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Soneri Bank: Annual Report 2020

IM Insights
By IM Insights
6 months ago
Soneri Bank: Annual Report 2020

Arif, Islamic banking, Mal, Mudaraba, Mudarib, Mufti, Murabaha, Musharakah, PLS, Salam, Shariah, Shariah advisor, Shariah compliant, Sukuk, Takaful, Zakat, Credit Risk, Mark-Up, Net Assets, Participation, Provision, Receivables, Reserves, Sales, Specific Provision


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  1. CORPORATE SOCIAL RESPONSIBILITY (CSR) ACTIVITIES Soneri Bank actively participated in several CSR activities throughout the year. Keeping the ‘Roshan Har Qadam’ spirit intact, the Bank made sure that it fulfilled its social responsibilities towards the country and its people. Soneri Bank’s contributions in various sectors of Pakistan despite the COVID-19 pandemic has left a lasting impact on the community. staff, as well as prizes for its social media contest winners. In this way, a pledge has been taken to support small businesses so that they can become big. Promoting Sports Continuing with our support towards sports since many years, this year Soneri Bank not only sponsored an international event held in Pakistan, but also a few individual players. Contribution to Healthcare Soneri Bank has generously contributed to healthcare organisations, to serve the purpose of humanity. The Sindh Institute of Urology & Transplantation - SIUT The Sindh Institute of Urology & Transplantation is a dialysis and kidney transplant centre located in Pakistan. SIUT is Pakistan's largest kidney disease centre, as well as Pakistan's largest public sector health organisation. Soneri Bank supported them through its Ramadan digital campaign #PledgeForKindness, where it generously donated to the organisation. The Aga Khan University Hospital The Aga Khan University Hospital in Karachi was established in 1985 with a vision to provide quality healthcare to the people of Pakistan. The hospital provides a broad range of secondary and tertiary care, including diagnosis of diseases and care for patients. AKUH joined hands with Soneri Bank for the Ramadan campaign #PledgeForKindness. The funds generated through this campaign were used to provide people with good healthcare facilities. The Kidney Centre (TKC) The Kidney Centre (TKC) is a non-profit organisation providing comprehensive quality renal care to patients suffering from kidney problems. Soneri Bank sponsored the Centre’s dialysis treatments for the underprivileged, as its contribution towards society welfare. Old Association of Kinnaird Society (Regd.) Karachi OAKS (Old Associates of Kinnaird Society) is an organisation of old students and teachers of Kinnaird College. Soneri Bank sponsored The Karachi Chapter of OAKS in their major project “Saving Thar”, aimed at providing pure drinking water to the inhabitants of the desert region of Thar. Empowering Education With the focus in the field of education, Soneri Bank has generously supported and promoted various educational institutions for their development. The Citizens Foundation The Citizens Foundation is a non-profit organisation that aims to bring a positive social change through education. It is one of Pakistan’s leading organisation in the field of education for the less privileged. The Foundation operates a network of 1,567 school units, educating 252,000 students throughout Pakistan. To support TCF’s cause of improving the literacy rate of Pakistan, Soneri Bank sponsored the fundraising event of ILLMATHON 2020 for the development of education and literacy. Family Education Services Foundation (FESF) Family Educational Services Foundation (FESF) a non-profit educational organisation which has been active in Pakistan since 1984. FESF is dedicated to enhance the quality of life for all members of the community, especially those who are disadvantaged. Soneri Bank supported generously in their Annual Fundraiser Golf Tournament to support the needy in reaching their full potential. Family Education Services Foundation was part of Soneri Bank’s Ramadan CSR campaign – #PledgeForKindness through which it generated a substantial amount that helped them provide quality education and skill development to the people of Pakistan. Women Empowerment It is true that women are a strong part of our society and every effort should be made to ensure their development. Soneri Bank has pledged its support to organisations working towards this cause. Attock Sahara Foundation (ASF) Attock Sahara Foundation (ASF) is a welfare based non-profit organisation, certified by Pakistan Centre for Philanthropy (PCP) and has been serving the community since 1966. Its aim is to play a vital role in uplifting the socio-economic conditions of the surrounding communities through various welfare projects. Soneri Bank supported their mission by participating in their Annual Meena Bazaar event. Supporting Women Entrepreneurship Keeping true to our values and belief in women empowerment, Soneri Bank has promoted women entrepreneurship by collaborating with home based small business owners for giveaways and gifts for its events, like Women’s Day celebration at office for its female 12 NAVIGATING OUR WAY TO SUCCESS The Lahore Polo Club Lahore Polo Club is one of the oldest and culturally rich clubs in the region. Soneri Bank partnered with The Lahore Polo Club for the Polo Tournament Championship aimed towards promoting polo and making it a celebrated sport in Pakistan. Alishan Table Tennis Club Table Tennis is one of the prevailing sports, which needs its due awareness and recognition. In this regard, Alishan & Co are making serious efforts in spreading the game amongst the masses as well as training aspiring players for the game. Soneri Bank participated in this cause through its generous contribution to the club. Supporting a Golfer In the spirit of promoting new talent and ambitious people to achieve their dreams, Soneri Bank has sponsored an inspiring golfer, to represent the Bank in various tournaments nationwide. Supporting the Underprivileged Soneri Bank strongly believes in supporting the less-privileged and helping the people of Pakistan in the fields of health and education. The Bank partnered with various welfare organisations for this noble cause. Shahid Afridi Foundation The Shahid Afridi Foundation aims to spread education, healthcare services, and access to clean water across Pakistan. Soneri Bank, as part of its #PledgeForKindness Campaign, partnered with the foundation in distributing ration bags amongst COVID-19 victims, to support them in their time of need and ease their financial troubles. Relief for COVID-19 Victims in Hunza Soneri Bank partnered with the Deputy Commissioner of Hunza Office in the drive to support COVID-19 victims. The Bank contributed in providing ration bags to the victims of COVID-19 in the region, so that they could access the basic necessities of life. Global Educational Consultants Society Global Education Consultants Society was established to provide access to low-cost and inclusive education for all, irrespective of caste, colour or creed. Soneri Bank actively partnered with GEC Society for the distribution of ration bags to those in need during the COVID-19 pandemic. Celebrating Culture and Heritage Soneri Bank values the heritage of Pakistan and takes pride in celebrating diversity and inclusiveness. The Bank partnered with various organisations to support and contribute to celebrating the country’s rich culture. The Citizens Archive of Pakistan (CAP) The Citizens Archive of Pakistan (CAP) is a non-profit organisation established for the preservation of the cultural and historic heritage of Pakistan. The organisation is currently operating in Karachi, Lahore and Islamabad. Soneri Bank was one of the primary sponsors of the CAP Family Carnival event aimed at celebrating the country’s rich heritage. Pakistan Hindu Council The Pakistan Hindu Council represents the Pakistani Hindu community on social and political issues. The Council aims to protect the basic rights and freedoms, especially of worship and assembly, of Hindus all over Pakistan. Soneri Bank sponsored the Combined Marriages Program 2020, hosted by the Pakistan Hindu Council, extending its support to the minorities of the country. Supporting Our Heroes Soneri Bank values the efforts of Pakistan’s unsung heroes and takes pride in supporting them to work towards a better future for Pakistan. Airports Security Force ASF was established in 1976 as a federal agency under the administrative control of the Secretary to the Government of Pakistan. It aims to improve the standard of aviation security in Pakistan and protect the airports, facilities and planes in the country. Soneri Bank made a generous contribution for ASF’s 48th Passing Out Parade to support their cause. ANNUAL REPORT 2020 13
  2. PRODUCTS AND SERVICES At Soneri Bank Limited , we offer the most diverse range of products and services that exceed our customer’s expectations. Our commitment to the customers is to leverage our brand promise “Roshan Har Qadam” by constantly innovating our product suite to best match the personal and business needs of our customers, which include Commercial, Retail & Corporate and Islamic segments. Our corporate vision is "To better serve the customers to help them and the society grow”, and our mission is "To provide innovative and efficient financial solutions to our customers". We serve our customers with distinguished solutions and constantly raise our performance standards. Savings Accounts Soneri Bank offers a diverse range of savings products with attractive rate of returns. These accounts are designed to cater to the specific needs of clients, be it individuals, senior citizens or corporate customers. Our savings product range includes: Current Accounts With an extensive range of current accounts available, our customers can choose to open any current account for their business & personal transactional needs and enjoy banking convenience offered via over 300+ branches and ATMs across Pakistan. Our suite of current accounts include: Soneri Ladies First Account A current account for females who are eligible to open a bank account. As women comprise half of the adult population in Pakistan, it is imperative for Soneri Bank Limited, being an inclusive financial services provider to offer financial services and an exclusive bank account truly accessible for all the Pakistani Ladies. Soneri Pensioners Account A unique account with option of both, i.e., Current as well as PLS Savings, that ensures hassle-free disbursement of Pension to retired individuals, government servants and existing pensioners. Soneri Pensioners Account offers customers the flexibility and capability to bank with ease. Basic Banking Account It is a non-profit bearing account with no minimum balance requirement. Initial deposit for account opening is Rs. 1,000/-. Unrestricted number of withdrawals from the account through ATMs are permissible, subject to applicable per day withdrawal limit for amounts in force. Soneri Ikhtiar Account Soneri Ikhtiar is the flagship current account which is ideally suited for businesses in search of a convenient and feature-rich bank account to fulfill their daily banking needs. This account offers numerous free facilities, including: Banker’s Cheque Issuance, Online Banking, Cheque Books, Debit Card and much more. In addition, Soneri Ikhtiar Account offers free Worldwide Accidental Insurance and ATM Withdrawal Coverage to help protect customers and their loved ones. Soneri Current Account Soneri Current Account lets the customers enjoy a host of free banking services with no restriction on number of transactions. It also provides complete peace of mind with free Worldwide Accidental Insurance and ATM Withdrawal Coverage. 16 PLS Savings Account Basic deposit account with no minimum balance requirement. It can be opened with an initial deposit of just PKR 100/-. The complete range of ADC services is offered with this account, including Debit Card, Internet/Mobile Banking, Online Banking and SMS Alerts. Soneri Savings Account Flexible and fast growing cumulative monthly profit account. The rate of profit on this account increases with the account balance as per the defined tiers. The complete range of ADC services is offered with this account. Soneri Sahara Account A savings account for senior citizens aged 60 years and above for meeting their basic banking needs while they enjoy high returns every month. Joint accounts and minor accounts can also be opened, under the guardianship of Senior Citizen. Soneri INSTA PAY Payroll Solution An efficient employee payroll solution for companies. The product is a bundled proposition providing one-stop tailored solution, catering to the specific needs and requirements of the client and its employees. Soneri Rupee Term Deposits Soneri Term Deposits are for customers who intend to retain their savings for a fixed period and earn a higher rate of profit. Term Deposits allow customers to save a fixed amount in Rupees for a set period ranging from 1 month to 3 years at attractive profit rates. The depositor has the option to reinvest the deposit automatically. Soneri Asaan Account Soneri Asaan Account offers a simple and convenient way to fulfil all banking needs with minimum documentation requirement. It is offered in both Current and Savings Account types and is suitable for self-employed individuals, students, housewives and daily wagers. NAVIGATING OUR WAY TO SUCCESS ANNUAL REPORT 2020 17
  3. Soneri Nigehban Term Deposit Soneri Nigehban Term Deposit is an “investment-for profit” product for customers with a vision to provide free Life Insurance equivalent to their investments upto PKR 5 Million (subject to terms and conditions) along with high return on their investment. Profit pay-out on this term deposit is made on monthly basis in linked Current or Savings Account. Soneri Foreign Currency Accounts Soneri Bank offers FCY Current, Savings and Term Deposit accounts to cater to the foreign currency transactional and saving needs of the customers with a host of attractive features. FCY Term Deposits Soneri Bank’s Foreign Currency Term Deposit offers competitive profit rates for any selected term of up to 1 year. It is an ideal investment to help customers save in a foreign currency and see their deposit grow over time. Financing Products for Commercial & Retail Banking Soneri Bank ensures meeting all banking needs of its customers by offering variety of financing products to facilitate them to grow their businesses and also contribute their share towards industrial growth of the country. The Bank is also committed to play its role towards strengthening the SME sector by encouraging quality players to avail credit facilities through our nationwide branches, empowering them to grow beyond financial limitations. In addition to our conventional financing products including Running Finance, Cash Finance, Term/Demand Finance, Letter of Credits (LCs), Finance against Imported Merchandise (FIM), Finance against Trust Receipts (FATR), Export Finance and Letter of Guarantees (LGs), the Bank also offers the following financing products to help its customers to operate their businesses without worrying about funding requirements which includes: SBP’s Incentive Schemes In line with the initiatives of State Bank of Pakistan to support exports and industrial growth with the ultimate objective of promoting overall economic development of the country, Soneri Bank is offering wide range of SBP’s refinancing schemes through our designated branches: • • • • PM’s Kamyab Jawan Youth Entrepreneurship Scheme Credit Guarantee Scheme for Small & Rural Enterprises SBP Refinancing Facility for Modernization of SMEs • • • • • • • Credit Guarantee Scheme for Special Persons Credit Guarantee Facility for Rice Husking Mills in Sindh Financing Facility for Storage of Agricultural Produce Export Refinance Scheme Financing Scheme for Renewable Energy Refinancing Scheme for Working Capital Financing Long Term Financing Facility for Plant & Machinery Refinance and Credit Guarantee Scheme for Women Entrepreneurs Consumer Financing 18 NAVIGATING OUR WAY TO SUCCESS With comfort, peace and security, now your dream of owning a beautiful house can become a reality with Soneri Ghar Finance. Be it acquiring a new house or an apartment, building a house or redesigning/renovating an existing house, this facility is tailored to suit the customers’ needs where maximum financing limit can be up to Rs. 75 million with flexible tenure for repayment of up to 20 years. Soneri Bank offers its consumers various kinds of financing options to choose from depending on their needs. Our range of consumer financing products include Soneri Car Finance, Soneri Ghar Finance, Mera Pakistan Mera Ghar and Soneri Personal Finance. Soneri Speed Finance Soneri Speed Finance is focused towards providing quick and flexible financing solutions to its customers while keeping their savings secure. This product is offered to Individuals, Small & Medium Enterprises, Commercial and Corporate businesses for meeting their business needs. It has been designed to provide hassle-free and swift financing solutions to meet both the short and long term financing needs of the customer. It is primarily secured against liquid security including Soneri Bank’s deposits (LCY & FCY Term Deposits, Cash Margin, Lien on Account) and Government Securities (DSC/SSC/RIC). Soneri Ghar Finance Mera Pakistan, Mera Ghar Soneri Car Finance Soneri Car Finance is designed to let the customers control their plan to select a vehicle that is new, used or imported at reasonable mark-up rates. Car Finance facility is available for up to Rs. 5 million and repayable in up to 7 years in equal monthly installments. Processing of application is fast and hassle-free. Partial payment and early settlement options are available to lower the customer’s burden at any point in time. Moreover, insurance along with tracker facility makes the facility complete which is very lucrative for Soneri Bank’s valuable customers. ANNUAL REPORT 2020 Soneri Bank, promotes the spirit of patriotism and advocates an affordable government mark-up subsidy scheme for house finance by State Bank of Pakistan that enables every Pakistani to own a house at subsidised mark-up rates as per the vision of our honourable Prime Minister. Soneri Personal Finance Soneri Personal Finance includes attractive plans, simple reimbursement alternatives and market competitive rates. It is a hassle-free way for customers' monetary needs with a maximum limit of up to Rs. 2 Million with flexible repayment tenures of up to 5 years. It is an easy solution to the customers' cash/liquid requirement for emergency funds, plan their child’s higher education, make their daughter's wedding the talk of the town, or take that dream vacation. 19
  4. Agriculture Financing Home Remittance Alternate Delivery Channel The agriculture sector constitutes a handsome portion of the GDP of our country and the livelihood of a huge population in Pakistan is based on it . Soneri Bank’s wide range of Agriculture Products are designed to support the farmers by providing access to Agriculture loans which assist them to grow the agriculture produce as well as their livelihood. To better contribute to our Agri economy, The farmers can avail any of the financing facilities as per products detailed hereunder: Soneri Bank with its vision ‘To Better Serve customers to help them and the society grow,’ is making home remittance accessible to all customers with a branch network of 300+ branches across Pakistan so their promises are received from their loved ones conveniently. Digital Banking is the way of the future and SNBL believes in the ever-evolving phase of secured technology which is paving the path to simple banking with a few simple clicks. ATMs With growing number of 300+ ATMs across the country, withdraw cash with convenience, transfer funds to bank account, pay your bills and much more. Soneri Digital Mobile Banking Talk about convenience at your finger tip, Soneri Mobile App is the right choice. Manage your account, transfer funds to any domestic bank account, mobile top-ups, bill payment, school fees, govt. payments and lot more. Soneri Debit Card With Soneri Bank Mastercard Debit Card, your bank account is accessible at more than 1 million ATMs and 25 million Point Of Sale around the world. Soneri Bank PayPak Debit Card is acceptable at all ATMs and Point of Sale across Pakistan. • Farm Production Loans – Revolving Credit • Farm Development Loan Including Farm Machinery • Tractor & Implements Loans • Non-Farm Working Capital Loan - Dairy Farming • Non-Farm Development Loan - Dairy Farming • Non-Farm Working Capital Loan - Poultry Farming • Non-Farm Development Loan - Poultry Farming • Non-Farm Working Capital Loan - Fish Farming • Non-Farm Development Loan - Fish Farming • Non-Farm Working Capital Loan - Cattle Farming • Non-Farm Development Loan - Cattle Farming • Value Chain – Contract Farmer Financing • Value Chain – Dairy Financing 20 Soneri Bank Limited (SNBL) under the guidance of Pakistan. Remittance Initiative (PRI) (a joint venture of State Bank, Ministry of Finance and Ministry of Overseas Pakistanis, Pakistan), started Home Remittance Payments Disbursement Initiative in July – 2012. In a very short span of time and with exceptional customer support and service delivery standards, Soneri Bank managed to make a positive contribution towards Home Remittance Business. Soneri Bank has recognised the potential in Home Remittance business and therefore brands its business with the service name of “Soneri Mehnat Wasool Remittance”. Soneri Mehnat Wasool Remittance offers unmatched services for overseas Pakistanis to send money home fast and free at no cost across Pakistan with our branch network of over 300 branches in 130 cities. Soneri Bank has already established relationship with many Global Exchange i.e. Moneygram, RIA Money Transfer, Al Ansari Exchange, Small World, Xpress Money, Ebixcash, World Wide Cash Express and Trans-Fast in different regions of Gulf Countries, UK, America and Canada to facilitate its customers. NAVIGATING OUR WAY TO SUCCESS SMS Alerts Stay Secure and keep up to date about your transactional activities by getting instant alerts on your registered cell phone. Phone Banking Soneri Digital Internet Banking A wide range of services including Account Balances, Bill Payments, Fund Transfers to Soneri and other bank account and many more on your desktop. ANNUAL REPORT 2020 Customers can access their accounts 24/7 with distinctive services with Soneri Phone Banking, including ATM Debit Card Replacement, Stop Cheque Request, Banker’s Cheque, ATM Debit Card Account Linking De-Linking, Cheque Book Request & E-Statement Request. Simply dial + 92-21-111-SONERI (766374) to avail easy access to your account based services. 21
  5. Protection and Coverage Products Soneri Bank offers a variety of exclusively designed Bancassurance conventional and Takaful products that cater to the protection , savings and investment needs of its customers. Bancassurance is one of the best purchases for the future of customers’ family. SNBL offers advice from certified professionals with expertise to help tailor coverage plans specific to customers' family needs. In partnership with Jubilee Life Insurance Ltd. and IGI Life Insurance Ltd., few of these products are: post-retirement, wish to retire early or to top-up their existing pension plan. The plan is ideal for self-employed and professionals like doctors, dentists, architects, lawyers, engineers and financial consultants. It is also suitable for employees having benefits of provident funds. Sunehra Income Builder Multi-Purpose Savings Plan Karobar Muhafiz This Bancassurance plan covers the lives of two individuals (or business partners) simultaneously allowing business continuation/succession in case of eventuality. It includes benefits like hospitalisation, critical illness, accidental disability and death benefits. SMEs, large enterprises and partnerships can avail this plan to ensure stability of their businesses. Professional practitioners like doctors, dentists, accountants, lawyers, architects, engineers, etc. can also use this plan to their advantage. Sunehra Income Builder Pearl & Pearl Takaful This Bancassurance plan is designed for High Net Worth (HNW) customers of SNBL, it offers higher investment returns along with the benefit of family’s financial protection (insurance coverage). A unique medical coverage (MediPal) is offered besides loyalty bonus that starts from fifth year. Sunehra Saver & Sunehra Saver Takaful This plan provides insurance cover in the form of guaranteed sum assured offering parallel returns on premium investment. Be it an objective of saving for your child’s education, marriage of your progeny, building/buying a home for yourself and your family, or starting/expansion of business, Sunehra Income Builder plan is a one stop solution for all your financial needs. This is a savings plan especially designed for those individuals who wish to have financial independence 22 Benefits of Investing in Mutual Funds: • Tax Credit • Diversification • Liquidity This plan offers a unique combination of savings, investment & protection. It provides Takaful coverage that is in line with Shariah Principles. Sunehra Ehad enables customers to build income for events like child education, daughter’s marriage, building/renovation of house or planning for a carefree life after retirement. • Transparent and Highly Regulated • Small Investment Size • Professional Management Types of Funds Offered Equity Scheme An equity scheme or equity fund is a fund that invests in equities more commonly known as stocks. The objective of an equity fund is long-term growth through capital appreciation, although dividends and capital gain realised are also sources of revenue. Balanced Scheme Roshan Aghaz & Roshan Aghaz Takaful Roshan Takmeel SNBL is constantly innovating its products suite to best match the personal and business needs of its customers, to ensure all their banking needs are met. We offer a variety of investment products to facilitate our customers. The role of Wealth Management is to provide tailored investment solutions and help the client develop, implement and monitor an entire investment portfolio, which enables client to manage, their financial needs. Our product menu comprises of a range of Mutual Funds, Voluntary Pension Schemes and Separately Managed Accounts, available in Conventional as well as Shariah Compliant variants. Sunehra Ehad Takaful These are SNBL’s Bancassurance plans that encourage customers to save at an early stage of their career to cater to the midlife family expenses. It is an affordable plan for young executives, entrepreneurs, middle aged professionals, working ladies and housewives. The plan is designed to meet the future financial needs like, wedding, education, house purchase, starting a business or expansion of an existing enterprise of the assured. These Bancassurance plans encourage parents to save money for their children’s higher education and provide protection in case of an eventuality. In the unfortunate event of death of the assured parent during the savings term, the built-in “Education Continuation” benefit ensures that the targeted fund at maturity is achieved. Wealth Management These funds provide investors with a single mutual fund that invests in both stocks and debt instruments and with this diversification aimed at providing investors a balance of growth through investment in stocks and of income from investments in debt instruments. Sunehra Cash Builder This is a regular premium Bancassurance product, where the premium paid will be credited to customer’s individual account to be invested as per the chosen investment strategy. Sunehra Cash Builder is intended for far sighted individuals who want a secure future for themselves and their loved ones, at the same time reaping benefits on their hard earned incomes. This plan ensures that our customers achieve their respective goals even when customer is unable to continue regular income. NAVIGATING OUR WAY TO SUCCESS Capital Plus & Capital Plus Takaful This plan is designed for High Net Worth (HNW) customers of SNBL, it offers higher investment returns along with the benefit of family’s financial protection (insurance coverage). Loyalty bonus starts from fifth year (commonly starts from 10th yr). ANNUAL REPORT 2020 23
  6. Soneri Bank Wealth Management – Product Menu In partnership with reliable Asset Management Company, we offer you a range of investments products. MCB Arif Habib Investment & Savings Mutual Funds • MCB Cash Management Optimizer • Pakistan Cash Management Fund • Pakistan Income Fund • MCB Pakistan Sovereign Fund • MCB DCF Income Fund • Pakistan Income Enhancement Fund • MCB Pakistan Asset Allocation Fund • MCB Pakistan Frequent Payout Fund • Pakistan Capital Market Fund • MCB Pakistan Stock Market Fund • Alhamra Islamic Income Fund • Alhamra Islamic Asset Allocation Fund Asset Allocation Scheme These Funds may invest its assets in any type of securities at any time, in order to diversify its assets across multiple types of securities & investment styles available in the market. Voluntary Pension Schemes (VPS) • Pakistan Pension Fund • Alhamra Islamic Pension Fund Soneri Mustaqeem Islamic Banking Soneri Mustaqeem Islamic Banking offers a broad range of 100% Shariah compliant financial solutions for the customers. Our Islamic Portfolio includes: Deposit Products: where the depositor acts as an Investor (Rab-ul-Maal) and bank acts as the Manager (Mudarib) of the funds deposited by the customers. It also offers wide range of services to cater to the banking needs. Soneri Mustaqeem - Munafa Account Soneri Mustaqeem - Munafa account provides regular stream of monthly income with the same convenience and service of a regular savings account. Through this, our valued customers can manage their short-term as well as long-term savings without any transactional restrictions. Current Accounts Soneri Mustaqeem - Meaadi Account Soneri Mustaqeem - Jari Account Soneri Mustaqeem - Jari Account is kind of Current Account (No profit and loss account) that provides the convenience of putting your money in account and accessing it without any restrictions on withdrawal while enjoying a host of professional conveniences from our Bank. This account is based on the Islamic principle of Qard. Soneri Mustaqeem - Meaadi Account is an alternative of TDR for those customers who intend to retain their savings for a fixed period and earn a higher rate of profit. Term Deposits allow customers to save a fixed amount in Rupees for a set period ranging from 1 month to 3 years at attractive profit rates. The depositor has the option to reinvest the deposit automatically with or without profit. HBL Asset Management Company Mutual Funds Fund of Funds Scheme Fund of Funds are those funds, which invest in other mutual funds. These funds operate a diverse portfolio of equity, balanced, fixed income and money market funds (both open and closed ended). Shariah Compliant (Islamic) Scheme Islamic funds are those funds which invest in Shariah Compliant securities i.e. shares, Sukuk, Ijara Sukuks, etc. as may be approved by the Shariah Advisor of such funds. These funds can be offered under the same categories as those of conventional funds. Money Market Scheme Money Market Funds are among the safest and most stable of all the different types of mutual funds. These funds invest in short term debt instruments such as treasury bills and bank deposits. • • • • • • • • HBL Money Market Fund HBL Income Fund HBL Government Securities Fund HBL Cash Fund HBL Multi Asset Fund HBL Equity Fund HBL Islamic Income Fund HBL Islamic Asset Allocation Fund • HBL Islamic Money Market Fund Disclaimer: The returns of mutual funds are not guaranteed, mutual funds returns are subject to market risk and the price of units may go up and down based on market conditions, past performance should not be taken as guarantee of future performance. As disclosed in the offering document available on asset management company website. Asset management company is the fund manager and Soneri Bank is the distributor of these funds. Shariah Compliant (Islamic) Scheme These funds focus on providing investors with a steady stream of fixed income. They invest in short term and long term debt instruments like TFCs, government securities like T-bills/PIBs, or preference shares. Soneri Mustaqeem - Asaan Account Soneri Mustaqeem – Rahat Account Soneri Mustaqeem – Rahat Account is a flagship remunerative-current account on the basis of Mudarabah, which is ideally suited for businesses in search of a convenient and feature-rich bank account to fulfill their daily banking needs. This account offers numerous free facilities. Soneri Asaan Account offers a simple and convenient way to fulfil all banking needs with minimum documentation requirements. It is offered in both current and savings account types and is suitable for self-employed individuals, students, housewives and daily wagers. Soneri Mustaqeem - Jari Foreign Currency Accounts Soneri Mustaqeem Jari offers Foreign Currency Current account to cater to the foreign currency transactional and saving needs of the customers with a host of attractive features. Saving Accounts Soneri Mustaqeem - Bachat Account Bachat account is kind of remunerative account offered to customers with small savings and looking for a Halal return on their deposits. It is based on the concept of Mudarabah 24 NAVIGATING OUR WAY TO SUCCESS ANNUAL REPORT 2020 25
