Sindh Bank: Unconsolidated Condensed Interim Financial Information For The Half Year Ended 30 June 2017

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2. Contents Vision and Mission Statements ...............................................................................02 Corporate Information............................................................................................. 03 Directors’ Report (English).......................................................................................04 Directors’ Report (Urdu)...........................................................................................08 Independent auditors' review report to the members ..............................................14 Unconsolidated Condensed Interim Statement of Financial Position......................15 Unconsolidated Condensed Interim Profit and Loss Account..................................16 Unconsolidated Condensed Interim Statement of Comprehensive Income............17 Unconsolidated Condensed Interim Cash Flow Statement.................................... 18 Unconsolidated Condensed Interim Statement of Changes In Equity.................... 19 Notes to and forming part of the Unconsolidated Condensed Interim Financial Statements ............................................................................................. 20 Consolidated Condensed Interim Statement of Financial Position..........................43 Consolidated Condensed Interim Profit and Loss Account .....................................44 Consolidated Condensed Interim Statement of Comprehensive Income................45 Consolidated Condensed Interim Cash Flow Statement........................................ 46 Consolidated Condensed Interim Statement of Changes In Equity ....................... 47 Notes to and forming part of the Consolidated Condensed Interim Financial Statements.............................................................................................. 48 Branch Network.......................................................................................................65 01
3. Vision & Mission Statements VISION Our vision is to be a leading bank which would play a positive role to generate economic activities for empowering the people by meeting their financial needs for running a successful business and create employment opportunities. MISSION To develop as a leading Commercial Bank in the country by meeting its stated objectives of promoting economic development of the country in general and in the Province of Sindh in particular. 02
4. Corporate Information Board of Directors Afzal Ghani Syed Hasan Naqvi Mohammad Shahid Murtaza Muhammad Naeem Sahgal Tajammal Husain Bokharee Raja Muhammad Abbas Muhammad Bilal Sheikh Tariq Ahsan Chairman / Independent Director Non Executive Director Non Executive Director Independent Director Independent Director Independent Director Non Executive Director President & CEO Chief Financial Officer Saeed Jamal Tariq Company Secretary Shamsuddin Khan Auditors EY Ford Rhodes Chartered Accountants Legal Advisors Mohsin Tayebaly & Co Shares Registrar Central Depository Company of Pakistan Limited Registered/Head Office 3rd, Floor Federation House Abdullah Shah Ghazi Road Clifton, Karachi-75600 UAN:+92-21-111-333-225 Fax:+92-21-35870543 Registration Number 0073917 NTN Number 3654008-7 Website www.sindhbankltd.com 03
5. Directors ' Report On behalf of the Board of Directors of Sindh Bank Limited I am pleased to present the financial results for the half year ended June 30, 2017. Review of performance is presented below. Financial Highlights Total Deposits increased by 8.3 percent to Rs. 129.0 billion compared to Rs. 119.0 billion on December 31, 2016. Government of Sindh, Finance Department deposits constituted 15.3 percent of the total deposits as compared to 16.7 percent on December 31, 2016. Number of customer accounts stood at 449,712 after addition of over 31,258 accounts (i.e. increase of 7.5 percent) during the period. Gross Advances increased by 18.7 percent to Rs. 66.5 billion from Rs. 56.0 billion as at December 31, 2016 whereas there was a nominal change in the Investment portfolio (excluding those utilized for Repo borrowings) comprising mainly of Government Securities. Pre-tax profit for the half year amounted to Rs.1,400.4 million increasing by 15.2 percent over Rs.1,215.2 million earned in the same period last year. Summary of financial performance