.06% 14.59% 11.15% 6.55% 17.69% 10.47% 0.00% 10.47% 4.29% 7.38% 11.67% 3.73% 12.56% 16.29% 8.09% 2.47% 10.55% 7.49% 2.99% 10.47% 12.78% 1.12% 13.89% Bank’s Total Eligible Regulatory Capital as on 31 December 2017 is Tk. 193,759.84 lac Shahjalal Islami Bank Limited Annual Report 2017 285
  288. HIGHLIGHTS OF PERFORMANCE OF BANK Annexure-E As at 31 December 2017 (Amount in Taka) SL PARTICULARS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Paid up Capital Total Eligible Regulatory Capital ( Tier-1 + Tier-2) Capital Surplus Total Assets Total Deposit Total Investment (Loans & Advance) Total Contingent Liabilities and Commitment Investment Deposit Ratio ( % ) Percentage of Classified Investment against total Investments Profit after Tax and Provision Amount of Classified Investment Provisions kept against classified Investment Provisions surplus Cost of Fund Profit Earning Assets Non-Profit Earning Assets Return on Investment in Securities (ROI) Return on Assets (ROA) Income from Investment in Securities Earnings Per Share Net Income Per Share Price Earning Ratio (Times) 286 2017 7,714,225,390 19,375,983,751 3,482,330,324 207,886,374,678 145,382,475,188 158,668,157,376 89,225,560,344 90.17% 3.97% 1,195,895,973 6,300,502,160 1,415,064,133 8,651,571 7.83% 173,187,406,756 34,698,967,922 2.59% 0.64% 299,298,822 1.55 1.55 21.29 2016 7,346,881,330 14,386,075,911 1,915,696,277 167,244,763,598 124,409,830,702 122,998,380,344 63,325,730,301 85.98% 4.70% 1,557,370,215 5,781,699,039 1,431,467,602 1,025,699 8.24% 138,948,604,650 28,296,158,948 1.49% 1.02% 136,077,151 2.02 2.02 7.43 Shahjalal Islami Bank Limited Annual Report 2017
  289. Annexure-F Shahjalal Islami Bank Limited (Off-Shore Banking Unit) Balance Sheet As at 31 December 2017 Property and Assets Note Cash Cash in hand (Including Foreign Currencies) Balance with Bangladesh Bank & Sonali Bank Ltd. (Including Foreign Currencies) USD 31.12.2017 Taka 31.12.2016 USD Taka - - - - - - - - 3 8,171,792.68 8,171,792.68 675,807,255 675,807,255 4,819,271.44 4,819,271.44 379,276,662 379,276,662 4 12,145,385.52 79,265,666.60 91,411,052.12 1,004,423,383 6,555,270,628 7,559,694,010 6,348,645.47 80,210,952.90 86,559,598.37 499,638,398 6,312,601,993 6,812,240,392 5 3,207.11 265,228 1,899.53 149,493 - - - - 99,586,051.91 8,235,766,493 91,380,769.34 7,191,666,547 6 69,921,700.00 5,782,524,590 74,034,800.00 5,826,538,760 Mudaraba Savings Deposits Mudaraba Term Deposits Other Mudaraba Deposits Al-Wadeeah Current & Other Deposit Accounts Bills Payable 7 100,592.75 28,863,000.00 28,963,592.75 8,319,020 2,386,970,100 2,395,289,120 16,127.68 16,742,000.00 16,758,127.68 1,269,248 1,317,595,400 1,318,864,648 Other Liabilities 8 Total Liabilities Capital/Shareholders’ Equity Paid-up Capital Statutory Reserve Retained Earnings Total Shareholders’ Equity Total Liabilities & Shareholders’ Equity 700,759.16 99,586,051.91 57,952,783 8,235,766,493 587,841.66 91,380,769.34 46,263,139 7,191,666,547 99,586,051.91 8,235,766,493 91,380,769.34 7,191,666,547 Placement with other Banks & Financial Institutions Balance with other Banks and Financial Institutions Inside Bangladesh Outside Bangladesh Investments General Investment etc. Bills Purchased and Discounted Fixed Assets Including Premises Other Assets Non Banking Assets Total Assets Liabilities and Capital Liabilities Placement from other Banks & Financial Institutions Deposits and Other Accounts Shahjalal Islami Bank Limited Annual Report 2017 287
  290. Annexure-F Shahjalal Islami Bank Limited (Off-Shore Banking Unit) Off-balance Sheet Items As at 31 December 2017 Contingent liabilities Note 31.12.2017 USD 31.12.2016 Taka USD Taka Acceptances & endorsements Letters of guarantee Irrevocable letters of credit (including back to back bills) Bills for collection Other contingent liabilities - - - - - - - - Total - - - - - - - - - - - - - - - - - - - - - - - - Other commitments Documentary credits, short term and trade related transactions Forward assets purchased and forward deposits placed Undrawn note issuance, revolving and underwriting facilities Undrawn formal standby facilities, credit lines and other commitments Total 288 Shahjalal Islami Bank Limited Annual Report 2017
  291. Annexure-F Shahjalal Islami Bank Limited (Off-Shore Banking Unit) Profit and Loss Account For the year ended 31 December 2017 Contingent liabilities Notes Investment Income Less: Profit paid on Deposits & Borrowing Net Investment Income Commission, Exchange and Brokerage Other Operating Income 9 10 2017 USD 2016 Taka USD Taka 4,334,658.74 358,476,278 3,440,515.99 270,768,608 1,892,691.54 2,441,967.20 156,525,590 201,950,687 1,291,128.45 2,149,387.54 101,611,809 169,156,799 10.00 108,810.66 108,820.66 2,550,787.86 827 8,998,642 8,999,469 210,950,156 20.00 97,141.70 97,161.70 2,246,549.24 1,574 7,645,052 7,646,626 176,803,425 69,107.94 19,967.18 - 5,715,227 1,651,286 - 52,339.09 2,701.69 - 4,119,086 212,623 - 6,905.75 571,106 6,760.66 532,064 906.08 - 74,933 - 702.09 - 55,254 - 662.99 822.37 98,372.31 54,829 68,010 8,135,390 303.39 265.33 63,072.25 23,877 20,881 4,963,786 2,452,415.55 2,452,415.55 202,814,766 202,814,766 2,183,476.99 2,183,476.99 171,839,639 171,839,639 Net Profit after Taxation 2,452,415.55 202,814,766 2,183,476.99 171,839,639 Retained Earnings from previous year Add: Retained Earnings of Current year Retained Earnings carried forward 2,452,415.55 2,452,415.55 202,814,766 202,814,766 2,183,476.99 2,183,476.99 171,839,639 171,839,639 2,452,415.55 - 202,814,766 - 2,183,476.99 - 171,839,639 - 11 12 Total Operating Income Salaries and Allowances Rent, Taxes, Insurances, Electricity etc. Legal Expenses Postage, Stamps, Telecommunication etc. Stationery, Printings, Advertisements etc. Auditors’ Fees Depreciation & Repairs of Bank’s Assets Other Expenses Total Operating Expenses 13 14 15 16 17 18 Profit before Provision Specific provisions for Classified Investment General Provisions for Unclassified Investment Provisions for Other Assets Total Provision Total Profit before Provisions for Taxation Deferred Tax Expenses Current Tax Expenses Less: Retained earnings transferred to central operation Shahjalal Islami Bank Limited Annual Report 2017 289
  292. Annexure-F Shahjalal Islami Bank Limited (Off-Shore Banking Unit) Cash Flow Statement For the year ended 31 December 2017 2017 USD 2016 Taka USD Taka Cash Flow from Operating Activities Investment Income receipt in cash Profit Paid on Borrowing Fees & Commission receipt in cash Cash Payments to Employees Cash Payments to Suppliers Receipts from other Operating activities Payments for other Operating activities (i) Operating Profit before changes in Operating Assets 4,334,658.74 (1,892,691.54) 10.00 (69,107.94) (906.08) 108,810.66 (27,695.30) 358,476,278 (156,525,590) 827 (5,715,227) (74,933) 8,998,642 (2,297,999) 3,440,515.99 (1,291,128.45) 20.00 (52,339.09) (702.09) 97,141.70 (9,727.68) 270,768,608 (101,611,809) 1,574 (4,119,086) (55,254) 7,645,052 (766,009) 2,453,078.54 202,861,997 2,183,780.38 171,863,075 (4,851,453.75) (747,453,619) (42,687,430.90) (3,368,275,246) 12,205,465.07 112,917.50 1,076,424,472 11,689,644 16,718,230.28 388,146.01 1,315,732,702 30,587,030 7,466,928.82 340,660,497 (25,581,054.61) (2,021,955,514) 9,920,007.36 543,522,494 (23,397,274.23) (1,850,092,438) - - - - (1,970.57) (1,970.57) (162,965) (162,965) - - (4,113,100.00) (44,014,170) 27,908,180.00 2,205,599,090 (2,452,415.55) (202,814,766) (2,183,476.99) (171,839,639) (6,565,515.55) (246,828,936) 25,724,703.01 2,033,759,451 3,352,521.24 296,530,593 2,327,428.78 183,667,013 4,819,271.44 379,276,662 2,491,842.66 195,609,649 8,171,792.68 675,807,255 4,819,271.44 379,276,662 Changes in Operating Assets and Liabilities Increase/decrease of Investment to Customers Increase/decrease of Deposits received from Customers Increase/decrease of Other Liabilities (ii) Cash flows from operating assets and liabilities Net cash flows from operating activities (A)=(i+ii) Cash flows from Investing Activities Proceeds from Sale of fixed assets Purchases of Property, Plant & Equipments Net cash used in investing activities (B) Cash flows from Financing Activities Borrowing from Shahjalal Islami Bank Ltd Profit transferred to Shahjalal Islami Bank Ltd Net cash flows from financing activities (C) Net Increase/(Decrease) in Cash (A+B+C) Add: Cash and cash equivalents at the beginning of the year Cash & cash equivalents at the end of the year 290 Shahjalal Islami Bank Limited Annual Report 2017