  7. Consumer Products : Corporate & Investment Banking Soneri Bank’s Corporate & Investment Banking division is well equipped to meet the requirements of our corporate clients. We have regional offices in Karachi, Lahore and Islamabad, which offer extensive coverage. Soneri Mustaqeem - Car Ijarah Car Ijarah is Soneri Bank’s car financing product, which is interest-free car financing. It is based on the Islamic financing mode of Ijarah (leasing). This product is ideal for individuals who want to get interest-free financing for acquiring a car. Our team of Relationship Managers and Team Leaders is fully geared to establish meaningful relationships with our Corporate & Institutional clients including public sector entities to become partners in their growth by acting as financial advisors, effectively catering to their financial needs and offering financial solutions through the following suite of products: Soneri Mustaqeem - Mera Pakistan Mera Ghar Soneri Mustaqeem Islamic Banking, now provides affordable and flexible subsidised Islamic Housing Financing Facility, as per the vision of our honourable Prime Minister. Being a provider of financial services, we offer end-to-end supply chain financing solutions to dealers & vendors of our corporate customers to meet their business requirements. Cash Management SNBL’s Cash Management services coupled with our next generation, web-based Cash Management System ‘Soneri Trans@ct’, provides our valued customers with comprehensive, one stop solution for cash flow management, i.e. Receivables and Payables Management, in the most effective and efficient manner. Our Cash Management services, comprise of a full array of products & services, designed and tailored to enable our Corporate, Commercial and SME customers to securely exchange funds and financial information in real-time with their trading partners, for optimal management of working capital. impact on the region. Over the years the flagship project has advanced and achieved excellent results. The Government is confident that CPEC is a win-win project of China-Pakistan economic cooperation and will prove to be a catalyst for socio-economic development of Pakistan and its benefits will reach the grassroots level. Significant progress has been made in the first phase with majority of the projects planned in the construction, infrastructure and energy sectors have been carried out and many are in the execution stage. The second stage will further focus on industrialization, agriculture, modernization and socio-economic development. The bank is focused on projects related to CEPC. In addition to a Chinese Business Unit working in Islamabad, the bank has established a China Desk in Lahore in order to facilitate Chinese customers. China Desk Pakistan’s strong ties with China are leading to new financial avenues and SNBL is also financing with branches in Lahore and Islamabad to facilitate its Chinese customers. Soneri Mustaqeem - Ghar Finance Soneri Mustaqeem – Ghar Finance is a Shariah compliant home finance facility enabling our valuable customers to get the house of their dream. Soneri Mustaqeem – Ghar Finance is based on the concept of Diminishing Musharakah where customer participates with Soneri Bank in joint ownership of property. Bank’s ownership share of the house/flat/land shall be divided into number of units. Customer will undertake to purchase bank’s share periodically until the ownership of the asset is completely transferred to the customer. Till the complete ownership, customer pays agreed rentals for using the bank’s share in the house/flat/land. Supply Chain Management Working Capital & Trade Finance Facilities Our corporate banking team is equipped with the required knowledge to contribute towards the sustainable growth of our clients by offering innovative, diverse and flexible solutions to meet their working capital needs, trade related solutions and expansion support. Investment Banking The Investment Banking Wing offers structured financial solutions and aims to establish strategic long-term relationships with our clients. This segment is well equipped to offer advisory services catering to various requirements such as Financial, M&A, Equity/Debt Capital Markets, Project Financing and Debt Syndication. Building upon Soneri Bank’s established relationships within the local market, the Investment Banking Wing identifies and helps unlock greater value for the Bank’s customers. 26 NAVIGATING OUR WAY TO SUCCESS China-Pakistan Economic Corridor (CPEC) is a framework of regional connectivity and prosperity. CPEC project will not only benefit China and Pakistan but will have positive ANNUAL REPORT 2020 27
  8. CUSTOMER EXPERIENCE In the year 2020 , our Customer Experience Department examined customer satisfaction keeping in view the global pandemic by redesigning the satisfaction metrics as per the need of the hour. The Bank positioned itself at the forefront by aiming to assess the effects of longer-term shifts in consumer behavior resulting from this crisis. Soneri Bank rapidly innovated the customer experience journey and further improved its operations/protocols to deal with these much needed changes. To increase the visibility on complaint registration process, various initiatives have been taken such as sending awareness SMS to all customers, declaring channels for complaint lodgment on biannual bank statements and on corporate website, social media and placement of complaint leaflets in all our branches. We have adopted various mechanisms to ensure that customer complaints are being catered in a timely and effective manner. Customer Satisfaction Survey - Covid-19: Voice Of Customer (VOC): A comprehensive customer satisfaction survey was devised keeping in view the 4 key insights; connecting with our customers online / digitally, better user-experience, focusing on customer services & to drive customer loyalty. The survey was conducted with customers who visited our branches during this pandemic, to gauge their satisfaction with the branch safety measures, ease of doing business and branch staff services and behavior. Overall SNBL Branch visit experience satisfaction logged at 88%, satisfaction with safety measures regarding COVID-19 taken by the SNBL branches logged at 82%, and satisfaction with branch staff services & behavior logged at 91%. The Bank has a robust in-house VoC Unit, which proactively captures ‘Voice of the Customer’ with a view towards ensuring that SNBL has its finger on the pulse of its customers. These exercises are all about being proactive and constantly innovative to capture the changing requirements of the customer to ensure we maintain our competitive edge while also ensuring customer satisfaction. During the year 2020, customers from different segments were surveyed i.e. Digital Banking, Corporate & Investment Banking, Trade Finance, Treasury, Credit Finance, Cash Management, Islamic Banking, Commercial & Retail Banking Group, Auto Finance and Bancassurance. Soneri Bank has been rated high mainly due to ‘ease of doing business’ and ‘old relationship with the bank’. The results driven from these studies will be used to reinvent our Service Standards. These results will also help us to work on the irregularities or defects in the system, to identify weaknesses and evaluate possible avenues for improvement. Employee Satisfaction Survey: Satisfied employees lead to satisfied customers. An online survey was conducted as a key aspect to improve employee satisfaction and retention ensuring our Bank’s values are attractive to our staff. The survey was conducted to make sure that our employees feel safe, supported, comfortable and free to share their feedback. The survey insights were shared with the Senior Management for them to better understand their employees and to assist them in improving the working environment. Ethical Conduct Guidelines: As per the guidelines for Compliance Risk Management issued vide BPRD Circular # 07 dated August 09, 2017 by SBP Banking Policy and Regulatory Department, Banks were advised to develop/revise their existing ethical conduct policies in order to promote ethical behavior in their day to day operations. In light of these guidelines, Bank has deputed Ethical Conduct Unit under the ambit of Customer Experience Department. Ethical practices like transparency, integrity, honesty and compliance go hand in hand when it comes to the banking industry and this area has emerged to be an essential element of overall compliance culture in any Bank. The Bank does not compromise on any unethical or immoral act in any case. Complaint Statistics 2020: Below are the key complaint statistics of Soneri Bank for the year: Total Complaints Received: 14,264 Problem Incidents’ Ratio (PIR): Total Complaint Resolved: 14,056 (As of December 31, 2020) Average within TAT Resolution: 2.47% 89.15% Average Complaints’ Resolution Satisfaction Ratio (CRS): Average Complaints’ Resolution Time: (Total Book) 83.42% 30 5.8 Days NAVIGATING OUR WAY TO SUCCESS ANNUAL REPORT 2020 31
  9. THE YEAR AT A GLANCE Pledge for Kindness Campaign Women ’s Day Celebration Each year in Ramadan, under its #PledgeForKindness campaign, Soneri Bank sponsors multiple NGOs, dedicated towards the welfare of the society in the fields of education and health. This year, the campaign embodied the spirit of giving in the holy month of Ramadan. Soneri Bank sponsored various organisations, such as Shahid Afridi Foundation (SAF), Aga Khan University Hospital (AKUH), the Family Educational Services Foundation (FESF) and the Sindh Institute for Urology and Transplantation (SIUT) to aid them in their continuous efforts towards the betterment of the society. The campaign was run all over Soneri Bank’s Social Media platform. To participate in the campaign, a pledge counter was setup, on Soneri Bank’s website, on which people voluntarily gave pledges online and for every pledge received, Rs. 10 was donated by Soneri Bank on behalf of these pledges to the hospitals and foundations. Soneri Bank believes in promoting and appreciating women at work. Equal Opportunity Employment remains a top priority at Soneri Bank, to ensure that all employees are treated as equal. This year Soneri Bank celebrated Women’s Day in a joyous manner and the day was all about highlighting equality within the workplace and appreciating women, in line with the global campaign #EachforEqual. Soneri Bank acknowledged and celebrated women’s achievements all over Pakistan by sharing exclusive promotions on its Soneri Master Debit cards. To mark the day and acknowledge the women workforce at Soneri Bank, a small giveaway was distributed to all the female staff across Pakistan. Brand of the Year Award Soneri Bank was awarded “Brand of the Year Awards 2019” in the Best Retail Banking Category by The Brands’ Foundation; which has been given the “Accredited Permanent Observer Status” by the World Intellectual Property Organisation (WIPO), the Specialised Agency of the United Nations. Soneri Bank strengthened its ties with Quetta Gladiators We believe that participation in sports can be strongly instrumental in promoting equality, solidarity and inclusion. It can act as a foundation for building healthier and more diverse societies. This year, Soneri Bank continued its partnership with Quetta Gladiators in PSL 2020. Soneri Bank believes in the Mantra of Quetta Gladiators, that resilience, passion and commitment to a cause can steer any team towards success. It is a great honour for Soneri Bank to receive this prestigious award, as it is a distinctive and premier recognition award that is presented to a Brand that is considered as crème de la crème, in its industry. Every year only one brand in each category is honoured, which has led through all the levels of selection criteria laid down by the “Award Accreditation Council”. The winner is based on current year’s market-standing and consumers’ preference. A Fun Day out To celebrate the trust and commitment of our clients in Soneri Bank, Soneri Bank organised a small event for its corporate clients in Karachi, Islamabad and Lahore, as a token of appreciation for their continued support. The Bank’s CIBG team and the corporate customers interacted with each other at a small get-together, which featured a movie screening, followed by an informal dinner. 14th August 2020 Campaign With the spirits of patriotism soaring high for Pakistan’s 74th Independence Day, Soneri Bank launched the #AzaadiKaySonehrayRang, a digital campaign, which consisted of contests fused with trivia, best selfies and photo frames, with the winners being awarded special prizes. The campaign was further amplified, by holding an inter branch and departmental decoration competition, with the best decorated branch and department being appreciated with certificates and prizes. Green Banking Initiatives Soneri Bank aims to play its part in the betterment of society by implementing eco-friendly practices that ensure reduction in waste and pollution. The Bank made efforts to create an eco-friendly environment by adopting sustainable practices for a cleaner and greener Pakistan. The Green Banking Office launched the #SoneriGoGreen campaign, promoting environment friendly work practices within the Bank. Re-usable fabric tote bags were distributed among all employees, so as to encourage them to reduce the use of plastic bags. A session of ‘World Water Week 2020’ was conducted with the collaboration of WWF Pakistan to train personnel about Water Conservation strategies. An energy efficient, LED lights, initiative has also been undertaken across the Bank. The Bank’s Environmental Risk Rating Models help in identifying environmental impacts for our clients. Regular trainings are conducted to educate employees regarding adoption of environment friendly work practices. 34 NAVIGATING OUR WAY TO SUCCESS Promoting Sports Sports has the ability to develop team spirit, increase motivation, encourage an active lifestyle, build unity and promote healthy competition. Soneri Bank believes sports can play a significant role in formulating a more inclusive society by bringing people together from all walks of life, fostering a mentality capable of overcoming difficult challenges, and builds a competitive approach into work practices. With this aim, Soneri Bank sponsored various sporting organisations and events throughout the year, including the Lahore Polo Club Polo Tournament and the Alishan Table Tennis Club. Soneri Bank also sponsored an inspiring golfer, with the spirit of promoting new talent and helping ambitious individuals in achieving their dreams. ANNUAL REPORT 2020 35
  10. BOARD OF DIRECTORS Mr . Alauddin J. Feerasta Mr. Muhammad Rashid Zahir Mr. Alauddin Feerasta is the Chairman and Sponsor Director of Soneri Bank Limited. He is also the Chairman of Spintex Limited and Rupali Foods (Pvt.) Limited. He is a renowned industrialist having diverse experience of over 40 years in manufacturing and marketing of Polyester Staple Fiber, Polyester Yarn, Trading of Cotton Yarn and Commercial Banking. His expertise includes setting up of large-scale industrial plants, evaluating project feasibilities, bid evaluations and contract negotiations; Rupali Foods (Pvt) Limited, a state of the art confectionary manufacturing unit has been set up recently to meet ever growing demand of confectionary in the country. He has attended various international and local seminars and training courses conducted by professional institutions, regulatory bodies from time to time. Mr. Muhammad Rashid Zahir is a Non-Executive Director of the Bank and is also the Member on the Board’s Audit and Credit Committees. His banking career started in 1968. He was GM/Chief Executive of Saudi Pak Industrial and Agricultural Investment Company Limited during the period 1991-2011. He remained Chairman of the Board of Saudi Pak Commercial Bank Ltd. (now Silk Bank Limited), Saudi Pak Real Estate Ltd., Saudi Pak Insurance Company Ltd., Saudi Pak Leasing Company Ltd., Islamabad Stock Exchange (Guarantee) Limited and the Association of Development Finance Institutions in member countries of the Islamic Development Bank, Jeddah (ADFIMI). He had also assisted the Implementation Committee appointed by the President of Pakistan for re-organisation of Public Sector Enterprises in 1978. Mr. Zahir is an Advisor at JCR-VIS Credit Rating Company Limited, as well as Director on the Board of Rupali Polyester Limited. He is author of a book, Legacy of a Manager. He did his MBA from Institute of Business Administration, Karachi in 1968. He has also participated in various international and local seminars on Islamisation of Economy, Advanced Management for Senior Executives, Lease Financing and Industrial Projects. Mr. Muhtashim Ahmad Ashai Mr. Manzoor Ahmed Mr. Muhtashim Ahmad Ashai joined Soneri Bank Limited on 01 April 2020 as President & Chief Executive Officer. Before joining Soneri Bank, he was the President & CEO MCB Islamic Bank Limited. He is a seasoned banker with an overall experience of more than 28 years in the financial industry, both local and international. He started his career with Fidelity Investment Bank International and later joined ABN AMRO Bank, where he was associated with their operations in Pakistan, Japan and China. Subsequently, Mr. Ashai joined MCB Bank Limited where he served in the capacity of Group Head Corporate and International Banking for more than 11 years. He has vast experience in the field of Corporate Banking, Transaction and Investment Banking. Mr. Manzoor Ahmed represents the interest of National Investment Trust (“NIT”) as its nominee on the Board of the Bank. He has an experience of over 29 years of the Mutual Funds industry and has held key position within NIT that includes capital market operations, investments, research and liaising with the regulatory authorities. Presently, he is the Chief Operating Officer of NIT. Mr. Ahmed is M.B.A. and also holds D.A.I.B.P. He has attended various training courses organised by local and international institutions like London Business School (LBS) UK, Financial Market World, New York (USA) and Institute of Director, London. He is also a Certified Director from Pakistan Institute of Corporate Governance. At Soneri, he is chairing the Board’s Human Resource and Remuneration and Risk Management Committees. He is also member of the Board’s Credit and IT Committees. Mr. Ahmed also represents NIT as Nominee Director on the Board of Directors of leading national and multinational companies of Pakistan. Chairman/Non-Executive Director Non-Executive Director Non-Executive Director (NIT Nominee) President & Chief Executive Officer He graduated with a BSc degree from University of Engineering & Technology and completed his MBA from LUMS. Mr. Jamil Hassan Hamdani Independent Director Mr. Nooruddin Feerasta Mr. Hamdani is an Independent Director of the Bank. He has a vast banking experience that dates back to 1973 and had worked with various foreign banks. He received his Bachelor’s degree in Economics from Government College University, Lahore. In 2016, he retired as Managing Director of Credit Agricole Indosuez (Suisse) SA, where he was responsible for overseeing functions pertaining to Pakistan, Bangladesh, Sri Lanka and Nepal. Presently, he is the Chairman/CEO of Pakistan France Business Alliance. He is currently Member of the Board’s IT Committee and Human Resource and Remuneration Committee. He is also the Chairman of the Board’s Audit Committee and Committee of Independent Directors of the Board. Non-Executive Director Mr. Nooruddin Feerasta is the Sponsor Director of the Bank. He is also managing Rupali Polyester Limited, Rupafil Limited, Rupali Nylon (Pvt.) Limited and Rupafil PowerGen (Pvt.) Limited as the Chairman and Chief Executive Officer. He obtained his MBA degree from the USA in 1986. He has also participated in various International and local seminars on industrial developments, marketing strategies, laws and taxation. He is a reputable industrialist with diversified experience of more than 30 years in managing industry’s operational activities, such as marketing, finance, manufacturing, plant operations and legal and corporate management. He is the Chairman of Board’s Credit Committee and member of the Audit Committee. Ms. Navin Salim Merchant Independent Director Ms. Navin Salim Merchant is an Advocate at the Supreme Court of Pakistan and has been working as a Senior Partner at Merchant Law Associates with over twenty-four years of experience in the practice of law. Mr. Ahmed A. Feerasta She has also worked internationally as an ADR Expert with global organisation such as International Finance Corporation (Member of the World Bank Group) and successfully undertook the task for establishing effective dispute resolutions systems in Middle East and North Africa (MENA). Non-Executive Director A young, energetic entrepreneur with a lot of ambition and sound business acumen, Mr. Ahmed Feerasta is the driving force behind Rupali Foods business set-up. After completion of his graduation in Bachelor of Arts from the University of Texas at Austin, USA, he joined Rupali Polyester Limited in 2006 where he looked after corporate procurement and planning. She has received her Bachelors of Law and Bachelors of Art from S.M. Law College and University of Karachi, holds a diploma in mediation from York University, Toronto, and Accreditation of Mediation and Master Trainer from the Centre of Effective Dispute Resolution, UK. Currently, she holds Directorship in Otsuka Pakistan Limited as an Independent Director and is a Certified Director from IBA. Before being appointed as the Chief Executive Officer of Rupali Foods, Mr. Ahmed was engaged in the business of manufacturing and sale of Polyester Yarn with annual turnover of about Rs. 5 billion. Apart from his rich experience in corporate operations including procurement, finance, imports and marketing, he also has extensive exposure in dealing with commercial banks/DFIs. She keenly participates in promoting social activities of the community particularly the alternative dispute resolution (ADR) and serves as the head of the IBA Dispute Resolution Forum and the Chair of the ADR Commission of the International Chamber of Commerce (ICC), Pakistan. She has previous experience of working as an Honourary Secretary of the Board of Governors of the Aga Khan Hospital & Medical College Foundation, Member of the Aga Khan International Conciliation and Arbitration Board, Member of the Aga Khan Foundation, Legal Portfolio Member of the Aga Khan Council, Pakistan, Director of the Aga Khan Education Service, Pakistan and Director of the Aga Khan Planning and Building Services. Under his dynamic leadership, Rupali Foods sets its eye on becoming one of the leading food brands in the country. 38 NAVIGATING OUR WAY TO SUCCESS ANNUAL REPORT 2020 39
  11. SENIOR MANAGEMENT From left to right 1 . Mirza Zafar Baig 2. Muhammad Qaisar 3. Muhtashim Ahmad Ashai 7. Ali Hassan Shah 4. Abdul Aleem Qureshi 5. Mubarik Ali 6. Shahid Abdullah 11. Tariq Yar Khan Chief Financial Officer Head of Commercial & Retail Banking Group Head of Corporate & Investment Banking Group Chief Risk Officer President & Chief Executive Officer Head of Treasury, Capital Markets, FI & PRI Head of Operations Chief Compliance Officer 8. Mohammad Amin Tejani Head of Islamic Banking 9. Aamir Nawaz Karim Head of Audit 12. Muhammad Merajuddin Ahmed Head of HR, Legal & General Services 10. Amin A. Feerasta Deputy Chief Executive Officer 13. Muhammad Salman Ali Chief Information Officer
  12. CORPORATE INFORMATION CHAIRMAN MR . ALAUDDIN FEERASTA CHIEF EXECUTIVE OFFICER MR. MUHTASHIM AHMAD ASHAI DIRECTORS MR. NOORUDDIN FEERASTA MR. AHMED A. FEERASTA MR. MUHAMMAD RASHID ZAHIR MR. MANZOOR AHMED (NIT NOMINEE) MR. JAMIL HASSAN HAMDANI MS. NAVIN SALIM MERCHANT CHIEF FINANCIAL OFFICER MR. MIRZA ZAFAR BAIG REGISTERED OFFICE RUPALI HOUSE, 241-242, UPPER MALL SCHEME, ANAND ROAD, LAHORE - 54000 CENTRAL OFFICE 10TH FLOOR, PNSC BUILDING, M.T. KHAN ROAD, KARACHI-74000 REGISTRAR AND SHARE TRANSFER AGENT THK ASSOCIATES (PRIVATE) LTD., PLOT NO. 32-C, JAMI COMMERCIAL STREET 2, DHA PHASE 7, KARACHI - 75500 UAN: (021) 111-000-322 FAX: (021) 35310191 COMPANY SECRETARY MR. MUHAMMAD ALTAF BUTT AUDITORS KPMG TASEER HADI & CO. CHARTERED ACCOUNTANTS SHARIAH BOARD MUFTI EHSAN WAQUAR AHMAD (CHAIRMAN) MUFTI MUHAMMAD ZAHID (RESIDENT MEMBER) MUFTI BILAL AHMED QAZI (MEMBER) LEGAL ADVISORS MANAN ASSOCIATES, ADVOCATES 46 NAVIGATING OUR WAY TO SUCCESS
  13. LIST OF COMMITTEES OF THE BOARD OF DIRECTORS Audit Committee of the Board 1 . 2. 3. 4. Mr. Jamil Hassan Hamdani Mr. Nooruddin Feerasta Mr. Muhammad Rashid Zahir Ms. Navin Salim Merchant Mr. Muhammad Altaf Butt Chairman Member Member Member Secretary Credit Committee of the Board 1. 2. 3. 4. 5. Mr. Mr. Mr. Mr. Mr. Mr. Nooruddin Feerasta Alauddin Feerasta Muhtashim Ahmad Ashai Muhammad Rashid Zahir Manzoor Ahmed Muhammad Altaf Butt Chairman Member Member Member Member Secretary Human Resource and Remuneration Committee of the Board 1. 2. 3. Mr. Manzoor Ahmed Mr. Jamil Hassan Hamdani Ms. Navin Salim Merchant Mr. Muhammad Altaf Butt Chairman Member Member Secretary Risk Management Committee of the Board 1. 2. 3. 4. Mr. Mr. Mr. Mr. Mr. Manzoor Ahmed Muhtashim Ahmad Ashai Jamil Hassan Hamdani Ahmed A. Feerasta Mubarik Ali Chairman Member Member Member Secretary Committee of Independent Directors of the Board 1. 2. Mr. Jamil Hassan Hamdani Ms. Navin Salim Merchant Mr. Muhammad Altaf Butt Chairman Member Secretary I.T. Committee of the Board 1. 2. 3. Mr. Mr. Mr. Mr. Ahmed A. Feerasta Manzoor Ahmed Jamil Hassan Hamdani Muhammad Salman Ali ANNUAL REPORT 2020 Chairman Member Member Secretary 47
  14. BOARD SUB-COMMITTEES Audit Committee Terms of Reference Constitution : Mr. Jamil Hassan Hamdani Chairman Audit Committee is mandated the responsibilities to determine appropriateness of measures taken by the management to safeguard Bank’s assets, ensure consistency of accounting policies, review financial statements and recommend appointment of the external auditors, as well as to have close coordination with them so as to comply with the statutory and CCG requirements. The Committee is inter-alia also responsible to ascertain the effectiveness of the Internal Control Systems including financial and operational controls, ensuring adequate and effective accounting and reporting structure and monitoring compliance with the best practices of the corporate governance. The other functions of the Committee include consideration of major findings of internal investigations and management’s response thereto, as well as ensuring that an effective internal audit functions is in place. Mr. Nooruddin Feerasta Member Mr. Muhammad Rashid Zahir Member Ms. Navin Salim Merchant Member Credit Committee Terms of Reference Constitution: Mr. Nooruddin Feerasta Chairman The primary functions of the Credit Committee of the Board are to ensure adherence to the lending policies, review the credit policies, systems and controlling strategies for their further strengthening and monitoring the loan portfolios regularly on an overall basis including a periodical review of problem loans, including classified and stuck-up cases. The Committee is also required to ensure that there are adequate systems, procedures and controls in the Bank for all significant areas related to credit and that the laid down procedures / guidelines are effectively communicated down the line and put in place a reasonable setup to implement the same. The Committee is also assigned the responsibility to review the credit related activities of the Executive Credit Committee (ECC) on a quarterly basis for threshold; fund based Rs.200.00 million and above, non-fund based Rs.400.00 million and above and total exposure Rs.400.00 million and above. Mr. Alauddin Feerasta Member Mr. Muhtashim Ahmad Ashai Member Mr. Muhammad Rashid Zahir Member Mr. Manzoor Ahmed Member Risk Management Committee Terms of Reference Constitution: Mr. Manzoor Ahmed Chairman The Board Risk Management Committee is primarily accountable to provide oversight and advice to the BoD of Soneri Bank Limited in relation to current and potential future risk exposures of the Bank and future risk strategy, including approval of risk appetite and tolerance. The Committee maintains an oversight about implementation of IFRS-9, as per the regulatory requirement. The Committee also ensures that an organizational culture that places a high priority required for effective risk management is established, by promoting a risk awareness culture within the Bank. It also validates that resources allocated to risk management are adequate, given the size, nature and volume of the business and managers and staff that take, monitor and control risk possess sufficient knowledge and expertise. The Committee also monitors the development of appropriate financial models and the system used to calculate each category of risk, and ensures that the Bank has clear, comprehensive and well documented policies and procedural guidelines relating to the risk management, available at all times, and the relevant staff fully understands those policies. The Committee also ensures that the Bank’s overall exposure to Credit, Market, Liquidity and Operational Risk is maintained at prudent levels and consistent with the available capital under rigorous stress tests. The Committee ensures adequate coverage of information security and cyber security. Mr. Muhtashim Ahmad Ashai Member Mr. Jamil Hassan Hamdani Member Mr. Ahmed A. Feerasta Member Human Resource and Remuneration Committee Constitution: Mr. Manzoor Ahmed Chairman Mr. Jamil Hassan Hamdani Member Ms. Navin Salim Merchant Member Committee of Independent Directors Constitution: Mr. Jamil Hassan Hamdani Chairman Terms of Reference The Board Human Resource and Remuneration Committee is responsible for overseeing the Human Resources function of the Bank by ensuring development and implementation of HR strategies that include recruiting, retaining and inspiring professional excellence in employees of the Bank. It recommends human resource management policies to the Board that ensures equal opportunity, gender balance, and transparency. It also reviews the significant HR policies of the Bank and ensures that they are well aligned to the market. The Committee also spearheads the Bank-wide programme for implementation of Guidelines on Remuneration Practices, including necessary awareness and change management initiatives, review, progress against roadmap for implementation of the policy. Terms of Reference Committee of Independent Directors is responsible for providing an independent opinion on state of affairs of the Bank and giving recommendations, if any, to the Board. Ms. Navin Salim Merchant Member I.T. Committee Terms of Reference Constitution: Mr. Ahmed A. Feerasta Chairman The I.T. Committee is responsible for reviewing and overseeing the I.T. Projects and for the development and implementation of I.T. policies. The Committee shall carry out its responsibilities by: Mr. Manzoor Ahmed Member • Reviewing I.T. and digital strategies and policies before submission to the Board; • Ensuring that risk management strategies are designed and implemented to achieve resilience; • Acquiring regular updates from I.T. Steering Committee, to monitor all the Board approved technology related projects; • Ensuring that technology related procurements are aligned with I.T. Strategy as approved by the Board. Mr. Jamil Hassan Hamdani Member 48 NAVIGATING OUR WAY TO SUCCESS
  15. BOARD AND COMMITTEES ’ MEETINGS Details of the meetings of the Board of Directors and its Committees held during the year 2020 and the attendance by each Director/Committee member is given as under:- Board of Directors Meetings Held during the tenure in the year Held during the tenure in the year Attended** Held during the tenure in the year Attended** Held during the tenure in the year Attended** Held during the tenure in the year 1 Mr. Alauddin Feerasta 8 8 * * 4 4 * * * * * * * * 2 Mr. Mohammad Aftab Manzoor*** 2 2 * * 1 1 * * 2 2 * * * * 3 Mr. Muhtashim Ahmad Ashai *** 6 6 * * 3 3 * * 4 4 * * * * 4 Mr. Nooruddin Feerasta 8 8 4 4 4 4 * * * * * * * * 5 Mr. Amin A. Feerasta **** 1 1 * * * * * * * * * * **** **** 6 Mr. Ahmed A. Feerasta **** 7 5 * * * * * * 4 3 * * 2 2 7 Mr. Muhammad Rashid Zahir 8 8 4 4 4 4 * * * * * * * * 8 Mr. Manzoor Ahmed (NIT Nominee) 8 8 * * 4 4 4 4 6 6 * * 2 2 9 Mr. Inam Elahi **** 1 1 1 1 * * **** **** 2 2 **** **** **** **** 10 Ms. Navin Salim Merchant **** 7 5 3 2 * * 4 3 * * 1 1 * * 11 Mr. Jamil Hassan Hamdani 8 8 4 4 * * 4 4 6 6 1 1 2 2 Total Number of meetings held during the year 8 4 4 4 6 1 Attended** Held during the tenure in the year Attended** Held during the tenure in the year Attended** Name of Director Board I.T Committee Meetings Attended** Sr. No. Board Board Human Board Audit Board Credit Resource and Board Risk Independent Management Directors’ Committee Committee Remuneration Committee Committee Committee Meetings Meetings Meetings Meetings Meetings 2 *Represents not a member of the Committee **Leave of absence was granted to those directors/members, by the Board/Committee, who could not attend some of the meetings. ***Mr. Muhtashim Ahmad Ashai was appointed as President and Chief Executive Officer in place of Mr. Mohammad Aftab Manzoor with effect from 01 April 2020. **** Mr. Ahmed A. Feerasta and Ms. Navin Salim Merchant were elected as Directors in place of retiring directors Mr. Amin A. Feerasta and Mr. Inam Elahi respectively, in the 28th AGM of the Bank held on 26 March 2020. ANNUAL REPORT 2020 49
  16. ROLES AND RESPONSIBILITIES Board and its Committees The Board has retained the ultimate responsibility for the Strategic Direction and Control of the Bank . The Board has delegated the Senior Management team under the leadership of the Chief Executive Officer, to deliver the Strategic Direction and Goals determined by the Board. A key function of the Board is to monitor the performance of Senior Management in this function. The Board from time-to-time establishes specialised Committees to share the load of activities and streamline the discharge of its responsibilities, except for policy making. For each Board Committee, the Board adopts a formal Terms of Reference (ToRs), setting out the matters relevant to the objectives, composition, roles, functions, responsibilities, authorities and administration of such Committees. The Board has currently established the following specialised Committees: 1. 2. 3. 4. 5. 6. Board Audit Committee Board Credit Committee Board Human Resource and Remuneration Committee Board Risk Management Committee Board Information Technology Committee Board Committee of Independent Directors The Committees’ ToRs are reviewed as per their defined frequency or if any regulatory change occurs whichever is earlier. As a matter of principle, Committee Members have access to the appropriate external and professional advice needed to assist the Committee in fulfilling its role. The Board reviews the performance of these specialised Committees on a quarterly basis, where respective Committees’ Chairmen brief the Board about their activities, achievements, as well as decisions taken, in compliance with the regulatory requirements. Chairman and the Chief Executive Officer (CEO) The Chairman and Chief Executive Officer have separate and distinct roles. The Chairman has all the powers vested under the Banking laws, Companies Act and Code of Corporate Governance and presides over Board meetings. The principal role of the Chairman is to manage and to provide leadership to the Board of Directors of the Bank. He acts as a leading figure for both the Board of Directors as well as the management and is entrusted with numerous responsibilities and roles ranging from monitoring Board level decision making activities to safeguarding the Bank’s commercial interests. Other responsibilities include: • Serving as a leader and the driving agent of the Board of Directors (BoD), monitoring and managing all of its activities, aligning Board’s goals and decisions with that of the management. The Chairman also ensures that the Board stays on the right direction with respect to achieving its objectives; • Presiding over the Board’s meetings and general meetings, and ensuring that these meetings are executed productively and key agenda is discussed along with a valuable conclusion/decision. The Chairman also oversees the Board’s key decision-making activities; and • Exercising the powers and authorities that are vested in and conferred to him under enabling laws and promoting the highest standards of corporate governance. The Chief Executive Officer at Soneri Bank also plays a critical and significant role and is entrusted with numerous responsibilities, subject to control and supervision of the Board of Directors. Key responsibilities include: • Managing and administering the affairs of the Bank in accordance with the laws, rules, regulations, and the Memorandum and Articles of Association of the Bank; • Complying with and arranging for implementation and compliance within the Bank, of all the policies, procedures and manuals approved by the Board of Directors and any directives given by the Board of Directors or Board Committee(s); • Preparation of corporate strategy for growth and expansion of the Bank’s operations and submitting the same for consideration and approval of the Board of Directors; • To appoint, promote, transfer, suspend or dismiss employees of the Bank and fix their remuneration and other entitlements in accordance with the policies and procedures approved by the Board of Directors; and • To deal with, represent and act on behalf of the Bank before the State Bank of Pakistan, Securities and Exchange Commission of Pakistan, Federal and Provincial Ministries, Government Departments, Courts, Stock Exchange and any other competent authority. • To evaluate asset utilisation and for redeployment in a prudent manner in line with the Board’s approved Strategy. • To make sure strong Compliance Culture and Internal Control within the organisation. 50 NAVIGATING OUR WAY TO SUCCESS