is as follows: (Rs. in '000) Balance Sheet Paid up Capital Reserves & un-appropriated profits Paid up Capital & Reserves Surplus on Revaluation-net of tax Equity Deposits Investment (net of repos) Gross Advances Profit & Loss Account Markup/return/interest income Markup/return/interest expensed Net markup/profit/interest income Non-mark-up/non-interest income Capital gains & Dividends Fee, Commission & Other Income Non mark-up/interest expenses Provisions Provisions-general Provision-specific Profit before Tax Profit After Tax Earnings per share (Rupees) Other Information No. of Accounts Number of Branches 04 As on June 30, 2017 As on December 31, 2016 %age Change 10,010,130 6,139,164 16,149,294 342,306 16,491,601 128,953,526 70,286,386 66,474,477 Half Year ended June 30, 2017 10,010,130 5,386,723 15,396,853 134,032 15,530,885 119,022,240 70,290,533 55,979,573 Half Year ended June 30, 2016 13.97% 4.89% 5,299,881 2,820,014 2,479,867 1,086,038 783,265 302,773 2,095,258 70,233 293 69,940 1,400,414 752,441 0.75 4,920,865 2,842,777 2,078,088 2,126,538 1,892,159 234,379 1,896,976 1,092,478 1,000,189 92,289 1,215,172 604,919 0.60 As on June 30, 2017 449,712 260 As on June 30, 2016 385,845 250 6.19% 8.34% 18.75% %age Change 19.33% -48.92% 10.45% 15.24% 24.39% 25% %age Change 16.55% 4%
6. Net markup /interest income increased by 19.3 percent compared to the same period last year. This is a trend reversal from last year, where a slight decline was witnessed which augurs well for the Bank as it adds to its core income. Non-markup/interest income decreased by 48.9 percent mainly due to reduction in gains on sale of investments of Rs. 699.1 million, compared to Rs.1,829.4 million last year because of lower gains on Government Securities (PIBs). Fee and Other income increased by 29.2 percent over the same period last year. Economic Review During FY 2016, Pakistan's economy recorded an eight year high GDP growth of 4.7 percent. Preliminary estimates of FY 2017 show GDP growth to be 5.3 percent, a ten year high. Industrial sector witnessed growth of 5.0 percent compared to 5.8 percent in the last fiscal, however large scale manufacturing (LSM) growth statistics till May 2017 indicate YOY growth of 5.7 percent against 3.4% last year. Agriculture sector achieved its target growth of 3.5 percent, much better that the growth of 0.3 percent recorded in FY 2016 while services sector surpassed its target of 5.7 percent for FY 2017 and recorded 6.0 percent growth as compared to 5.6 percent last year. Average CPI inflation for the first 10 Months of FY 2017 was 4.1 percent compared to 2.8 percent during the same period last year which was within SBP's forecast range for the period. The rise is attributed to uptick in global commodity and oil prices along with rise in domestic demand. There was no change in Policy Rate during the half year which remains at an all-time low of 5.75 percent. SBP is projecting average CPI inflation in the range of 4.5 - 5.5 percent for FY 2018. On the external front, the current account deficit reached US$ 12.1 billion during FY 2017. While exports and workers' remittances declined, imports surged by 17.7 percent during FY 2017, owing mainly to machinery imports both for CPEC and non-CPEC energy and infrastructure projects, whereas, imports for plant up-gradation under the ongoing export package for the textiles sector also added pressures. Subsequent statistics indicate that the declining trend in exports appears to have bottomed out. FX reserves as at end of FY 2017 closed at US$ 21.4 billion, down from US$ 23.1 billion at end of FY 2016. The decline is attributed to Euro Club Loan Payments, withdrawal of Chinese government deposit with SBP and external debt servicing. PSX 100 index ended the half year at 46,565 points, decreasing by 2.6 percent over 47,807 points at December 31, 2016. Technical correction and uncertainty surrounding the country in the aftermath of the Panama case decision appears to be weighing down on the index post June 30, 2017. Credit Rating JCR-VIS Credit Rating Company has assigned the Bank medium to long term entity rating of 'AA' (Double A) and short term rating of 'A-1+' (A One Plus), with a 'Rating Watch-Developing' status due to the proposed merger of Summit Bank into Sindh Bank and surviving entity being Sindh Bank. IT Initiatives Establishing a robust IT platform has been one of the strategic pillars of the Bank to achieve the key goal of customer