  293. Off-shore Banking Unit Notes to the Financial Statements For the year ended 31 December 2017 1 . Status of the Unit Off-shore Banking Unit (OBU) is a separate business unit of Shahjalal Islami Bank Limited, governed under the rules and Guidelines of Bangladesh Bank. The Bank obtained the Off-shore Banking Unit permission from Bangladesh Bank vide letter no. BRPD (P-3)744(99)/2008-2800 dated 24 July 2008. The Bank opened its Off-shore Banking Unit on 21 December 2008. The unit is located at Shahjalal Islami Bank Tower, Plot#4, Block-CWN(C), Gulshan Avenue, Gulshan, Dhaka-1212. 1.1 Nature of Business/Principal Activities The principal activities of the OBU are to provide all kinds of shariah based commercial banking services to its customers through its Unit complying the applicable rules & regulations. 2. Significant Accounting Policies 2.1 Basis of accounting The accounting records of the unit are maintained in USD forms and the financial statements are prepared on a going concern basis under the historical cost convention and in accordance with first schedule of Bank Companies Act 1991 as amended by Bangladesh Bank BRPD Circular No.14 dated 25 June 2003, other Bangladesh Bank circulars, International Financial Reporting Standards (IFRSs) and International Accounting Standards (IASs) as adopted by the Institute of Chartered Accountants of Bangladesh (ICAB), the Companies Act 1994, the listing Regulations of the Stock Exchanges, the Securities and Exchange Rule 1987 and other laws and rules applicable in Bangladesh. 2.2 Common expense a. Expenditure for audit fees has not been separately accounted for in the Financial Statements of OBU. b. Provision for taxation, loans & advances and off-Balance Sheet items have not been separately accounted for in these Financial Statements. These are accounted for in the central account of Shahjalal Islami Bank Limited. 2.3General a. These Financial Statements are presented in Taka, which is the Bank’s functional currency. Figures appearing in these financial statements have been rounded off to the nearest Taka. b. Assets, liabilities, income & expenses have been converted to BDT currency @ US$1= Taka 82.70 (weighted average rate as at 31st December 2017) Shahjalal Islami Bank Limited Annual Report 2017 291
  294. 31 .12.2017 USD 31.12.2016 Taka USD Taka 675,807,255 675,807,255 4,819,271.44 4,819,271.44 379,276,662 379,276,662 8,171,792.68 8,171,792.68 675,807,255 675,807,255 4,819,271.44 4,819,271.44 379,276,662 379,276,662 4 Investments (Loans and Advances) Country-wise Classification of Investments Inside Bangladesh Gross Murabaha, Bai-Muajjal etc 12,145,385.52 Less: Profit receivable on Murabaha, Bai-Muajjal etc Net Murabaha, Bai-Muajjal etc 12,145,385.52 Bills purchased and discounted-net (Note- 4.1) 79,265,666.60 Out side Bangladesh 91,411,052.12 1,004,423,383 1,004,423,383 6,555,270,628 7,559,694,010 6,348,645.47 6,348,645.47 80,210,952.90 86,559,598.37 499,638,398 499,638,398 6,312,601,993 6,812,240,392 79,274,939.60 79,274,939.60 6,556,037,505 6,556,037,505 80,210,952.90 80,210,952.90 6,312,601,993 6,312,601,993 9,273.00 79,265,666.60 766,877 6,555,270,628 80,210,952.90 6,312,601,993 5 Fixed Assets including Premises, Furniture & Fixtures Furniture & Fixture 246.3 Office Equipment 2960.81 Carrying value 3,207.11 20,369 244,859 265,228 273.68 1,625.85 1,899.53 21,539 127,954 149,493 6 Placement from other Banks & Financial Institutions Borrowing from Shahjalal Islami Bank Ltd 69,921,700.00 69,921,700.00 5,782,524,590 5,782,524,590 74,034,800.00 74,034,800.00 5,826,538,760 5,826,538,760 100,592.75 100,592.75 28,863,000.00 28,863,000.00 28,963,592.75 8,319,020 8,319,020 2,386,970,100 2,386,970,100 2,395,289,120 16,127.68 16,127.68 16,742,000.00 16,742,000.00 16,758,127.68 1,269,248 1,269,248 1,317,595,400 1,317,595,400 1,318,864,648 699,976.56 782.60 700,759.16 57,888,062 64,721 57,952,783 587,211.36 630.30 587,841.66 46,213,534 49,605 46,263,139 3 Balance with Other Banks and Financial Institutions (Other than Mudaraba Term Fund) Inside Bangladesh (Note - 3.1) 8,171,792.68 Outside Bangladesh 8,171,792.68 3.1 Inside Bangladesh Shahjalal Islami Bank Ltd 4.1 Bills Purchased and Discounted Payable inside Bangladesh Payable outside Bangladesh Gross Bills Purchased and Discounted Less: Profit receivable on Bills Purchased and Discounted Net Bills Purchased and Discounted 7 Deposits and Other Accounts Al-Wadiah Current Deposit Mudaraba Savings Deposit Mudaraba Term Deposit 8 Other Liabilities Profit Payable Others Payable Outstanding Expenses 292 Shahjalal Islami Bank Limited Annual Report 2017
  295. 2017 2016 USD Taka USD Taka 3 ,954,625.44 380,033.30 4,334,658.74 327,047,524 31,428,754 358,476,278 3,261,365.77 179,150.22 3,440,515.99 256,669,486 14,099,122 270,768,608 10 Profit paid on Deposits & Borrowing Profit paid on borrowings 1,892,691.54 156,525,590 1,291,128.45 101,611,809 11 Commission, Exchange & Brokerage Commission from LC 10.00 827 20.00 1,574 24,581.39 84,229.27 108,810.66 2,032,881 6,965,761 8,998,642 22,626.24 74,460.46 55 97,141.70 1,780,685 5,860,038 4,329 7,645,052 27,150.17 25,636.86 13,687.22 2,633.69 69,107.94 2,245,319 2,120,168 1,131,933 217,806 5,715,227 20,637.48 20,282.79 9,429.53 1,989.29 52,339.09 1,624,170 1,596,256 742,104 156,557 4,119,086 19,727.43 239.75 19,967.18 1,631,458 19,827 1,651,286 2,372.46 329.23 2,701.69 186,713 25,910 212,623.00 6,905.75 6,905.75 571,106 571,106 6,760.66 6,760.66 532,064 532,064 775.56 130.52 906.08 64,139 10,794 74,933 565.71 136.38 702.09 44,521 10,733 55,254 27.38 635.61 662.99 662.99 2,264 52,565 54,829 54,829 33.34 270.05 303.39 303.39 2,624 21,253 23,877 23,877 18.29 783.40 20.68 822.37 1,513 64,787 1,710 68,010 25.14 240.19 265.33 1,979 18,903 20,881 9 Profit on Investment Profit received from Mudaraba Import Bills (UPAS) Profit received from Hire Purchase 12 Other Operating Income SWIFT & REUTERS Miscellaneous Earnings Service & Charges Receipts 13 Salary & Allowances Basic Salary Allowances Bonus Bank’s Contribution to Provident fund 14 Rent, Taxes, Insurance, Electricity etc. Rent, Rates & Taxes Electricity & Lighting 15 Postage, Stamps, Telecommunication etc Telephone charges 16 Stationery, Printing, Advertisement etc Computer Stationery Advertisement 17 Depreciation and Repair of Fixed Assets Depreciation of Fixed Assets Furniture & Fixtures Office Appliance & Equipment Repair’s & Maintainance 18 Other Expenses Utility Entertainment Exp. Travelling Expense Shahjalal Islami Bank Limited Annual Report 2017 293
  296. AUDITORS ’ REPORT TO THE SHAREHOLDERS OF SHAHJALAL ISLAMI BANK SECURITIES LTD. We have audited the accompanying financial statements of SHAHJALAL ISLAMI BANK SECURITIES LTD., which comprise the statement of financial position as at 31 December 2017, the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended and a summary of significant accounting policies and other explanatory information. Management’s Responsibility Management of SHAHJALAL ISLAMI BANK SECURITIES LTD. is responsible for the preparation and fair presentation of these financial statements in accordance with Bangladesh Financial Reporting Standards (BFRSs), the Companies Act, 1994, the Securities and Exchange Rules, 1987, rules and regulations issued by the Bangladesh Securities and Exchange Commission and for such internal control as management determines necessary to enable the preparation of financial statements that are free from material misstatement whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Bangladesh Standards on Auditing (BSA). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements, prepared in accordance with Bangladesh Financial Reporting Standards (BFRSs), give a true and fair view of the financial position as at 31 December 2017 and its financial performance and its cash flows for the year then ended comply with the Companies Act, 1994, the Securities and Exchange Rules, 1987, rules and regulations issued by the Bangladesh Securities and Exchange Commission and other applicable laws and regulations. We also report that: (a) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit and made due verification thereof; (b) proper books of account as required by law have been kept by the company so far as it appeared from our examination of those books; (c) the company’s statement of financial position and statement of profit or loss and other comprehensive income dealt with by the report are in agreement with the books of account; and (d) the expenditure incurred was for the purpose of the business. Place: Dhaka, Bangladesh Dhaka, 28 March 2018 294 K. M. HASAN & CO. Chartered Accountants Shahjalal Islami Bank Limited Annual Report 2017
  297. Shahjalal Islami Bank Securities Ltd . Statement of Financial Position As at 31 December 2017 ASSETS Notes 2017 Taka 2016 Taka Non-current assets Property, plant and equipment Investment in Stock Exchange Membership 4 5 51,046,105 518,500,000 569,546,105 40,972,680 518,500,000 559,472,680 Current assets Investment Investment in securities Trade and other receivables Cash and cash equivalents 6 7 8 9 3,269,416,687 914,448,480 2,166,544,118 412,994,289 6,763,403,574 7,332,949,679 3,755,495,358 1,352,680,894 2,570,816,907 381,221,166 8,060,214,325 8,619,687,005 10 2,740,000,000 322,020,728 3,062,020,728 2,740,000,000 162,132,256 2,902,132,256 11 12 13 14 15 805,000,000 2,683,474,125 293,833,926 65,000,000 423,620,900 4,270,928,951 7,332,949,679 1,654,336,661 3,363,550,700 211,046,488 65,000,000 423,620,900 5,717,554,749 8,619,687,005 Total assets EQUITY AND LIABILITIES Capital and reserves Share capital Retained earnings Current liabilities Short term borrowings Trade and other payables Provision for income tax Provision for investments in securities Provision for margin investment Total equity and liabilities The financial statements should be read in conjunction with the annexed notes and were approved by the Board of Directors on 28 March 2018 and were singed on its behalf by: Chief Executive Officer Vice Chairman Chairman Signed in terms of our separate report of even date annexed. Place: Dhaka, Bangladesh Dhaka, 28 March 2018 Shahjalal Islami Bank Limited Annual Report 2017 K.M.HASAN & CO. Chartered Accountants 295