  17. MECHANISM ADOPTED FOR BOARD ’S PERFORMANCE EVALUATION Soneri Bank Limited has put in place a mechanism whereby performance of overall Board is evaluated annually. Quantitative technique is used, where a scaled questionnaire is provided to each director to obtain their feedback. Assessment is carried out for the following categories:- • Overall Board • Chairman of the Bank • CEO of the Bank • Sponsor Directors • Independent Directors • Individual Directors • Board Committees Scale from 1 to 5 (1 being “Strongly disagree” and 5 being “Very strongly agree”) is used to rate the assessment criteria given under each section. Feedback, so received, from each director is then collated and analysed to denote performance in percentage terms against each of the abovementioned section. Final result of the Annual Evaluation of the Board’s Performance is then presented to the Board of Directors, which it accordingly reviews and identifies any issues, weaknesses or challenges along with how these can be adequately addressed. Accordingly, Board has reviewed its Performance Evaluation for the year 2020 in its 183rd meeting convened on 17 February 2021 and the challenges identified by them have been duly noted to be addressed. This mechanism disclosure on the evaluation process adopted by Soneri Bank Limited is being published for all the stakeholders in compliance with the BPRD Circular No.11, dated 22 August 2016. ANNUAL REPORT 2020 51
  18. MANAGING CONFLICT OF INTEREST The Board of Directors recognise that they have been entrusted with fiduciary duties of loyalty towards the Bank and its shareholders , accordingly they demonstrate due care and skill while performing in their capacity as Directors of the Bank. One of the key aspects of their responsibilities includes managing potential or actual conflict of interests arising from personal relationships, external associations and interest in material matters, which may have a bearing on their independent judgment. In order to effectively manage conflict of interest, the Board regularly monitors whether or not they are placed in position of actual or potential conflicts through the following: Disclosure of Interest by Director: • Every Director (including spouse and minor children) of the Bank who is in any way, whether directly or indirectly, concerned or interested in any contract or arrangement entered into, or to be entered into, by or on behalf of the Bank, shall disclose the nature of his/her concern or interest at a meeting of the Directors. • The Directors are required to disclose existing or perceived conflicts of interest at the Board meeting as per the requirements of prevailing law. Where a conflict of interest or potential conflict of interest has been disclosed, the concerned Board Member shall not take part in the Board discussion on that agenda item. The Member who has disclosed the conflict cannot vote on that agenda item. Insider Trading: • The Board has approved Insider Trading Policy, where Directors are required not to deal directly or indirectly in the securities of the Bank; whether on their own account or their relative’s account, if they are in possession of any unpublished price sensitive information concerning the Bank. Directors who are in possession of any unpublished price sensitive information shall not communicate directly or indirectly the said information to others who trade on such information. • Where any Director or his/her spouse sells, buys or takes any beneficial position, whether directly or indirectly, in the shares of the Bank, he/she shall immediately notify the Company Secretary in writing. Such Director shall also deliver a written record of the price, number of shares, form of share certificates (i.e. whether physical or electronic within the Central Depository System) and nature of transaction to the Company Secretary. Further, no Director shall, directly or indirectly, deal in the shares of the Bank, in any manner, during the closed period as determined by the Board of Directors. Related Party Transaction: • The Board has approved Related Party Transaction Policy, where the Bank has devised a mechanism for identification of related parties and execution of related party transactions at arm’s length, which are executed in the normal course of business. Based on the statutory requirements, complete transactional details of related parties are presented before the Audit Committee for review and deliberations. The Audit Committee reviews and recommends the related party transactions to the Board and AGM, where required, for its approval. • Moreover, as a statutory requirement, a comprehensively prepared return is submitted on half yearly interval to the State Bank of Pakistan that primarily covers every related party transaction executed during the said period. Confidentiality: • Directors shall maintain the privacy and confidentiality of all the information acquired being Member of Board of Directors of the Bank or which has come into their knowledge and refrain from disclosing the same unless otherwise required by statutory authorities/law and Bank’s own policies. All such information will remain with them as a trust and will only be used for the purpose for which it is intended and will not be used for personal benefits. Inside information about affairs of the Bank shall not be used for their own gains or for that of others, either directly or indirectly. • Directors of the Bank are strictly prohibited to disclose the fact (that comes into their knowledge) to the customer or any other quarter that a suspicious transaction or related information is being or has been reported to any authority, except if required under the law. Conflict of Interest: • Avoid all such circumstances in which there is personal conflict of interest, or which may appear to be in conflict with any of the stakeholder as prescribed by the statutes and in probable case where their interest conflicts with any of the stakeholders, he/she would immediately declare such interest before the Board of Directors. • No Director shall exploit for their own personal gain, opportunities that are discovered through use of corporate property, information or position, unless the opportunity is disclosed completely in writing to the Board of Directors of the Bank and the Board allows him to avail such opportunity. • No interested person shall participate in the discussion or vote in the Board’s proceedings or participate in any other manner in the conduct or supervision of such dealings. • Avoid any dealing with contractors or suppliers of the Bank that compromises the ability to transact business on a professional, impartial and competitive basis or that may influence discretionary decision to be made by the Board Members / Bank. • No Director shall hold any position or job or engage in outside business or other interest that is prejudicial to the interests of the Bank. • No Director shall make any statement, which has the effect of adverse criticism of any policy or action of the Bank or which is capable of embarrassing the relation between the Bank and the public including all the stakeholders; provided that nothing in this clause shall apply to any statement made or views expressed by a Board Member, which are purely factual in nature and are not considered as confidential, in his official capacity or in due performance of the duties assigned to him. • All Directors shall refrain from accepting gifts, personal favours or preferential treatment, that could, in any way, influence or appear to influence, business decisions in favour of any person or organisation with whom or with which the Bank has or is likely to have business dealings. 52 NAVIGATING OUR WAY TO SUCCESS
  19. STAKEHOLDERS ’ RELATIONSHIP AND ENGAGEMENT Steps to Encourage Minority Shareholders’ Participation in AGMs Apart from being an event for decision making on important matters, Annual General Meeting also provides a forum for two-way engagement with the shareholders, particularly the minority shareholders. Therefore, the Bank takes the following measures to ensure meaningful participation of minority shareholders in the AGM: • • • • • • • We encourage our minority shareholders, who qualify for election to the office of a director, to file nomination papers. Minority shareholders shall be facilitated in terms of the requirements of Regulation 5 of the Listed Companies (Code of Corporate Governance) Regulations, 2019. Minority shareholders are facilitated and apprised about the details of the documents required to be submitted, vide our Notice of AGM. Notice of AGM is sent to every member of the Bank, at least 21 days before the meeting. The notice is also published in newspapers (both English and Urdu) having nationwide circulation. Moreover, the notice is also circulated from the forum of Pakistan Stock Exchange Ltd. Annual Report of the Bank is sent to each member of the Bank before the AGM in electronic (CD/DVD) or hard copy form (on request). The shareholders are facilitated to appoint a proxy, if they are unable to attend the AGM in person. During the AGM, a detailed briefing on the Bank’s performance and future plans is given to the shareholders both in English and Urdu. The shareholders are encouraged to raise queries and give suggestions relating to the Bank's operations. Summary of the Analyst Briefings Analyst briefings are interactive sessions between the management of the Bank and the investor community, whereby the Bank takes the opportunity to apprise the investors about the business environment and economic indicators of the country, explain its financial performance, the competitive environment in which the Bank operates, investment decisions, challenges faced, as well as business outlook. The idea behind the Bank’s investor engagement through these briefings is to give the right perspective of the business affairs of the Bank to the investors (both existing and potential), which help them in making their investment decisions. Accordingly, the Bank’s Corporate Briefing Session for the year 2020 was arranged on 22 December 2020, in compliance of the PSX requirement, conveyed vide their Notice No.PSX/N-92 dated 28 January 2019. Issues Raised in the last Annual General Meeting (AGM) No significant issue was raised in the last Annual General Meeting of the Bank held on 26 March 2020. General clarification or information sought by the shareholders including minority shareholders was duly provided by the Chief Financial Officer and Chief Executive Officer during the AGM. ANNUAL REPORT 2020 53
  20. SHARIAH BOARD PROFILE Mufti Ehsan Waquar (Chairman Shariah Board) Mufti Ehsan Waquar is among the few scholars who possess a unique combination of religious and contemporary education. Graduating as a Shariah Scholar and a Mufti, he later obtained a degree of Masters in Economics and Masters in Business Administration with majors in Finance, along with Bachelors in Law and Legislation. This unique blend of educational combination gives him an edge upon many others to understand, correlate and align modern day banking practices with Shariah principles. He has strong communication skills combined with fluency in several languages. Mufti Ehsan Waquar has a diversified cross-functional management experience in Islamic Finance, Business Management and Operation, Project Management and Administration for more than two decades; he has hands-on experience of people and project management, with a rich experience of working with board of directors and senior management of banks, regulators, auditors and legal counsels. Mufti Ehsan Waquar has exclusively served Islamic Financial Industry with institutions like World Bank-IFC, National Bank of Pakistan, Allied Bank of Pakistan, Soneri Bank, NAFA, Askari General Insurance Company Limited, Window Takaful Operations (AGICO), Emirates Global Islamic Bank, now Al Baraka Bank Pakistan, UBL, Yasaar Ltd., - UAE & UK, Minhaj Advisory – UAE and Arif Habib for more than a decade now. He has structured several Sukuks including the largest Sukuk in Pakistan; a hundred billion Sukuk for Neelum Jhelum Hydro Power, Fatima Fertilizer, Fauji Fertilizer, Sitara Energy, Sitara Peroxide and IBL. Besides this, he has achieved the industry’s largest conversion drive of converting more than two hundred (200) conventional branches into Islamic banking branches. This was a complete transition from conventional business to Islamic operation, including development and implementation of policies, procedure and training. He also served as member of the Technical Committee for Developing Accounting & Auditing Standard for Islamic Financial Institutions at Institute of Chartered Accountants of Pakistan (ICAP). As member of SAF at State Bank of Pakistan (SBP), he worked actively in matters pertaining to Islamic Banks, which included drafting of Shariah Standard on Shirkat-ul-Milk usually used for Housing Finance, Tawarruq, Commodity Murabahah, Treasury, Trade Finance and Agricultural Financing Products. He had the privilege to work on a project of World Bank-IFC for developing Islamic Re-Mortgage Finance through his own Management Consultancy Co., ESAAC. He has also worked with SECP team on Takaful Rules 2012 with its insurance division. Beside this, he conducts courses and sessions on Islamic Banking, Capital Markets, Derivatives, Takaful and Risk Management in renowned Business schools like CBM, IBA and KUBS. He has been associated with Mustaqeem Islamic Banking, Soneri Bank Limited as Chairman Shariah Board since October 2015. Mufti Bilal Ahmed Qazi (Shariah Board Member) Mufti Bilal Ahmed Qazi is a qualified Shariah Scholar having Al-Aalamiyyah (a degree recognized by the Higher Education Commission Pakistan as a Masters in Arabic and Islamic Studies) in 2003 from Jamia-tul-Uloom Ul-Islamiyah, Binori Town. He then completed his specialization in Islamic Jurisprudence from Jamia Darul Uloom Karachi. He has completed his MBA from IBA (Institute of Business Administration) Karachi, Pakistan. He is also a Certified Shariah Scholar and Auditor (CSAA) from AAOFI, Bahrain. Prior to joining SBL Islamic Banking, he had worked with Meezan Bank Ltd. as Shariah Scholar till 2006. He is also working as Shariah Board Member of Summit Bank, Al Baraka Bank Pakistan, also Shariah advisor of TPL Life and Shaheen Insurance Window Takaful. He has been associated with Mustaqeem Islamic Banking, Soneri Bank Limited as Shariah Board member since November 2015. Mufti Muhammad Zahid (Resident Shariah Board Member) Mufti Muhammad Zahid completed his dissertation in Islamic Jurisprudence with outstanding record throughout his academic career, winning numerous awards. He is well-versed with the anatomy of Islamic Jurisprudence. He has completed his Al–Aalamiyyah (a degree recognized by the Higher Education Commission of Pakistan, as a Masters in Arabic and Islamic Studies) in 2005 from Jamia Darul Uloom Karachi and later Specialized in Islamic Jurisprudence (Al-Takhassuss Fil Iftaa) in 2008 from Jamia Darul Uloom Karachi as well. Prior to joining SBL Islamic Banking, he worked for Pak-Qatar Family Takaful Ltd. as the Head of Shariah Compliance from 2008 to 2016, later he served as the Shariah Board Member of Pak-Qatar Family Takaful Ltd. Mufti M. Zahid is a visiting faculty at IBA, he focuses on presenting Islamic solutions to problems related to modern existence, thereby applying his acumen in bringing the modern world abreast as per the Shariah practices. He provides Islamic Finance, Takaful and Risk Management trainings at different forums as well and at the same time, he is responsible as Resident Shariah Board Member (RSBM) at Mustaqeem Islamic Banking, Soneri Bank Limited. for all Shariah related activities, which have a legal bearing with respect to the Shariah. He is also working as a Shariah Board Member at TPL Life and Shaheen Window Takaful. He has been associated with the Bank as Resident Shariah Board member since October 2016. 54 NAVIGATING OUR WAY TO SUCCESS
  21. TERMS OF REFERENCE AND MEETINGS OF THE SHARIAH BOARD The Shariah Board (SB) of Soneri Mustaqeem Islamic Banking has been entrusted with the responsibility of directing, reviewing and supervising all Shariah related matters of the Islamic Banking and shall be accountable for all its decisions accordingly. Prime responsibility of the SB is to facilitate the Soneri Mustaqeem Islamic Banking in devising a comprehensive Shariah Compliance Framework for all of its operations. The SB is also responsible for ensuring that all relevant procedure manuals and marketing advertisements are in conformity with the rules and principles of Shariah. Moreover, all the products or services to be offered and/or launched by the Islamic Banking shall have prior approval of the SB. Resident Shariah Board Member (RSBM) of the Bank appointed in line with the requirements of SBP’s Shariah Governance Framework, acts as the representative of the SB and oversees the procedures to be adopted for implementation of the resolutions, pronouncements and fatawas of the SB and provides guidance thereon. He is entrusted with the responsibility to provide explanation/clarification to the management and staff of Islamic Banking on products, documents, process flows and other operational Shariah related matters, in the light of decisions, rulings, fatawas, already issued by the SB. He also provides guidance regarding the Shariah aspects of new products/ideas and responds to clients’ queries relating to the Islamic products and services. Shariah Board Meetings Details of the meetings of the Shariah Board held during the year 2020 and the attendance by each Shariah Board Member are given as under:- Sr. No. Name of Shariah Board Member Shariah Board Meetings Held During the Year Attended 1. Mufti Ehsan Waquar Ahmad 4 4 2. Mufti Bilal Ahmed Qazi 4 4 3. Mufti Muhammad Zahid 4 4 Total Number of Meetings Held During the Year ANNUAL REPORT 2020 4 55
  22. HUMAN RESOURCE PRACTICES At Soneri Bank Ltd ., we appreciate that employees’ experience matters. Our HR policies aim to promote a climate where staff feels respected, valued, driven, and fairly treated. Our leaders are the role models, showcasing the right behaviours to create that enabling climate. The Coronavirus outbreak gave birth to a new set of challenges and the role of HR increased significantly. Focusing on staff’s well-being, we enacted Coronavirus protocols, which helped ensure the safety of our staff and minimised the disruption to business. To curb the transmission of the virus, we adopted a work-from-home policy and restricted attendance to 50%. This reduced the density of the workforce in the office and allowed social distancing to be practiced easily. HR interviews were conducted virtually and meetings were held using conferencing tools. During these trying times there have been unprecedented mass layoffs across the globe. We, however, ensured that no position was made redundant and no salary deductions were made. Moreover, to help staff members cover the expense of Covid-19 detection test, Soneri Bank Ltd. reimburses 75% of the total cost. In collaboration with IT, HR Learning & Development developed the infrastructure required to conduct online training sessions using e-learning systems, developed user guides, and distributed IT equipment to branches, where it was required. This made it possible for all trainings to be conducted online. Moreover, to keep our staff up-to-date with changing practices and regulatory compliance requirements, a learning initiative using weekly quizzes called “Theme of the Month” was started. Learning material was provided with each theme and cash awards were given to top scorers of the weekly quizzes. Organisational excellence is only achievable if you have the right people for each job role. We are not only committed to recruiting and onboarding top talent, but also focused on retaining our top performers. In 2020, our attrition rate decreased by 7%. We not only focused on operational continuity, but we were also able to reduce HR replacement hiring costs by Rs. 1.6 million/month. To boost employee engagement, we launched a campaign by the name of “We Value You”. This campaign gives recognition and cash awards to staff who are nominated by their colleagues for demonstrating extraordinary behaviour, which also exemplifies Soneri Bank’s core values. The aim of this initiative is to align staff’s behaviour with Soneri Bank’s Values, promote engagement and enhance psychological inclusion and connectivity. We identify succession candidates for key positions and offer them targeted development opportunities. This helps us in having a robust leadership pipeline. This offers upward career-mobility of talent within the organisation and allows fulfilment of their career growth aspirations. We aim to go ‘paperless’ by transforming our existing processes and leveraging technology. This environment-friendly approach will not only help us save time and money by reducing costs associated with printing and paper-storage, but will also provide enhanced information security, easily accessible data and transparency with a digital paper-trial. Above all, this will enable us to be environment friendly. Despite the uncertainty and obstacles faced in 2020, we were able to prove our resilience. Through quick and effective adjustments, we were able to circumvent the negative impact of Covid-19. With a forward-looking approach and our commitment to excellence, we intend to reach new heights as we continually learn, improve, innovate and grow. The Human Resources Department will continue to contribute to the success of the Bank. Headcount status Permanent Headcount Headcount Dec 2020 3,272 Average HC 2020 3,213 Outsourced Headcount Headcount Dec 2020 1,109 Average HC 2020 1,072 As of 31 December 2020 Governance Trainings Soneri Bank strongly believes that in order to stay Roshan Har Qadam, learning must never stop, no matter what may come. With a paradigm shift taking place in the banking industry every year, Soneri Bank ensures that its employees are always up-to-date and hands on with every aspect of banking, especially Governance and Controls. Hence, Soneri Bank conducts rigorous training programs every year for its employees, to keep them well equipped and reach the apex of their performance. In the midst of Covid-19, learning did not stop and employees were strongly encouraged to keep a steep learning curve, by proactively attending various online meetings and taking trainings on digital platforms. Apart from other knowledge and skill based trainings, a lot of trainings were also conducted on topics like Operational Risk, Business Continuity Planning, Risk Management Framework, Cyber and Information Security Awareness, etc. 56 NAVIGATING OUR WAY TO SUCCESS
  23. IT GOVERNANCE Soneri Bank ’s IT Governance Policy has been developed as a guide, model and decision-making reference for the Bank's IT Division to accomplish all level(s) of regulatory compliance. Our Policy is an integral part of enterprise governance and consists of leadership and organizational structure and processes that ensure that the Bank’s IT Division sustains and extends the organization’s strategies and objectives. This Policy provides a platform to the attainment of the strategic objectives of the core business streams and to align IT with the Business Strategy. The management of IT Division and Digital Banking is commanded by the Chief Information Officer of the Bank who reports directly to the Deputy CEO and works in close coordination with other Business Groups, IT Steering Committee, Board IT Committee and the Management Committee of the Bank. The CIO and his team are responsible for the implementation of the entire Enterprise Technology Governance Framework and ensures providing valuable strategic insights to keep the Bank abreast with new technological enhancements and systems. The policy also ensures that the Bank is equipped with innovative, world class robust IT Infrastructure with adequate hardware and high-availability of network to enable a connected workforce for timely servicing its worthy customers. The Policy is also tightly coupled with the Bank’s Information Security Policy and ensures cyber security on the topmost level. Bank’s IT Services are designed to benefits the Bank with large or complex software and hardware deployments, diverse system requirements, dynamic configuration changes, high uptime requirements, and to meet user expectations by ensuring that technology governance, information security and risk management are fully-equipped and up-to-date. On the other-side, independent IT audit of IT infrastructure services, policies and operations are being conducted to evaluate that all IT controls are in place protecting the Bank’s assets while ensuring the integrity of the data and service delivery are in line with the goals and objectives of the Bank. It’s widely accepted that attention to the needs of people, process and technology is the foundation of effective information governance. In this emerging technological trends, our IT people are equipped with the necessary skillset and tools and go regularly through trainings to stay abreast of existing and new technologies in relation with their job requirements and their impact on the Bank's business. Our people are the real key to successful implementation of information and technology. They create, use and interpret data. They manage information systems and administer access rights and preemptively identify risks to prevent incidents and crises from occurring. At the most simple level, our policy outlines how Soneri Bank meet a designed set of objectives and focuses on how Soneri Bank intends to use and organize technology to meet its business objectives. ANNUAL REPORT 2020 57
  24. WHISTLE BLOWING Overview Soneri Bank Limited (SNBL) believes in the conduct of the affairs of its constituents in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behavior. Whistle Blowing Policy (WBP) provides a framework enabling the Bank’s staff and outside parties such as shareholders, vendors, customers etc., to report their concerns against irregularities, financial malpractices, frauds & forgeries, harassment, improper conduct or wrong doing without any fear, reprisal or adverse consequences. Scope The scope of the WBP mainly covers the cases that escape the existing normal procedures and systems. WBP is additional to the existing systems of complaint and dispute resolutions. It is part of an effort to further improve governance and accountability at SNBL. The employees and outside parties are encouraged to use the guidance provided by this program for reporting wrong doing/improper conduct. Independence of Whistle Blowing (WB) Unit To ensure the independence, WB Unit has been established at Internal Audit & RAR Group of the Bank under the ambit of the Board Audit Committee (BAC) of the Bank. Protection for Whistle Blowers The Bank shall protect the identity of whistle blower. For whistle blowing and complaint handling mechanism to be effective, the concerned parties must be adequately assured that the information given will be treated in a confidential manner and above all that they will be protected against retaliation from within or outside the Bank. Rewards for Whistle Blowers Anyone providing information leading to investigation or detection of frauds/forgeries or incident which may have impacted the Bank’s reputation will be suitably rewarded, at the discretion of the management considering all facts and circumstances. Communication Channel for Lodging Complaint - Post/courier addressed to WB Unit on the prescribed form and address available on Bank’s website. Dedicated email ID whistleblowing.unit@soneribank.com accessible to WB Unit Head. Number of Whistle Blowing Incidences Reported to BAC Three (3) number of whistle blowing incidences were reported to BAC in the year 2020. 58 NAVIGATING OUR WAY TO SUCCESS
  25. INVESTORS ' GRIEVANCE The Bank believes that its association with its investors should be given utmost priority and continuously strives to strengthen its relationship with them, which is also reflected in the mechanism deployed for addressing investors’ grievances. Moreover, it also promotes equitable treatment of every shareholder, whether they are majority or minority shareholders, institutional investors, or foreign shareholders. The Bank has dedicated a section of its website solely for the provision of significant information and various documents for the investors’ benefit. Accordingly, the Bank has posted essential information on its website about the Bank, Board of Directors, Management Team, External Auditors, past and current financial data, shareholding details, investor relations and grievances, as well as such other information as stipulated under the Securities and Exchange Commission of Pakistan’s S.R.O.1196(1)/2019 dated 03 October, 2019. Further, in order to facilitate our shareholders, the following information has been prominently displayed on the Bank’s corporate website: • Contact details of our Share Registrar. • Contact information of the focal person of the Bank for dealing with investors’ grievances. • Designated email address of the Bank for addressing the queries and complaints relating to shares and dividend. • Various documents, such as Notice of AGM, Proxy Form, Dividend Mandate Form, List of unclaimed dividends and shares, and Transfer Deed, etc. for easy access of the investors. • The Bank endeavours to investigate and resolve all the complaints and queries of the investors to their maximum satisfaction. However, in case an investor remains unsatisfied, the Bank has also shared the contact details of the SECP, along with the website link of its complaint cell, providing investors an alternative course for resolution of their complaints. ANNUAL REPORT 2020 59
  26. MANAGEMENT COMMITTEES 1 . Management Committee 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Mr. Muhtashim Ahmad Ashai, Chairman Mr. Amin A. Feerasta Mr. Abdul Aleem Qureshi Mr. Muhammad Qaisar Riaz Mr. Shahid Abdullah Mr. Mirza Zafar Baig Mr. Tariq Yar Khan Mr. Mubarik Ali Mr. Muhammad Salman Ali Mr. Ali Hassan Shah Mr. Muhammad Merajuddin Ahmed Mr. Hyder Rahi, Secretary 2. Executive Credit Committee 1. 2. 3. 4. 5. 6. Mr. Muhtashim Ahmad Ashai, Chairman Mr. Amin A. Feerasta Mr. Abdul Aleem Qureshi Mr. Muhammad Qaisar Riaz Mr. Muhammad Amin Tejani Mr. Mubarik Ali, Member/Secretary 3. Compliance Committee 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Mr. Muhtashim Ahmad Ashai, Chairman Mr. Amin A. Feerasta Mr. Abdul Aleem Qureshi Mr. Ali Hassan Shah Mr. Muhammad Aamir Mr. Muhammad Merajuddin Ahmed Mr. Muhammad Qaisar Riaz Mr. Muhammad Salman Ali Mr. Mohammad Amin Tejani Mr. Rizwan Zafar Mian Sikander Hayat Mr. Tariq Yar Khan, Member/Secretary 4. Assets and liability Committee 1. 2. 3. 4. 5. 6. 7. 8. 9. Mr. Muhtashim Ahmad Ashai, Chairman Mr. Amin A. Feerasta Mr. Abdul Aleem Qureshi Mr. Muhammad Qaisar Riaz Mr. Mubarik Ali Mr. Mirza Zafar Baig Mr. Mohammad Amin Tejani Mr. Muhammad Aamir Mr. Shahid Abdullah, Member/Secretary 5. Investment Committee 1. 2. 3. 4. 5. Mr. Muhtashim Ahmad Ashai, Chairman Mr. Amin A. Feerasta Mr. Shahid Abdullah Mr. Abdul Aleem Qureshi Mr. Mirza Zafar Baig Mr. Muhammad Imran Khan, Secretary 60 NAVIGATING OUR WAY TO SUCCESS
  27. 6 . I.T. Steering Committee 1. 2. 3. 4. 5. 6. 7. 8. 9. Mr. Muhtashim Ahmad Ashai, Chairman Mr. Amin A. Feerasta Mr. Mirza Zafar Baig Mr. Ali Hassan Shah Mr. Tariq Yar Khan Mr. Muhammad Salman Ali Mr. Abdul Aleem Qureshi Mr. Qurban R. Punjwani Mr. Mubarik Ali Mr. Muhammad Imran, Secretary 7. Credit Risk Management Committee 1. 2. 3. 4. 5. 6. 7. 8. 9. Mr. Muhtashim Ahmad Ashai, Chairman Mr. Amin A. Feerasta Mr. Mubarik Ali Mr. Muhammad Qaisar Riaz Mr. Abdul Aleem Qureshi Mr. Mirza Zafar Baig Mr. Shahid Abdulllah Mr. Mohammad Amin Tejani Mr. Muhammad Aamir, Member/Secretary 8. Operational Risk Management Committee 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Mr. Muhtashim Ahmad Ashai, Chairman Mr. Amin A. Feerasta Mr. Abdul Aleem Qureshi Mr. Muhammad Qaiser Riaz Mr. Mirza Zafar Baig Mr. Tariq Yar Khan Mr. Ali Hassan Shah Mr. Mubarik Ali Mr. Muhammad Salman Ali Mr. Muhammad Aamir, Member/Secretary 9. Business Continuity Plan Steering Committee 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. Mr. Muhtashim Ahmad Ashai, Chairman Mr. Amin A. Feerasta Mr. Mubarik Ali Mr. Mirza Zafar Baig Mr. Abdul Aleem Qureshi Mr. Ali Hassan Shah Mr. Muhammad Merajuddin Ahmed Mr. Muhammad Qaisar Riaz Mr. Muhammad Salman Ali Mr. Tariq Yar Khan Mr. Farhan Mufti Mr. Pervaiz Panhwar Mr. Mian Asif Iqbal Mr. Sajjad Butt Mr. Muhammad Azizullah Abid Mr. Azhar Sajjad Siddiqui Mr. Mohammad Amin Tejani Mr. Nasir Iqbal Mr. Rizwan Zafar Mr. Muhammad Aamir, Secretary ANNUAL REPORT 2020 61
  28. CHAIRMAN 'S REVIEW Dear Stakeholders, On behalf of the Board of Directors, I am pleased to present the Annual Report of Soneri Bank Limited for the financial year ended 31 December 2020. The year 2020 brought about unprecedented challenges across the globe as the effects of the COVID-19 pandemic continued to disrupt regular business operations. Due to timely efforts on the part of the government, with measures such as imposition of smart lockdowns and relief packages announced in support of businesses, Pakistan was able to achieve notable success in containing the dual health and economic challenges. Despite the challenges that persisted, the Bank continued to forge ahead, and I am pleased to note that our results are testimony to our commitment to excellence, and the hard work and dedication put in by our management team and staff. There were valuable lessons learnt as the year progressed, as we were forced to change the way we work. While working remotely, our key staff maintained the highest levels of service quality for customers, whilst supporting the well-being of their families and colleagues. Our business continuity protocols were also put to the test, as virtual meetings amongst senior management and the Board members became the norm. Over the course of the year, we were able to continue our operations uninterrupted, with strictly enforced SOPs, ensuring the safety of employees as well as customers. Our HR policies aimed at ensuring employees’ well-being and increased engagement amidst testing times. I am pleased to report that during the year, we had no redundancies and no salary deductions were made. In terms of overall performance, the Bank was able to achieve a number of key milestones this year. We continued to deliver on our strategic objectives, and were able to achieve record levels of revenues and operating profits. Our branch outreach 62 NAVIGATING OUR WAY TO SUCCESS