convenience and delivery of innovative services. Towards this end, the Bank's Core Banking Software was upgraded with SOA (service-oriented architecture) which will ensure higher availability of system in branches. Further, to facilitate the Bank's increased emphasis in the consumer financing segment, an Auto Loan module has been added to the Core Banking system to improve operating efficiency and ensure efficient service delivery. PayPak Debit Card in 'Classic' and 'Gold' categories have been launched. PayPak is Pakistan's first ever domestic payments card which will facilitate local vendors and customers by virtue of lower merchant and issuance fees, not to mention the savings in the Country's foreign exchange. 05
7. VISA Debit card in the 'Classic', 'Gold' and 'Platinum' categories have been launched. VISA card uses EMV (Euro Master Visa) chip technology making it more secure and less prone to frauds, including skimming. Debit cards issued by the bank now total 228,113 which include cards issued for BISP, ZAKAT, VISA, Union Pay and PayPak. Another 14 ATMs were added to the Bank's network during the half year which totaled 239 at June 30, 2017. More than 170,000 customers are enjoying Sindh Bank's state of the art, SMS banking services. Sindh Bank is ranked 9th amongst Institutions providing utility bill collection services out of a total of 35 participating institutions. Sindh Microfinance Bank Limited Sindh Microfinance Bank Limited (SMFB), the Bank's wholly owned subsidiary started microfinance operations in May 2016 with an objective to serve less-privileged segment of our society. As a rare example in Microfinance sector, from very first month of its operations, SMFB has been running a profitable operation with capital and reserves of Rs.785.81 million as at June 30, 2017. SMFB has been focusing on its flagship loan product branded as 'SUJAG AURAT' (which means 'Visionary Woman') which is designed exclusively for women empowerment. However, another product namely "Fisheries Loan" in the category of non-farm Agri loan, has also been launched recently. With the cumulative loan disbursement of over Rs. 260 million, the total outstanding loans disbursed as of June 30, 2017 stood at Rs. 182.23 million to 12,458 female borrowers. Due to strict risk control measures, there were no Non-Performing Loans (NPLs) / Over-dues outstanding as on June 30, 2017. SMFB has Six (6) branches and Twenty (21) Micro-credit centers, mostly in rural and far-flung parts of Sindh, like Mithi, Islamkot, Umarkot, Golarchi, Kunri, Digri, Mirpur Sakro, and other similar areas. SMFB plans to add four more branches and 19 more Micro-credit centers in various towns and cities of Sindh taking the tally to 10 branches and 40 Micro-credit centers by the end of this year. Future Outlook Going forward, the global forecasts project a positive outlook with both growth and international trade picking up in FY2018. Based on this assessment coupled with positive domestic policy measures, Pakistan's exports are expected to post gains. Imports on the other hand, albeit at a slower pace, are also expected to grow in line with continuation of CPEC related activities and improving economic growth. Process of potential amalgamation/merger of Summit Bank into Sindh Bank Limited is on track and subject to required corporate and regulatory approvals is expected to be completed in the coming period. The Bank is pursuing a comprehensive bank-wide strategy aimed at increasing business volumes, increasing Net Interest/Markup Income and fee based income which includes increasing advances, improving profitability of established branches and launching new depository and loan products aimed at the consumer segment. 40 branches are planned to be opened in the coming period, thereby expanding the Bank's network to 300 online branches. 06
8. Acknowledgements On behalf of the Board of Directors , I would like to sincerely thank the regulators, shareholders and customers for their continued guidance, support and confidence reposed in the Bank and its Management. My thanks to the staff of Sindh Bank whose team spirit, hard work and commitment has enabled the Bank to achieve these excellent results in such a short time. I am hopeful that they will continue to serve the Bank with the same zeal and spirit. On behalf of the Board of Directors Tariq Ahsan President/CEO Karachi, August 28, 2017 07