  298. Shahjalal Islami Bank Securities Ltd . Statement of Profit or Loss and other Comprehensive Income For the year ended 31 December 2017 Notes Brokerage commission Investment income Other operating income Total operating income Operating expenses Net income from operation Other income Office and administrative expenses Financial expenses 16 2017 Taka 2016 Taka 205,332,215 283,358,549 166,712,278 655,403,042 (130,933,387) 524,469,655 11,000,096 (51,156,586) (104,637,255) 120,321,381 288,804,022 106,383,963 515,509,366 (110,383,395) 405,125,971 7,771,307 (39,046,155) (227,632,180) Profit before provision and income tax 379,675,910 146,218,943 Provision for margin investment Net profit before income tax 379,675,910 146,218,943 (82,787,438) (34,407,336) Net profit after income tax 296,888,472 111,811,607 Other comprehensive income Total comprehensive income 296,888,472 111,811,607 1.08 0.41 17 18 19 20 21 Provision for income tax Earnings Per Share (EPS) 22 The financial statements should be read in conjunction with the annexed notes and were approved by the Board of Directors on 28 March 2018 and were singed on its behalf by: Chief Executive Officer Vice Chairman Chairman Signed in terms of our separate report of even date annexed. Place: Dhaka, Bangladesh Dhaka, 28 March 2018 296 K.M.HASAN & CO. Chartered Accountants Shahjalal Islami Bank Limited Annual Report 2017
  299. Shahjalal Islami Bank Securities Ltd . Statement of Changes in Equity For the year ended 31 December 2017 Particulars Balance as at 01 January 2017 Dividend paid Net profit during the year Balance as at 31 December 2017 Share capital 2,740,000,000 2,740,000,000 Retained earnings 162,132,256 (137,000,000) 296,888,472 322,020,728 Share capital 2,140,000,000 600,000,000 2,740,000,000 Retained earnings 50,320,649 111,811,607 162,132,256 Amount in Taka Total 2,902,132,256 (137,000,000) 296,888,472 3,062,020,728 For the year ended 31 December 2016 Particulars Balance as at 01 January 2016 Additional share capital 21 July 2016 Net profit during the year Balance as at 31 December 2016 Amount in Taka Total 2,190,320,649 600,000,000 111,811,607 2,902,132,256 The financial statements should be read in conjunction with the annexed notes and were approved by the Board of Directors on 28 March 2018 and were singed on its behalf by: Chief Executive Officer Vice Chairman Chairman Signed in terms of our separate report of even date annexed. Place: Dhaka, Bangladesh Dhaka, 28 March 2018 Shahjalal Islami Bank Limited Annual Report 2017 K.M.HASAN & CO. Chartered Accountants 297
  300. Shahjalal Islami Bank Securities Ltd . Statement of Cash Flows For the year ended 31 December 2017 2017 Taka A. B. C. 2016 Taka Cash flows from operating activities Cash received from commission and others Payment for profit and bank charges and expenses Income tax paid Net Cash flow from/(used) in operating activities 1,119,402,974 (964,737,765) (44,099,165) 110,566,044 580,804,093 (183,990,017) (57,954,718) 338,859,358 Cash flow from investing activities Investment Investment in securities Purchase of property plant and equipment Net Cash flow from/(used) in investing activities 486,078,671 438,232,414 (16,767,345) 907,543,740 267,407,164 (77,810,484) (5,514,883) 184,081,797 Cash flow from financing activities Receipts from issue of ordinary shares Short term investment Dividend paid during the year Net cash flow from/ (used) in financing activities (849,336,661) (137,000,000) (986,336,661) 600,000,000 (910,683,200) (310,683,200) 31,773,123 381,221,166 412,994,289 212,257,955 168,963,211 381,221,166 Net Increase/(decrease) in cash and cash equivalents (A+B+C) Opening cash and cash equivalents Closing cash and cash equivalents The financial statements should be read in conjunction with the annexed notes and were approved by the Board of Directors on 28 March 2018 and were singed on its behalf by: Chief Executive Officer Vice Chairman Chairman Signed in terms of our separate report of even date annexed. Place: Dhaka, Bangladesh Dhaka, 28 March 2018 298 K.M.HASAN & CO. Chartered Accountants Shahjalal Islami Bank Limited Annual Report 2017
  301. SHAHJALAL ISLAMI BANK SECURITIES LTD . NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2017 1. Introduction 1.1 Legal status of the company SHAHJALAL ISLAMI BANK SECURITIES LTD. has been incorporated as a public company limited by shares under the Companies Act, 1994 vide certificate of incorporation no. C - 86917/10 dated September 06, 2010 and commenced its operation on the 25th day of May 2011. Presently the company is operating its business through Head Office with one extension office and 08 (Eight) branches with 67 employees all over Bangladesh. It has corporate membership of Dhaka Stock Exchange Limited (DSE) and Chittagong Stock Exchange Limited (CSE). 1.2 Address of registered office and principal place of business Its Corporate Head Office and Principal place of business is at Jiban Bima Bhaban (4th floor), 10 Dilkusha C/A, Dhaka-1000. 2. Nature of business activities The principal objectives of the company are to carry on the business of stock brokers/stock dealers and other related business in connection with the dealings of listed securities. Other objectives of the company are to buy, sell, hold shares, stocks and fixed income securities or otherwise acquire or invest the capital of the company in the same and other services as mentioned in the Memorandum and Articles of Association of the Company . 3. Significant accounting policies 3.1 Basis for preparation of financial statements The financial statements have been prepared on a going concern concept basis under historical cost convention in accordance with the Bangladesh Accounting Standards (BAS) and Bangladesh Financial Reporting Standards (BFRS), Companies Act, 1994, the Securities and Exchange Rules, 1987, rules and regulations issued by the Bangladesh Securities and Exchange Commission and other applicable laws and regulations. The disclosures of information have been made in accordance with the requirements of the above mentioned standards and in compliance with Companies Act 1994 and the statement of financial position and statement of profit or loss and other comprehensive income have been prepared according to BAS-1 (Presentation of Financial Statements ) based on accrual basis and other applicable laws and regulations. 3.2 Integral Components of the Financial Statements The financial statements of the Company include the following components:a. Statement of Financial Position as at 31 December 2017. b. Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2017. c. Statement of Changes in Equity for the year ended 31 December 2017. d. Statement of Cash Flows for the year ended 31 December 2017. e. Notes, Comprising a Summary of Significant Accounting Policies and Other Explanatory Information. 3.3 Property, plant and equipment i) All property, plant and equipment are stated at cost less accumulated depreciation as per BAS -16 “Property, plant and equipment”. ii) For addition the depreciation has been charged for the remaining months of the accounting year and for disposal depreciation charged up to the date of disposal. Shahjalal Islami Bank Limited Annual Report 2017 299
  302. iii ) Depreciation has been charged under reducing balance method at the following rates: Asset Category Furniture and fixtures Office equipment Rate (%) 10 or 20 20 3.4 Investments to clients Investments to clients include investment to margin customers and receivable there from. 3.5 Cash and Cash Equivalents Cash and cash equivalents include cash in hand and cash at bank which are available for use by the Company without any restriction. There is an insignificant risk of changes in value of these current assets. 3.6 Liabilities, provisions and disclosures There are no other material liabilities or gains or loss contingencies that are required to be accrued or disclosed, other than those accrued or disclosed in the financial statements, nor there are any accruals for loss contingencies included in the statement of financial position that are not in conformity with the Company’s existing practices. The company follows shariah based rules, so the income from non shariah based Banking & financial institutions has not been recognized as income. Hence, this income has been mention as income suspense account in other liability. 