  29. now extends to 340 branches across the country . Deposits at health in the days to come, and expect the same level of the year-end were reported at Rs. 345.499 billion, indicating a commitment and dedication as we move towards achieving our year on year growth of 14 percent, with current accounts goals together, as part of the Soneri Bank family. registering a growth of 24 percent. In terms of balance sheet size, we are close to crossing the half a trillion mark, with total On behalf of the Board of Directors, I would like to express my assets reported at Rs. 485.345 billion at 31 December 2020. sincere gratitude to our customers and our shareholders, for their Operating Profit growth for the year was recorded at an continued trust and support. I would also like to thank the State impressive 105 percent, while overall profitability after Bank of Pakistan, the Securities and Exchange Commission of provisions and taxes grew by 26 percent. Pakistan and other regulatory authorities for their support and continued guidance. During the year, the composition of the Bank’s Board of Directors underwent a change, following the election of Directors in March 2020. All our members of the Board of Directors possess rich and diversified experience, and have performed their duties effectively and diligently all throughout the course of the year. The Board has remained fully compliant with the provision with regard to their training program. Also, as required under the regulations, the Alauddin Feerasta Board’s Performance Evaluation for the year 2020 was conducted Chairman in-house, and the challenges identified by the Board have been duly Lahore: 17 February 2021 noted to be addressed. In today’s dynamic and competitive environment, the key to continued success and achieving growth lies in focusing on enhanced delivery platforms and seamless customer engagement. I am pleased to share that during the course of the year, the Bank has successfully initiated its digital transformation journey. The first step involved an infrastructure upgrade, which has successfully been rolled out. I am confident that the Bank is well positioned and on track for reaping the benefits that digital transformation has to offer in the coming days. We remain cognizant of the challenges posed by COVID-19 and are continually re-assessing and re-aligning our operational strategies as we continue to serve our customers and clients. I would like to congratulate the entire Management team, and our dedicated employees at the Bank, especially our frontline staff, for their notable contributions, amidst times of crisis. I wish you all the best of ANNUAL REPORT 2020 63
  30. DIRECTORS ’ REPORT TO THE SHAREHOLDERS On behalf of the Board of Directors, we are pleased to present the Directors’ Report of Soneri Bank Limited (the Bank) along with the audited financial statements and Auditors’ report thereon for the year ended 31 December 2020. Economic Review: The year 2020 started on a positive note as our Government successfully launched an economic reform program to address external and fiscal imbalances. However, the outbreak of the Covid-19 Pandemic unfolded an unprecedented healthcare-cum-economic crisis across the globe, and governments were forced to change the course of their policies to stimulate economies, fight recessionary trends and shift the focus from growth to survival. Pakistan, like most developing economies of the world, was also affected as key economic indicators and targets were all significantly impacted. In addition to the impact of Covid-19, currency devaluation and inflationary pressures also contributed to the negative growth rate. The Government of Pakistan and the SBP took several timely relief measures to contain economic fallout. Various relief packages for households and businesses were announced. Support to health sector was provided for combating the virus. Relaxation of credit requirements for exporters and importers were made and several measures were taken to facilitate new investment. Paradoxically, the pandemic brought good tidings to the macro-economy of Pakistan. On the external front, the Current Account continued to show improving numbers supported by a robust momentum of workers’ remittances. Moreover, curtailed global activity helped the balance of imports significantly. While a resurgence of the virus towards the latter half of the year did jolt investor confidence in the markets to a certain extent, with the availability of the vaccine in the country, the sentiment has once again improved. The National Command and Operation Centre has recently launched the immunisation campaign across the country. Following five consecutive months of progressive surpluses, the current account registered a deficit of $662 million in December 2020. While remittances and exports continued to grow steadily, the trade deficit rose due to a rise in imports of machinery and industrial raw material, in line with the pick-up in economic activity. At the same time, wheat and sugar imports also rose to close demand and supply gaps in the domestic market. Encouragingly, exports have recovered to their pre-Covid monthly level of around $2 billion since September 2020, with a broad-based recovery in export volumes recorded in almost all categories in December 2020. The outlook for the external sector has improved further and the current account deficit for FY21 is now projected to remain below 1 percent of GDP. Fiscal developments have been largely in line with this year’s budget and the government has continued to adhere to its commitment of no fresh borrowing from the SBP. Despite higher interest payments and Covid-19 related spending, healthy growth in revenues has contained the fiscal deficit during the fiscal year so far. Driven by a rebound in direct taxes and the sales tax, FBR revenue during H1-FY21 has grown by 5 percent YoY to land close to the targeted level. Despite higher non-interest current expenditures, the primary balance posted a surplus of 0.5 percent of GDP during July-November 2020, 0.2% better than the same period last year. As with the last several years, the government plans to sustain its expansionary fiscal policy thrust in FY21 with a budgeted outlay of PKR 7,231bn, although down by 11% compared to FY20 estimates of PKR 8,135bn. For FY21, the government refrained from introducing any new taxation measures in the budget and only undertook a variety of measures for tariff rationalisation in order to revive the stalled economic activity. The fiscal deficit is expected to clock-in at 7.5% in FY21 against the government’s target of 7%. The country’s international forex reserves rose to USD 20.5bn in December 2020, from USD 17.9bn at the end of December 2019. At almost 2.9 months of imports coverage, Pakistan’s foreign reserves are slightly below the IMF’s minimum 3 months’ threshold. However, Pakistan will be relying on financing from IMF and other bilateral partners to meet its external debt requirements in FY21. Pakistan was placed on FATF’s (Financial Action Task Force) grey list in June 2018. In October 2019, FATF handed out another extension to Pakistan, maintaining its status on grey list until February 2020. While significant progress has been made, certain loopholes still exist, such as the nonexistence of a formal framework to combat money laundering and eliminate terror financing. In August 2020, rating agency Moody’s upgraded the country’s outlook from ‘under review for downgrade’ to ‘stable’, while maintaining the country’s B3 rating. The stable outlook reflects Moody’s view that the pressures Pakistan faces in the wake of the Coronavirus shock and prospects for its credit metrics are likely to remain consistent with the current rating level. The KSE-100 index remained volatile during the year. The market saw a V-shaped recovery after a severe hammering following the outbreak of Covid-19, beginning the year at 40,888 index points and ending it at 43,755 index points. The KSE100 index is expected to generate a total return of 28% during 2021, while the index is expected to reach 52,000 points by December 2021. 64 NAVIGATING OUR WAY TO SUCCESS
  31. The SBP has maintained that overall financial conditions in the country are stable and inflationary risks are balanced . A recent surge in inflationary readings have been fuelled by an uptick in selected food items, which was attributable to supply shocks from monsoon rains and locust attacks. Shortage in wheat and sugar was also seen owing to premature export of said commodities. However, the government has intervened and took measures such as increasing the Minimum Support Price for wheat, while also importing commodities. While food inflation has seen a surge, core inflation has remained stable primarily attributable to subdued demand in the economy. While CPI started its ascent from June 2020 onwards, core inflation has remained moderately stable at an average of 6.4% during 5MFY21 compared to average CPI of 8.8% during the same period. Real GDP is estimated to grow by 1.84% during 2021, following a year of negative growth. This recovery should take Pakistan closer to levels witnessed prior to the pandemic and is relatively rapid compared to many other countries, supported by pent-up domestic demand. The SBP’s policy rate since mid-March 2020 saw a cumulative reduction of 625 basis points. The Monetary Policy Committee in its last meeting in January 2021, has decided to keep the policy rate unchanged at 7 percent, as business confidence and the outlook for growth appear to have improved. The Bank’s Performance and Operating Results: The Bank continued to exhibit growth momentum during 2020, and performance remained robust, as we closed the year delivering sound financial results. The highlights of the financial results for the year ended 31 December 2020 are as follows: FINANCIAL POSITION Advances – net Investments – net Total Assets Deposits and others Accounts Shareholders’ Equity FINANCIAL PERFORMANCE Net Interest Income and Non Mark-up Income Non Mark-up Expenses Profit Before Tax Profit After Tax Earnings Per Share – Rupees 2020 2019 ---(Rupees in millions)--164,545 249,956 485,345 345,499 23,157 204,901 177,056 442,541 302,083 20,214 2020 2019 ---(Rupees in millions)--14,463 9,026 4,035 2,400 2.1772 10,787 8,129 3,247 1,906 1.7289 Overview of the Business: The Bank posted profit before tax (PBT) of Rs. 4.035 billion and profit after tax (PAT) of Rs. 2.400 billion in the year 2020, as compared to Rs. 3.247 billion and Rs. 1.906 billion respectively in 2019, increasing by 24.27 percent and 25.93 percent respectively. Consequently, the Bank’s EPS improved to Rs. 2.1772 per share in 2020 from Rs. 1.7289 per share in 2019. The Bank’s net interest income improved by 34.43 percent to Rs. 10.655 billion in the year 2020 from Rs. 7.926 billion in the year 2019. Non-interest income improved by 33.08 percent to Rs. 3.807 billion from Rs. 2.861 billion in the preceding year. The overall income of the Bank showed an improvement of Rs. 3.675 billion, or 34.07 percent, year on year. In line with the cumulative decrease in the SBP’s policy rates, yields on advances declined to 9.74 percent in the year 2020, as compared to 12.19 percent in 2019. As a result, income from advances ended lower by Rs. 4.967 billion as against last year, despite average volumes remaining nearly intact at Rs. 193.261 billion in 2020 (2019: Rs. 195.132 billion). However, increase in income from investments of Rs. 8.722 billion, more than offset this decline, with investment average volumes improving to Rs. 223.132 billion in the year 2020 as against Rs. 132.899 billion in 2019. Yields on investments declined marginally to 10.35 percent in the year 2020 as against 10.81 percent in 2019. ANNUAL REPORT 2020 65
  32. The Bank ’s net advances portfolio stood at Rs. 164.545 billion as at 31 December 2020, 19.70 percent lower than the year end 2019 level, while on the investments side, a significant volumetric increase of Rs. 72.900 billion was recorded, indicating an increase of 41.17 percent during the year. The composition of the Bank’s net investments book, which stood at Rs. 249.956 billion as at 31 December 2020 continues to remain predominantly skewed towards government securities. Within this mix, the Bank has prudently managed its portfolio, with duration optimisation also taken into consideration. Additional liquidity was deployed in floating rate PIBs, as well as fixed PIBs, increasing the PIB contribution to the total investment mix to 52 percent as compared to 34 percent on 31 December 2019. Deposits at the year-end amounted to Rs. 345.499 billion as against Rs. 302.082 billion at 31 December 2019, indicating a growth of 14.37 percent. In terms of averages, the portfolio grew by Rs. 40.540 billion, or 15.0 percent year on year. The Bank’s cost of deposits decreased to 6.74 percent in 2020 as against 8.24 percent in the last year. At the year end, the Bank’s CASA percentage stood at 68.65 percent (December 2019: 63.26 percent). For Current Accounts, the mix improved to 27.15 percent at December 2020 from 24.90 percent at December 2019, and volumes grew by Rs. 18.578 billion or 25 percent year on year. The Bank continues to focus on CASA mix improvement, and retaining current accounts, by ensuring service levels of the highest quality, so as to rationalise our funding costs and improve overall margins. On the borrowings side, the Bank’s borrowings decreased to Rs. 87.020 billion at 31 December 2020 from Rs. 95.705 billion at 31 December 2019. In terms of averages, however, borrowings increased by Rs. 40.484 billion, with costs decreasing to 7.99 percent from 9.71 percent year on year. Additional liquidity was utilised to fund the investments portfolio. The Bank’s overall cost of funds has decreased to 6.80 percent for 2020 as against 8.36 percent for 2019. Non-Mark-up expenses were reported at Rs. 9.026 billion for the year ended 31 December 2020, as against Rs. 8.129 billion for the year 2019, indicating a growth of 11.03 percent, mainly due to a one off adjustment for WWF reversal considered in the year 2019. Operating expenses for the year were reported at Rs. 8.857 billion, reflecting an increase of 8.14 percent, as the management continued to pursue stringent cost discipline measures over the course of the year. The Bank’s Operating Profit before provisions and taxation ended at Rs. 5.436 billion for the year 2020, indicating a remarkable growth of 104.54 percent against Rs. 2.658 billion reported last year. This growth was led by an increase in business volumes and maintained spreads, together with positive contribution from non-mark-up income. Under the heading of provisions, the one off reversal impact of Rs. 700 million in 2019, in lieu of a successful debt property swap arrangement led to an adverse variance being reflected on a year on year basis. Additionally, with the capital markets predominantly affected by the Covid-19 outbreak in Q1 2020, the Bank has had to consider an impairment charge of Rs. 717.214 million on its equity portfolio, based on the assessment of impairment in accordance with applicable standards and procedures. As at end December 2020, the Bank’s overall mark to market position of securities stands at a net unrealised surplus of Rs. 817.551 million. The Bank continues to carefully and prudently monitor its portfolio. Various relief measures have been advised by the State Bank of Pakistan post Covid-19 outbreak, to facilitate Banks as well as Borrowers to restructure and reschedule their commitments. With an effective risk management framework in place, the Bank remains committed to facilitating the rebound of the economy, whilst maintaining regulatory compliance with all applicable laws and best practices. The Bank’s gross Advances to Deposits ratio (ADR) at the year-end 2020 was reported at 49.98 percent as against 70.35 percent in 2019. Non-performing loans to total Advances ratio stood at 6.25 percent (31 December 2019: 5.13 percent), mainly due to reduction in overall loan book, while specific coverage improved to 75.16 percent (31 December 2019: 69.46 percent). As at 31 December 2020, there are no loans, TFCs, or any other debt instruments in which the Bank is in default or is likely to default. Capital Structure of the Bank: The Bank remains well capitalised, with a capital base above the regulatory limits and Basel capital requirements. During the year, the State Bank of Pakistan relaxed the general regulatory requirement for Capital Adequacy post Covid-19 outbreak. 66 NAVIGATING OUR WAY TO SUCCESS
  33. As at 31 December 2020 , the Bank’s total Capital Adequacy Ratio has been reported at 16.97 percent against the revised requirement of 11.50 percent (including Capital Conservation Buffer). Previously, this requirement was 12.50 percent with a CCB of 2.50 percent. The Common Equity Tier 1 (CET-1) to total Risk Weighted Assets ratio works out to be 11.90 percent, well above the requirement of 6.00 percent, which is indicative of the quality of the Bank’s capital. Human Resource: At Soneri Bank, we believe in providing our employees with a work environment that fosters customer centricity and ownership in a proactive manner whilst maintaining high moral standards. Our human resource selection process is merit-based and non-discriminatory. We believe that employees who are committed deliver better results. Through our policy on succession planning, we identify successors for senior roles within the organisation, thus allowing upward career mobility to the right talent, and help them in fulfilling their career growth aspirations. Our focus is on maintaining constructive employee relations, and fostering a culture of transparency and good behaviour. The Bank’s Remuneration Framework, developed in line with the SBP’s guidelines, promotes an effective risk management culture, and ensures that the remuneration practice at the Bank is in line with the Bank’s objectives. As a result, a fair, objective, transparent and sound remuneration policy, aligned with risks and responsibilities of Financial Intermediation has been put in place. The disclosures required under the SBP’s Guidelines on Remuneration Practices are given in notes 28.1 and 41 to the financial statements and are also included as part of the Governance Section of this Annual Report. The Bank has a well-defined and structured Code of Conduct in place. The Bank’s Disciplinary Action policy provides an expertly designed corrective action process and a formal framework for issues to be dealt with fairly and swiftly. The policy ensures that HR affairs are managed in a transparent manner and it addresses the instances where the performance or conduct of an employee fails to meet the standards laid down by the Bank. We believe in investing in our people, and are therefore committed to their regular training and development, so that they acquire competencies required to meet professional challenges effectively. The policy provides the staff with opportunities to acquire knowledge and develop skills through training, to handle higher responsibilities in the future. Covid-19 posed significant HR challenges across the globe. The Bank’s HR function remained proactive in providing support to employees and staff, where critical staff was provided the option of VPN access at home during lockdowns, and a work from home culture was introduced to keep staff engaged and motivated. During the year, physical trainings sessions were conducted with social distancing measures and protocols in place. Online learning was also encouraged and mandatory online assessments were successfully conducted in a timely manner. Towards the end of the year, as part of the Bank’s commitment towards investing in leadership Development, a comprehensive 360-degree Leadership Assessment exercise was conducted for the Bank’s senior management team. The assessment was conducted by an external consultant with a leading 360-degree assessment tool used globally for measuring leadership effectiveness and leadership potential. As part of the Bank’s strategic initiatives, this step would be the first in setting up a strategic leadership direction for the Bank’s top talent, through setting up of development goals for each individual and the Bank’s collective leadership team. Our Whistle-blowers’ Policy corroborates our promise to give people (internal & external) a chance to voice their concerns, exposing irregularities/wrongdoings/AML/CFT/corruption related issues, helping uncover financial malpractices, preventing frauds, etc. to appropriate pre-identified authority without any fear. ANNUAL REPORT 2020 67
  34. Corporate Governance : Corporate Governance at Soneri Bank refers to rights and responsibilities of different stakeholders of the Bank through a defined set of rules, policies and practices keeping focus on proper delegation, transparency and accountability in the organisation as a whole. The Board of Directors is committed to ensuring that the requirements of Corporate Governance set by the Securities and Exchange Commission of Pakistan are fully met. The Board of Directors is entrusted to provide strategic leadership to the management of the Bank. The Bank has adopted the best practices envisioned in the Code of Corporate Governance, and the Bank’s Statement of Compliance with the Code forms part of this Annual Report. Composition of the Bank’s Board of Directors: The election of the Board of Directors was held at the 28th Annual General Meeting of the Bank’s shareholders’ meeting convened on 26 March 2020. From the previous Board’s composition, both Mr. Amin A. Feerasta and Mr. Inam Elahi opted not to contest the elections and in their place, Mr. Ahmed A. Feerasta and Ms. Navin Salim Merchant were elected as Non-executive Director and Independent Director respectively. During the year, Mr. Muhtashim Ahmad Ashai was appointed as the Bank’s President and Chief Executive Officer (deemed Director), in place of Mr. Mohammad Aftab Manzoor. With the election of Ms. Navin Salim Merchant to the Board, the Bank is compliant with the Listed Companies (Code of Corporate Governance) Regulations, 2019, which require companies to have at least one female director represented on the Board. The Bank has complied with the regulatory requirements of the SECP and SBP for appointment of directors (including the Executive Director) starting from nomination of directors to their appointment by shareholders in Annual General Meeting and the Fit and Proper Test clearance by SBP to these appointments. There has been no further change in the composition of the Board of Directors since the election of directors held on 26 March 2020. The present composition of the Board of Directors is as under: Total number of Directors: 08 including the President and Chief Executive Officer Male Female 07 01 Category Names Independent Directors Mr. Jamil Hassan Hamdani Ms. Navin Salim Merchant Non-Executive Directors Executive Director Mr. Mr. Mr. Mr. Mr. Alauddin Feerasta Nooruddin Feerasta Ahmed A. Feerasta Muhammad Rashid Zahir Manzoor Ahmed (NIT Nominee) Mr. Muhtashim Ahmad Ashai* *Deemed director as per clause 3 of Section 188 of Companies Act, 2017. Foreign Directors There is no representation of a foreign director on the Board of the Bank. Other Directorships of Executive Director Mr. Muhtashim Ahmad Ashai does not serve as a Director in any other organisation. Board Meeting Outside Pakistan During the year, no Board Meeting was held outside Pakistan. 68 NAVIGATING OUR WAY TO SUCCESS
  35. Directors ’ Training and Orientation: The Board has remained fully compliant with the provision with regard to their training program. Two directors have received "Certificate of Director Education" from the Pakistan Institute of Corporate Governance (“PICG”) and one director has completed the Directors’ Training Program conducted by Institute of Business Administration (“IBA”). Further, both directors Mr. Nooruddin Feerasta and Mr. Muhammad Rashid Zahir are exempted from training as per the requirements of the Listed Companies (Code of Corporate Governance) Regulations, 2019 provided under clause 2 of Regulation 19. Additionally, our directors have also attended various workshops, seminars and courses. Mr. Alauddin Feerasta, Chairman and Mr. Nooruddin Feerasta, Director had participated in a three full days’ workshop on "Corporate Governance & Duties Excellence" held in Malaysia. Mr. Muhammad Rashid Zahir had also attended a week long course of Institute of Directors, UK held by PICG. Board’s Performance Evaluation: During the year 2020, in-house evaluation of the Board/Committees was carried out. Quantitative techniques were used where scaled questionnaires were provided to each director to obtain their feedback. Feedback so received was collated and analysed and results were prepared in accordance with the requirements of BPRD Circular No. 11 dated 22 August 2016 and Listed Companies (Code of Corporate Governance) Regulations, 2019. Final result of the Annual Evaluation of the Board’s Performance was presented to the Board of Directors for their review. Accordingly, the Board has reviewed its Performance Evaluation for the year 2020 in its 183rd meeting convened on 17 February 2021 and the challenges identified by them have been duly noted to be addressed. Previously, The Pakistan Institute of Corporate Governance (“PICG”), a premier and independent body in the field of promoting good corporate governance practices in Pakistan, had been engaged to independently conduct the Board’s Performance Evaluation for the year 2018, in line with the requirements of BPRD Circular No. 11 dated 22 August 2016 that requires for external evaluations once every three years. ANNUAL REPORT 2020 69
  36. Board and Committees ’ Meetings: Details of the meetings of the Board of Directors and its Committees held during 2020 and the attendance by each director/committee member are given as under: Board of Directors’ Meetings Held during the tenure in the year Held during the tenure in the year Attended** Held during the tenure in the year Attended** Held during the tenure in the year Attended** Held during the tenure in the year 1 Mr. Alauddin Feerasta 8 8 * * 4 4 * * * * * * * * 2 Mr. Mohammad Aftab Manzoor*** 2 2 * * 1 1 * * 2 2 * * * * 3 Mr. Muhtashim Ahmad Ashai *** 6 6 * * 3 3 * * 4 4 * * * * 4 Mr. Nooruddin Feerasta 8 8 4 4 4 4 * * * * * * * * 5 Mr. Amin A. Feerasta **** 1 1 * * * * * * * * * * **** **** 6 Mr. Ahmed A. Feerasta **** 7 5 * * * * * * 4 3 * * 2 2 7 Mr. Muhammad Rashid Zahir 8 8 4 4 4 4 * * * * * * * * 8 Mr. Manzoor Ahmed (NIT Nominee) 8 8 * * 4 4 4 4 6 6 * * 2 2 9 Mr. Inam Elahi **** 1 1 1 1 * * **** **** 2 2 **** **** **** **** 10 Ms. Navin Salim Merchant **** 7 5 3 2 * * 4 3 * * 1 1 * * 11 Mr. Jamil Hassan Hamdani 8 8 4 4 * * 4 4 6 6 1 1 2 2 Total number of meetings held during the year 8 4 4 4 6 1 Attended** Held during the tenure in the year Attended** Held during the tenure in the year Attended** Name of Director Board I.T Committee Meetings Attended** Sr. No. Board Board Human Board Risk Board Audit Board Credit Resource & Independent Management Directors’ Committee Committee Remuneration Committee Committee Committee Meetings Meetings Meetings Meetings Meetings 2 *Represents not a member of the Committee **Leave of absence was granted to those directors/members, by the Board/Committee, who could not attend some of the meetings. ***Mr. Muhtashim Ahmad Ashai was appointed as President and Chief Executive Officer in place of Mr. Mohammad Aftab Manzoor with effect from 01 April 2020. **** Mr. Ahmed A. Feerasta and Ms. Navin Salim Merchant were elected as Directors in place of retiring directors Mr. Amin A. Feerasta and Mr. Inam Elahi respectively, in the 28th AGM of the Bank held on 26 March 2020. Note: The profiles of the Board Members and the composition of the Board/Committees and their TORs forms part of this Annual Report Director’s Remuneration: The revised Remuneration Policy for Non-Executive Directors including Independent Directors of the Bank for attending Board/Committee meetings was approved by the Board in its 175th meeting held on 13 February 2020 in compliance of the State Bank of Pakistan’s BPRD Circular No. 03, dated 17 August 2019. The scale of meeting fee for Non-Executive Directors was approved by the Board at Rs. 150,000/- for attending the Board/Committees’ Meetings and the same was duly approved by the Shareholders in their 28th Annual General Meeting held on 26 March 2020. 70 NAVIGATING OUR WAY TO SUCCESS
  37. Considering devotion of valuable time in performing extra services and providing guidance and oversight of the conduct and management of business affairs of the Bank by the Management , the remuneration for the Chairman of the Bank (for Board and Committee Meetings) and Committee’s Chairmen for chairing their respective Committees was fixed at Rs. 180,000/- per meeting, which was duly approved by the shareholders. The shareholders also approved that expenses related to boarding and lodging, air ticket and pick and drop of the Non-Executive Directors shall be borne by the Bank and Hotel allowance of Rs. 15,000/- per night stay was approved to be paid to non-executive directors who don’t avail the Bank’s provided accommodation. No remuneration in respect of meeting fee is being paid to the Executive Director. However, expenses for boarding and lodging, air ticket and usual TA/DA continue to be paid in accordance with the Bank’s approved Travel Policy. Meeting fee paid to the non-executive Directors for the year 2020 has been disclosed in note 41 to the financial statements under the “fees” category. Further, administrative expenses pertaining to the office, staff and security has been allocated to the Chairman in line with the SBP’s BPRD Circular No. 03 dated 17 August 2019. In compliance of this Circular, two security guards, one driver, one personal secretary and chairman’s office rent was accordingly approved by the shareholders. The shareholders also approved that no consultancy or allied work shall be awarded to a Director or to the firms/institutions/companies, etc. in which he individually and/or in concert with other Directors of the Bank, holds substantial interest. Further, if any Director obtains ‘unsatisfactory performance rating’ evaluated as per the guidelines issued by the SBP vide their BPRD Circular No. 11 of 2016, the matters relating to his/her performance as well as remuneration shall be decided by the Board. Statement of Investments of Provident and Gratuity Funds: The Bank operates approved funded provident and gratuity fund schemes covering all its permanent employees. The investment balances (excluding deposit with banks) based on the latest audited Financial Statements of the funds are: (Rupees in ‘000) nvestments of Provident Fund 384,312 Investments of Gratuity Fund 157,505 Statement on Risk Management Framework: Risk Management Framework is an integral component of Soneri Bank’s strategy. The framework aims at optimising the value for all stakeholders via identifying, measuring, monitoring and reporting the multitudes of risky exposures. The risk management practices adopted by the Bank are in line with procedures required by the State Bank of Pakistan and advised by the Board of Directors. The feedback of the latter is crucial in terms of the risk appetite. The Risk Management function in the Bank is equipped with latest models, tools and systems, which are regularly reviewed/updated to strengthen the Risk Management framework in the Bank. The diversity of our business model requires us to identify, assess, measure, aggregate and manage our risks, and to allocate our capital among our businesses. Our aim is to help reinforce our resilience by encouraging a holistic approach to the management of risk and return throughout our organisation as well as the effective management of our risk, capital and reputational profile. We actively take risks in connection with our business and as such the following principles underpin our risk management framework: • • • • Risk is taken within a defined risk appetite; Every risk taken needs to be approved within the risk management framework; Risk taken needs to be adequately compensated; and Risk should be continuously monitored and managed. The risk strategy is approved by the Board on an annual basis and is defined based on the Risk Appetite and the Strategic and Capital Plans in order to align risk, capital and performance targets. Cross-risk analysis reviews are conducted across the Group to validate that there exist sound risk management practices and a holistic awareness of risk. All material risk types, including credit risk, market risk, operational risk, liquidity risk, business risk and reputational risk, are managed via risk management processes. Modelling and measurement approaches for quantifying risk and capital demand are implemented across the material risk types. In today’s environment, IT Security Risk has emerged as a critical challenge for Banks. The Bank is totally cognisant of the gravity of the issue. ANNUAL REPORT 2020 71