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15. AUDITORS ' REPORT TO THE MEMBERS ON REVIEW OF INTERIM FINANCIAL INFORMATION 14
16. Unconsolidated Condensed Interim Statement of Financial Position as at 30 June 2017 June 30 , December 31, 2017 2016 (Un-audited) (Audited) Note ASSETS Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments - net Advances - net Operating fixed assets Deferred tax assets - net Other assets 6 7 8 9 10 11 12 ------ (Rupees in ‘000) -----10,490,701 1,117,128 355,158 87,402,106 62,257,853 1,678,153 1,107,235 4,609,089 169,017,423 7,500,675 791,478 6,938,610 71,539,737 51,833,182 1,825,483 1,190,485 4,735,723 146,355,373 988,884 20,476,379 128,953,526 2,107,033 152,525,822 714,212 8,910,738 119,022,240 2,177,298 130,824,488 16,491,601 15,530,885 10,010,130 1,351,300 4,787,864 16,149,294 342,307 10,010,130 1,200,812 4,185,911 15,396,853 134,032 16,491,601 15,530,885 LIABILITIES Bills payable Borrowings from financial institutions Deposits and other accounts Sub-ordinated loans Liabilities against assets subject to finance lease Deferred tax liability Other liabilities 13 14 15 NET ASSETS REPRESENTED BY: Share capital Reserves Unappropriated profit 16 Surplus on revaluation of assets - net of tax 17 CONTINGENCIES AND COMMITMENTS 18 The annexed notes from 1 to 30 form an integral part of this unconsolidated condensed interim financial information. President & Chief Executive Officer Chairman Director Director 15
17. Unconsolidated Condensed Interim Profit and Loss Account (Un-audited) For the half year ended 30 June 2017 Half year ended June 30, June 30, 2017 2016 Quarter ended June 30, June 30, 2017 2016 Note ------------------ (Rupees in ‘000) -----------------Mark-up / return / interest earned Mark-up / return / interest expensed Net mark-up / return / interest income Provision against non-performing loans and advances Provision against advances - general Provision against consumer and small enterprise advances Provision for diminution in the value of investments Bad debts written off directly 19 20 5,299,881 2,820,014 2,479,867 4,920,865 2,842,777 2,078,088 2,809,617 1,488,218 1,321,399 2,544,186 1,438,518 1,105,668 10.4 69,940 - 92,289 1,000,000 56,920 - 35,596 475,000 10.4 293 70,233 189 1,092,478 298 57,218 198 510,794 2,409,634 985,610 1,264,181 594,874 250,087 84,136 44,930 699,129 201,891 62,801 30,009 1,829,358 125,009 69,835 16,489 166,139 129,117 1,650 11,407 735,349 7,756 1,086,038 3,495,672 2,479 2,126,538 3,112,148 3,524 380,996 1,645,177 555 878,078 1,472,952 2,095,190 68 2,095,258 1,400,414 1,400,414 1,896,953 23 1,896,976 1,215,172 1,215,172 1,082,580 1,082,580 562,597 562,597 1,034,232 5 1,034,237 438,715 438,715 516,534 160,336 (28,897) 647,973 793,255 184,845 (367,847) 610,253 209,994 160,336 (15,646) 354,684 329,187 184,845 (175,545) 338,487 752,441 604,919 207,913 100,228 0.75 0.60 0.21 0.10 Net mark-up / return / interest income after provisions NON MARK-UP / INTEREST INCOME Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Gain on sale / redemption of securities - net Unrealised gain on revaluation of investments classified as held-for-trading Other income Total non mark-up / interest income NON MARK-UP / INTEREST EXPENSES Administrative expenses Other provisions / write-offs Other charges Total non mark-up / interest expenses 21 22 Extraordinary / unusual items PROFIT BEFORE TAXATION Taxation - Current - Prior years - Deferred PROFIT AFTER TAXATION Basic and diluted earnings per share (Rupee) 23 The annexed notes from 1 to 30 form an integral part of this unconsolidated condensed interim financial information. President & Chief Executive Officer 16 Chairman Director Director
18. Unconsolidated Condensed Interim Statement of Comprehensive Income (Un-audited) For the half year ended 30 June 2017 Half year ended June 30, June 30, 2017 2016 Quarter ended June 30, June 30, 2017 2016 ------------------ (Rupees in ‘000) -----------------Profit after taxation for the period 752,441 604,919 207,913 100,228 Other comprehensive income Components of comprehensive income reflected in equity Items that will be reclassified subsequently to profit and loss account - - - - Items that will not be reclassified subsequently to profit and loss account - - - - Total comprehensive income for the period transferred to equity 752,441 604,919 207,913 100,228 320,424 (112,149) 208,275 1,452,916 (508,521) 944,395 53,156 (18,605) 34,551 617,613 (216,164) 401,449 960,716 1,549,314 242,464 501,677 Components of comprehensive income reflected below equity Items that will be reclassified subsequently to profit and loss account : Surplus on revaluation of investments Related tax effects Total comprehensive income The annexed notes from 1 to 30 form an integral part of this unconsolidated condensed interim financial information. President & Chief Executive Officer Chairman Director Director 17