3.7 Corporate income tax Income tax withheld from the transactions of traded securities @ 0.05% as per section 53BBB is the final tax liability of the company under section 82C of Income Tax Ordinance 1984. Income tax provision is made on capital gains on sale of shares of listed securities @ 10% as per SRO No. 269/Law/Income Tax/2010 dated 1 July 2010 whereas it is to pay @35% on other income as per income tax law. 3.8 Revenue recognition Revenue is recognized only when it is probable that the economic benefits associated with the transaction will flow to the company and the amount of revenue can be measured reliably. Revenue recognition policy on specific item is described as under: (i) Brokerage commission is recognized as income when selling or buying order is executed. (ii) Income from profit bearing Bank Account is recognized on accrual basis. (iii) Capital gains on sale of securities are recognized when these are realized. 3.9 Earnings per share (EPS) The Company calculates Earnings per Share (EPS) in accordance with BAS 33: Earnings per Share, which has been shown on the face of Statement of Profit or Loss and Other Comprehensive Income, and the computation of EPS is stated in related note. 3.10 Statement of cash flows Statement of cash flows is prepared principally in accordance with BAS -7 “ Statement of Cash Flows” and cash flows from operating activities have been presented under direct method. 3.11 Related party disclosure under BAS - 24 List of related parties with whom transactions have taken place and their relationship as identified and certified by management : Name of related party Relationship SHAHJALAL ISLAMI BANK LTD. Parent Company 3.12 General (i) The figures in the financial statements represent Bangladesh currency (Taka), which have been rounded off to the nearest Taka. (ii) Previous year’s figures have been rearranged/ reclassified/ regrouped, where necessary, to confirm to current year’s financial presentation. 300 Shahjalal Islami Bank Limited Annual Report 2017
  303. Shahjalal Islami Bank Limited Annual Report 2017 301 14 ,042,518 2,724,827 16,767,345 5,514,883 Total as at 31 December 2016 71,275,061 - 76,789,944 52,268,612 41,288,677 93,557,289 10% or 20% 20% Addition Sales/ Balance during the Adjustas at Rate (%) year ment 31.12.2017 COST Furniture and fixtures 38,226,094 Office equipment 38,563,850 Total as at 31 December 2017 76,789,944 Particulars Balance as at 01.01.2017 4. Property, plant and equipment As at 31 December 2017 Fixed Assets Schedule As at 31 December 2017 Fixed Assets Schedule 29,224,061 14,095,042 21,722,222 35,817,264 Balance as at 01.01.2017 6,593,203 3,116,512 3,577,408 6,693,920 Charged during the year DEPRECIATION SHAHJALAL ISLAMI BANK SECURITIES LTD. - - Adjustment 35,817,264 17,211,554 25,299,630 42,511,184 Balance as at 31.12.2017 40,972,680 35,057,058 15,989,047 51,046,105 Written Down value as at 31.12.2017 Amount in Taka
  304. 2017 Taka 5 . Investment in Stock Exchange Membership Membership license-DSE (Note-5.1) Membership license-CSE (Note-5.2) 362,000,000 156,500,000 518,500,000 2016 Taka 362,000,000 156,500,000 518,500,000 5.1 As per the provision of the Exchange Demutualization Act, 2013 and in accordance with the Bangladesh Securities and Exchange Commission (BSEC) approved Demutualization Scheme, Dhaka Stock Exchange allotted 7,215,106 ordinary Shares of Taka 10 each and Trading Right Entitlement Certificate (TREC) in favour of the company against the membership of DSE. Out of the total 7,215,106 Shares DSE transferred and credited 2,886,042 shares directly to Company’s Beneficiary Owners’ (BO) Account and rest 4,329,064 shares were credited to the “Demutualization Blocked Account” maintained by the DSE. 5.2 As per the provision of the Exchange Demutualization Act, 2013 and in accordance with the Bangladesh Securities and Exchange Commission (BSEC) approved Demutualization Scheme, Chittagong Stock Exchange allotted 4,287,330 ordinary Shares of Taka 10 each and Trading Right Entitlement Certificate (TREC) in favour of the company against the membership of CSE. Out of the total 4,287,330 Shares CSE transferred and credited 1,714,932 shares directly to Company’s Beneficiary Owners’ (BO) Account and rest 2,572,398 shares were credited to the “Demutualization Blocked Account” maintained by the CSE. 6. Investment Investment to clients Investment to executive car finance scheme 7. Investment in securities Cost value of securities (annexure-A) Add: Deposit for application of right share/IPO 3,267,905,887 1,510,800 3,269,416,687 3,755,495,358 3,755,495,358 913,056,491 1,391,989 914,448,480 1,322,580,256 30,100,638 1,352,680,894 This represent investment in securities at cost Tk.913,056,490.64 market value of which is Tk. 900,636,295.10 as at 31 December 2017. Unrealized loss stood at Tk.12,420,195.54 against which Tk. 65,000,000 has been maintained as provision as mentioned under note -14. These exists surplus of Tk.52,579,804.00 against the required provision It may be mentioned here that The Bangladesh Securities and Exchange Commission vide its Directives no. BSEC/ CMRRCD/2009-193/62 dated 28 December 2017 allowed the stock dealer to provide the loss on investment in securities in 5 quarters in equal amount (20%) beginning from December 2017 to December 2018. 8. Trade and other receivables Advances, deposits & prepayments (Note-8.1) Accounts receivable (Note-8.2) 8.1 Advances, deposits & prepayments Advance office rent Advance commission for bank guarantee Prepaid expenses Security deposit Advance income tax (Note-8.1 .1) 302 238,507,084 1,928,037,034 2,166,544,118 189,780,037 2,381,036,870 2,570,816,907 7,300,810 1,150,000 2,166,928 230,400 227,658,946 238,507,084 3,956,470 1,643,386 390,000 230,400 183,559,781 189,780,037 Shahjalal Islami Bank Limited Annual Report 2017
  305. 2017 Taka 8 .1.1 Advance income tax Opening Balance Add: Paid during the year Closing Balance 2016 Taka 183,559,781 44,099,165 227,658,946 125,605,063 57,954,718 183,559,781 1,891,570,122 546,617 35,797,273 123,022 1,928,037,034 2,322,301,923 410,122 15,997,686 42,327,139 2,381,036,870 412,994,289 412,994,289 381,221,166 381,221,166 393,408,115 14,251 15,790 96,240 19,182,364 277,529 412,994,289 376,062,425 4,740,195 142,320 97,390 82,970 95,866 381,221,166 10. Share capital Authorized 500,000,000 ordinary shares of Tk. 10 each 5,000,000,000 5,000,000,000 Issued, Subscribed and Paid up: 274,000,000 ordinary shares of Tk. 10 each 2,740,000,000 2,740,000,000 No. of Shares 2017 251,500,000 1,250,000 1,250,000 1,250,000 1,250,000 1,250,000 2,515,000,000 12,500,000 12,500,000 12,500,000 12,500,000 12,500,000 2,515,000,000 12,500,000 12,500,000 12,500,000 12,500,000 12,500,000 1,250,000 12,500,000 12,500,000 8.2 Accounts receivable Profit receivable Receivable from Shahjalal Islami Bank Limited Receivable from DSE Receivable from CSE 9. Cash and cash equivalents Cash in hand Cash at Banks (Note-9.1) 9.1 Cash at banks Shahjalal Islami Bank Limited One Bank Limited Al-Arafah Islami Bank Limited Commercial Bank of Ceylon Social Islami Bank Limited Prime Bank Limited Shareholding Position: Sl. Name of Shareholders 1 2 3 4 5 6 7 Shahjalal Islami Bank Limited Alhaj Sajjatuz Jumma Alhaj Anwer Hossain Khan Alhaj Mohammed Faruque Alhaj Tofazzal Hossain Electra International Ltd. (Represented by : Alhaj Md. Sanaullah Shahid) Shams Uddin Khan And Harun Miah Ltd. (Represented by : Alhaj Shams Uddin Khan) Shahjalal Islami Bank Limited Annual Report 2017 303
  306. 8 9 10 11 12 13 14 15 16 17 18 19 Alhaj Mohammed Farooq Alhaj Mohammed Hasan Alhaj Md . Abdul Barek Mrs. Shahan Ara Begum Anwer Khan Modern Hospital Ltd. (Represented by: M. Shamsul Huq) Alhaj Abdul Halim Alhaj Mohiuddin Ahmed Alhaj Akkas Uddin Mollah Alhaj Khandoker Sakib Ahmed Alhaj Engr.Md.Towhidur Rahman Alhaj A. K. Azad Alhaj Mohammed Younus 2017 Taka 2016 Taka 1,250,000 1,250,000 1,250,000 1,250,000 1,250,000 12,500,000 12,500,000 12,500,000 12,500,000 12,500,000 12,500,000 12,500,000 12,500,000 12,500,000 12,500,000 1,250,000 1,250,000 1,250,000 1,250,000 1,250,000 1,250,000 1,250,000 274,000,000 12,500,000 12,500,000 12,500,000 12,500,000 12,500,000 12,500,000 12,500,000 2,740,000,000 12,500,000 12,500,000 12,500,000 12,500,000 12,500,000 12,500,000 12,500,000 2,740,000,000 250,000,000 255,000,000 300,000,000 805,000,000 650,000,000 700,000,000 4,336,661 300,000,000 1,654,336,661 1,466,789,084 1,216,685,041 2,683,474,125 1,683,092,705 1,680,457,995 3,363,550,700 365,832,381 720,133 1,097,433 1,063,059,276 36,079,861 1,466,789,084 243,795,946 27,731,947 2,452,300 1,352,959,318 56,153,194 1,683,092,705 885,127,287 177,931,989 1,063,059,276 885,027,329 467,931,989 1,352,959,318 20,922,248 12,146,207 331,784,174 518,500,000 1,379,100 395,558 885,127,287 20,922,248 12,146,207 331,784,174 518,500,000 1,379,100 295,600 885,027,329 11. Short term borrowings SJIBL, Bai-muazzal (Commercial) investment Social Islami Bank Ltd., Bai- Muazzal ( Revolving ) investment Borrowing from ICB Prime Bank Ltd., Bai- Muazzal ( Revolving ) investment 12. Trade and other Payables Accounts payable (Note-12.1) Other liabilities (Note-12.2) 12.1 Accounts payable Payable to client Payable to DSE Payable to CSE Payable to Shahjalal Islami Bank Limited (Note-12.1.1) Other payable (Note-12.1.2) 12.1.1 Payable to Shahjalal Islami Bank Limited Payable for others (Note-12.1.1.1) Profit Payable for margin investment 12.1.1.1 Payable for others Furniture & fixture Office equipment Profit prior to separation from bank Membership purchase (DSE & CSE) Incentive bonus -2012 Other expenditure 304 Shahjalal Islami Bank Limited Annual Report 2017