  38. To carry out this task , a dedicated IT Security Risk Management Department is also in place for planning, directing and coordinating the Bank's information security policies, setting procedures and guidelines to ensure that all information systems are functional, secure and safeguarded throughout the Bank. Systems, processes and policies are critical components of our risk management capability. Recovery and contingency planning provides the escalation path for crisis management and supplies the senior management with a set of actions designed to improve the capital and liquidity positions in a stress event. We promote a healthy risk culture where employees at all levels are responsible for the management and escalation of risks. We expect employees to exhibit behaviour that supports a strong risk culture in line with our Code of Business Conduct and Ethics. Our policies require that risk-related behaviour is taken into account during our performance assessment and compensation processes. In addition, our Board members and senior management frequently communicate on the importance of the subject to support a consistent tone from the top. Statement of Internal Controls: The Management of the Bank is responsible for maintaining a sound system of internal controls to ensure efficiency and effectiveness of operations, compliance with legal requirements and reliability of financial reporting. Adequate systems, processes and controls have been put in place to identify and mitigate the risk of failure to achieve the overall objectives of the Bank. These controls encompass the policies and procedures approved by the Board of Directors. Their compliance and effectiveness is verified by an independent Internal Audit Division reporting directly to the Board Audit Committee. Existing policies and procedures are reviewed on a regular basis and improved from time to time. The Board has constituted its committees for oversight of the overall Risk Management framework, Finance and Strategy. The Committees meet at regular intervals to ensure adequacy of governance. The Board of Directors ensures that an adequate and effective internal control system covering various aspects of our banking operations is in place and vigorously followed by senior management. Based on the reviews of internal control system by Internal Audit Division, Compliance Control & Investigation Group and Statutory Auditors as well as various policies and procedures, we believe that the Bank’s existing system of Internal Control is reasonable in design and is being effectively implemented and monitored. The Board endorses the management’s evaluation on effectiveness of the overall internal controls, including ICFR, as detailed in the Statement of Internal Controls, presented as part of this Annual Report. Trends and factors that could affect the Bank’s future development, performance and business position: The Board is cognisant of its responsibilities in setting the overall direction of the Bank. It oversees the progress of the Bank against the defined KPIs. The Bank’s financial and operational soundness, governance structure, and the effectiveness of internal controls, audit functions and risk management framework are monitored regularly. The Board also regularly reviews all significant policies as per the regulatory requirements. The factors that may potentially affect the Bank’s resources, revenues and operations are regularly focused and prioritised by the Board in setting the overall strategic direction. The following factors are considered for sensitivity analysis at the time of setting of business targets and revisions to short-term forecasts. These include: • • • • • • • • • • • • 72 Decisions on Discount Rate/Monetary policy; Revisions to rate of returns on deposits; Repricing on loans and advances; Investment strategy and time horizon; Geo-political risks and uncertainties, including law and order situation; Short to medium term impacts of Covid-19 on overall economy, businesses in general, and regulatory relief measures; Government rules and regulations; Inflation, fuel and commodity prices; Corporate taxation measures; Technological advancements leading to competitive advantage; Dividend decisions and capital adequacy; The potential impacts of changes in accounting and regulatory framework. NAVIGATING OUR WAY TO SUCCESS
  39. Amongst the significant ongoing exercises being conducted , is the impact assessment of the International Financial Reporting Standard 9, Financial Instruments, on the Bank’s financial statements, the effective date of adoption for which had initially been set by the SBP at 01 January 2021. As per SBP instructions, all banks were required to report results of impact assessment for the year 2019 to the SBP and a parallel run, which was originally expected to be effective from 01 January 2020 was deferred to periods after 01 July 2020 post Covid-19. As at 31 December 2020, Banks await SBP instructions for implementation of the said standard. The Bank continues to regularly review potential impact assessments of changes to financial reporting standards and adoption of new standards on its financial position. The above factors are regularly reviewed and monitored for any potential impacts, risks and uncertainties. Based on the Board’s current assessment, there are no significant doubts about the Bank’s ability to continue as a going concern. Financial Statements: The financial statements of the Bank have been audited without qualification by the auditors of the Bank, M/s. KPMG Taseer Hadi & Co., Chartered Accountants and approved/authorised by the Board in its meeting held on 17 February 2021 for issuance to the shareholders. No material changes and commitments affecting the financial position of your Bank have occurred between the end of the financial year to which these financial statements relate and the date of the Directors’ report. External Auditors: Based on the consent received from the Bank’s existing auditors, M/s. KPMG Taseer Hadi and Co, Chartered Accountants, to continue to act as auditors of the Bank, if so appointed, the Board Audit Committee has recommended the re-appointment of the existing auditors as statutory external auditors of Bank for the year 2021. The appointment shall be subject to approval in the forthcoming Annual General Meeting of the Bank’s shareholders. The firm of auditors has confirmed that they have been given a satisfactory rating under the Quality Control Review program of the Institute of Chartered Accountants of Pakistan, and that the firm and all their partners are compliant with the International Federation of Accountants' (IFAC) Guidelines on Code of Ethics, as adopted by the Institute of Chartered Accountants of Pakistan, and meet the requirements for appointment under the applicable laws. On behalf of the management of the Bank and the Board, we would like to thank and appreciate the auditors for the services and support extended throughout the period of the audit. Corporate Social Responsibility: Soneri Bank remains firm in its commitment to actively contribute to socio-economic development. The Bank actively and regularly participates in philanthropic efforts in the field of healthcare, education and women empowerment along with other areas of community development, sports and rehabilitation. A summary of the Bank’s key CSR activities during the year forms part of this Annual Report. Six Years’ Operating and Financial Data: Six years’ financial performance of the Bank is presented on page no. 99 of this Annual Report. Credit Rating: The Pakistan Credit Rating Agency (PACRA) has maintained the long-term credit rating of 'AA-' (Double A Minus) and short-term rating of 'A1+' (A One Plus) with Stable Outlook of the Bank through its notification dated 25 June 2020 [2019: Long-term 'AA-' (Double A Minus): Short-term 'A1+' (A One Plus)]. The rating reflects the Bank’s sustained and stable positions in the market with strong risk profiling and lending capacity. PACRA has also maintained the credit rating of the Bank's unsecured, subordinated and listed Term Finance Certificates (TFC–2) issue of Rs. 3,000 million at 'A+' (Single A plus) with Stable Outlook through its notification dated 18 December 2020. Furthermore, the Bank's unsecured, subordinated, rated, listed perpetual and non-cumulative Term Finance Certificates of Rs. 4,000 million have been assigned the rating of 'A' with Stable Outlook by PACRA through their notification dated 25 June 2020. ANNUAL REPORT 2020 73
  40. Pattern of Shareholding : The ownership structure along with the pattern of shareholding and categories of shareholders as required under section 227(2)(f) of the Companies Act, 2017 forms part of this Director’s Report, which has been placed at page no. 202 of this Annual Report. Related Party Transactions: Transactions with related parties were carried out in the ordinary course of the Bank’s business and were conducted at arm’s length basis. Details of these transactions are disclosed in note 45 to the financial statements. Looking ahead: Effective risk management continues to remain a top priority to mitigate all potential threats. The Board reiterates its objective to remain compliant with all statutory and regulatory guidelines and policies, to promote the culture of integrity and compliance across the board. The Bank is well-positioned for sustainable growth and building long-term shareholder value. We continue to invest in our branch network, our technology infrastructure, our human capital, whilst strengthening our overall control environment. Our focus remains on building a stable deposit base, improving customer experience, and optimising returns through growth strategies and by enforcing a strong cost discipline across the Bank. The Bank is in the process of digitalising its processes and innovating new products to facilitate and enhance customer experience. The year 2021 will also be a year of strategy refresh for the Bank, as we look forward to building on our strengths, while crafting a new strategic road map for the Bank. We remain cognisant of the threat that Covid-19 has posed to businesses and the economy in general and shall continue to work with our customers and partner with them amidst these challenging times. We are optimistic about the future, and remain confident that the economy would be on the track to recovery. Dividend: The Board of Directors, in their meeting held on 17 February 2021, has recommended a final cash dividend (D-12) of Rs. 1.25/- per share (i.e. 12.50 percent) for the year ended 31 December 2020 to be approved in the forthcoming Annual General Meeting of the Shareholders. Acknowledgment: On behalf of the Board, we would like to take this opportunity to thank the State Bank of Pakistan, the Securities and Exchange Commission of Pakistan, and other regulatory authorities for their continued guidance and support. At the same time, we would like to express our gratitude to our shareholders, our valued customers, and business partners for their continued patronage amidst these challenging times, and appreciate our employees for their exemplary hard work, passion and relentless dedication, even in times of hardship. We look forward to 2021 and beyond with optimism, and remain confident that the Bank will deliver on our promise to the stakeholders, by continuing to enhance our customer experience and building on sustainable and lasting business partnerships. For and on behalf of the Board of Directors, MUHTASHIM AHMAD ASHAI President & Chief Executive Officer ALAUDDIN FEERASTA Chairman Lahore: 17 February 2021 74 NAVIGATING OUR WAY TO SUCCESS
  41. REPORT OF SHARIAH BOARD TO THE BOARD OF DIRECTORS FOR THE YEAR ENDED 31 ST DECEMBER 2020 In the name of Allah , the Beneficent, the Merciful By the grace of Almighty Allah, this was the 15th year of Islamic banking operation at Soneri Bank Limited. It is the vital responsibility of the Board of Directors and Executive Management to ensure compliance with the Shariah Guidelines. As a regulatory requirement the BOD is responsible to appoint a Shariah Board to oversee the entire Islamic Banking operation on behalf of them and issue an annual report on the overall Shariah Compliance environment within the Bank. Based on the reviews carried out by Shariah Compliance Department and Shariah audit reports of internal and external auditors, we have examined on test check basis of each class of transaction to form the opinion. The year 2020 had been a challenging year for the world specially emerging countries including Pakistan. The economy shrunk manifolds coupled with limited resources, the reliance on the banking services became all more important. Even though the pandemic had a worst effect on all business baring few, the life, economy and the bank must go on. Despite these challenges, the Bank held his head high and continue to sail forward with the vision of progress for Islamic Banking. Deposit Composite: It is encouraging to report that the Islamic Banking deposit has increased by 27.36% amounting to Rupees PKR 22.113 Bn, as compared to previous year. The composition of the deposit is dominated by savings accounts which stood at 66% of the total deposits. Furthermore, IBD has witnessed a positive increase of 26% in the current deposits. The same can be viewed as follows: Current 4,470 Savings 3,194 2,444 3,069 14,575 22,113 2019 11,724 2020 17,362 Deposit Composition Meadi Total Asset Review: The Shariah Compliance Department (SCD) reviewed and structured various transactions, processes to ensure Shariah compliance of the transactions. The asset portfolio slightly decreased by -2.11% and stood at PKR 9.03 Bn as compare to 2019. The main modes of financing used for the bank’s Islamic financing consist of Diminishing Musharakah (47%), Murabaha (14%), Salam (12%), Running Musharakah (12%), Istisna (11%) and Ijarah (4%). Concetration of Islamic Products Salam 12% Istasna 11% Diminishing Musharakah 47% Ijarah 4% Murabaha 14% Musharakah 12% To strengthen and broaden the functions of Shariah control, the Shariah Compliance Department (SCD) supported the Asset team to understand and assess the customers’ business needs and gave their due feedback on the process flows. Product Developments: During the year, Shariah Board approved new products using Musharakah mode for Mera Pakistan Mera Ghar, staff house finance, Ghar finance, low cost housing scheme and Islamic long term financing facility. 86 NAVIGATING OUR WAY TO SUCCESS
  42. In addition to the above , the bank revamped the product program guidelines, manuals and relevant documents that pertain to existing asset products. Moreover, policies and various procedures of Islamic branches operations of the Bank were updated and adopted to ensure the Islamic Banking division remain compliant at all times. Trainings of Islamic Banking Staff: It is encouraging to note that the Bank’s HR-Learning and Development together with SCD facilitation conducted various Islamic Banking trainings for majority of the employees in Islamic Banking Group. Despite of the limitation due to the Pandemic, Bank’s HR-Learning and Development in liaison with SCD work around to ensure that the learning graph remains upward for Islamic Banking Staff. Board of Directors, Shariah Board and Executives Trainings: Learning & Development Department organized orientation sessions for Board of Directors and Management Committee members in line with the regulatory requirement to keep them abreast with the concepts and best practices of Islamic Banking. It is pleasure to report that the Senior Management was very enthusiastic to explore Islamic Banking opportunities. These regular trainings are expected to enhance their knowledge and give them better insight. Shariah Compliance and Audit: During the year, Shariah Compliance department carried out Shariah Compliance reviews of branches and departments. The team reviewed process flows, legal agreements, policies, procedures, and marketing materials. Based on the above, we are of the view that: i. The Bank has complied by and large with Shariah rules and principles in the light of fatawa, rulings and guidelines issued by its Shariah Board. ii. The Bank has complied with the directives, regulations, instructions and guidelines related to Shariah compliance issued by SBP in accordance with the rulings of SBP’s Shariah Advisory Committee (SAC). iii. Bank has a well-defined system in place in form of Shariah Compliance Review and Internal Shariah Audit to ensure that the earning realized from the sources or means prohibited by Shariah shall be identified. iv. During the year, an amount of Rupees five hundred forty-five thousand five hundred and three only (PKR 545,503/-) were collected as charity from various customers on account of delay in payments. Further, an income of Rupees One hundred sixty-two thousand four hundred ninety-seven only (PKR 162,497/-) has been transferred to the charity account on Shariah Board instructions due to the violation of Shariah guidelines. Total amount of Rupees Seven hundred and eight thousand only (PKR 708,000/-) was disbursed for charitable purposes as per the Charity Policy approved by the Shariah Board and Board of Directors. v. Based on the Shariah Compliance review and Shariah Audit report, we are of the opinion that profit distribution was found in conformity with Shariah rules & principles. We expect, with the automation of the pool management system, the bank will also comply with the regulatory guidelines. Recommendation We are pleased to report that Bank Management has finally acquired the Pool Management System (PMS) as this will enable the Bank to ensure efficient, effective and automized profit distribution to Investment Account holders and balance the pool of deposits on daily basis through system. We hope that the earliest implementation of the Pool Management system shall resolve all issues which requires automation. Staff related Facilities: We appreciate the Bank’s management for continue efforts in resolving staff related issues such as Staff vehicle financing and Staff home financing for Islamic banking staff. We also expect the bank to convert conventional Provident Fund (PF) into Islamic for Islamic Banking staff at their earliest. Capacity Building: While we recognize the efforts of State Bank of Pakistan (SBP) and Learning & Development Department for capacity building directives and its implementation, we recommend that the efforts should continue with the same zeal and ensure that all Islamic Banking staffs should receive Islamic Banking training enabling them to effectively serve the customers in line with the regulatory and Shariah guidelines. The Soneri Bank Limited – Islamic Banking (Mustaqeem) has a mechanism in place to ensure Shariah compliance in their overall operations. With the expansion of the business, we hope to improve this mechanism with adequately staffed SCD. We pray to Almighty Allah, for the success of Islamic Banking and provide us the guidance to adhere to his Shariah in day to day operations and forgive our mistakes. And Allah knows best Mufti Ehsan Waquar Ahmad Chairman Shariah Board Mufti Muhammad Zahid Resident Shariah Board Member Mufti Bilal Ahmed Qazi Shariah Board Member Dated: 02 February 2021 ANNUAL REPORT 2020 87
  43. STATEMENT OF COMPLIANCE WITH LISTED COMPANIES (CODE OF CORPORATE GOVERNANCE) REGULATIONS YEAR ENDED 31 DECEMBER 2020 The company has complied with the requirements of the Regulations in the following manner: 1. The total number of Directors is eight (8) including the President and Chief Executive Officer as per the following: Male Female 2. 07 01 The composition of Board is as follows: Category Names Independent Directors** Mr. Jamil Hassan Hamdani Ms. Navin Salim Merchant Non-Executive Directors Mr. Mr. Mr. Mr. Mr. Executive Directors* Mr. Muhtashim Ahmad Ashai (President & Chief Executive Officer) Female Directors Ms. Navin Salim Merchant Alauddin Feerasta Nooruddin Feerasta Ahmed A. Feerasta Muhammad Rashid Zahir Manzoor Ahmed (NIT Nominee) * He is a deemed director as per the criteria given under Clause 3 of Section 188 of the Companies Act, 2017 (“the Act”). **The independent Directors meet the criteria of independence as laid down under Section 166 of the Act. **Fraction arrived at while calculating the one-third of Independent Directors was not rounded up to one since it was lower than one half. 3. The Directors have confirmed that none of them is serving as a Director on more than seven listed companies, including the Bank. 4. The Bank has prepared a “Code of Conduct” and has ensured that appropriate steps have been taken to disseminate it throughout the Bank, along with its supporting policies and procedures. 5. The Board has developed a vision/mission statement, overall corporate strategy and significant policies of the Bank. The Board has ensured that complete record of particulars of the significant policies along with their date of approval or updating is maintained by the Bank. 6. All the powers of the Board have been duly exercised and decisions on relevant matters have been taken by Board/Shareholders as empowered by the relevant provisions of the Act and these Regulations. 7. The meetings of the Board were presided over by the Chairman and, in his absence, by a Director elected by the Board for this purpose. The Board has complied with the requirements of the Act and the Regulations with respect to frequency, recording and circulating minutes of meeting of the Board. 8. The Board of Directors has a formal policy and transparent procedures for remuneration of Directors in accordance with the Act and these Regulations. 9. The Board has arranged Directors’ Training program for the following: a) Directors’ Training Name of Directors 90 Category Mr. Jamil Hassan Hamdani Independent Director Mr. Manzoor Ahmed Non-Executive Director Ms. Navin Salim Merchant Independent Director Directors’ Training Program Certificate of Director Education conducted by Pakistan Institute of Corporate Governance (“PICG”) Directors’ Training Program conducted by Institute of Business Administration (“IBA”) NAVIGATING OUR WAY TO SUCCESS
  44. Further , Directors namely Mr. Nooruddin Feerasta and Mr. Muhammad Rashid Zahir duly comply with the exemption criteria provided under Clause 2 of Regulation 19 of the CCG. Additionally, our Directors have also attended various workshops, seminars and courses. Mr. Alauddin Feerasta, Chairman and Mr. Nooruddin Feerasta, Director had participated in a three days’ workshop on "Corporate Governance & Duties Excellence" held in Malaysia. Mr. Muhammad Rashid Zahir had also attended a week long course of Institute of Directors, UK held by PICG. b) Executives’ Training Names of Executives Designation Directors’ Training Program Mr. Amin A. Feerasta Deputy CEO Certificate of Director Education by PICG Company Secretary Certificate in Company Direction (International) by Institute of Directors, UK Mr. Muhammad Altaf Butt 10. The Board has approved the appointment of Chief Financial Officer, Company Secretary and Head of Internal Audit, including their remuneration and terms and conditions of employment and complied with the relevant requirements of the Regulations. 11. Chief Financial Officer and Chief Executive Officer duly endorsed the financial statements before approval of the Board. 12. The Board has formed Committees comprising of members as given below: a) Audit Committee of the Board Names of Directors Position Mr. Jamil Hassan Hamdani Chairman Mr. Nooruddin Feerasta Member Mr. Muhammad Rashid Zahir Member Ms. Navin Salim Merchant Member b) Credit Committee of the Board Mr. Mr. Mr. Mr. Mr. Names of Directors Position Nooruddin Feerasta Alauddin Feerasta Muhtashim Ahmad Ashai Muhammad Rashid Zahir Manzoor Ahmed Chairman Member Member Member Member c) Human Resource and Remuneration Committee of the Board* Names of Directors Position Mr. Manzoor Ahmed Mr. Jamil Hassan Hamdani Ms. Navin Salim Merchant Chairman Member Member *The composition of the Human Resource & Remuneration Committee (HRRC) is in line with the Revised Guidelines on Remuneration Practices 2017 issued by the State Bank of Pakistan, which allows a Non-Executive Director to be the Chairman, in case the majority members of the committee are Independent Directors. Following the guidelines, majority members of HRRC are Independent Directors, however, the Chairman of the HRRC is not an Independent Director. ANNUAL REPORT 2020 91
  45. d ) Risk Management Committee of the Board Names of Directors Mr. Manzoor Ahmed Position Chairman Mr. Muhtashim Ahmad Ashai Member Mr. Jamil Hassan Hamdani Member Mr. Ahmed A. Feerasta Member e) Committee of Independent Directors of the Board Names of Directors Position Mr. Jamil Hassan Hamdani Ms. Navin Salim Merchant Chairman Member f) IT Committee of the Board Names of Directors Position Mr. Ahmed A. Feerasta Mr. Manzoor Ahmed Mr. Jamil Hassan Hamdani Chairman Member Member 13. The Terms of Reference of the aforesaid Committees have been formed, documented and advised to the Committees for compliance. 14. The frequency of meetings (quarterly/half yearly/yearly) of the Committees were as per the following: Board’s Committees Frequency Audit Committee At least once every quarter of the financial year Credit Committee At least once every quarter of the financial year Human Resource & Remuneration Committee At least once every quarter of the financial year Risk Management Committee Minimum of four meetings in a financial year Committee of Independent Directors Once every financial year IT Committee Twice every financial year 15. The Board has set up an effective Internal Audit Function, which is considered suitably qualified and experienced for the purpose and is conversant with the policies and procedures of the company. 16. The statutory auditors of the Bank have confirmed that they have been given a satisfactory rating under the Quality Control Review program of the Institute of Chartered Accountants of Pakistan and registered with Audit Oversight Board of Pakistan, that they and all their partners are in compliance with International Federation of Accountants’ (IFAC) guidelines on code of ethics as adopted by the Institute of Chartered Accountants of Pakistan and that they and the partners of the firm involved in the audit are not a close relative (spouse, parent, dependent and non-dependent children) of the Chief Executive Officer, Chief Financial Officer, Head of Internal Audit, Company Secretary or Director of the Bank. 17. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the Act, these Regulations or any other regulatory requirement and the auditors have confirmed that they have observed IFAC guidelines in this regard. 18. We confirm that all requirements of regulations 3, 6, 7, 8, 27, 32, 33 and 36 of the Regulations have been complied. _______________________________ MUHTASHIM AHMAD ASHAI President & Chief Executive Officer _______________________________ ALAUDDIN FEERASTA Chairman Lahore: 17 February 2021 92 NAVIGATING OUR WAY TO SUCCESS
  46. INDEPENDENT AUDITORS ’ REVIEW REPORT TO THE MEMBERS ON THE STATEMENT OF COMPLIANCE CONTAINED IN LISTED COMPANIES (CODE OF CORPORATE GOVERNANCE) REGULATIONS We have reviewed the enclosed Statement of Compliance with the Listed Companies (Code of Corporate Governance) Regulations, 2019 (the Regulations) prepared by the Board of Directors of Soneri Bank Limited (“the Bank”) for the year ended 31 December 2020 in accordance with the requirements of regulation 36 of the Regulations. The responsibility for compliance with the Regulations is that of the Board of Directors of the Bank. Our responsibility is to review whether the Statement of Compliance reflects the status of the Bank’s compliance with the provisions of the Regulations and report if it does not and to highlight any non-compliance with the requirements of the Regulations. A review is limited primarily to inquiries of the Bank’s personnel and review of various documents prepared by the Bank to comply with the Regulations. As a part of our audit of the financial statements we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the Board of Directors’ statement on internal control covers all risks and controls or to form an opinion on the effectiveness of such internal controls, the Bank’s corporate governance procedures and risks. The Regulations require the Bank to place before the Audit Committee, and upon recommendation of the Audit Committee, place before the Board of Directors for their review and approval, its related party transactions and also ensure compliance with the requirements of section 208 of the Companies Act, 2017. We are only required and have ensured compliance of this requirement to the extent of the approval of the related party transactions by the Board of Directors upon recommendation of the Audit Committee. We have not carried out procedures to assess and determine the Bank’s process for identification of related parties and that whether the related party transactions were undertaken at arm’s length price or not. Based on our review, nothing has come to our attention which causes us to believe that the Statement of Compliance does not appropriately reflect the Bank's compliance, in all material respects, with the requirements contained in the Regulations as applicable to the Bank for the year ended 31 December 2020. Further, we highlight below instance of non-compliance with the requirements of the Regulations as reflected in the paragraph reference where it is stated in the Statement of Compliance Note/paragraph Reference to the Statement of Compliance Description 12(c) The composition of the Human Resource & Remuneration Committee (HRRC) is in line with the Revised Guidelines on Remuneration Practices 2017 issued by the State Bank of Pakistan which allows a non-executive director to be the Chairman in case the majority members of the committee are independent directors. Following the guidelines majority members of HRRC are independent directors, however, the Chairman of the HRRC is not an Independent Director. KPMG Taseer Hadi & Co. Chartered Accountants Karachi: 01 March 2021 ANNUAL REPORT 2020 93
  47. STATEMENT OF INTERNAL CONTROLS YEAR ENDED 31 DECEMBER 2020 This Statement of Internal Control is based on an ongoing process designed to : - Identify the significant risks in achieving the bank’s policies, aims and objectives. Evaluate the nature and extent of those risks. Manage these risks efficiently, effectively and economically. This process was in place for the year ended December 31, 2020. The Board of Directors have instituted an effective Internal Audit Division which not only monitors compliance with the bank’s policies, procedures and controls and reports significant deviations regularly to the Board Audit Committee but also regularly reviews the adequacy of the overall Internal Control system. The observations and weaknesses pointed out by the external auditors are also addressed promptly and necessary steps are taken by the management to eliminate such weaknesses. It is the responsibility of the Bank’s management to establish and maintain an adequate and effective system of internal control, to implement sound control procedures and to maintain a suitable control environment. In order to ensure implementation as well as to minimize various regulatory, reputational and compliance risks, the management conducts on site monitoring of branches through periodical visits and Off-Site monitoring through various automated tools such as SAS AML, World Check and Safe Watch Filtration system by Compliance Control & Investigation Group. The Bank has adopted the internationally accepted COSO (Committee of Sponsoring Organizational of Treadway Commission) Internal Control- Integrated Framework. A reputable advisory firm had been appointed to provide services on implementation of SBP guidelines on Internal Controls over Financial Reporting (ICFR) in the prior years. To further strengthen controls, enhanced governance and monitoring, the management had constituted an Internal Control Unit which is also an integral part of Compliance Control & Investigation Group of the Bank. In order to ensure consistency in the process of compliance with the relevant guidelines the Bank followed a structured roadmap. Accordingly, the Bank had completed a detailed documentation of the existing processes and controls, together with a comprehensive gap analysis of designed controls and developed remediation plans for the gaps in the Year 2010. Furthermore, the bank has developed a comprehensive management testing and reporting framework for ensuring ongoing operating effectiveness of majority of key controls and has significantly addressed the design improvement opportunities identified to complete the project related initiatives. While concerted efforts have always been made to comply with the SBP Guidelines issued, the identification, evaluation, and management of risks within each of the Bank’s key activities, and their continued evaluation and changes to procedure remains an ongoing process. In accordance with SBP directives, the Bank has completed all the stages of ICFR and upon satisfactory completion of ICFR roadmap, the SBP granted waiver from the submission of external auditor Long Form Reports effective 2012. An annual assessment report by Board Audit Committee on ICFR duly signed by chairman BAC is being submitted to SBP since then. The Bank has also successfully completed the cycle of SBP’s Internal Control over Financial Reporting exercise for the Year 2020 and report will be submitted by Board Audit Committee to the State Bank of Pakistan during the year 2021. MUHTASHIM AHMAD ASHAI President & Chief Executive Officer Lahore: 17 February 2021 94 NAVIGATING OUR WAY TO SUCCESS
  48. REPORT OF AUDIT COMMITTEE The Audit Committee of the Board comprises of four non-executive members including two independent directors , one being Chairman of the Audit Committee. The members of the Audit Committee bring years of diversified rich experience at senior management positions and strategic roles in commercial banking, investment banking, manufacturing, insurance and leasing sectors. Detailed profile of the respective members is given on the website of the Bank. The following are the members of Audit Committee: 1. 2. 3. 4. Mr. Jamil Hassan Hamdani Mr. Nooruddin Feerasta Mr. Muhammad Rashid Zahir Ms. Navin Salim Merchant Chairman Member Member Member (Independent Director) (Non-Executive Director) (Non-Executive Director) (Independent Director) During the year under review, the Audit Committee diligently performed its duties and responsibilities in accordance with the Charter of the Committee approved by the Board of Directors, while remaining compliant with the requirements of the Code of Corporate Governance and Prudential Regulations issued by State Bank of Pakistan (“SBP”). The Committee oversees the functions of the Internal Audit & Risk Asset Review Group (IA & RARG) and ensures that it has adequate physical, financial, technological and operational resources along with appropriate human resources, who have the required skill-sets, expertise and training necessary to perform their responsibilities independently and objectively. The Head IA & RARG reports directly to the Audit Committee. He assists the Audit Committee and the Board of Directors in the discharge of their responsibility in respect of Internal Control Systems. He periodically reviews, assesses adequacy and monitors the ongoing effectiveness of the control systems. The Audit Committee is actively engaged in reviewing the Annual/Half yearly/Quarterly financial statements and internal audit activities, in accordance with the Code of Corporate Governance and committee charter. The Audit Committee also recommends the scope and appointment of external auditors, including finalisation of audit and other fees. The Audit Committee evaluates the qualifications, performance and independence of the external auditors. In doing so, the Audit Committee considers the quality and efficiency of the services provided by the external auditors, the external auditors’ capabilities, technical expertise and knowledge of the Bank’s operations and industry. The Audit Committee ensures compliance with relevant regulations in regard to the tenure of external auditors and provisions of non-audit services by external auditors to ensure independence and objectivity of the external auditors. The Audit Committee recommends to the Board of Directors the re-appointment of M/s KPMG Taseer Hadi & Co. Chartered Accountants, as statutory auditors of the Bank for the year ending 31 December 2021 for the 3rd term subject to approval of the Bank’s shareholders in the forthcoming Annual General Meeting. The Board evaluated Performance of the Committee for the year 2020 in light of Board’s approved Charter and adopting the process as detailed in the “Mechanism adopted for Board’s Performance Evaluation”, included in this Annual Report and gave “Satisfactory Rating” to the Committee. ANNUAL REPORT 2020 95