19. Unconsolidated Condensed Interim Statement of Cash Flows (Un-audited) For the half year ended 30 June 2017 Note CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation Less: Dividend income Adjustments for: Depreciation Amortization Provision against non-performing advances - net Provision against advances - general Provision against consumer & small enterprise advances Gain on disposal of operating fixed assets (Increase) / decrease in operating assets Lendings to financial institutions Advances - net Other assets (excluding advance taxation) Increase / (decrease) in operating liabilities Bills payable Borrowings Deposits and other accounts Other liabilities (excluding current taxation) Income tax paid Net cash flows generated from / (used in) operating activities CASH FLOWS FROM INVESTING ACTIVITIES Net investment in available-for-sale securities Net investment in held-to-maturity securities Dividend income received Investment in operating fixed assets Sale proceeds from disposal of operating fixed assets Net cash flows (used in) / generated from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in cash and cash equivalents Cash and cash equivalents at beginning of the period Cash and cash equivalents at end of the period 24 June 30, June 30, 2017 2016 ------ (Rupees in ‘000) -----1,400,414 (84,136) 1,316,278 1,215,172 (62,801) 1,152,371 180,704 14,688 69,940 293 (2,413) 263,212 1,579,490 184,783 16,739 92,289 1,000,000 189 (758) 1,293,242 2,445,613 6,583,452 (10,494,904) 152,104 (3,759,348) (1,176,095) (7,379,513) 557,214 (7,998,394) 274,672 11,565,641 9,931,286 (132,992) 21,638,607 19,458,749 (614,145) 18,844,604 718,238 (11,961,985) 15,080,351 (258,415) 3,578,189 (1,974,592) (628,052) (2,602,644) (5,808,738) (9,733,207) 58,666 (50,308) 4,659 (15,528,928) 3,315,676 8,292,153 11,607,829 3,415,347 (153,069) 62,801 (211,080) 2,414 3,116,413 513,769 6,383,687 6,897,456 The annexed notes from 1 to 30 form an integral part of this unconsolidated condensed interim financial information. President & Chief Executive Officer 18 Chairman Director Director
20. Unconsolidated Condensed Interim Statement of Changes in Equity (Un-audited) For the half year ended 30 June 2017 Share capital Reserves Capital Share Statutory Premium Reserve * Revenue Unappropriated Profit** Total -------------------------(Rupees in ‘000)------------------------Balance as at 1 January 2016 10,000,000 - 922,596 3,076,915 13,999,511 604,919 604,919 604,919 604,919 Comprehensive Income Profit after taxation for the half year ended 30 June 2016 Other comprehensive income Transfers Transfer to statutory reserve Balance as at 30 June 2016 Comprehensive Income Profit after taxation for the half year ended 31 December 2016 Other comprehensive loss Transfers Transfer to statutory reserve Issue of share capital Balance as at 31 December 2016 Comprehensive Income Profit after taxation for the half year ended 30 June 2017 Other Comprehensive income Transfers Transfer to statutory reserve Balance as at 30 June 2017 * 10,000,000 - 120,984 (120,984) - 1,043,580 3,560,850 14,604,430 785,907 (3,665) 782,242 785,907 (3,665) 782,242 - - - - 10,130 51 10,010,130 51 - - - - 10,010,130 - 51 157,181 (157,181) 1,200,761 - - - - 10,181 4,185,911 15,396,853 752,441 752,441 752,441 752,441 150,488 (150,488) 1,351,249 4,787,864 16,149,294 Statutory reserve represents amount set aside as per the requirements of section 21 of the Banking Companies Ordinance, 1962. ** As more fully explained in note 10.3 of this unconsolidated condensed interim financial information, unappropriated profit includes an amount of Rs.1,113.84 million net of tax as at June 30, 2017 (December 31, 2016: Rs.472.71 million) representing additional profit arising from availing forced sale value benefit for determining provisioning requirement which is not available for the purpose of distribution of dividend to shareholders. The annexed notes from 1 to 30 form an integral part of this unconsolidated condensed interim financial information. President & Chief Executive Officer Chairman Director Director 19