  307. 12 .1.2 Other payable Profit payable to SJIBL Bai- Muzzal (Commercial) investment Profit payable to SIBL Bai- Muzzal ( Revolving ) investment Profit payable to PBL Bai- Muzzal ( Revolving ) investment 12.2 Other liabilities Accrued expenses VAT payable Office rent payable Tax payable Leave fare assistance payable Income suspense account Profit suspense account Security deposit Payable for Initial Public Issue (IPO) process Payable to SJIBL for miscellaneous expenses Cash dividend received on margin account 13. Provision for income tax Opening Balance Add: Provision made during the year Closing Balance 14. Provision for investment in securities Opening Balance Add: Provision made during the year Closing Balance 15. Provision for margin investment Opening balance Add: Transfer from provision for incentive bonus Provision made during the year Closing balance 2017 Taka 2016 Taka 620,139 7,834,722 27,625,000 36,079,861 7,037,917 47,438,194 1,677,083 56,153,194 901,705 288,258 1,403,890 209,463 1,349,530 16,651,626 1,194,759,678 25,128 9,017 1,086,746 1,216,685,041 1,890,551 301,266 831,098 129,943 1,285,662 16,651,626 1,592,856,965 54,518 66,405,000 38,396 12,970 1,680,457,995 211,046,488 82,787,438 293,833,926 176,639,152 34,407,336 211,046,488 65,000,000 65,000,000 65,000,000 65,000,000 423,620,900 425,000,000 423,620,900 (1,379,100) 423,620,900 The market value of shares of the client account having negative equity stood at Tk. 3,215,617,606 as on December 31, 2017 against equity investment Tk. 3,756,795,614 leaving a shortfall of Tk.1,176,196,089. If the market price of the shares go up in future this equity erosion will be reduced.The company has also maintained provision for margin investment Tk. 423,620,900 as mentioned under note-15 and profit suspense Tk. 1,194,759,678 under note-12.2. The Bangladesh Securities and Exchange Commission vide its Instruction no. BSEC/CMRRCD/2009-193/62 dated 28 December 2017 allowed the stock broker to provide the loss on margin investment in 5 quarters in equal amount (20%) beginning from December 2017 to December 2018. During the year the company has written off Tk.333,742,568.00 from margin account (Negative equity account) by using profit suspense of Tk. 266,024,563 and the rest amount of Tk. 67,718,005 by charging as loss in the Profit and Loss account. Shahjalal Islami Bank Limited Annual Report 2017 305
  308. 2017 Taka 16 . Brokerage commission Commission income through DSE Commission income through CSE 17. Other operating income Capital gain on sale of shares Dividend income 18. Operating expenses Rent, taxes, insurance, electricity etc. (Note-18.1) Legal and professional expenses Postage, stamp, telecommunication etc. (Note-18.2) Stationery, printing & advertisement (Note-18.3) Depreciation, repairs & maintenance (Note-18.4) Other operating expenses (Note-18.5) 18.1 Rent, taxes, insurance, electricity etc. Office rent Electricity & generator Insurance for motor vehicle Fuel 18.2 Postage, stamp, telecommunication etc. Revenue stamp Telephone & mobile Networking Postage & Courier 18.3 Stationery, printing & advertisement Office stationery Other stationery Paper expenses Advertisement Printing Computer Accessories 18.4 Depreciation, repairs & maintenance Depreciation Repair & maintenance 306 2016 Taka 200,714,329 4,617,886 205,332,215 116,968,159 3,353,222 120,321,381 109,739,471 56,972,807 166,712,278 39,846,593 66,537,370 106,383,963 17,534,706 7,475 2,570,931 1,409,446 7,258,347 102,152,482 130,933,387 15,398,848 324,250 2,571,397 1,384,292 6,744,226 83,960,382 110,383,395 14,897,880 2,409,667 61,815 165,344 17,534,706 13,094,422 2,124,035 122,226 58,165 15,398,848 26,045 817,173 1,691,800 35,913 2,570,931 16,031 793,055 1,684,800 77,511 2,571,397 153,923 118,318 325,628 336,130 427,088 48,359 1,409,446 129,050 96,050 245,286 517,658 364,672 31,576 1,384,292 6,693,920 564,427 7,258,347 6,593,203 151,023 6,744,226 Shahjalal Islami Bank Limited Annual Report 2017
  309. 2017 Taka 18 .5 Other expenses Commission expenses Conveyance Travelling and conveyance Uniform Water bill Trade license renewal fee Training expense Bank charge Excise duty Entertainment Howla charge Laga charge Audit fee BO A/C maintenance fee CDBL transaction fee Loss for written off margin investment Service charge Utility bill Directors fee Software Expenses Car Maintenance Miscellaneous expenses 19. Other income Margin documentation fee BO account opening fee Income from CDBL Cheque dishonor fee BO account maintenance charge BO account closing fee Profit on special notice deposit Miscellaneous income Income from IPO process Notice pay earning 20. Office and administrative expenses Basic salary Allowances Bonus Contribution to provident fund Other allowance Office maintenance Shahjalal Islami Bank Limited Annual Report 2017 2016 Taka 2,333,386 167,364 98,279 51,452 504,008 546,110 29,000 58,741 161,950 1,712,969 67,448 15,372,948 39,500 3,386,000 8,614,430 67,718,005 120,000 17,015 310,500 126,000 21,862 695,515 102,152,482 541,612 133,810 61,793 7,990 285,700 879,245 31,000 46,781 113,900 1,433,352 64,608 8,379,200 39,500 3,153,500 5,385,402 62,033,042 142,650 18,640 448,000 131,670 35,400 593,587 83,960,382 21,000 458,000 1,527,036 62,000 4,371,000 50,571 4,150,684 79,755 280,050 11,000,096 2,000 327,500 853,326 83,000 4,194,000 30,437 1,896,904 292,500 91,640 7,771,307 17,828,330 22,843,672 7,020,927 1,651,255 150,000 1,662,402 51,156,586 14,053,145 19,899,713 2,269,925 1,360,470 1,462,902 39,046,155 307
  310. 2017 Taka 21 . Financial expenses Profit paid on Bai-muazzal (Commercial ) TR investment, SIBL Profit paid on Bai-muazzal (Revolving) investment, AIBL Profit paid on ICB Profit paid on Bai-muazzal ( Commercial) TR investment, SJIBL Profit paid on Bai-muazzal TR investment, PBL 22. Earnings per share Net profit attributable to ordinary shareholders Number of ordinary shares outstanding 2016 Taka 22,633,606 26,984 46,544,027 35,432,638 104,637,255 47,438,194 68,704,061 670,083 109,142,759 1,677,083 227,632,180 296,888,472 274,000,000 1.08 111,811,607 274,000,000 0.41 23. RELATED PARTY TRANSACTION The related party’s transaction is given below during this financial year: Related Party Name Relationship SHAHJALAL ISLAMI BANK LTD. Parent Company Period Payable Current year 1,063,059,276 546,617 Short Term Borrowing with profit 250,620,139 Last year 1,352,959,318 410,122 657,037,917 Receivables 24. Event after the reporting period: (i) The Board of Directors in its meeting held on 28 March 2018 approved the financial statements of the company for the year ended 31 December 2017 and authorized the same for issue. (ii) The Board of Directors of the company at its 49 th meeting held on 28 March 2018 has recommended 10% cash dividend for the year 2017. This is subject to the approval by the shareholders at the forthcoming Annual General Meeting (AGM) of the company. Chief Executive Officer Vice Chairman Chairman Place: Dhaka, Bangladesh Dhaka, 28 March 2018 308 Shahjalal Islami Bank Limited Annual Report 2017
  311. Annexure-A Shahjalal Islami Bank Securities Ltd . Investment in securities As at 31 December 2017 Sl. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Name Of The Company BXPHARMA DESCO ENVOYTEX FAREASTLIF ISLAMIINS ORIONPHARM PADMALIFE POWERGRID PRIMELIFE RAKCERAMIC SHASHADNIM SAPORTL TAKAFULINS DACCADYE TITASGAS NAHEEACP OIMEX Grand Total Shahjalal Islami Bank Limited Annual Report 2017 31.12.2017 Cost Value 9,206,849.80 56,700,119.90 49,502,891.38 55,898,738.65 4,452,876.12 54,309,616.24 41,230,608.46 19,249,782.30 43,350,416.59 37,532,282.97 185,084,354.38 44,240,391.61 12,963,468.37 112,370,345.99 186,836,701.93 62,245.95 64,800.00 913,056,491 Amount in Taka 31.12.2017 Market Value 9,383,104.80 54,480,000.00 40,194,556.80 48,605,700.00 8,857,420.00 51,495,526.10 50,200,000.00 18,270,000.00 31,704,750.00 34,861,800.00 321,123,820.00 34,300,000.00 16,578,552.00 40,383,750.00 139,230,000.00 502,569.80 464,745.60 900,636,295 309
  312.  CHAPAINAWABGANJ      310 Shahjalal Islami Bank Limited Annual Report 2017
  313.   Dhaka Zone : Chittagong Zone : Khulna Zone : Sylhet Zone : Rajshahi Zone : Barisal Zone : Shahjalal Islami Bank Limited Annual Report 2017 60 Branches 25 Branches 07 Branches 07 Branches 11 Branches 03 Branches 311