  49. KEY PERFORMANCE INDICATORS 2020 2019 Variance Compared to 2019 Amount Financial Investments-Gross Advances-Gross Total Assets Deposits Shareholders ' Equity / Net Assets Net Interest Income Non Interest Income Gross Income Profit Before Provisions Provisions / (Reversals) and write-offs - net Profit Before Taxation Profit After Taxation Trade Volumes % Rs. In Millions " " " " " " " " " " " " 250,164 172,693 485,345 345,499 23,157 10,655 3,808 14,463 5,437 1,402 4,035 2,400 418,242 177,176 212,516 442,541 302,083 20,214 7,926 2,861 10,787 2,658 (589) 3,247 1,906 431,293 72,988 (39,823) 42,804 43,416 2,943 2,729 947 3,676 2,779 1,991 788 494 (13,051) 41% -19% 10% 14% 15% 34% 33% 34% 105% -338% 24% 26% -3% Absolute " " " " " " 533,083 32 64,150 51,776 3,097 35,090 514,546 14 1 74,460 61,490 3,026 31,024 18,537 18 (1) (10,310) (9,714) 71 4,066 4% 129% -100% -14% -15.80% 2% 13.16% 2.18 21.00 9.95 10,970 4.57 11.07% 0.52% 49.98% 16.97% 1.73 18.33 9.85 10,859 5.70 9.98% 0.46% 70.35% 15.79% Non Financial No. of customers No. of new branches opened No. of branches closed No. of new accounts opened No. of debit cards issued No. of permanent employees No. of virtual/mobile banking customers Key Financial Ratios Earnings Per Share Book Value Per Share Share Price Market Capitalization Price Earning Ratio Return on Equity Return on Assets Gross Advances to deposits ratio Capital Adequacy Ratio 98 Rs. " " Rs. In Millions Times % % % % NAVIGATING OUR WAY TO SUCCESS
  50. SIX YEARS ' FINANCIAL SUMMARY 2015-2020 (Rs. In Millions) Profit & loss account Mark-up / Return / Interest Earned Mark-up / Return / Non Interest Expensed Fund based Income Fee, Commission and exchange Income Dividend Income and Capital Gain Other income Non Interest Income Total Income Non mark-up / interest expenses Profit before tax and provisions Provisions / (Reversals) and write-offs - net Profit before tax Profit after tax Cash Dividend paid 2020 2019 2018 2017 2016 2015 42,228 31,573 10,655 2,812 953 43 3,808 14,463 9,026 5,437 1,402 4,035 2,400 - 38,790 30,864 7,926 3,016 (192) 37 2,861 10,787 8,129 2,658 (589) 3,247 1,906 1,102 21,600 14,647 6,953 2,694 519 47 3,260 10,213 7,380 2,833 (71) 2,904 1,784 1,102 18,504 12,032 6,472 2,016 1,399 41 3,456 9,928 7,003 2,925 78 2,848 1,660 827 17,524 10,815 6,709 1,711 1,131 29 2,871 9,580 6,454 3,126 49 3,077 1,879 1,378 18,320 10,839 7,481 1,926 1,284 57 3,267 10,748 6,098 4,650 1,054 3,596 2,213 1,378 NON-MARKUP INCOME FUND BASED INCOME (Rs. in Millions) 2018 2019 PROFIT BEFORE TAX 2017 3,808 2018 2,861 3,260 3,456 2017 2019 2020 2018 2019 2020 2015 2016 2017 2018 2019 2,400 1,906 1,784 1,660 1,879 4,035 3,247 (Rs. in Millions) 2,904 2,848 3,077 3,596 ANNUAL REPORT 2020 2016 2016 PROFIT AFTER TAX (Rs. in Millions) 2015 2015 2,871 3,267 10,655 2020 2,213 2017 7,926 2016 6,953 6,472 2015 6,709 7,481 (Rs. in Millions) 2020 99
  51. SIX YEARS ' FINANCIAL SUMMARY 2015-2020 (Rs. In Millions) 2018 2017 2016 2015 11,025 2,970 3,471 5,691 23,157 485,345 423,456 172,693 164,545 10,785 249,956 462,188 345,499 237,198 87,021 347,743 174,804 11,025 2,490 1,894 4,805 20,214 442,541 383,160 212,516 204,901 10,903 177,056 422,327 302,083 191,110 95,705 330,739 244,866 11,025 2,109 543 4,312 17,989 382,498 337,042 194,831 186,475 11,357 146,646 364,509 262,379 159,404 81,963 285,135 200,522 11,025 1,753 2,095 3,632 18,505 325,219 288,224 172,772 164,293 10,245 117,429 306,714 227,304 158,294 64,584 231,438 111,064 11,025 1,424 2,393 3,447 18,289 281,805 248,913 133,753 125,306 10,419 117,884 263,516 209,894 142,241 38,905 199,807 80,100 10,023 1,049 2,856 4,264 18,192 255,655 224,015 120,617 112,002 11,584 108,846 237,463 184,847 126,798 39,876 184,209 114,988 SHAREHOLDERS' EQUITY 2017 2018 2020 2015 2016 2016 2017 2019 485,345 442,541 382,498 2018 2020 INVESTMENTS 2017 108,846 2018 2019 2020 2015 2016 2017 2018 2019 249,956 177,056 345,499 302,083 262,379 (Rs. in Millions) 227,304 209,894 184,847 172,693 212,516 2019 2015 325,219 255,655 2020 (Rs. in Millions) 194,831 172,772 133,753 120,617 100 2016 2019 DEPOSITS (Rs. in Millions) 2015 2018 146,646 GROSS ADVANCES 2017 23,157 20,214 2016 117,429 2020 (Rs. in Millions) 17,989 2015 18,505 2019 18,289 11,025 2018 18,192 11,025 2017 11,025 11,025 2016 10,023 2015 TOTAL ASSETS (Rs. in Millions) 11,025 (Rs. in Millions) 281,805 PAID UP CAPITAL 2019 117,884 Statement of Financial Position Paid up Capital Reserves Surplus on revaluation of assets Unappropriate Profit Shareholders' Equity / Net Assets Total Assets Earning Assets Gross Advances Advances-Net of Provisions Non-Performing Loans (NPLS) Investments Total Liabilities Deposits and other accounts Current and Saving deposits (CASA) Borrowings Interest bearing liabilities Contingencies and Commitments 2020 2020 NAVIGATING OUR WAY TO SUCCESS
  52. SIX YEARS ' FINANCIAL SUMMARY 2015-2020 2020 2019 2018 2017 2016 2015 % " " Times % " Rs. Rs. % " Rs. % Times % " " " Times Times Times 27.90% 25.23% 26.33% 1.60 11.07% 0.52% 3.66 2.18 49.98% 47.63% 21.00 87.25% 1.22 5.21% 68.65% 6.25% 70.22% 20.96 440.22 14.92 30.09% 20.43% 26.52% 1.33 9.98% 0.46% 2.94 1.73 70.35% 67.83% 18.33 86.58% 1.16 9.37% 63.26% 5.13% 69.46% 21.89 401.40 14.94 28.43% 32.19% 31.92% 1.38 9.78% 0.50% 2.63 1.62 74.26% 71.07% 16.32 88.12% 1.18 6.12% 60.75% 5.83% 73.21% 21.26 346.94 14.58 28.68% 34.98% 34.81% 1.42 9.02% 0.55% 2.58 1.51 76.01% 72.28% 16.78 88.62% 1.25 3.78% 69.64% 5.93% 82.39% 17.57 294.98 12.28 32.12% 38.28% 29.97% 1.48 10.30% 0.70% 2.79 1.70 63.72% 59.70% 16.59 88.33% 1.25 3.47% 67.77% 7.79% 80.58% 15.41 255.61 11.48 33.46% 40.84% 30.40% 1.76 12.56% 0.94% 3.26 2.01 65.25% 60.59% 18.15 87.62% 1.22 4.42% 68.60% 9.60% 73.97% 14.05 255.07 10.16 Rs.in Millions " % " " 22,845 161,785 14.12% 16.97% 1.50% 21,152 157,799 13.40% 15.79% 1.20% 18,442 159,389 11.57% 14.70% 1.11% 15,963 161,971 9.86% 12.77% 1.09% 15,329 141,609 10.82% 14.12% 1.39% 15,032 128,905 11.66% 15.39% 1.75% % 12.50%* 10% 10% 7.50% 12.50% 12.50% Rs. " " Rs.in Millions Rs. Times 9.95 13.80 7.76 10,970 0.47 4.57 9.85 13.24 9.01 10,859 0.54 5.70 12.67 14.40 11.76 13,968 0.78 7.83 13.40 19.20 12.25 14,773 0.80 8.90 17.65 17.9 12.76 19,458 1.06 10.36 15.13 15.35 10.06 16,680 0.83 7.54 % " 1.93% 1.94% 2.06% 2.51% 1.86% 2.36% 1.84% 2.65% 1.78% 2.40% 1.99% 2.52% Absolute " " 340 3,097 338 308 3,026 323 295 2,823 316 290 2,847 313 288 2,715 306 266 2,715 274 FINANCIAL RATIOS Profit before tax ratio ( PBT/total income) Gross Spread (NIM/Interest Income) Non interest income to total income Income /expense ratio ( excluding provisions) Return on average equity (ROE) (including surplus) Return on average assets (ROA) Earning Per Share (EPS before tax) Earning Per Share ( EPS after tax) Gross Advances to deposit ratio Net Advances to deposit ratio Break up value per share (net assets based) Earning Assets to total assets Earning assets to interest bearing liabilities Weighted average cost of deposits CASA to total deposits NPLs to total advances ratio Coverage ratio (Specific Provisions/NPLs) Assets to Equity Total assets per share Deposits to shareholders' equity Risk Adequacy Tier I Capital Risk Weighted Assets (RWA) Tier I to RWA Capital Adequacy Ratio Net Return on Average RWA Stock Dividend -% Cash dividend per share Share Information Market Value per share-31 Dec - High during the year - Low during the year Market Capitalization Price to book value (net assets based) Price to Earning Ratio Industry Share Deposits Advances Non Financial Information No of branches No of permanent employees ATMs * Subject to shareholders' approval in the forthcoming AGM ANNUAL REPORT 2020 101
  53. PER BRANCH PERFORMANCE GROSS ADVANCES DEPOSITS 2018 2019 2020 102 2018 2019 1 ,016.17 980.79 889.42 728.91 783.96 2017 2015 2016 2020 2017 2018 2019 11.87 10.54 2020 9.84 2019 9.76 2018 697.64 2017 620.49 540.35 493.89 546.00 476.68 2016 (Rs. in Millions) (Rs. in Millions) 2016 2015 PROFIT BEFORE TAX CASA 2015 694.91 507.92 689.99 660.44 595.77 2017 10.69 2016 (Rs. in Millions) 13.52 2015 464.42 453.45 (Rs. in Millions) 2020 NAVIGATING OUR WAY TO SUCCESS
  54. MATURITIES OF ASSETS AND LIABILITIES 31 DECEMBER 2020 (CONTRACTUAL) Total Up to 3M 3M to 1Y 1Y to 3Y 3Y to 5Y 5Y & above ---------------------------- (Rupees in Millions) ------------------------------Assets Cash and balances with treasury banks Balances with other banks Lending to financial institutions Investments - net Advances - net Fixed assets Intangible assets Other assets - net Liabilities Bills payable Borrowings Deposits and other accounts Subordinated loans Deferred tax liabilities - net Other liabilities 29,964 4,268 8,956 249,956 164,545 11,911 408 15,337 485,345 29,964 4,268 5,009 58,835 89,570 281 45 12,526 200,498 3,947 109,001 18,756 1,072 133 1,669 134,578 53,804 22,855 1,999 226 6 78,890 18,049 12,779 1,457 4 12 32,301 10,267 20,585 7,102 1,124 39,078 6,708 87,020 345,499 6,994 1,533 14,434 462,188 6,708 55,826 311,251 1 10,315 384,101 26,442 32,533 1 1,533 1,300 61,809 2,780 1,316 2,992 1,047 8,135 100 399 807 1,306 1,872 4,000 965 6,837 ASSETS LIABILITIES (Rs. in Millions) (Rs. in Millions) 384,101 200,498 134,578 78,890 32,301 39,078 61,809 8,135 Up to 3M 3M to 1Y ANNUAL REPORT 2020 1Y to 3Y 3Y to 5Y 5Y & above Up to 3M 3M to 1Y 1Y to 3Y 1,306 3Y to 5Y 6,837 5Y & above 103
  55. KEY INTEREST BEARING ASSETS AND LIABILITIES 2020 2019 Avg . Vol. Interest Avg. Vol. Interest (Rs. in Millions) Interest Rate % (Rs. in Millions) (Rs. in Millions) Interest Rate % (Rs. in Millions) Interest Bearing Assets Balance with other Banks Lendings and other placements Advances (excluding NPLs) Investments (excluding equity investments) 1,613 3,727 193,261 219,598 0.56 8.21 9.74 10.51 9 306 18,826 23,087 1,732 4,820 192,213 128,956 3.52 11.80 12.38 11.14 61 569 23,794 14,366 Interest Bearing Liabilities Deposits and other accounts Subordinated loans Borrowings* 313,044 6,994 106,752 6.74 12.01 8.67 21,104 840 9,256 272,503 6,995 66,658 8.24 13.65 10.76 22,463 955 7,174 * Includes FCY swap cost 8.67 10.76 13.65 12.01 8.24 6.74 11.14 10.51 12.38 9.74 3.52 0.56 8.21 11.8 EFFECTIVE INTEREST RATE ON ASSETS AND LIABILITIES Balance with other Banks Lendings and other placements Advances (excluding NPLs) Investments (excluding equity investments) 2020 Deposits and other accounts Subordinated loans Borrowings 2019 KIBOR-6 MONTHS (AVERAGE) 15% 10% 5% 0% Jan Feb Mar Apr May 2020 104 Jun Jul Aug Sep Oct Nov Dec 2019 NAVIGATING OUR WAY TO SUCCESS
  56. STATEMENT OF VALUE ADDITION 2020 (Rs. in Millions) Value added Net Interest Income Non interest income Non-markup expenses excluding staff costs, depreciation, amortization,donation and WWF (Provision) / Reversal and write off against advances, investments & others Value added available for distribution To employees -Salaries, allowances and other benefits To Government -Income tax -Worker Welfare fund To providers of capital -Cash Dividends To Society -Donations To expansion and growth - Depreciation on Fixed Assets - Amortization -Retained in business 2019 % (Rs. in Millions) 10,655 3,808 7,926 2,861 (4,459) (4,250) (1,402) 8,602 589 7,126 % 3,697 43% 3,313 47% 1,635 86 19% 1% 1,341 (121) 19% -2% 1,378* 16% 1,102 15% 44 0% 16 0% 574 166 1,022 8,602 7% 2% 12% 100% 534 137 804 7,126 8% 2% 11% 100% * Subject to shareholders' approval in the fifthcoming AGM 2020 2019 To Providers of Capital 16% To Providers of Capital 15% Employees 43% Expansion and Growth 21% Government 20% ANNUAL REPORT 2020 Employees 47% Expansion and Growth 21% Government 17% 105
  57. QUARTERLY PERFORMANCE 2020 & 2019 2020 Profit & Loss Account 2019 4th 3rd 2nd 1st 4th 3rd 2nd 1st Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter 8,773 (6,258) 2,515 880 (2,351) (102) 942 (353) 589 10,067 (7,281) 2,786 866 (2,219) (271) 1,162 (480) 682 11,563 (8,317) 3,246 894 (2,197) (696) 1,247 (525) 722 11,825 (9,717) 2,108 1,168 (2,259) (333) 684 (277) 407 11,803 (9,845) 1,958 1,139 (2,012) 95 1,180 (485) 695 11,532 (9,460) 2,072 629 (2,094) (174) 433 (197) 236 7,960 (6,060) 1,900 427 (1,933) 91 485 (201) 284 7,495 (5,499) 1,996 665 (2,090) 577 1,148 (457) 691 29,964 4,268 8,956 249,956 164,545 11,911 408 15,337 485,345 31,893 1,660 11,328 229,875 187,243 9,376 436 15,070 486,881 29,543 1,198 2,216 224,817 198,542 9,383 457 15,953 482,109 28,011 1,959 2,014 184,732 196,785 8,277 449 14,497 436,724 33,961 2,075 1,202 177,056 204,901 8,329 467 14,550 442,541 24,528 1,693 4,503 210,957 199,275 8,259 377 14,753 464,345 30,106 2,241 101 107,692 200,557 8,284 408 15,972 365,361 22,835 2,145 5,826 84,818 190,371 6,332 439 13,774 326,540 6,708 87,020 345,499 6,994 1,533 14,434 462,188 5,420 105,009 330,650 6,994 1,454 15,457 464,984 5,197 105,638 323,454 6,995 2,299 15,727 459,310 4,662 85,863 301,643 6,995 1,438 15,673 416,274 3,961 95,705 302,083 6,995 951 12,632 422,327 3,521 142,792 280,563 6,995 348 11,562 445,781 4,281 36,114 287,771 6,995 74 12,315 347,550 3,844 27,480 258,791 6,996 181 11,473 308,765 11,025 2,970 5,691 3,471 23,157 11,025 2,853 5,199 2,820 21,897 11,025 2,716 4,637 4,421 22,799 11,025 2,572 4,044 2,809 20,450 11,025 2,490 4,805 1,894 20,214 11,025 2,351 954 4,234 18,564 11,025 2,304 452 4,030 17,811 11,025 2,253 688 3,809 17,775 Interest / Return / Non Interest Income Mark-up / Return / Interest Earned Mark-up / Return / Interest Expensed Net Mark-up Interest Income Non-mark-up / interest income Non-mark-up / interest expenses Provisions and write offs Profit before taxation Taxation Profit after taxation Statement of Financial Position Assets Cash and balances with treasury Balances with other banks Lending to financial institutions Investment-net Advances-net Fixed assets Intangible assets Other assets Total Assets Liabilities Bills payable Borrowings Deposits and other accounts Subordinated loans Deferred tax liabilities -net Other liabilities Total Liabilities Equity Share Capital Reserves Un-appropriated profit Surplus on revaluation of assets Total Equity 106 NAVIGATING OUR WAY TO SUCCESS
  58. MARKET STATISTICS OF SNBL SHARES Market Share Price Trend Year Quarter end High (Rs.) Low (Rs.) Closing (Rs.) 2019 March June September December 13.24 11.00 10.50 10.80 10.40 9.12 9.06 9.01 10.99 10.25 9.60 9.85 2020 March June September December 13.80 11.75 11.37 10.50 7.76 8.22 8.76 8.40 8.86 11.10 9.33 9.95 Market Share Price Trend 14 12 10 8 6 4 2 0 Mar Jun Sep Dec Mar Jun Sep 2019 Dec 2020 High (Rs.) Low (Rs.) Closing (Rs.) Historical Trend vs KSE Index (2015-2020) 17.65 15.13 13.40 12.67 2016 2017 KSE-100 Index 43,755 40,735 37,067 40,471 47,807 32,812 2015 9.95 9.85 2018 2019 2020 Soneri Bank Ltd. Price Year ended 2015 2016 2017 2018 2019 2020 Share Price (Rs.) 15.13 17.65 13.40 12.67 9.85 9.95 KSE-100TM Index 32,812 47,807 40,471 37,067 40,735 43,755 ANNUAL REPORT 2020 107
  59. SIX YEARS ' VERTICAL ANALYSIS STATEMENT OF FINANCIAL POSITION / PROFIT & LOSS 2020 2019 % Rs. in Mln % Rs. in Mln 2016 % Rs. in Mln 2015 Assets Cash and balances with treasury banks Balances with other banks Lending to financial institutions Investment-net Advances-net Fixed assets Intangible assets Deferred tax assets-net Other assets Total Assets 29,964 6% 33,961 8% 26,020 7% 4,268 1% 2,075 0% 1,180 0% 8,956 2% 1,202 0% 3,921 1% 249,956 52% 177,056 41% 146,646 38% 164,545 34% 204,901 46% 186,475 49% 11,911 2% 8,329 2% 6,239 2% 408 0% 467 0% 454 0% 15,337 3% 14,550 3% 11,563 3% 485,345 100% 442,541 100% 382,498 100% Liabilities and Equity Bills payable Borrowings Deposits and other accounts Subordinated debt Deferred tax liabilities-net Other liabilities 6,708 87,020 345,499 6,994 1,533 14,434 1% 3,961 18% 95,705 71% 302,083 1% 6,995 0% 951 3% 12,632 1% 3,994 22% 81,963 67% 262,379 2% 6,996 0% 120 3% 9,057 1% 4,895 21% 64,584 69% 227,304 2% 2,998 0% 936 2% 5,997 2% 4,164 20% 38,905 69% 209,894 1% 2,999 0% 1,138 2% 6,416 1% 3,077 15% 39,876 75% 184,847 1% 3,000 0% 1,417 2% 5,246 1% 16% 72% 1% 1% 2% Total Liabilities 462,188 95% 422,327 95% 364,509 95% 306,714 94% 263,516 94% 237,463 93% Represented by Share Capital - net of discount Reserves Surplus on revaluation of assets Un-appropriated profit Rs. in Mln 2017 Rs. in Mln Net Assets % 2018 Statement of Financial Position % 19,431 6% 18,279 6% 1,151 0% 823 0% 6,503 2% 5,522 2% 117,429 36% 117,884 43% 164,293 51% 125,306 44% 6,464 2% 4,936 2% 117 0% 202 0% 9,831 3% 8,853 3% 325,219 100% 281,805 100% Rs. in Mln % 16,718 7% 1,635 1% 3,094 1% 108,846 42% 112,002 44% 4,884 2% 73 0% 8,403 3% 255,655 100% 23,157 5% 20,214 5% 17,989 5% 18,505 6% 18,289 6% 18,192 7% 11,025 2,970 3,471 5,691 23,157 2% 1% 1% 1% 5% 11,025 2,490 1,894 4,805 20,214 2% 11,025 1% 2,109 0% 543 2% 4,312 5% 17,989 3% 11,025 1% 1,753 0% 2,095 1% 3,632 5% 18,505 3% 1% 1% 1% 6% 11,025 1,424 2,393 3,447 18,289 4% 10,023 0% 1,049 1% 2,856 1% 4,264 6% 18,192 4% 0% 1% 2% 7% Profit & Loss Account Interest / Return / Non Interest Income Mark-up / Return / Interest Earned 42,228 92% Fee, Commission and Exchange income 2,812 6% Capital Gain and Dividend Income 953 2% Other income 43 0% Total Income 46,036 100% 38,790 93% 21,600 87% 18,504 84% 3,015 7% 2,694 11% 2,016 10% (192) 0% 519 2% 1,399 6% 37 0% 47 0% 41 0% 41,650 100% 24,860 100% 21,960 100% 17,524 86% 18,320 85% 1,711 8% 1,926 9% 1,131 6% 1,284 6% 29 0% 57 0% 20,395 100% 21,587 100% Mark-up / Return / Non Interest Expense Mark-up / Return / Non Interest Expensed Non mark-up / interest expenses Provisions / (Reversals) and write-offs - net Taxation Total Expenses Profit after taxation 30,864 8,129 (589) 1,340 39,744 1,906 10,815 6,454 49 1,198 18,516 1,879 108 31,573 9,026 1,402 1,635 43,636 2,400 69% 20% 3% 4% 95% 5% 74% 14,647 19% 7,380 -1% (71) 3% 1,120 95% 23,076 5% 1,784 59% 12,032 29% 7,003 0% 78 5% 1,187 93% 20,300 7% 1,660 55% 32% 0% 5% 92% 8% 53% 10,839 32% 6,098 0% 1,054 6% 1,383 91% 19,374 9% 2,213 50% 29% 5% 6% 90% 10% NAVIGATING OUR WAY TO SUCCESS
  60. SIX YEARS ' HORIZONTAL ANALYSIS STATEMENT OF FINANCIAL POSITION / PROFIT & LOSS 2020 Statement of Financial Position Rs. in Mn Assets Cash and balances with treasury banks Balances with other banks Lending to financial institutions Investment-net Advances-net Fixed assets Intangible assets Deferred tax assets-net Other assets Total Assets 29,964 4,268 8,956 249,956 164,545 11,911 408 15,337 485,345 Liabilities and Equity Bills payable Borrowings Deposits and other accounts Subordinated debt Deferred tax liabilities-net Other liabilities Total Liabilities 6,708 87,020 345,499 6,994 1,533 14,434 462,188 2020 vs 2019 % 2019 2019 vs 2018 Rs. in Mn -12% 33,961 106% 2,075 645% 1,202 41% 177,056 -20% 204,901 43% 8,329 -13% 467 5% 14,550 10% 442,541 % 2018 Rs. in Mn 2018 vs 2017 % 2017 2017 vs 2016 2016 2016 vs 2015 2015 2015 vs 2014 Rs. in Mn % Rs. in Mn % Rs. in Mn % 31% 26,020 34% 19,431 6% 18,279 9% 16,718 6% 76% 1,180 3% 1,151 40% 823 -50% 1,635 184% -69% 3,921 -40% 6,503 18% 5,522 78% 3,094 412% 21% 146,646 25% 117,429 0% 117,884 8% 108,846 44% 10% 186,475 14% 164,293 31% 125,306 12% 112,002 4% 33% 6,239 -3% 6,464 31% 4,936 0% 4,884 -1% 3% 454 288% 117 -42% 202 177% 73 20% 26% 11,563 18% 9,831 11% 8,853 5% 8,403 -22% 16% 382,498 18% 325,219 15% 281,805 10% 255,655 18% 69% 3,961 -1% 3,994 -18% 4,895 18% 4,164 -9% 95,705 17% 81,963 27% 64,584 66% 38,905 14% 302,083 15% 262,379 15% 227,304 8% 209,894 0% 6,995 0% 6,996 133% 2,998 0% 2,999 61% 951 693% 120 -87% 936 -18% 1,138 14% 12,632 39% 9,057 51% 5,997 -7% 6,416 9% 422,327 16% 364,509 19% 306,714 16% 263,516 35% 3,077 -2% 39,876 14% 184,847 0% 3,000 -20% 1,417 22% 5,246 11% 237,463 0% 54% 13% 0% 0% -15% 19% 0% 19% 83% 18% 15% 11,025 0% 11,025 2,490 18% 2,109 1,894 249% 543 4,805 11% 4,312 20,214 12% 17,989 0% 11,025 0% 20% 1,753 23% -74% 2,095 -12% 19% 3,632 5% -3% 18,505 1% 11,025 1,424 2,393 3,447 18,289 10% 10,023 36% 1,049 -16% 2,856 -19% 4,264 1% 18,192 0% 12% -3% 35% 7% Mark-up / Return / Interest Earned Fee, Commission and Exchange income Capital Gain and Dividend Income Other income Total Income 42,228 9% 2,812 -7% 953 -596% 43 16% 46,036 11% 38,790 80% 21,600 3,015 12% 2,694 (192) -137% 519 37 -21% 47 41,650 68% 24,860 17% 18,504 34% 2,016 -63% 1,399 15% 41 13% 21,960 17,524 1,711 1,131 29 20,395 -4% 18,320 8% -11% 1,926 -3% -12% 1,284 140% -49% 57 63% -6% 21,587 11% Mark-up / Return / Non Interest Expense Mark-up / Return / Non Interest Expensed Non mark-up / interest expenses Provisions / (Reversals) and write-offs - net Taxation Total Expenses Profit after taxation 31,573 2% 9,026 11% 1,402 -338% 1,635 22% 43,636 10% 2,400 26% 30,864 111% 14,647 22% 12,032 11% 8,129 10% 7,380 5% 7,003 9% (589) 730% (71) -191% 78 59% 1,340 20% 1,120 -6% 1,187 -1% 39,744 72% 23,076 14% 20,300 10% 1,906 7% 1,784 7% 1,660 -12% Share Capital Reserves Surplus on revaluation of assets Un-appropriated profit Total Equity 11,025 2,970 3,471 5,691 23,157 Profit & Loss Account ANNUAL REPORT 2020 6% 18% 24% 41% 8% 10,815 0% 10,839 6,454 6% 6,098 49 -95% 1,054 1,198 -13% 1,383 18,516 -4% 19,374 1,879 -15% 2,213 2% 6% 75% 61% 8% 40% 109
  61. CASH FLOW STATEMENT DIRECT METHOD CASH FLOW FROM OPERATING ACTIVITIES 2020 2019 ---------- (Rupees in ‘000)---------- Markup / return / interest and commission receipts 47,413,644 38,569,878 Markup / return / interest payments (32,987,280) (28,731,345) (8,219,176) (7,465,521) 6,207,188 2,373,012 Cash payments to employees, suppliers and others (Increase) / decrease in operating assets Lendings to financial institutions (7,753,843) 2,719,027 Held-for-trading securities 3,834,066 1,468,016 39,563,246 (17,869,821) Advances - net Others assets - (excluding advance taxation) (1,813,766) 78,828 33,829,703 (13,603,950) 2,746,624 (32,568) Increase / (decrease) in operating liabilities Bills payable Borrowings Deposits and other accounts Other liabilities Income tax paid Net cash flow generated from operating activities (8,644,271) 13,940,843 43,415,783 39,704,224 2,704,133 (863,313) 40,222,269 52,749,186 80,259,160 41,518,248 (1,673,729) (1,092,471) 78,585,431 40,425,777 (76,003,892) (29,807,564) CASH FLOW FROM INVESTING ACTIVITIES Net investments in securities Dividend received 127,910 339,921 (3,390,910) (848,746) 21,599 29,476 (79,245,293) (30,286,913) (1,200) (1,200) Dividend paid (1,102,463) (1,102,463) Net cash flow used in financing activities (1,103,663) (1,103,663) Investment in operating fixed assets (including intangible assets) Proceeds from disposal of fixed assets Net cash flow used in investing activities CASH FLOW FROM FINANCING ACTIVITIES Receipts / payments of subordinated debt (Decrease) / Increase in cash and cash equivalents (1,763,525) 9,035,201 Cash and cash equivalents at the beginning of the period 35,946,694 26,911,493 Cash and cash equivalents at the end of the period 34,183,169 35,946,694 29,963,954 33,961,308 4,219,215 1,985,386 34,183,169 35,946,694 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD Cash and balances with treasury banks Balances with other banks 110 NAVIGATING OUR WAY TO SUCCESS
  62. CASH FLOW STATEMENT INDIRECT METHOD INDIRECT METHOD - SUMMARY 2020 2019 2018 2017 (Rupees in Million) 2016 2015 Cash flow from financing activities (1,104) (1,104) 3,172 (1,379) (1,379) 1,898 Cash flow from investing activities (79,245) (30,287) (35,239) 8,650 (10,288) (33,398) Cash flow from operating activities 78,586 40,426 38,673 (5,930) 12,284 33,745 Cash and cash equivalent at the beginning of the year 35,946 26,911 20,305 18,964 18,347 16,102 Cash and cash equivalent at the end of the year 34,183 35,946 26,911 20,305 18,964 18,347 Financing Activities Investing Activities (Rs. in Millions) 3,172 (Rs. in Millions) 1,898 2015 2017 2018 (35,239) 2020 2019 2020 (30,287) 8,650 2019 (10,288) 2018 (33,398) 2017 (1,104) (1,104) 2016 (1,379) (1,379) 2015 2016 (79,245) Operating Activities ANNUAL REPORT 2020 40,426 2016 38,673 12,284 2015 (5,930) 33,745 78,586 (Rs. in Millions) 2017 2018 2019 2020 111
  63. INDEPENDENT AUDITORS ’ REPORT TO THE MEMBERS Report on the Audit of the Financial Statements Opinion We have audited the annexed financial statements of Soneri Bank Limited (the Bank), which comprise the statement of financial position as at 31 December 2020, and the profit and loss account, the statement of comprehensive income, the statement of changes in equity and cash flow statement for the year then ended, along with unaudited certified returns received from the branches except for forty branches which have been audited by us and notes to the financial statements, including a summary of significant accounting policies and other explanatory information and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit. In our opinion and to the best of our information and according to the explanations given to us, the statement of financial position, the profit and loss account, the statement of comprehensive income, the statement of changes in equity and cash flow statement together with the notes forming part thereof conform with the accounting and reporting standards as applicable in Pakistan, and, give the information required by the Banking Companies Ordinance, 1962 and the Companies Act, 2017 (XIX of 2017), in the manner so required and respectively give a true and fair view of the state of the Bank’s affairs as at 31 December 2020 and of the profit, the comprehensive income, the changes in equity and its cash flows for the year then ended. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) as applicable in Pakistan. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Bank in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants as adopted by the Institute of Chartered Accountants of Pakistan (the Code) and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Following are the Key Audit Matters: S.No. 1 Key Audit Matters Provision against advances (Refer note 9.3 to the financial statements) The Bank makes provision against advances on a time based criteria that involves ensuring all non-performing loans and advances are classified in accordance with the ageing criteria specified in the Prudential Regulations (PRs) issued by the State Bank of Pakistan (SBP). In addition to the above time based criteria the PRs require a subjective evaluation of the credit worthiness of borrowers to determine the classification of advances. The PRs also require the creation of general provision for the consumer portfolio. The Bank has recognized a net provision against advances amounting to Rs. 673.49 million in the profit and loss account in the current year. As at 31 December 2020, the Bank holds a provision of Rs 8,148.12 million against advances. The determination of provision against advances based on the above criteria remains a significant area of judgement and estimation. Because of the significance of the impact of these judgements / estimations and the materiality of advances relative to the overall statement of financial position of the Bank, we considered the area of provision against advances as a key audit matter. 114 How the matter was addressed in our audit Our audit procedures to verify provision against advances, amongst others, included the following: • Assessed the design and tested the operating effectiveness of key controls established by the Bank to identify loss events and for determining the extent of provisioning required against non-performing loans. The testing of controls included testing of: • automated (IT system based) controls over correct classification of non-performing advances on time based criteria; • controls over monitoring of advances with higher risk of default and correct classification of non-performing advances on subjective criteria; • controls over accurate computation and recording of provisions; and • controls over the governance and approval process related to provisions, including continuous reassessment by the management. • In accordance with the regulatory requirement, we sampled and tested at least sixty percent of the total advances portfolio and performed the following substantive procedures for sample loan accounts: NAVIGATING OUR WAY TO SUCCESS
  64. S .No. Key Audit Matters How the matter was addressed in our audit • verified repayments of loan / mark-up installments and checked that non-performing loans have been correctly classified and categorized based on the number of days overdue; and • examined watch list accounts and, based on review of the individual facts and circumstances, discussions with management and our assessment of financial conditions of the borrowers, formed a judgement as to whether classification of these accounts as performing was appropriate. • Analysed the accuracy of specific provision made against non-performing advances and of general provision made against consumer finance by recomputing the provision amount after considering the benefit of forced sales value, if any, in accordance with the criteria prescribed under the PRs. • Where the management has not identified indicators displaying impairment, reviewed the credit history, account movement, financial ratios, report on security maintained and challenged the management’s assessment based on our view of the credit from the review of credit file. 2 Valuation of investments (Refer note 8 to the financial statements) The carrying value of investments held by the Bank amounted to Rs. 249,955.67 million, which constitutes 51.5% of the Bank’s total assets as at 31 December 2020 . The significant portion of the investments comprise of equity, debt and government securities. Investments are carried at cost or fair value in accordance with the Bank’s accounting policy relating to their recognition. Provision against investments is made based on impairment policy of the Bank which includes both objective and subjective factors. We identified assessing the carrying value of the investment as a key audit matter because of its significance to the financial statements and because assessing the key impairment assumptions involves a significant degree of management judgment. Our audit procedures to verify valuation of investments, amongst others, included the following: • Assessed the design and tested operating effectiveness of the relevant controls in place relating to valuation of investments; • Assessed on a test basis the valuation of investments in the portfolio, as recorded in the general ledger, to supporting documents, externally quoted market prices and break-up values including the significant and prolonged decline in fair value of equity investments for impairment; • Obtained independent confirmations for verifying the existence of the investment portfolio as at 31 December 2020 and reconciled it with the books and records of the Bank. Where such confirmations were not available, alternate procedures were performed; • Evaluated the Bank’s assessment of available for sale and held to maturity financial assets for any additional impairment in accordance with the relevant accounting standards as applicable in Pakistan and performed an independent assessment of the assumptions and conclusions; and • Considered the Bank’s disclosures of investments, such as the fair value hierarchy, to the requirements of the accounting standards. ANNUAL REPORT 2020 115
  65. Information other than the Financial Statements and Auditors ’ Report Thereon Management is responsible for the other information. The Other Information comprises the information included in the Bank's Annual Report but does not include the financial statements and our auditors’ report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of Management and the Board of Directors for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting and reporting standards as applicable in Pakistan, the requirements of Banking Companies Ordinance, 1962 and the Companies Act, 2017 (XIX of 2017) and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so. The Board of directors is responsible for overseeing the Bank’s financial reporting process. Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs as applicable in Pakistan will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs as applicable in Pakistan, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Bank to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. 116 NAVIGATING OUR WAY TO SUCCESS
  66. We communicate with the Board of Directors regarding , among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide to the Board of Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on Other Legal and Regulatory Requirements 1. Based on our audit, we further report that in our opinion: a) proper books of account have been kept by the Bank / branches as required by the Companies Act, 2017 (XIX of 2017) and the returns referred above from the branches have been found adequate for the purpose of our audit; b) the statement of financial position, the profit and loss account, the statement of changes in equity and cash flow statement (together with the notes thereon have been drawn up in conformity with the Banking Companies Ordinance, 1962 and the Companies Act, 2017 (XIX of 2017) and are in agreement with the books of account and returns; c) investments made, expenditure incurred and guarantees extended during the year were in accordance with the objects and powers of the Bank and the transactions of the Bank which have come to our notice have been within the powers of the Bank; and d) zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted by the Bank and deposited in the Central Zakat Fund established under section 7 of that Ordinance. 2. We confirm that for the purpose of our audit we have covered more than sixty per cent of the total loans and advances of the Bank. The engagement partner on the audit resulting in this independent auditors’ report is Muhammad Taufiq. KPMG Taseer Hadi & Co. Chartered Accountants Karachi: 01 March 2021 ANNUAL REPORT 2020 117
  67. STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2020 Note 2020 2019 ---------- (Rupees in ‘000)---------ASSETS Cash and balances with treasury banks 5 29,963,954 33,961,308 Balances with other banks 6 4,268,063 2,074,533 Lendings to financial institutions 7 8,956,086 1,202,243 Investments 8 249,955,671 177,056,116 Advances 9 164,544,519 204,901,313 Fixed assets 10 11,910,925 8,328,905 Intangible assets 11 408,274 466,686 Deferred tax assets - Other assets 12 - 15,337,731 14,549,678 485,345,223 442,540,782 LIABILITIES Bills payable 14 6,707,581 3,960,957 Borrowings 15 87,020,539 95,705,109 Deposits and other accounts 16 345,498,768 302,082,985 Liabilities against assets subject to finance lease 17 Deferred tax liabilities - net 18 1,533,265 951,459 Other liabilities 19 14,434,032 12,631,477 462,188,185 422,327,187 23,157,038 20,213,595 11,024,636 11,024,636 NET ASSETS 6,994,000 - Subordinated debt 6,995,200 REPRESENTED BY Share capital 20 Reserves Surplus on revaluation of assets 21 Unappropriated profit CONTINGENCIES AND COMMITMENTS 2,970,486 2,490,432 3,471,003 1,893,455 5,690,913 4,805,072 23,157,038 20,213,595 22 The annexed notes 1 to 50 and annexures I to III form an integral part of these financial statements. Alauddin Feerasta Muhtashim Ahmad Ashai Mirza Zafar Baig Muhammad Rashid Zahir Jamil Hassan Hamdani Chairman President & Chief Executive Officer Chief Financial Officer Director Director 118 NAVIGATING OUR WAY TO SUCCESS