  314. Branches Dhaka Zone Dhaka Main Branch 58 Dilkusha C /A, Dhaka-1000 Phone: 02-9570795-8, 9570804, 9570805 Fax: 02-9556011 e-mail: dhakamain@sjiblbd.com Moulvi Bazar Branch (Former Mitford Branch) Moulvi Bazar Tower, 69, 70 Moulvi Bazar, Dhaka Phone: 02-7313788, 7315533 Fax: 02-7315534 e-mail: mitford@sjiblbd.com Dhanmondi Branch Momtaz Plaza (1st Floor), House # 07, Road # 04 Dhanmondi R/A, Dhaka-1205 Phone: 02-9665766-7, Fax: 02-57315534 e-mail: dhanmondi@sjiblbd.com Gulshan Branch 40/5 North Avenue, Gulshan-2, Dhaka-1212 Phone: 02-9890520-1, 9893454, 9890322 Fax: 02-9893008 e-mail: gulshan@sjiblbd.com Foreign Exchange Branch Modern Mansion (1st & 2nd Foor) 53 Motijheel C/A, Dhaka-1000 Phone: 02-9574726-28, Fax: 02-9574729 e-mail: fex@sjiblbd.com Joydevpur Chowrasta Branch Khaleque Complex (1st Foor) Joydevpur Chowrasta, Gazipur Phone: 02-9262393-4, Fax: 02-9262393 e-mail: jcb@sjiblbd.com Kawran Bazar Branch T K Bhaban, 13 Kazi Nazrul Islam Avenue Kawran Bazar, Dhaka Phone: 02-9114044, 9122396, Fax: 02-9126604 e-mail: kawran@sjiblbd.com Uttara Branch Anwar Complex (1st Foor), House # 12 Road # 14/C, Sector # 4, Uttara Model Town Dhaka-1230 Phone: 02-8932084, Fax: 02-8953586 e-mail: uttara@sjiblbd.com Bangshal Branch 215/1 Bangshal Road, Dhaka-1100 Phone: 02-9552922, Fax: 02-7172910 e-mail: bangshal@sjiblbd.com Baipail (Dhaka EPZ) Branch Swapneel Tower (1st Floor), Baipail, DEPZ, Savar, Dhaka Phone: 02-7788292, Fax: 02-7790517 e-mail: baipail@sjiblbd.com Narayanganj Branch Osman Tower 56/1 S. M. Maleh Road, Narayanganj Phone: 02-7635172, Fax: 02-7635173 e-mail: narayanganj@sjiblbd.com Satmasjid Road Branch Khuda Buksh Foundation (1st Floor) Road # 11/A, House # 99, Dhanmondi, Dhaka-1209 Phone: 02-9127931, 9129848, Fax: 02-9129848 e-mail: satmasjid@sjiblbd.com Banani Branch Ataturk Tower (1st Floor), 22 Kamal Ataturk Avenue Road # 17, Banani, Dhaka-1213 Phone: 02-9820627-8, 9820625 Fax: 02-9820626 e-mail: banani@sjiblbd.com Joypara Branch Monowara Mansion (1st Floor) Joypara, Dohar, Dhaka Phone: 02-7768155, Fax: 02-7768155 e-mail: joypara@sjiblbd.com Motijheel Branch Karim Chamber (Ground & 1st Floor) 99 Motijheel C/A, Dhaka-1000 Phone: 02-9563156, 9562763, Fax: 02-9564029 e-mail: motijheel@sjiblbd.com Mirpur Branch Saleha Complex (1st & 2nd Floor), Holding # 142/1 Begum Rokeya Sarani, Ward # 14, Mirpur-10 Phone: 9012962-3, 9012045, Fax: 88-02-9012857 e-mail: mirpur@sjiblbd.com 312 Shahjalal Islami Bank Limited Annual Report 2017
  315. Savar Branch Bismillah Super Market (1st Floor) B-71/1 & B-72/1 Bazar Road, Savar, Dhaka Phone: 02-7742894-5, Fax: 02-7742893 e-mail: savar@sjiblbd.com Bijoynagar Branch MCT Ally’s Center (1st Floor) 40 Bijoynagar, Kakrail, Dhaka-1000 Phone: 02-9335771, 9344867, Fax: 02-9344867 e-mail: bijoy@sjiblbd.com Progati Sarani Branch Confidence Center (1st Floor), Kha-9, Progati Sarani Gulshan, Dhaka-1229 Phone: 02- 9852248-9, Fax: 02- 9852247 e-mail: progati@sjiblbd.com Keranigonj Branch Ma Plaza (1st Floor), Shahid Nagar Keranigonj, Dhaka Phone:02-7762293, 7762291, Fax: 02-7762292 e-mail: keranigonj@sjiblbd.com Mymensingh Branch Noor Fatema Tower (1st Floor) 25 Shawdeshi Bazar, Mymensingh Phone: 091-64397, Fax: 091-62370 e-mail: mymensingh@sjiblbd.com Panthapath Branch ENA Tower, Di-Olie (1st Floor), 57/3, 57/4 Lake Circus Road Kolabagan, Dhanmondi, Dhaka-1212 Phone: 02-9137723, 9133746 Fax: 02-9133745 e-mail: panthapath@sjiblbd.com College Gate Branch Union Center (1st Floor) 1/5 Mohammadpur Housing Estate, Mirpur Road, Dhaka Phone : 02-9136291, 8150232, Fax: 02-9136197 e-mail: collegegate@sjiblbd.com Baruakhali Branch Baruakhali High School Market (1st Floor) P.S.: Nababganj, P.O.: Baruakhali, Dhaka Mobile: 01755556136 e-mail: baruakhali@sjiblbd.com Madhabdi Branch M. B. Tower (1st floor), Holding no.-256, Par Kashipur Road, Madhabdi Bazar, Madhabdi, Narsingdi Phone: 01755556137, 01755556237, 9446166 (PABX), 9446017, Fax: 9446167 madhabdi@sjiblbd.com Ashkona Branch City Port, 398 Ashkona Bazar Road (Haji Camp), Dhaka Phone: 02-8956762, Fax: 02-7911606 e-mail: ashkona@sjiblbd.com Barachowna Bazar Branch Barachowna Bazar, P.S.: Shakhipur, Tangail Phone: 0755556145 e-mail: barachowna@sjiblbd.com Shafipur Branch A-62 Haji Osman Market, Shafipur Bazar, Kaliakair, Gazipur Phone: 06822-51864-6, Fax- 06822-51867 e-mail: shafipur@sjiblbd.com Gulshan South Avenue Branch Nasa Heights, Holding No-47, Gulshan Avenue Gulshan-1, Dhaka-1212 Phone: 02-9847406, Fax: 02-58816560 e-mail:gsa@sjiblbd.com Tongi SME/Agri Branch Rupali Plaza (1st Floor), Holding No. 24 Anarkoli Road, Tongi Bazar, Tongi, Gazipur Phone: 02-9817393, PABX: 9817391-2, Fax: 02-9817394 e-mail: tongi@sjiblbd.com Bhaluka SME/Agri Branch Masud Market (1st Floor), Holding No. 58 Bhaluka, Mymensingh Phone: 09022-56175, Fax- 09022-56237 e-mail: bhaluka@sjiblbd.com Eskaton Branch Eskaton Fantasia (1st Floor) 122 & 123 New Eskaton, Dhaka Phone: 02-9355681, 8316973, Fax: 02-9355672 e-mail: eskaton@sjiblbd.com Mawna Branch N.S. Bhaban (1st Floor), Mawna Chowrasta, Sreepur, Gazipur Phone: 06825-55026, Fax: 06825-53905 e-mail: mawna@sjiblbd.com Faridpur Branch 110 Thana Road (1st & 2nd Floor), Faridpur Phone: 0631-67156, 0631-67155, Fax: 0631-67154 e-mail: faridpur@sjiblbd.com Shahjalal Islami Bank Limited Annual Report 2017 313
  316. Tangail Branch Nirala Complex (1st & 2nd Floor) Nirala More, Main Road, Tangail Phone: 0921-62434, Fax- 0921-62435 e-mail: tangail@sjiblbd.com Shikarpur Nimtola Branch Eajuddin Mollah Super Market (1st Floor) 573 Shirajdikhan, Keyan, Munshigonj Cell: 01755556165 e-mail: nimtola@sjiblbd.com Mohakhali Branch Venture Tower (1st & 2nd Floor), Plot-03, Bir Uttam A.K. Khandaker Road; Mohakhali C/A, Dhaka-1213 Phone: 01755556169, 01755556269, 9888586, 9884782, 9884784, Fax: 02 9881103 e-mail: mohakhali@sjiblbd.com Nawabpur Road Branch Fazlur Rahman Plaza (1st Floor) 218 Nawabpur Road, Dhaka Phone: 02-7125943, 7125947, Fax: 02-7125982 e-mail: nawabpur@sjiblbd.com Uttara Ladies Branch Solar Trade Center (1st & 2nd Floor), Plot #16, Sector #11 Garib-E-Newaz Avenue, Uttara, Dhaka-1230 Phone: 02-8991901-2, Fax: 02-8991902 e-mail: uttaraladies@sjiblbd.com Malibagh Chowdhurypara Branch Holding # 34-B (1st Floor), DIT Road Malibagh Chowdhurypara, Khilgaon, Dhaka-1219 Phone: 02-9357317, 02-8319725, Fax: 02-9334356 e-mail: malibagh@sjiblbd.com Haluaghat Branch Uttar Bazar, Haluaghat Sadar, Haluaghat, Mymensingh Phone: 0902656136, Mob: 01755556177 e-mail: haluaghat@sjiblbd.com Karatia Branch Karatia Bazar (Karatia Bus Stand), Karatia, Tangail Mob: 01755556178 e-mail: karatia@sjiblbd.com Nawabgonj Branch Isamoti Plaza (1st Floor), Baghmara Bazar, Kolakopa Nawabgonj, Dhaka Phone: 02-7765286, 7765289, Fax: 02-7765287 e-mail: nawabgonj@sjiblbd.com Sarulia Branch Khandaker Super Market (1st & 2nd floor) Khandaker Moor, Tengra Road, Sarulia Bazar, Demra, Dhaka Phone: 02-7500669 (Dir.), 02-7501002 (PABX) Fax: 88-02-7500654 e-mail: sarulia@sjiblbd.com Donia Branch Fatema Monjil (1st Floor) 436 Donia, Zia Sarani Moor, Kadamtoli, Dhaka Phone: 02-7549878, 02-7549873, Fax: 02-7549878 e-mail: donia@sjiblbd.com Jamalpur Branch Haji Market (1st floor), 84-85 Jam-e-Masjid Road Jamalpur Sadar, Jamalpur Phone: 09816-4990, 09816-4978, Fax: 09816-5022 e-mail: jamalpur@sjiblbd.com Nagarpur Branch Refaz Uddin Plaza (1st Floor), 369 Sadar Road Nagarpur, Tangail Phone: 09233-73212, 09233-73214 Mobile: 01755556186, Fax: 09233-73213 e-mail: nagarpur@sjiblbd.com Bandura Branch Roksana Shopping Complex and Pawl & Elizabeth Holy Garden (1st Floor), 592 Old Bandura Bazar Bandura, Nawabgonj, Dhaka Phone: 01755-556187 e-mail: bandura@sjiblbd.com Elephant Road Branch Fahim Mansion (1st Floor), 23 Elephant Road New Market, Dhaka-1205 Phone: 02-967710, 9673176 Fax: 02-9663236, Mobile: 01755-556190 e-mail: elephantrd@sjiblbd.com Manikgonj Branch Salam Tower (1st Floor), 168 Shaheed Rafique Road Manikgonj Sadar, Manikgonj Phone: 7711211, 7711620 Fax: 7711783, Mobile: 01755556192 e-mail: manikgonj@sjiblbd.com 314 Shahjalal Islami Bank Limited Annual Report 2017
  317. Dighirpar Branch Dighirpar Bus Stand , Mulchor Tongibari, Munshigonj Mobile: 01755556193 e-mail: dighirpar@sjiblbd.com Charbhadrasan Branch Charbhadrasan Bazar, Charbhadrasan, Faridpur Phone: 01755556196, 06325-56012 (Direct) 06325-56013 (PABX), Fax: 06325-56014 e-mail: charbhadrasan@sjiblbd.com Jurain Branch Rezia Alam Shopping Complex (1st Floor), Holding No.-414/2 New Jurain, Alambagh Road, Kadamtoli Dhaka-1204 Phone: +88 01755556199 e-mail: jurain@sjiblbd.com Chalakchar Branch Chalakchar Bus Stand, Chalakchar Monohardi, Narsingdi Phone: 01755556402 e-mail: chalakchar@sjiblbd.com Chinishpur Branch Kafil Uddin Mansion (1st Floor), Nandipara Velanagar, Narsingdi Sadar, Narsingdi Phone: 01755556403, 029451960(PABX) 029451957(Direct), Fax: 029451959 e-mail: chinishpur@sjiblbd.com Shahjalal Islami Bank Tower Branch Shahjalal Islami Bank Tower Plot No: 4, CWN(C), Gulshan Avenue, Dhaka-1212. Phone: 01755556404 e-mail: towerbranch@sjiblbd.com Ati Bazar Branch Shah Alam Tower, 65 Ati Bazar Main Road Keraniganj, Dhaka, Phone: 01755556405, 01755556455 e-mail: atibazar@sjiblbd.com Panchabati Branch Mirbaksh Plaza, Panchabati, Fatulla Narayanganj, Bangladesh Phone: 01755556406 e-mail: panchabati@sjiblbd.com Kalihati Branch Haji Samad Shopping Complex 116 Kalihati Bus Stand, Kalihati, Tangail Phone: 01755556408, 09227-74625, 09227-74016 e-mail: kalihati@sjiblbd.com Sherpur Branch Bhasha Sainik Shafiuddin Bhaban 187 C&B Road, Sherpur Phone: 01755556409 e-mail: sherpur@sjiblbd.com Chittagong Zone Agrabad Branch Delwar Building, 104 Agrabad C/A, Chittagong Phone: 031-2523050-3, Fax: 031-716960 e-mail: agra@sjiblbd.com Khatungonj Branch 398/A Khatungonj (1st & 2nd Floor), Chittagong Phone: 031-637256, 637275, 637257, Fax: 031-637281 e-mail: khatungonj@sjiblbd.com Jubilee Road Branch Haque Tower (1st Floor), 610/11 Jubilee Road, Chittagong Phone: 031-2853151-2, Fax: 031-2853153 e-mail: jubilee@sjiblbd.com Muradpur Branch Shiraj Shopping Complex (1st Floor), 85 Muradpur, Chittagong Phone: 031-2552589-91, Fax: 031-2552592 e-mail: muradpur@sjiblbd.com Comilla Branch Salahuddin Complex (1st & 2nd Floor) Monohorpur Chowmuhoni, Laksam Road, Comilla Phone: 081-61655, Fax: 081-61545 e-mail: comilla@sjiblbd.com Ashugonj Branch Doctor Plaza (1st Floor), Kachari Road, Ashugonj Phone: 08528-74103 Fax- 08528-74104 e-mail: ashugonj@sjiblbd.com Nazirhat Branch B. A. Center (1st Floor), Nazirhat, Fatikchhari, Chittagong Mobile: 01755556147 e-mail: nazirhat@sjiblbd.com Chawkbazar Branch 2 Chawkbazar, kapashgola Road, Chittagong Phone: 0312-865281-2, Fax: 0312-865284 e-mail: chawkbazar@sjiblbd.com Shahjalal Islami Bank Limited Annual Report 2017 315