  68. PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2020 Note 2020 2019 ---------- (Rupees in ‘000)---------Mark-up / return / interest earned 23 42,228,185 38,790,413 Mark-up / return / interest expensed 24 31,572,929 30,864,247 10,655,256 7,926,166 1,774,841 1,874,447 Net mark-up / interest income Non mark-up / interest income Fee and commission income 25 Dividend income Foreign exchange income 134,133 332,221 1,037,446 1,141,514 Income / (loss) from derivatives - - Gain / (loss) on securities - net 26 818,393 (523,831) Other income 27 42,682 36,811 Total non-markup / interest Income 3,807,495 2,861,162 Total income 14,462,751 10,787,328 Non mark-up / interest expenses Operating expenses 28 8,857,542 8,190,466 Workers' Welfare Fund - net 29 85,718 (120,733) Other charges 30 83,033 59,748 9,026,293 8,129,481 5,436,458 2,657,847 1,401,703 (588,899) Total non mark-up / interest expenses Profit before provisions Provision / (Reversals) and write offs - net 31 Extraordinary / unusual items - Profit before taxation Taxation 32 Profit after taxation - 4,034,755 3,246,746 1,634,483 1,340,722 2,400,272 1,906,024 --------------(Rupees)-------------Basic earnings per share 33 2.1772 1.7289 Diluted earnings per share 34 2.1772 1.7289 The annexed notes 1 to 50 and annexures I to III form an integral part of these financial statements. Alauddin Feerasta Muhtashim Ahmad Ashai Mirza Zafar Baig Muhammad Rashid Zahir Jamil Hassan Hamdani Chairman President & Chief Executive Officer Chief Financial Officer Director Director ANNUAL REPORT 2020 119
  69. STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2020 Note 2020 2019 ---------- (Rupees in ‘000)---------Profit after taxation for the year 2,400,272 1,906,024 526,759 1,346,104 (985) Other comprehensive income Items that may be reclassified to profit and loss account in subsequent periods: Movement in surplus on revaluation of investments - net of tax Items that will not be reclassified to profit and loss account in subsequent periods: Remeasurement gain / (loss) on defined benefit obligations - net of tax 39.8.2 4,734 Movement in surplus on revaluation of operating fixed assets - net of tax 21.1 1,090,493 Movement in surplus on revaluation of non banking assets 21.2 23,648 Total comprehensive income 76,041 1,118,875 75,056 4,045,906 3,327,184 The annexed notes 1 to 50 and annexures I to III form an integral part of these financial statements. Alauddin Feerasta Muhtashim Ahmad Ashai Mirza Zafar Baig Muhammad Rashid Zahir Jamil Hassan Hamdani Chairman President & Chief Executive Officer Chief Financial Officer Director Director 120 NAVIGATING OUR WAY TO SUCCESS
  70. CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2020 Note 2020 2019 ---------- (Rupees in ‘000)---------CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation Less: dividend income 4,034,755 134,133 3,900,622 3,246,746 332,221 2,914,525 574,288 120,038 550,180 165,890 373,470 1,401,703 (628,420) (17,193) 85,718 (8,350) 2,617,324 6,517,946 533,943 116,119 291,597 136,649 271,575 (588,899) (10,247) (120,733) (2,458) 627,546 3,542,071 (7,753,843) 3,834,066 39,563,246 (743,566) 34,899,903 2,719,027 1,468,016 (17,869,821) (3,255,319) (16,938,097) Income tax paid Net cash flow generated from operating activities 2,746,624 (8,644,271) 43,415,783 1,323,175 38,841,311 (1,673,729) 78,585,431 (32,568) 13,940,843 39,704,224 1,301,775 54,914,274 (1,092,471) 40,425,777 CASH FLOWS FROM INVESTING ACTIVITIES Net investments in available-for-sale securities Net investments in held-to-maturity securities Dividends received Investments in operating fixed assets Proceeds from sale of fixed assets Net cash flow used in investing activities (71,964,167) (4,039,725) 127,910 (3,390,910) 21,599 (79,245,293) (23,609,885) (6,197,679) 339,921 (848,746) 29,476 (30,286,913) CASH FLOWS FROM FINANCING ACTIVITIES Payments of subordinated debt Dividend paid Net cash flow used in financing activities (1,200) (1,102,463) (1,103,663) (1,200) (1,102,463) (1,103,663) (Decrease) / Increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year (1,763,525) 35,946,694 34,183,169 9,035,201 26,911,493 35,946,694 Adjustments: Depreciation on fixed assets Depreciation on ijarah assets Depreciation on right-of-use assets Amortisation Finance charge on lease liability against right-of-use assets Provision / (reversals) and write offs - net Reversal of provision for diminution in the value of investments Gain on sale of fixed assets - net Provision / (reversal) of Workers' Welfare Fund - net Unrealised gain on revaluation of investments classified as held-for-trading 10.3 11 31 8.4 27 29 26 (Increase) / decrease in operating assets Lendings to financial institutions Held-for-trading securities Advances Others assets (excluding advance taxation) Increase / (decrease) in operating liabilities Bills payable Borrowings from financial institutions Deposits Other liabilities 36 The annexed notes 1 to 50 and annexures I to III form an integral part of these financial statements. Alauddin Feerasta Muhtashim Ahmad Ashai Mirza Zafar Baig Muhammad Rashid Zahir Jamil Hassan Hamdani Chairman President & Chief Executive Officer Chief Financial Officer Director Director ANNUAL REPORT 2020 121
  71. STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2020 Note Share capital Statutory reserve (a) Surplus / (deficit) on revaluation of Investments Fixed assets / Non Banking assets Unappropriated profit Total ---------------------------------(Rupees in ‘000)--------------------------------Balance as at 31 December 2018 11,024,636 Comprehensive income for the year Profit after taxation for the year ended 31 December 2019 Other comprehensive income / (loss) - Movement in surplus on revaluation of investments - net of tax - Remeasurement loss on defined benefit obligations - net of tax - Movement in surplus on revaluation of non banking assets Transfer to statutory reserve - - - - - Transfer from surplus on revaluation of assets to unappropriated profit - net of tax 21.1 Transactions with owners recorded directly in equity Final cash dividend for the year ended 31 December 2018 at Re 1.00 per share Balance as at 31 December 2019 Other comprehensive income / (loss) - Movement in surplus on revaluation of investments - net of tax - Remeasurement gain on defined benefit obligations - net of tax - Movement in surplus on revaluation of operating fixed assets - net of tax - Movement in surplus on revaluation of non banking assets 21.2 Transfer to statutory reserve 381,205 (1,346,736) 1,346,104 1,346,104 - - - - - - - - - 480,054 (632) 526,759 526,759 - - - Transactions with owners recorded directly in equity Final cash dividend for the year ended 31 December 2019 at Re 1.00 per share 49.1 - - - (a) 2,970,486 (71,327) 1,894,087 - 1,090,493 23,648 1,114,141 - 21.1 11,024,636 76,041 76,041 - Transfer from surplus on revaluation of assets to unappropriated profit - net of tax Balance as at 31 December 2020 - - - 2,490,432 1,889,373 - - 11,024,636 Comprehensive income for the year Profit after taxation for the year ended 31 December 2020 2,109,227 526,127 (63,352) 2,944,876 4,312,374 17,988,874 1,906,024 1,906,024 (985) 1,905,039 1,346,104 (985) 76,041 3,327,184 (381,205) - 71,327 - (1,102,463) (1,102,463) 4,805,072 20,213,595 2,400,272 2,400,272 4,734 2,405,006 526,759 4,734 1,090,493 23,648 4,045,906 (480,054) - 63,352 - (1,102,463) (1,102,463) 5,690,913 23,157,038 This represents reserve created under section 21(i)(a) of the Banking Companies Ordinance, 1962. (b) As explained in note 9.3.4 to these financial statements, unappropriated profit includes an amount of Rs. 1,275.492 million - net of tax as at 31 December 2020 (31 December 2019: Rs. 1,718.033 million) representing additional profit arising from availing forced sales value benefit for determining provisioning requirement which is not available for distribution either as cash or stock dividend to shareholders and bonus to employees. The annexed notes 1 to 50 and annexures I to III form an integral part of these financial statements. Alauddin Feerasta Muhtashim Ahmad Ashai Mirza Zafar Baig Muhammad Rashid Zahir Jamil Hassan Hamdani Chairman President & Chief Executive Officer Chief Financial Officer Director Director 122 NAVIGATING OUR WAY TO SUCCESS
  72. NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020 1 STATUS AND NATURE OF BUSINESS Soneri Bank Limited ("the Bank") was incorporated in Pakistan on 28 September 1991 as a public limited bank under the repealed Companies Ordinance, 1984 (now Companies Act, 2017). Its registered office and central office are situated at Rupali House 241-242, Upper Mall Scheme, Anand Road, Lahore, Punjab and at 10th Floor, PNSC Building, M.T. Khan Road, Karachi respectively. The shares of the Bank are quoted on Pakistan Stock Exchange Limited. The Bank is engaged in banking services as described in the Banking Companies Ordinance, 1962 and operates with 340 branches including 30 Islamic banking branches and 01 sub branch (2019: 308 branches including 25 Islamic banking branches) in Pakistan. The credit rating of the Bank is disclosed in note 37 to the financial statements. 2 BASIS OF PRESENTATION These financial statements have been prepared in conformity with the format of financial statements prescribed by the State Bank of Pakistan (SBP) vide BSD Circular No. 02, dated 25 January 2018. In accordance with the directives of the Federal Government regarding the shifting of the banking system to Islamic modes, the State Bank of Pakistan has issued various circulars from time to time. Permissible forms of trade-related modes of financing include purchase of goods by banks from their customers and immediate resale to them at appropriate mark-up in price on deferred payment basis. The purchases and sales arising under these arrangements are not reflected in these financial statements as such but are restricted to the amount of facility actually utilised and appropriate portion of mark-up thereon. However, the Islamic Banking branches of the Bank have complied with the requirements set out under the Islamic Financial Accounting Standards (IFAS), issued by the Institute of Chartered Accountants of Pakistan (ICAP) as are notified under the provisions of Companies Act, 2017. The financial results of all Islamic banking branches of the Bank have been consolidated in these financial statements for reporting purposes, after eliminating material intra branch transactions / balances. The financial results of all Islamic banking branches are disclosed in Annexure II to these financial statements. 2.1 STATEMENT OF COMPLIANCE These financial statements have been prepared in accordance with the accounting and reporting standards as applicable in Pakistan. The accounting and reporting standards comprise of: - International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB) as are notified under the Companies Act, 2017; - Islamic Financial Accounting Standards (IFAS) issued by the Institute of Chartered Accountants of Pakistan (ICAP) as are notified under the Companies Act, 2017; - Provisions of and directives issued under the Banking Companies Ordinance, 1962 and the Companies Act, 2017; and - Directives issued by the State Bank of Pakistan (SBP) and the Securities and Exchange Commission of Pakistan (SECP) from time to time. 2.1.1 Whenever the requirements of the Banking Companies Ordinance, 1962, the Companies Act, 2017, or the directives issued by SBP and the SECP differ with the requirements of IFRS or IFAS, the requirements of the Banking Companies Ordinance, 1962, the Companies Act, 2017 and the said directives shall prevail. 2.1.1.1 The SBP, vide its BSD Circular Letter no. 10 dated 26 August 2002 has deferred the applicability of International Accounting Standard 40, Investment Property, for banking companies till further instructions. Moreover, SBP vide BPRD circular no. 4, dated 25 February 2015 has deferred the applicability of Islamic Financial Accounting Standards (IFAS) 3, Profit and Loss Sharing on Deposits. Further, the SECP, through S.R.O 411(1) / 2008 dated 28 April 2008, has deferred the applicability of IFRS 7, Financial Instruments: Disclosures, to banks. Further, the SBP has deferred the applicability of International Accounting Standard (IAS) 39, Financial Instruments, Recognition and Measurement, and has directed all Banks to implement IFRS 9, Financial Instruments, with effect from 01 January 2021 vide BPRD Circular No. 04 of 2019 dated 23 October 2019. Accordingly, the requirements of these standards have not been considered in the preparation of these financial statements. However, investments have been classified and valued in accordance with the requirements prescribed by the SBP through various circulars. The Bank awaits further instructions from the SBP on applicability of IFRS 9. 2.2 Standards, interpretations of and amendments to published accounting and reporting standards that are effective in the current year: 2.2.1 Amendments to IAS 1 'Presentation of Financial Statements' and IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors' (effective for annual periods beginning on or after 1 January 2020). The amendments are intended to make the definition of material in IAS 1 easier to understand and are not intended to alter the underlying concept of materiality in IFRS Standards. In addition, the IASB ANNUAL REPORT 2020 123
  73. has also issued guidance on how to make materiality judgments when preparing their general purpose financial statements in accordance with IFRS Standards . 2.2.2 On 29 March 2018, the IASB issued a revised Conceptual Framework for Financial Reporting which became applicable immediately, and contained changes setting a new direction for IFRS in the future. The Conceptual Framework primarily serves as a tool for the IASB to develop standards and to assist the IFRS Interpretations Committee in interpreting them. It does not override the requirements of individual IFRSs and any inconsistencies with the revised Framework will be subject to the usual due process – this means that the overall impact on standard setting may take some time to crystallize. Entities now use the Framework as a reference for selecting their accounting policies in the absence of specific IFRS requirements. In these cases, entities should review those policies and apply the new guidance retrospectively as of 01 January 2020, unless the new guidance contains specific scope outs. The Bank's accounting policies have been consistently applied in accordance with applicable laws and reporting standards as applicable in Pakistan, and have not been impacted due to the applicablity of the said framework. 2.2.3 In addition to the above, there are certain new standards, amendments and interpretations that are mandatory for the Bank's accounting periods beginning on or after 01 January 2020, but are considered not to be relevant or do not have any significant effect on the Bank's operations and are, therefore, not disclosed in these financial statements. 2.3 Standards, interpretations of and amendments to published accounting and reporting standards that are not yet effective: 2.3.1 The following International Financial Reporting Standards (IFRS Standards) as notified under the Companies Act, 2017 and the amendments and interpretations thereto will be effective for accounting periods beginning on or after 01 January 2021: 2.3.1.1 IFRS 9 ‘Financial Instruments’ and amendment – Prepayment Features with Negative Compensation – the effective date of the standard has been extended to annual periods beginning on or after 01 January 2021 vide SBP circular 4 dated 23 October 2019. IFRS 9 replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. The standard includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39. According to SBP circular referred to above, the Banks were required to have a parallel run of IFRS 9 from 01 January 2020, which was subsequently extended to commence for periods beginning 01 July 2020 vide SBP's BPRD Circular Letter No. 15 of 2020. As per the directives of the SBP, Banks were required to prepare pro-forma financial statements including the impact of IFRS 9 for the year ended 31 December 2019, and for parallel run periods and submit the same to the State Bank of Pakistan. During the year, the Bank continued to report its impact assessments to the SBP for reporting periods falling under the parallel run, which were based on certain estimates and assumptions considered in the absence of uniform implementation guidelines. The Bank has estimated the impact of adoption of IFRS 9 on the financial statements of the Bank on the date of initial application, which shall be finalised post issuance of and subject to standardisation of implementation guidelines and approaches, from the State Bank of Pakistan. 2.3.1.2 There are certain new and amended standards and interpretations that are mandatory for the Bank's accounting periods beginning on or after 01 January 2021 but are considered not to be relevant or will not have any significant effect on the Bank's operations and are therefore not detailed in these financial statements. 2.3.2 Annual Improvements to IFRS standards 2018-2020: The following annual improvements to IFRS standards 2018-2020 are effective for annual reporting periods beginning on or after 01 January 2022. 2.3.2.1 Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) effective for the annual period beginning on or after 01 January 2022, clarifies that sales proceeds and cost of items produced while bringing an item of property, plant and equipment to the location and condition necessary for it to be capable of operating in the manner intended by management e.g. when testing etc., are recognized in profit or loss in accordance with applicable Standards. The entity measures the cost of those items applying the measurement requirements of IAS 2. The standard also removes the requirement of deducting the net sales proceeds from cost of testing. An entity shall apply those amendments retrospectively, but only to items of property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after the beginning of the earliest period presented in the financial statements in which the entity first applies the amendments. The entity shall recognize the cumulative effect of initially applying the amendments as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at the beginning of that earliest period presented. 2.3.2.2 Extension of the Temporary Exemption from Applying IFRS 9 (Amendments to IFRS 4) - In response to concerns regarding temporary accounting mismatches and volatility, and increased costs and complexity, the Board issued amendments to IFRS 4 Insurance Contracts in 2017. The two optional solutions raised some considerations which required detailed analysis and management judgement. On the issue of IFRS 17 (Revised) Insurance Contracts in June 2020, the end date for applying the two options under the IFRS 4 amendments was extended to 01 January 2023, aligned with the effective date of IFRS 17. 124 NAVIGATING OUR WAY TO SUCCESS
  74. 2 .4 Effects of COVID-19 on the Financial Statements: The COVID – 19 pandemic has taken a toll on all economies and emerged as a contagion risk around the globe. Regulators and governments across the globe have introduced fiscal and economic stimulus measures to mitigate its impact. The State Bank of Pakistan (SBP) responded to the crisis by cutting the policy rate by 625 basis points since the beginning of the year to 7 percent in 2020, and by introducing regulatory measures to maintain banking system soundness and to sustain economic activity. These include (i) reducing the capital conservation buffer by 100 basis points to 1.5 percent; (ii) increasing the regulatory limit on extension of credit to SMEs by 44 percent to Rs 180 million; (iii) relaxing the debt burden ratio for consumer loans from 50 percent to 60 percent; (iv) allowing banks to defer clients’ payment of principal on loan obligations by one year and or restructure / reschedule loans for borrowers who require relief of principal repayment exceeding one year and / or mark-up with no reflection on credit history; and (v) introduction of refinancing schemes for payments of wages and salaries. The Risk Management function of the Bank is regularly conducting assessments of the credit portfolio to identify borrowers most likely to get affected due to changes in the business and economic environment. The Bank has further strengthened its credit review procedures in the light of COVID-19. The Bank is continuously reviewing the portfolio, to identify accounts susceptible to higher risk, resulting from the COVID-19 outbreak. 2.4.1 Credit Risk and Asset Quality: Given the nature of the pandemic, it can be expected that most businesses in general, would be impacted. However, since many such borrowers have availed the SBP enabled deferment / restructuring & rescheduling relief, the full potential effect of the economic stress is difficult to predict given the uncertain economic environment. Given that the SBP has relaxed the classification and provisioning requirements for such burrowers, no additional provisioning has been made by the management at December 2020. 2.4.2 Liquidity risk: In view of the relaxation granted by SBP for deferral of principal and markup and rescheduling of loans there will be an impact on the maturity profile of the Bank. The Asset and Liability Committee (ALCO) of the Bank is continuously monitoring the liquidity position and the Bank is confident that the liquidity buffer currently maintained is sufficient to cater to any adverse movement in the cash flow maturity profile. 2.4.3 Operational risk: The management of the Bank has invoked all required actions to ensure the safety and security of Bank’s staff and provision of uninterrupted service to its customers. The management is continuously monitoring the evolving situation and is taking timely decisions to resolve any concerns as they arise. Business Continuity Plans (BCP) for respective areas are in place and tested. Remote work capabilities were enabled for critical staff, where required, and related risk and control measures were assessed to ensure that the Bank’s information assets are protected from emerging cyber threats and comply with the regulatory protocols required under the circumstances. The Bank is communicating with its customers on how they can connect with the Bank through its full suite of channels including digital and online channels as well as enhancing customer awareness pertaining to online fraud risks. The Bank has taken all measures to ensure that service levels are maintained, customer complaints are resolved and turnaround times are monitored and the Bank continues to meet the expectations of its employees and customers. 2.4.4 Capital adequacy ratio (CAR) In order to encourage Banks to continue lending despite anticipated pressure on profits and credit risk, the SBP has relaxed the Capital Conversion Buffer (CCB) requirements to 1.5%, resulting in a 1% decline in CAR requirements for all Tiers. The Bank has sufficient buffer in its CAR requirement to meet any adverse movements in credit, market or operational risks. 3 BASIS OF MEASUREMENT 3.1 Accounting convention These financial statements have been prepared under the historical cost convention, except that certain operating fixed assets and non-banking assets acquired in satisfaction of claims are stated at revalued amounts less accumulated depreciation, certain investments and commitments in respect of forward exchange contracts have been marked to market and are carried at fair values, right-of-use assets and their related lease liabilities are measured at present values adjusted for depreciation, interest cost and lease repayments respectively, and staff retirement benefits are carried at present values. ANNUAL REPORT 2020 125
  75. 3 .2 Functional and presentation currency Items included in the financial statements are measured using the currency of the primary economic environment in which the Bank operates. These financial statements are presented in Pakistani Rupee which is the Bank's functional and presentation currency. 3.3 Critical accounting estimates and judgements The preparation of the financial statements in conformity with the accounting and reporting standards as applicable in Pakistan, requires the management to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities and income and expenses. It also requires management to exercise judgement in application of its accounting policies. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. These estimates and assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods. Significant accounting estimates and areas where judgements were made by the management in the application of accounting policies are as follows: i) ii) iii) iv) v) vi) vii) viii) ix) x) xi) xii) 4 classification and provisioning against investments (notes 4.3, 4.16.1 and 8); classification and provisioning against loans and advances (notes 4.4 and 9); current and deferred taxation (notes 4.15, 18, 22.3.1, 22.3.3 and 32); accounting for defined benefit plan (notes 4.12.1 and 39); depreciation, amortisation methods, useful lives and revaluation of fixed assets and intangibles (notes 4.5.1, 4.6, 10 and 11); ijarah assets (note 4.4.1); right of use assets and related lease liabilities (note 4.7); provisions and contingent assets and liabilities (notes 4.17 and 22); impairment of assets (note 4.16); Workers Welfare Fund (note 29); Valuation of non-banking assets acquired in satisfaction of claims (note 4.9); and Remuneration framework and related disclosures (note 4.12.3 and 41). SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies applied and adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented. 4.1 Cash and cash equivalents Cash and cash equivalents for the purpose of cash flow statement represent cash in hand and balances with treasury banks, balances with other banks in current and deposit accounts, national prize bonds, if any, and overdrawn nostro accounts. 4.2 Lendings to / borrowings from financial and other institutions The Bank enters into repurchase agreements (repo) and reverse repurchase agreements (reverse repo) at contracted rates for a specified period of time. These are recorded as under: (a) Sale of securities under repurchase agreements Securities sold subject to a repurchase agreement (repo) are retained in the financial statements as investments and the counter party liability is included in borrowings. The differential in sale and repurchase value is recognised over the period of the contract and recorded as an expense. (b) Purchase of securities under resale agreements Securities purchased under agreement to resell (reverse repo) are included in lendings to financial institutions. The underlying security is not recognised as a separate asset in the financial statements. The difference between the contracted price and resale price is recognised over the period of the contract and recorded as income. Securities held as collateral are not recognized in the financial statements, unless these are sold to third parties, in which case the obligation to return them is recorded at fair value as a trading liability under borrowings from financial institutions. 126 NAVIGATING OUR WAY TO SUCCESS
  76. (c) Lending under margin trading system Securities purchased under margin financing are recorded as "lendings to financial and other institutions" at the fair value of the consideration given. All margin financing transactions are accounted for on the transaction date. Income on margin financing is accrued over the period of the contract. (d) Call lendings / placements Call lendings / placements with financial institutions are stated net of provision. Return on such lending is accrued to the profit and loss account on a time proportion basis except for mark-up on impaired / delinquent lendings, which is recognized on receipt basis. (e) Borrowings These are recorded at the proceeds received. Mark-up on such borrowings is charged on a time proportion basis to the profit and loss account over the period of borrowings. (f) Bai Muajjal Bai Muajjal transactions are reported as part of lendings to financial institutions, except for transactions with the Government of Pakistan through SBP, which are reported as part of investments. In the case of Bai Muajjal transactions, the Bank sells shariah compliant instruments on credit to customers. The credit price is agreed at the time of sale and such proceeds are received at the end of the credit period. The difference between the deferred payment amount receivable and carrying value at the time of sale is accrued and recorded as income over the life of the transaction. (g) Musharaka / Mudaraba In Musharaka / Mudaraba (Letters of placement), the Bank invests in the Shariah compliant business pools of the financial institutions at the agreed profit and loss sharing ratio. 4.3 Investments The Bank classifies its investments as follows: Held for trading These represent securities, which are either acquired for the purpose of generating profit from short-term fluctuations in market prices, interest rates or dealer’s margin or are securities included in the portfolio in which a pattern of short-term profit making exists. Held to maturity These are securities with fixed or determinable payments and maturity, which the Bank has the positive intent and ability to hold till maturity. Available for sale These are investments, other than those in subsidiaries and associates, if any, that do not fall under the held for trading or held to maturity categories. 4.3.1 Initial measurement Investments other than those categorised as held for trading are initially recognised at fair value which includes transaction costs associated with the investment. Investments categorised as held for trading are initially recognised at fair value, and transaction costs are expensed in the profit and loss account. All purchases and sales of investments that require delivery within the time frame established by regulations or market conventions are recognised at the trade date. Trade date is the date on which the Bank commits to purchase or sell the investment. 4.3.2 Subsequent measurement Held for trading These are measured at subsequent reporting dates at fair value. Gains and losses on re-measurement are included in the profit and loss account. ANNUAL REPORT 2020 127
  77. Held to maturity These are measured at amortized cost using the effective interest rate method , less any impairment loss recognized to reflect irrecoverable amounts. Available for sale Quoted securities classified as available for sale investments are measured at subsequent reporting dates at fair value. Any surplus or deficit arising thereon is kept in a separate account shown in the statement of financial position as part of the equity and is taken to the profit and loss account when realized upon disposal or when the investment is considered to be impaired. Unquoted equity securities are valued at the lower of cost and break-up value. The break-up value of these securities is calculated with reference to the net assets of the investee Bank as per the latest available audited financial statements. A decline in the carrying value is charged to the profit and loss account. A subsequent increase in the carrying value, upto the cost of the investment, is credited to the profit and loss account. Investments in other unquoted securities are valued at cost less impairment, if any. Provisions for diminution in the value of term finance certificates and Sukuks are made as per the ageing criteria prescribed by the Prudential Regulations issued by the SBP. Provision for diminution in the value of other securities is made after considering objective evidence of impairment, if any. 4.4 Advances Advances are stated net of specific and general provisions. Specific provision for advances are made in accordance with the requirements of the Prudential Regulations and other directives issued by SBP and charged to the profit and loss account. General provision against consumer and small enterprises financings portfolio is maintained as per the requirements of the Prudential Regulations issued by SBP. Advances are written off when there is no realistic prospect of recovery. In addition to conventional products, the Bank also offers various Islamic financing products which mainly include the following: 4.4.1 Islamic financings and related assets Murabaha Murabaha financings are reflected as receivables at the invoiced amount. Actual sales and purchases are not reflected, as the goods are purchased by the customer as an agent of the Bank and all documents relating to purchase are in the customer's name. However, the profit on that sale revenue not due for payment is deferred and is recognised on a time proportion basis. Funds disbursed under Murabaha financing arrangements for purchase of goods are recorded as "Advance Against Murabaha" in advances. Salam Salam financings are reflected as receivables at the invoiced amount. Profit not due for payment is deferred and is recognised on a time proportion basis. Funds disbursed under Salam financing arrangements for purchase of goods are recorded as "Advance Against Salam" in advances. Running Musharaka Running Musharakah is the economic equivalent of conventional running finance. The Bank and the customer enter a Musharakah (transaction or business partnership arrangement) where the Bank agrees to finance the operating activities of the customer's business and share the profit or loss at a pre-agreed ratio. Profit is provisionally recognised on an accrual basis and is adjusted once the customer declares the final profit after issuance of audited financial statements. Diminishing Musharaka In Diminishing Musharaka financing, the Bank enters into Musharaka based on Shirkat-ul-mulk for financing an agreed share of fixed asset (e.g. house, land, plant or machinery) with its customers. The customers pay periodic profit as per the agreement for the utilisation of the Bank's Musharaka share and also periodically purchase the Bank's share over the tenure of the transaction. Istisna In Istisna financing, the Bank places an order to purchase some specific goods / commodities from its customers to be delivered to the Bank within an agreed time. The goods are then sold by the customer on behalf of the bank and the amount hence financed along with profit is paid back to the Bank. 128 NAVIGATING OUR WAY TO SUCCESS