  318. Ramgonj Branch Islam Plaza (1st Floor), 85 Sonapur Bazar Ramgonj, Laksmipur Phone: 0382-475405, Fax: 0382-475072 e-mail: ramgonj@sjiblbd.com Cox’s Bazar Branch A. B. Super Market (1st Floor) 145 Laldighirpar, Cox’s Bazar Phone: 0341-52031, Fax: 0341-52032 e-mail: coxsbazar@sjiblbd.com Brahmanbaria Branch City Center Shopping Complex (2nd Floor) 1072 Court Road, Brahmanbaria Phone: 0851-61170, Fax: 0851-61370 e-mail: bbaria@sjiblbd.com Bandartila Branch Zalal Plaza (1st Floor), 311 Bandartila Sailor’s Colony, Chittagong Phone: 031-741174, 031-741203, Fax: 031-741195 e-mail: bandartila@sjiblbd.com Chowmuhani Branch Ali Bhaban (1st & 2nd Floor), 1523 Karimpur Road Chowmuhani, Begumganj, Noakhali Phone: 0321-56646, Fax: 0321-56645 e-mail: chowmuhani@sjiblbd.com Hajigonj Branch Maa Mansion (1st & 2nd Floor) 622 Hajigonj, Chandpur Phone: 08424-75138, Fax: 08424-75139 e-mail: hajigonj@sjiblbd.com Laxmipur Branch Haider Shopping Complex (2nd Floor) 339 Hospital Road, Laxmipur Sadar, Laxmipur Phone: 0381-62306-8, Fax: 0381-61360 e-mail: laxmipur@sjiblbd.com Feni Branch 295-2 & 202 S. S. K. Road (1st & 2nd Floor) Feni Sadar, Feni Phone: 0331-69021-2, Fax: 0331-73372 e-mail: feni@sjiblbd.com Madunaghat Branch Abul Farah Market (1st Floor), Madunaghat Bazar Road Madarsha, Hathazari, Chittagong Phone: 031-2573261-2, Fax: 031-2573264 e-mail: modunaghat@sjiblbd.com WASA Moor Branch Mim Hasnat Tower (1st Floor), 88 High Level Road WASA Moor, Lalkhan Bazar, Chittagong Phone: 031-633060-1, Fax: 031-633062 e-mail: wmoor@sjiblbd.com Anderkilla Branch Pubali Art Press Bhaban (1st Floor) 320 Anderkilla, Chittagong Phone: 031-2869703, 031-2869701-2, Fax: 031-2869704 e-mail: anderkilla@sjiblbd.com Dattapara Branch Chowdhury Bhaban (1st Floor), 549 Dattapara Road Dattapara Bazar, Laxmipur Sadar, Laxmipur Mobile: 01755556188 e-mail: dattapara@sjiblbd.com Gunabati Branch Faraiji Shopping Complex (1st Floor), College Road Gunabati, Chouddagram, Comilla Mobile: 01755556189 e-mail: gunabati@sjiblbd.com Pahartoli Branch Nazir Saleh Complex (1st Floor) 612/544 D. T. Road, Pahartoli, Chittagong Phone: 03127-73872-3, FAX- 03127-73875 e-mail: pahartoli@sjiblbd.com Dashgharia Branch Nur Shopping Complex, Paniwala Road, Dashgharia Bazar, Chatkhil Noakhali, Bangladesh Phone: 01755556410 e-mail: dashgharia@sjiblbd.com Mainamati Branch A.M. Haji Market, Nishchintapur Mainamati Cantonment, Comilla Phone: 01755556411 e-mail: mainamati@sjiblbd.com Halishahar Branch Shahidullah Bhaban, 1764/1/2221, North Agrabad, Doublemuring, Chittagong Phone: 01755556412 e-mail: halishahar@sjiblbd.com 316 Shahjalal Islami Bank Limited Annual Report 2017
  319. Khulna Zone Khulna Branch 4 KDA Avenue , Khulna Phone: 041-2830458-60 Fax: 041-2830457 e-mail: khulna@sjiblbd.com Jessore Branch Sadhinata Castle (1st & 2nd Floor) 91 M.K. Road, Kotowali, Jessore Phone: 0421-64641, 0421-65385, Fax: 0421-65386 e-mail: jessore@sjiblbd.com Kaligonj Branch Munsur Plaza (1st Floor) 162 Madhugonj Bazar, Kaligonj, Jhenaidah Phone: 04523-56677, Fax: 04523-56678 e-mail: kaligonj@sjiblbd.com Kushtia Branch 7 N. S. Road (1st & 2nd Floor) Kushtia Sadar, Kushtia Phone: 071-63094, 071-63103, Fax: 071-63095 e-mail: kustia@sjiblbd.com Chuadanga Branch Malik Tower (1st & 2nd Floor) 43 & 107 Shaheed AK Road, Chuadanga Phone: 0761-81015, 0761-81013-4, Fax: 0761-81016 e-mail: chuadanga@sjiblbd.com Chuknagar Branch Azad Plaza (1st floor), Chuknagar Bazar Atlia, Dumuria, Khulna Phone: 01973-772727, 01755556197 e-mail: chuknagar@sjiblbd.com Hat Gopalpur Branch Shahjalal Shopping Complex, Padmakar, Jhenaidah Sadar, Jhenaidah Phone: +88 01755556400 e-mail: hatgopalpur@sjiblbd.com Sylhet Zone Beani Bazar Branch City Centre Bhaban (1st Floor) Beani Bazar Market, Beani Bazar, Sylhet Phone: 08223-56134, Fax: 08223-56133 e-mail: beani@sjiblbd.com Sylhet Branch Al-Falah Tower (1st Floor) Dhupadighir Purbopar, Kotowali, Sylhet Phone: 0821-725115, Fax: 0821-725225 e-mail: sylhet@sjiblbd.com Dargah Gate Branch 297 Amberkhana, Dargah Gate, Airport Road, Sylhet Phone: 0821-727234 Fax: 0821-814277, Mobile: 01755556112 e-mail: dargah@sjiblbd.com Moulvibazar Branch 286/300 Ahmed Mansion (1st Floor) Saifur Rahman Road, Moulvibazar-3200 Phone: 0861-62874-6, Fax- 0861-62875 e-mail: moulvi@sjiblbd.com Goalabazar Branch Afzal Mansion (1st Floor), Goala Bazar P.O.: Goala Bazar, P.S.: Osmani Nagor, Sylhet Phone: 08242-56307, Fax: 08242-56238 e-mail: goalabazar@sjiblbd.com Subidbazar Branch Merlin Tower, Holding No: 7746, Sunamganj Road, Sylhet Phone: 880 821 727407-8 (PABX), 880 821 727462 (Direct) 01755556194 e-mail: subidbazar@sjiblbd.com Habiganj Branch Harun Tower, 3679-01 B Zaman, Khan Road, Habiganj, Bangladesh Phone: 01755556413 e-mail: habiganj@sjiblbd.com Shahjalal Islami Bank Limited Annual Report 2017 317
  320. Rajshahi Zone Saidpur Branch Saidpur Plaza (1st Floor), Sher-e-Bangla Road, Saidpur, Nilphamari Phone: 05526-73025, Fax: 05526-73027 e-mail: saidpur@sjiblbd.com Rajshahi Branch Habib Plaza (1st Floor), 111 Shaheb Bazar, Zero Point, Rajshahi Phone: 0721-772402, Fax: 0721-772427 e-mail: rajshahi@sjiblbd.com Bogra Branch Nurul Hoque Tower (1st Floor) 357/395, Boro Gola More, Bogra Phone: 051-67206, 051-67646, Fax: 051-67205 e-mail: bogra@sjiblbd.com Naogaon Branch Holding# 33/66 (1st Floor) Naogaon Main Road, Chawkdev, Naogaon Phone: 0741-62174, Fax: 0741-61496 e-mail: naogaon@sjiblbd.com Dinajpur Branch Holding No. 887/848 (1st Floor) Gonesh Tola, Kotowali, Dinajpur Phone: 0531-52052-3, Fax: 0531-52054 e-mail: dinajpur@sjiblbd.com Rangpur Branch Motahar Commercial Complex (1st Floor) Jahaj Company Moor, GL Roy Road, Rangpur Phone: 0521-63012, 0521-67901, Fax: 0521-63082 e-mail: rangpur@sjiblbd.com Sirajgonj Branch Siddique Plaza (1st Floor) 122 S. S. Road, Sirajgonj Phone: 0751-64722 (Dir.), 0751-64720 (PABX) Fax: 0751-64733 e-mail: sirajgonj@sjiblbd.com Chapainawabganj Branch G. R. Bhaban (1st Floor), 62 Godagari Road, Baro Indara Moor Chapainawabganj Sadar, Chapainawabganj Phone: 0781-51571, 0781-51572 Fax: 0781-51573, Mobile: 01755556185 e-mail: chapainganj@sjiblbd.com Thakurgaon Branch Galary Complex, 722 Bangabandhu Road, Thakurgaon Phone: +88 01755556195 e-mail: thakurgaon@sjiblbd.com Pabna Branch J. P. Super Market (1st floor), 985 M. M. Ali Road, Delalpur, Pabna Phone: 01874-799051, 01755556198 e-mail: pabna@sjiblbd.com Joypurhat Branch Tofayel Complex, 173/1 & 203, Sadar Road, Joypurhat, Bangladesh e-mail: joypurhat@sjiblbd.com Barisal Zone Khepupara Branch 116 Oil Mill Road, Khepupara, Patuakhali Phone: 04425-56507, Fax: 04425-56508 e-mail: khepupara@sjiblbd.com Barisal Branch Hawladar Plaza (1st & 2nd Floor) 475 K. B. Hemayet Uddin Road, Barisal Phone: 0431-2177505, 62138, Fax: 0431-62262 e-mail: barisal@sjiblbd.com Amtali Branch N Islam Mansion, Holding No-189/1, New Bazar Hospital Road, Amtali, Barguna Phone: 01755556401, 04452-56116, 56117(PABX), 04452-56114(Direct) Fax: 0445256115 amtali@sjiblbd.com 318 Shahjalal Islami Bank Limited Annual Report 2017
  321. Off-Shore Banking Unit Shahjalal Islami Bank Tower Plot No .-04, Block-CWN(C), Gulshan Avenue, Dhaka-1212 Phone: 88-02-9845457 (Hunting) Shahjalal Islami Bank Securities Limited Main Office Jiban Bima Bhaban, Front Block (4th Floor) 10 Dilkusha Commercial Area, Dhaka-1000 Phone : 02-9577564, Fax: 02-7161877 Extension of Main Office Karim Chamber (1st Floor) 99 Motijheel C/A, Dhaka 1000 Phone: 02-7113825, Fax: 02-7161877 Dhaka Zone Gulshan Unit Jabbar Tower (4th Floor), 42 Gulshan Avenue Road No. 135, Gulshan-1, Dhaka-1212 Phone: 02-9861338, 9860950, Fax: 02-9860423 College Gate Unit Union Center (1st Floor), 1/5 Mohammadpur Housing Estate, Mirpur Road, Dhaka Phone: 02-8156267, 9110323 Savar Unit Sk. Purnima View, House No. 87/A (1st Floor) Bazar Road, Savar, Dhaka Phone: 02-7744108, 7744109, Fax: 02-7744107 Uttara Unit Tropical Rafa Tower (3rd Floor) Plot No. 02, Road No. 12, Sector- 6, Uttara, Dhaka Phone: 02-8963046, 8963276, Fax: 02-8960376 Chittagong Zone Agrabad Unit Delwar Building 104 Agrabad C/A, Chittagong Tel: 031-2528353, Fax: 031-2528352 Chawkbazar Unit 2 No. Chawkbazar (3rd Floor) Kapashgola Road, Chittagong Phone: 031-626403, 031-626402, 626404 Sylhet Zone Sylhet Unit Al-Falah Tower (1st Floor), East Dhopa Dighir Paar, Sylhet Phone: 0821-720966, Fax: 0821-720711 Shahjalal Islami Bank Limited Annual Report 2017 319
  322. ATM Location Dhaka Zone Gulshan ATM Booth 40 /5, North Avenue, Gulshan-2, Dhaka-1212 Dhanmondi ATM Booth Momtaz Plaza, House # 07, Road # 04, Dhanmondi R/A, Dhaka Dilkhusha ATM Booth 58 Dilkusha C/A, Dhaka-1000 Motijheel ATM Booth Karim Chamber, 99, Motijheel C/A, Dhaka Anwer Khan Mordern Hospital & College ATM Booth Road No.-08, Dhanmondi, Near Mirpur Road, Dhaka Gulshan South Avenue ATM Booth Nasa Heights, Holding No-47, Gulshan Avenue, Gulshan-1, Dhaka-1212 Tangail ATM Booth Nirala Complex, Par Dihgulia, Tangail Savar ATM Booth Bismillah Super Market, Holding no.:71/1&72/1, Savar Shafipur ATM Booth A-62 Haji Osman Market,Shafipur Bazar,Kaliakair, Gazipur Wari ATM Booth 24/C, Ranking Street Wari Dhaka Uttara ATM Booth Anwer Complex, House#12,Road#14/C, Sec#04, Ward#01 Uttara Model Town, Dhaka Uttara (Ladies Branch) ATM Booth Solar Trade Center, Plot No.: 16, Sector: 11, Garib-E-Newaz Avenue Uttara Residential Area , Uttara, Dhaka Malibag Chowdhury Para ATM Booth 34/B, DIT Road, Malibag Chowdhury Para, Dhaka Karatia ATM Booth Plot-584/587, Karatia Bazar, Tangail Sarulia ATM Booth Khandaker Super Market, Khandar Moor, Tanra Road, Ward-05 Union- Sarulia, PO- Sarulia Bazar, Demra, Dhaka Joypara ATM Booth Monowara Mansion, Joypara, Dohar, Dhaka Haluaghat ATM Booth Kamar Potti, Halua Ghat, Halua Ghat Sadar, Mymensing Baruakhali ATM Booth Baruakhali high school market, Baruakahli, Nobabgong, Dhaka Shikarpur Nimtola ATM Booth Eajuddin Mollah Super Market (Ground floor floor), 573 Shirajdikhan Keyan, Munshigonj Mymensingh ATM Booth Mymensingh College Super Market, Holding: 42/2, Rambabu Road, Mymensingh Sadar, Mymensingh Nagarpur ATM Booth Refaz Uddin Plaza (1st Floor), 369 Sadar Road, Nagarpur, Tangail Baipail ATM Booth Swapneel Tower, Baipail, Ashulia, Dhaka EPZ, Savar, Dhaka Ha-Meem Group ATM Booth 1 407 Tejgoan Industrial Area, Dhaka-1208 Banani ATM Booth Ataturk Tower (1st floor) 22 Kamal Ataturk Avenue, Banani Dhaka-1213 Ha-Meem Group ATM Booth 2 407 Tejgoan Industrial Area, Dhaka-1208 320 Shahjalal Islami Bank Limited Annual Report 2017
  323. Narayangonj ATM Booth Osman Tower , 56/1 SM Maleh Road, Narayangonj Incepta_HO ATM Booth Incepta Pharmaceuticals Ltd. Head Office 40, Shahid Tajuddin Ahmed Sarani, Tejgaon, I/A, Dhaka Aswad_Mawna_1 ATM Booth Aswad Composit Mills, 1317, Beraider Chala, Sreepur, Gazipur Aswad_Mawna_2 ATM Booth Aswad Composit Mills, 1317, Beraider Chala, Sreepur, Gazipur Incepta_Manikgong ATM Booth Incepta Pharmaceuticals Ltd. Factory: Krishnapura, Shahabelishwar Dhanrai, Dhaka Al-Razzak Bangshal ATM Booth Hotel Al-Razzak (Pvt) Ltd, 29/1, North South Road, Bangshal, Dhaka Charbhadrasan ATM Booth Charbhadrasan Bazar, Charbhadrasan, Faridpur Joydevpur Chowrasta Branch ATM Khaleque Complex (1st floor), Joydevpur Chowrasta, Gazipur SJIBL Incepta_Savar_01 ATM Incepta Pharmaceuticals Ltd, Dewan Idris Road, Boro Rangamati Jirabo, Savar, Dhaka SJIBL Incepta_Savar_02 ATM Incepta Pharmaceuticals Ltd, Dewan Idris Road, Boro Rangamati Jirabo, Savar, Dhaka SJIBL Tower ATM Shahjalal Islami Bank Tower, Plot No: 4, CWN(C) Gulshan Avenue, Dhaka-1212. Elephant Road Branch ATM Booth Fahim Mansion (1st Floor), 23 Elephant Road, New Market, Dhaka-1205 Ati Bazar Branch ATM Booth Shah Alam Tower, 65 Ati Bazar Main Road, Keraniganj, Dhaka Kalihati Branch ATM Booth Haji Samad Shopping Complex, 116 Kalihati Bus Stand, Kalihati, Tangail Anowara ATM Booth Anowara Knit Composite Limited, Mulayed, Mawna, Sreepur, Gazipur Jurain Branch ATM Booth Rezia Alam Shopping Complex (1st Floor), Holding No.-414/2, New Jurain, Alambagh Road, Kadamtoli, Dhaka-1204 Chittagong Zone Agrabad ATM Booth 104, Agrabad C/A, Chittagong Chawkbazar ATM Booth 2 Chawkbazar, Kapashgola Road, Chittagong Bandartila ATM Booth Zalal Plaza, 311 Bandartila, Sailor’s Colony, Chittagong Laxmipur ATM Booth Ali-Haidar Shopping Complex, Holding No.#339, Hospital Road P.O+P.S: Laxmipur, Ward No#07, Dist-Laxmipur Hajigong ATM Booth Holding No.-622,P.O+P.S-Hajigong, Ward No.-06, Chadpur Brahmanbaria ATM Booth City Center Shopping Complex, 1072 Court Road Chowmuhuni ATM Booth Ali Bhaban, 1523 katimpur Road, Chowmuhuni, Begumganj, Noakhali Comilla ATM Booth Comilla Tower, Lakxam Road, Comilla Gunabati ATM Booth Faraiji Shopping Complex (1st Floor), College Road, Gunabati, Chouddagram, Comilla Shahjalal Islami Bank Limited Annual Report 2017 321
  324. Feni Branch ATM Booth Star Line Complex , 314/1, S.S.K Road, Feni Dashgharia Branch ATM Booth Nur Shopping Complex, Paniwala Road, Dashgharia Bazar, Chatkhil, Noakhali Halishahar Branch ATM Booth Shahidullah Bhaban, 1764/1/2221 North Agrabad, Doublemuring, Chittagong Sylhet Zone Sylhet ATM Booth Star view Tower, Sylhet Al-Falah ATM Booth Dhopa Dighirpar, Sylhet Darghagate Branch ATM Booth Amin Complex, 80/A-1, Waves, Airport Road, Amberkhana, Sylhet Habiganj Branch ATM Booth Harun Tower, 3679-01 B Zaman Khan Road, Habiganj Khulna Zone Khulna ATM Booth Moon Mansion, 10 KDA Avenue Moylapota More, Khulna Jessore ATM Booth Sadhinata Bhaban, Holding no:91, M.K. Road. Kotawaly, Jessore Kushtia ATM Booth Shop No.#09, Chowdhury Super Market, 1-Sir Sayed Ahammed Road Panch Raster more/Sapla more, Thana para, Kushtia Chuadanga ATM Booth Malik Tower, Holding No-43 & 107, Chuadanga Chuknagar ATM Booth Azad Plaza (1st floor), Chuknagar Bazar, Atlia, Dumuria, Khulna Hat Gopalpur Branch ATM Booth Shahjalal Shopping Complex, Padmakar, Jhenaidah Sadar, Jhenaidah Rajshahi Zone Bogra ATM Booth Nurul Haque Tower, 357/395, Boro Gola Mor, Bogra Rajshahi ATM Booth Al-Helal Super Market (Ground Floor) shop No.-02, Sahebbazar, P.S- Blia, Rajshahi Naogoan ATM Booth 3366 Chawkdeb, Naogaon, Dist: Naogaon Saidpur ATM Booth Saidpur Plaza(1st Floor), Sere Bangla Road Saidpur, Nilphamari Dinajpur ATM Booth T&T Road, South Munshi para, Bahadur Bazar, Dinajpur Chapainawabgonj ATM Booth Monsur Mansion, Boro Indra Mor, Chapinawabgonj sador, Chapinawabgonj-6300 Rangpur ATM Booth Shalek Pump, Station Road, Rangpur Thakurgaon ATM Booth Galary Complex, Bango Bando Road, Thakurgaon Pabna ATM Booth J. P. Super Market (1st floor), 985 M. M. Ali Road, Delalpur, Pabna Bogra ATM 2 Booth House No. 511/579, Khandar Mor, Carmichael Road, Ward No. 9, Bogra Sadar, Bogra Barishal Zone Amtali Branch ATM Booth 322 N Islam Mansion, Holding No-189/1, New Bazar Hospital Road, Amtali, Barguna Shahjalal Islami Bank Limited Annual Report 2017
  325. Shahjalal Islami Bank Limited Registered Office : Shahjalal Islami Bank Tower, Plot No.-04, Block-CWN(C), Gulshan Avenue, Dhaka-1212 PROXY FORM I/We -------------------------------------------------------------------------------------------------------------- of (address) -------------------------------------------------------------------------------------------------------------------being the Member of Shahjalal Islami Bank Limited do hereby appoint Mr./Mrs.------------------------------------------------------------------------------------------------------------------------------------------- of (address) -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------as my/our proxy on my/our behalf to attend and vote for me/us at the 17th Annual General Meeting to be held on Sunday the 08th July 2018 at 09.00 am at the RAOWA Convention Hall No.1 (HELMET), VIP Road, Mohakhali, Dhaka-1206 at any adjournment thereof. ------------------------------------------------------------------------------------------------------------- Signed this ------------------------------------------------------------- day of ----------------------------------------- 2018. ----------------------------------------------------------- ----------------------------------------------------- (Signature of the Member) (Signature of the Proxy) Affix Revenue Stamp of Tk. 20.00 BO ID No. of Member Signature Verified by -------------------------------------------------------------------------- -------------------------------------------------------------------------- (Signature of the Member) Authorized Signatory of the Bank Notes:  This Proxy Form, duly filled and stamped, must be deposited at least 72 (seventy two) hours before scheduled time of the meeting at the Company’s Share Department.  Signature of the Shareholders should match with the specimen signature registered with the Company/Depository Participant(s). Shahjalal Islami Bank Limited Registered Office: Shahjalal Islami Bank Tower, Plot No.-04, Block-CWN©, Gulshan Avenue, Dhaka-1212 ATTENDANCE SLIP I do hereby record my attendance at the 17th Annual General Meeting to be held on Sunday the 08th July 2018 at 09.00 am at the RAOWA Convention Hall No.1 (HELMET), VIP Road, Mohakhali, Dhaka-1206. Name of the Member/Proxy (in Block Letter) BO ID No. of Member Signature Verified by -------------------------------------------------------------------------- -------------------------------------------------------------------------- (Signature of the Member/Proxy) Authorized Signatory of the Bank Note:  Any friend or children accompanying with the honorable Shareholder/Proxy will not be allowed to attend the meeting. evsjv‡`k wmwKDwiwUR GÛ G·‡PÄ Kwgk‡bi wb‡`©kbv Abyhvqx Avmbœ evwl©K mvaviY mfvq †kqvi‡nvìvi‡`i Rb¨ †Kvb ai‡bi Dcnvi/Lvevi/Kzcb cÖ`v‡bi e¨e¯’v _vK‡e bv|
  328. 326 Shahjalal Islami Bank Limited Annual Report 2017