  78. Ijarah assets Ijarah assets are stated at cost less accumulated depreciation and impairment losses , if any. Depreciation is charged from the date of recognition of ijarah assets on a straight line basis over the period of Ijarah. Impairment of Ijarah assets is determined on the same basis as that of operating fixed assets. Ijarah income is recognised in income on an accrual basis as and when the rental becomes due. Impairment of Ijarah rental is determined in accordance with the requirements of the Prudential Regulations and other directives issued by SBP and charged to the profit and loss account. 4.5 Fixed assets and depreciation 4.5.1 Tangible assets - owned Fixed assets (other than land and building) are stated at cost less accumulated depreciation and impairment losses, if any. Building is carried at revalued amount less any accumulated depreciation and subsequent impairment losses, if any. Land is carried at revalued amount less subsequent impairment losses, if any. Depreciation on all fixed assets (excluding land which is not depreciated) is charged using the straight line method in accordance with the rates specified in note 10.3 to the financial statements after taking into account residual values, if significant. The residual values and useful lives are reviewed and adjusted, if appropriate, at each reporting date. Depreciation on additions is charged from the month the assets are available for use while in the case of assets disposed of, it is charged upto the date of disposal. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Bank and the cost of the item can be measured reliably. All other repair and maintenance expenditure are charged to the profit and loss account as and when incurred. Land and buildings are revalued by independent, professionally qualified valuers with sufficient regularity to ensure that the net carrying amount does not differ materially from their fair value. An increase arising on revaluation is credited to the surplus on revaluation of fixed assets account. A decrease arising on revaluation of fixed assets is adjusted against the surplus of that asset or, if no surplus exists, is charged to the profit and loss account as an impairment of the asset. A surplus arising subsequently on an impaired asset is reversed through the profit and loss account up to the extent of the original impairment. Surplus on revaluation of fixed assets (net of associated deferred tax) to the extent of the incremental depreciation charged on the related assets is transferred to unappropriated profit. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Gains and losses on disposal of fixed assets are credited / charged to the profit and loss account currently, except that the related surplus on revaluation of fixed assets (net of deferred taxation) is transferred directly to unappropriated profit. 4.5.2 Capital work in progress Capital work-in-progress is stated at cost less accumulated impairment losses, if any. All expenditure connected with specific assets incurred during installation and construction / development period are carried under this head. These are transferred to specific assets as and when assets become available for use. 4.6 Intangible assets and amortisation Intangible assets having a definite useful lives are stated at cost less accumulated amortisation and impairment losses, if any. Intangible assets are amortised from the month, when these assets are available for use, using the straight line method, whereby the cost of the intangible asset is amortised on the basis of the estimated useful life over which economic benefits are expected to flow to the Bank. The residual values, useful lives and amortisation method are reviewed and adjusted, if appropriate, at each reporting date. Subsequent costs are included in the asset’s carrying amounts or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Bank and the cost of the item can be measured reliably. Intangible assets having an indefinite useful life are stated at acquisition cost less accumulated impairment losses, if any. Gains and losses on disposals, if any, are taken to the profit and loss account in the period in which they arise. ANNUAL REPORT 2020 129
  79. 4 .7 Right-of-use assets and related lease liability 4.7.1 Right-of-use assets On initial recognition, right-of-use assets are measured at an amount equal to initial lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to be incurred to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located. Right-of-use assets are subsequently stated at cost less any accumulated depreciation / accumulated impairment losses and are adjusted for any remeasurement of lease liability. The remeasurement of lease liability will only occur in cases where the terms of the lease are changed during the lease tenor. Right-of-use assets are depreciated over their expected useful lives using the straight-line method. Depreciation on additions (new leases) is charged from the month in which the leases are entered into. No depreciation is charged in the month in which the leases mature or are terminated. 4.7.2 Lease liability against right-of-use assets Lease liabilities are initially measured as the present value of the remaining lease payments, discounted using the interest rate implicit in the lease, or if that rate cannot be readily determined, the Bank’s incremental borrowing rate. The lease liability is subsequently measured at amortised cost using the effective interest rate method. The lease liability is also remeasured to reflect any reassessment or change in lease terms. These remeasurements of lease liabilities are recognised as adjustments to the carrying amount of related right-of-use assets after the date of initial recognition. Each lease payment is allocated between a reduction of the liability and a finance cost. The finance cost is charged to the profit and loss account as markup expense over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. 4.8 Acceptances Acceptances comprise undertakings by the Bank to pay bills of exchange drawn on customers. The Bank expects most acceptances to be simultaneously settled with the reimbursement from the customers. As required by the State Bank of Pakistan through the amended format for financial statements for Banks, acceptances are accounted for as on-balance sheet transactions and are reported in "other assets" and "other liabilities" simultaneously. 4.9 Non-banking assets acquired in satisfaction of claims Non-banking assets acquired in satisfaction of claims are initially recorded at cost. These assets are revalued at each year end date of the statement of financial position. An increase in market value over the acquisition cost is recorded as a surplus on revaluation. A decline in the market value is adjusted against the surplus of that asset, if any, or if no surplus exists, is charged to the profit and loss account as an impairment. A subsequent increase in the market value of an impaired asset is reversed through the profit and loss account up to the extent of the original impairment. All direct costs of acquiring title to the asset are charged immediately to the profit and loss account. However, this revaluation surplus shall not be admissible for calculating bank’s/DFI’s Capital Adequacy Ratio (CAR) and exposure limits under Prudential Regulations. The surplus can be adjusted upon realization of sale proceeds. Depreciation on non-banking assets acquired in satisfaction of claims is charged to the profit and loss account in line with depreciation charged on fixed assets. These assets are generally intended for disposal. Gains and losses realised on the disposal of such assets are disclosed separately from gains and losses realised on the disposal of operating fixed assets. If such asset is subsequently used by the Bank for its own operations, the assets, along with any related surplus, are transferred to fixed assets. 4.10 Borrowings / deposits and their cost Borrowings / deposits are recorded at the proceeds received. Borrowing / deposit costs are recognised as an expense in the period in which these are incurred. 4.10.1 Deposits - Islamic Banking Islamic Banking deposits are generated on the basis of two modes i.e. Qard and Modaraba. Deposits taken on Qard basis are classified as ‘Current Account’ and Deposits generated on Modaraba basis are classified as ‘Savings Account’ and ‘Fixed Deposit Accounts’. No profit or loss is passed on to current account depositors. Profits realised in investment pools are distributed in pre-agreed profit sharing ratio. Rab-ul-Maal (customer) share is distributed among depositors according to weightages assigned at the inception of profit calculation period. Mudarib (Bank) can distribute its share of profit to Rab-ul-Maal upto a specified percentage of its profit. Profits are distributed from the pool so the depositors (remunerative) only bear the risk of assets in the pool during the profit calculation period. Asset pools are created at the Bank’s discretion and the Bank can add, amend, transfer an asset to any other pool in the interests of the deposit holders. In case of loss in a pool during the profit calculation period, the loss is distributed among the depositors (remunerative) according to their ratio of Investments. 130 NAVIGATING OUR WAY TO SUCCESS
  80. 4 .11 Subordinated debt Subordinated debt is initially recorded at the amount of proceeds received. Mark-up on sub-ordinated debt is charged to the profit and loss account over the period on an accrual basis and is recognised as part of other liabilities. 4.12 Employee benefits 4.12.1 Defined benefit plan The Bank operates an approved funded gratuity scheme for its permanent employees. The Bank’s net obligation in respect of defined benefit plan is calculated by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets. The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Bank, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements. Re-measurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in OCI. The Bank determines the net interest expense (income) on the net defined benefit liability (asset) for the year by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the year as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in profit and loss account. When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit and loss. The Bank recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs. Gratuity is payable to employees on completion of the prescribed qualifying period of service under the scheme. 4.12.2 Defined contribution plan The Bank operates an approved funded provident fund scheme for all its permanent employees. Equal monthly contributions are made, both by the Bank and its employees, to the Fund at the rate of 8.33% of basic salaries of the employees. 4.12.3 Remuneration framework In order to align the remuneration practices in Pakistan with the international standards and best practices, the SBP issued Guidelines on Remuneration Practices through its BPRD circular no. 02 dated March 03, 2016, which were subsequently revised through BPRD Circular No. 01 dated 25 January 2017. In accordance with these guidelines, the Bank has developed a comprehensive remuneration framework. The aim of this framework is to promote an effective risk management culture, and to ensure that the remuneration practice at the Bank is in line with the Bank’s objectives taking into consideration all risks that the Bank may face. As a result, a fair, objective, transparent and sound remuneration policy, aligned with risks and responsibilities of Financial Intermediation has been put in place. The framework has been reviewed and recommended by the Board’s Human Resource & Remuneration Committee (BHRRC) and approved by the Board of Directors (BoD). Under the policy, all employees across the Bank who are materially responsible for risk taking - Material Risk Takers (MRTs), or risk controlling activities - Material Risk Controllers (MRCs) are identified. The remuneration of these MRTs and MRCs is dependent upon the achievement of performance measured through risk-adjusted balance scorecards which include financial and non-financial/ qualitative performance indicators including compliance with internal policies/ procedures/ controls, customer experience, as well as certain risk-adjusting factors (negative earners) such as regulatory compliance, frauds, complaints etc. All other individuals who do not fall within the criteria of MRTs and MRCs continue to be governed through the Bank’s existing HR policy. The features of total compensation i.e. fixed remuneration as well as variable remuneration offered through performance bonuses have been disclosed in note 41 to these financial statements. A certain portion of the variable compensation of the MRTs and MRCs shall now be made subject to mandatory deferrals for a defined period, thus creating alignment between the employees’ and stakeholders’ interests and reinforcing that compensation is appropriately linked to longer-term sustainable performance. Deferred remuneration, especially with risk adjustments, improves risk-taking incentives because the amount ultimately received by employees can be made to depend on risk outcomes, and shall vest proportionately over the deferral period following the year of variable remuneration award, subject to any malus trigger adjustments. Under the Bank's framework, the deferral percentages range between 10 to 15 percent while the deferral period is set at three years. ANNUAL REPORT 2020 131
  81. The payouts for variable compensation for the performance year 2019 onwards for MRTs and MRCs is based on the revised mechanism which takes into consideration factors (such as position within the organization, roles and responsibilities, risk alignment, and performance against KPIs) for differentiating the variable pays across employees or group of employees under the framework. Furthermore, the balanced scorecards used for performance assessment also take into consideration that MRCs are remunerated independently of the functions they oversee. As approved by the Board, and as allowed under the SBP's Guidelines on Remuneration Practices, the deferral amount retained for performance years is set aside and managed by the Bank internally, with a team of members from amongst the internal management responsible for oversight and subsequent payouts. 4.13 Foreign currencies 4.13.1 Foreign currency transactions Foreign currency transactions are translated into rupees at the exchange rates prevailing on the date of the transaction. Monetary assets and liabilities in the foreign currencies are expressed in rupee terms at the exchange rates ruling on the reporting date. Outstanding forward foreign exchange contracts and foreign bills purchased are valued at the forward rates applicable to the respective maturities. Exchange gains and losses are included in the profit and loss account. 4.13.2 Translation gains and losses Translation gains and losses are included in the profit and loss account. 4.13.3 Commitments Commitments for outstanding forward foreign exchange contracts are disclosed in the financial statements at the contracted rates. Contingent liabilities / commitments for letters of credit and letters of guarantee denominated in foreign currencies are expressed in rupee terms at the rates of exchange ruling on the reporting date. 4.14 Revenue recognition Revenue is recognised to the extent that the economic benefit assoicated with a transaction will flow to the Bank and the revenue can be reliably measured. 4.15 - Mark-up income / interest on advances and returns on investments are recognised on a time proportion basis using the effective yield on the arrangement / instrument except that mark-up / return on non-performing advances and investments is recognised on receipt basis. Interest / return / mark-up on rescheduled / restructured advances and investments is recognised as permitted by SBP except where, in the opinion of the management, it would not be prudent to do so. - Fee, commission and brokerage income is recognised upon performance of obligations. Fees for ongoing account management are charged to the customer's account on monthly basis. Transaction based fees are charged to the customer's account when the transaction takes place. - Dividend income from investments is recognised when the Bank's right to receive the dividend is established. - Premium or discount on acquisition of investments is amortised using effective yield method and taken to profit and loss account. - Gains and losses on disposal of investments and certain operating fixed assets are taken to the profit and loss account in the year in which they arise. - Profits on Bai Muajjal lendings are recognised on a straight line basis. Taxation Income tax expense comprises current and deferred tax. Income tax expense is recognised in the profit and loss account except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. 4.15.1 Current Provision for current taxation is based on taxable income for the year determined in accordance with the prevailing laws and at the prevailing rates for taxation on income earned by the Bank.The amount of current tax payable is the best estimate of the tax amount expected to be paid that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends. Current tax assets and liabilities are offset only if certain criteria are met. 132 NAVIGATING OUR WAY TO SUCCESS
  82. 4 .15.2 Deferred Deferred tax is recognised using the balance sheet liability method on all temporary differences between the carrying amounts of assets and liabilities used for financial reporting purposes and amounts used for taxation purposes. Deferred tax is calculated at the rates that are expected to apply to the period when the differences are expected to reverse based on tax rates that have been enacted or substantively enacted at the reporting date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. The carrying amount of deferred tax asset is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be utilised. The Bank also recognises deferred tax asset / liability on deficit / surplus on revaluation of operating fixed assets and securities which is adjusted against the related deficit / surplus in accordance with the requirements of International Accounting Standard (IAS) 12, 'Income Taxes'. 4.16 Impairment 4.16.1 Impairment on investments Impairment loss in respect of investments categorised as available for sale (except term finance certificates and sukuk) and held to maturity is recognised based on management's assessment of objective evidence of impairment as a result of one or more events that may have an impact on the estimated future cash flows of the investments. A significant or prolonged decline in the fair value of a listed equity investment below its cost is also considered an objective evidence of impairment. Provision for diminution in the value of term finance certificates and sukuks is made as per the requirements of the Prudential Regulations issued by SBP. In case of impairment of available for sale securities, the cumulative loss that has been recognised in surplus / deficit on revaluation of securities in the statement of changes in equity is transferred to the profit and loss account. For investments categorised as held to maturity, the impairment loss is recognised in the profit and loss account. 4.16.2 Impairment on non financial assets At each reporting date, the Bank reviews the carrying amounts of its non-financial assets to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that is largely independent of the cash inflows of other assets or CGUs. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. The Bank’s corporate assets do not generate separate cash inflows and are used by more than one CGU. Corporate assets are allocated to CGUs on a reasonable and consistent basis and tested for impairment as part of the testing of the CGUs to which the corporate assets are allocated. Impairment losses are recognised in profit and loss account reducing the carrying amounts of the non financial assets in the CGU on a pro rata basis. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. 4.17 Provisions and contingent assets and liabilities Provisions are recognised when the Bank has a legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made. Provisions are reviewed at each reporting date and are adjusted to reflect the current best estimate. Contingent assets are not recognised and are also not disclosed unless an inflow of economic benefits is probable. Contingent liabilities are not recognised but disclosed unless the probability of an outflow of resources embodying economic benefits are remote. ANNUAL REPORT 2020 133
  83. 4 .18 Provision for guarantee claims and other off balance sheet obligations Provision for guarantee claims and other off-balance sheet obligations are recognised when intimated and where reasonable certainty exists for the Bank to settle the obligation. Charge to profit and loss account is stated net of expected recoveries. 4.19 Financial instruments 4.19.1 Financial assets and liabilities Financial instruments carried on the balance sheet include cash and balances with treasury banks, balances with other banks, lendings to financial institutions, investments, advances, certain receivables, bills payable, borrowings from financial institutions, deposits and other accounts, sub-ordinated debt and other payables. The particular recognition methods adopted for significant financial assets and financial liabilities are disclosed in the individual policy statements associated with them. 4.19.2 Derivative financial instruments Derivative financial instruments, if any, are initially recognised at fair value on the date on which a derivative contract is entered into and are, subsequently, remeasured at fair value using appropriate valuation techniques. All derivative financial instruments are carried as assets when fair value is positive and liability when fair value is negative. Any change in the fair value of derivative financial instruments is taken to the profit and loss account. 4.19.3 Off-setting Financial assets and financial liabilities are off-set and the net amount is reported in the financial statements when there exists a legally enforceable right to set-off and the Bank intends either to settle on a net basis or to realise the assets and to settle the liabilities simultaneously. Income and expense items of such assets and liabilities are also off-set and the net amount is reported in the financial statements. 4.20 Basic and diluted earnings per share The Bank presents basic and diluted earnings per share (EPS) for its shareholders. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Bank by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, if any. 4.21 Dividend and appropriation to reserves Dividend and appropriation to reserves after the reporting date, except appropriations which are required by law are recognised as liability in the Bank's financial statements in the year in which these are approved. 4.22 Segment reporting A segment is a distinguishable component of the Bank that is engaged either in providing product or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. Segments are reported as per the Bank's functional structure and are as follows: (a) Business segments (i) Retail It includes all retail related lendings and banking services (including staff, consumer and SME financing) as well as deposits mobilized from Retail branches. (ii) Corporate Corporate banking includes financing and services provided to corporate customers including services in connection with mergers and acquisitions, underwriting, privatisation, securitisation, syndication, Initial Public Offers (IPOs), etc. It also includes deposits mobilized from Corporate branches. (iii) Islamic This includes Islamic branches income and expenses. 134 NAVIGATING OUR WAY TO SUCCESS
  84. (iv) Trading and sales It includes fixed income, equity, foreign exchanges, lendings and repos. (v) Others It includes the Bank's head office related activities and other activities not specifically tagged to the segments above. (b) Geographical segment The operations of the Bank are currently based only in Pakistan. Therefore, geographical segment is not relevant. 5 CASH AND BALANCES WITH TREASURY BANKS Note In hand Local currency Foreign currencies With State Bank of Pakistan in Local currency current accounts Foreign currency current accounts Foreign currency deposit accounts against foreign currency deposits mobilised 2020 2019 ---------(Rupees in ‘000)--------6,393,784 1,788,180 8,181,964 6,752,627 2,141,905 8,894,532 5.1 5.2 17,083,273 871,899 18,318,273 1,069,225 5.3 1,585,852 19,541,024 2,952,655 22,340,153 1,669,585 2,618,837 571,381 29,963,954 107,786 33,961,308 With National Bank of Pakistan in Local currency current accounts Prize bonds 5.1 The local currency current accounts are maintained with SBP as per the requirements of Section 36 of the State Bank of Pakistan Act, 1956. This section requires banking companies to maintain a local currency cash reserve in current accounts opened with SBP at a sum not less than such percentage of its time and demand liabilities as may be prescribed by SBP. 5.2 This represents cash reserve account maintained with SBP at an amount equivalent to at least 5% of the Bank's foreign currency deposits mobilised under FE-25 scheme and carry NIL return. (2019: NIL return). 5.3 This represents special cash reserve maintained with SBP at an amount equivalent to at least 10% (2019 : 15%) of the Bank's foreign currency deposits mobilised under FE-25 scheme, which currently carries mark-up at NIL rates (2019 :0.7% to 1.51% per annum) and 6% special cash reserve requirement on FE-25 deposits maintained by Islamic Banking branches. 6 BALANCES WITH OTHER BANKS Note In Pakistan In current accounts In deposit accounts Outside Pakistan In current accounts 6.1 6.1 2020 2019 ---------(Rupees in ‘000)--------12,041 450 12,491 12,036 181,203 193,239 4,255,572 4,268,063 1,881,294 2,074,533 This includes Rs.2,076.008 million (2019: Rs. 691.243 million) eligible for Automated Investment Plans. This balance is current in nature with no return on balance. However, if balance is increased over a specified amount, it entitles the Bank to earn interest income from the correspondent banks at agreed rates. ANNUAL REPORT 2020 135
  85. 7 7 .1 LENDINGS TO FINANCIAL INSTITUTIONS Note 2020 2019 ---------(Rupees in ‘000)--------- Repurchase agreement lendings (reverse repo) Bai Muajjal receivable - with other financial institutions Letters of placements Lending under margin trading system 7.2 6,974,800 7.3 & 7.6 7.4 7.5 1,981,286 8,956,086 501,861 500,000 200,382 1,202,243 8,956,086 8,956,086 1,202,243 1,202,243 Particulars of lendings In local currency In foreign currency 7.2 - Securities held as collateral against lendings to financial institutions 2020 Held by Bank 2019 Further given as collateral Total Held by Bank Further given as collateral Total ----------------------------------- (Rupees in ‘000) ----------------------------------Market Treasury Bills Pakistan Investment Bonds Total 6,974,800 6,974,800 - 6,974,800 6,974,800 - - - 7.2.1 The market value of securities held as collateral against repurchase agreement lendings amounted to Rs. 6,968.57 million (2019: Rs. Nil). 7.3 Bai Muajjal receivable 2020 2019 ---------(Rupees in ‘000)--------- Bai Muajjal receivable - with other financial institutions 2,020,185 504,527 less: deferred income - with other financial institutions (38,899) (2,666) 1,981,286 501,861 Bai Muajjal receivable - net 7.4 As at 31 December 2020, there was no outstanding lending through letters of placement. At 31 December 2019, this represented lending through letters of placement with a financial institution carrying mark up at 11% per annum with maturity falling due on 16 January 2020. 7.5 As at 31 December 2020, there was no outstanding lending under margin trading securities. At 31 December 2019, such lendings carried mark up rates ranging from 10% to 21.65% per annum with latest maturity falling due by 24 February 2020. 7.6 This represents Bai Muajjal placements entered into with financial institutions whereby the Bank has sold sukuks having carrying value of Rs. 1,952.524 million (2019: Rs. 499.02 million) on deferred payment basis. The average return on these transactions is 7% per annum (2019: 13% per annum). 136 NAVIGATING OUR WAY TO SUCCESS
  86. 8 INVESTMENTS 8 .1 Investments by type: 2020 Cost / amortised cost Provision for diminution 2019 Surplus / (deficit) Carrying value Cost / amortised cost Provision for diminution Surplus / (deficit) Carrying value --------------------------------------------------------- (Rupees in ‘000) ----------------------------------------------------------Held-for-trading securities Federal Government securities Shares Available-for-sale securities Federal Government securities Shares Non-Government debt securities Units of mutual funds Commercial Papers Held-to-maturity securities Federal Government securities Non Government debt securities Total investments 8.2 1,925,742 1,925,742 - 226,129,343 3,189,295 3,910,455 390,284 34,194 233,653,571 (122,331) (122,331) 13,666,853 100,379 13,767,232 (86,094) (86,094) 249,346,545 (208,425) Investments by segments: 8,125 8,125 1,933,867 1,933,867 5,700,007 57,662 5,757,669 701,977 37,866 43,851 25,732 809,426 226,831,320 3,104,830 3,954,306 416,016 34,194 234,340,666 154,435,450 3,673,391 3,365,350 215,213 161,689,404 (33,537) (33,537) 13,666,853 14,285 13,681,138 9,592,335 135,172 9,727,507 (86,094) (86,094) 249,955,671 177,174,580 (119,631) 817,551 - 2020 Cost / amortised cost Provision for diminution 5,453 (3,314) 2,139 5,705,460 54,348 5,759,808 33,003 154,468,453 (48,421) 3,591,433 23,745 3,389,095 (9,299) 205,914 (972) 161,654,895 - 9,592,335 49,078 9,641,413 1,167 177,056,116 Surplus / (deficit) Carrying value 2019 Surplus / (deficit) Carrying value Cost / amortised cost Provision for diminution --------------------------------------------------------- (Rupees in ‘000) ----------------------------------------------------------Federal Government securities Market Treasury Bills Pakistan Investment Bonds Bai Muajjal with Government of Pakistan (GoP) Ijarah sukuks Units of mutual funds Shares Listed companies Unlisted companies Non-Government debt securities Listed Unlisted Total investments ANNUAL REPORT 2020 103,316,207 130,301,875 - 27,005 682,297 103,343,212 130,984,172 106,708,835 60,294,997 - 36,628 5,678 106,745,463 60,300,675 2,603,856 5,500,000 241,721,938 - 800 710,102 2,603,856 5,500,800 242,432,040 2,338,960 385,000 169,727,792 - (3,850) 38,456 2,338,960 381,150 169,766,248 390,284 - 25,732 416,016 215,213 - (9,299) 205,914 3,122,495 66,800 3,189,295 (116,631) (5,700) (122,331) 37,866 37,866 3,043,730 61,100 3,104,830 3,714,253 16,800 3,731,053 (27,837) (5,700) (33,537) (51,735) (51,735) 3,634,681 11,100 3,645,781 1,346,499 2,698,529 4,045,028 (16,269) (69,825) (86,094) 1,373 42,478 43,851 1,331,603 2,671,182 4,002,785 696,499 2,804,023 3,500,522 (16,269) (69,825) (86,094) 398 23,347 23,745 680,628 2,757,545 3,438,173 249,346,545 (208,425) 817,551 249,955,671 177,174,580 (119,631) 1,167 177,056,116 137
  87. 8 .2.1 2020 2019 ---------(Rupees in ‘000)--------- Investments given as collateral Market Treasury Bills Pakistan Investment Bonds 8.3 2,855,000 (516,040) 2,338,960 119,631 717,214 (628,420) 208,425 117,597 2,034 119,631 Particulars of provision against debt securities Category of classification Loss Total 8.6 2,855,000 (251,144) 2,603,856 Provision for diminution in the value of investments Opening balance Charge for the year Reversal recognised in capital gains for the year Closing balance 8.5 31,281,591 39,808,381 71,089,972 Bai Muajjal with Government of Pakistan Bai Muajjal investment Less: deferred income Bai Muajjal investment - net 8.4 25,533,895 39,434,851 64,968,746 2020 2019 NonNonProvision Provision Performing Performing Investments Investments --------------------------- (Rupees in ‘000) --------------------------86,094 86,094 86,094 86,094 86,094 86,094 86,094 86,094 Quality of available-for-sale securities Details regarding quality of available-for-sale (AFS) securities are as follows: Federal Government Securities - Government guaranteed Market Treasury Bills Pakistan Investment Bonds Bai Muajjal with Government of Pakistan (GOP) Ijarah Sukuks Shares Listed companies - Cement - Chemical - Commercial Banks - Engineering - Fertilizer - Glass & Ceramics - Insurance - Oil & Gas Exploration Companies - Oil & Gas Marketing Companies - Pharmaceuticals - Power Generation & Distribution - Real Estate Investment Trusts - Technology & Communication - Textile Composite 138 2020 2019 Cost/Amortized Cost ---------(Rupees in ‘000)--------103,316,207 114,709,280 2,603,856 5,500,000 226,129,343 102,198,954 49,512,536 2,338,960 385,000 154,435,450 260,461 137,781 724,609 241,779 21,932 55,551 565,664 109,734 221,896 488,003 122,051 173,034 3,122,495 147,481 795,571 146,357 405,340 79,795 398,626 453,217 93,736 560,876 148,709 120,232 306,651 3,656,591 NAVIGATING OUR WAY TO SUCCESS
  88. Unlisted companies DHA Cogen Limited ISE Towers REIT Management Company Limited Pakistan Export Finance Guarantee Agency Limited 1-Link Private Limited Note 8 .11 8.12 8.13 8.14 2020 2019 Cost Break-up value Cost Break-up value ----------------------------(Rupees in ‘000)----------------------------11,100 5,700 50,000 66,800 Non-Government debt securities 47,496 78,257 125,753 Note Listed - AAA - AA+, AA, AA- A+, A, A- Unrated Unlisted - AAA - AA+, AA, AA- A+, A, A- 11,100 5,700 16,800 43,979 43,979 2020 2019 Cost/Amortized Cost ---------(Rupees in ‘000)--------240,000 415,230 22,916 850,000 1,528,146 240,000 415,231 25,000 680,231 1,031,251 874,900 476,158 2,382,309 3,910,455 1,218,750 1,444,941 21,428 2,685,119 3,365,350 113,100 29,805 189,430 49,346 190,797 21,932 108,796 295,800 298,573 107,976 241,779 20,318 311,471 95,383 77,651 315,038 250,626 22,875 122,051 86,859 55,551 117,338 3,122,495 79,795 93,736 29,805 146,357 183,261 152,138 122,834 148,709 342,482 62,858 160,267 377,615 21,515 117,676 360,332 285,135 317,085 81,541 115,600 120,232 337,618 3,656,591 Equity securities Listed Adamjee Insurance Company Limited [Nil (2019: 2,170,500) shares] AGP Limited [1,057,500 (2019: 1,200,000) shares] Agritech Limited [851,560 (2019: 851,560) shares] Aisha Steel Mills Limited [Nil (2019: 13,700,000) shares] Altern Energy Limited [5,934,500 (2019: 5,707,500) shares] Askari Bank Limited [Nil (2019: 6,800,000) shares] Bank Alfalah Limited [Nil (2019: 2,700,000) shares] Cherat Cement Company Limited [400,000 (2019: Nil) shares] D. G. Khan Cement Company Limited [1,750,000 (2019:Nil) shares] Dolmen City REIT [Nil (2019: 13,000,000) shares] Engro Fertilizers Limited [Nil (2019: 5,000,000) shares] Fauji Fertilizer Bin Qasim Limited [Nil (2019: 3,000,000) shares] Fauji Fertilizer Company Limited [200,000 (2019: Nil) shares] Glaxosmithkline Pakistan Limited [575,000 (2019: Nil) shares] Habib Bank Limited [2,170,000(2019: 1,000,000) shares] Hub Power Company Limited [3,500,000 (2019: 4,000,000) shares] I.C.I. Pakistan Limited [150,000 (2019: Nil) shares] International Industries Limited [1,825,000 (2019: Nil) shares] Kohinoor Textile Mills Limited [Nil (2019: 700,000) shares] Lotte Chemicals Pakistan Limited [Nil (2019: 7,750,000) shares] Lucky Cement Limited [30,000 (2019: Nil) shares] MCB Bank Limited [1,500,000 (2019: 1,700,000) shares] Nishat Chunian Limited [2,325,000 (2019: 6,400,000) shares] Nishat Mills Limited [930,000 (2019: Nil) shares] Oil and Gas Development Company Limited [2,597,451 (2019: 2,100,000) shares] Pakistan Petroleum Limited [2,690,000 (2019: 700,000) shares] Pakistan State Oil Company Limited [120,000 (2019: 585,000) shares] Pakistan Telecommunication Company Limited [12,300,000 (2019: 12,000,000) shares] Sui Northern Gas Company Limited [1,700,000 (2019: 4,175,000) shares] Tariq Glass Industries Limited [625,000 (2019: Nil) shares] The Bank Of Punjab [11,750,000 (2019: Nil) shares] ANNUAL REPORT 2020 8.10 139
  89. Note Unlisted DHA Cogen Limited [5,853,822 (2019: 5,853,822) shares] ISE Towers REIT Management Company Limited [3,034,603 (2019: 3,034,603) shares ] Pakistan Export Finance Guarantee Agency Limited [569,958 (2019: 569,958) shares] 1-Link Private Limited [4,999,999 (2019: Nil) shares] 8.11 8.12 8.13 8.14 Note 8.7 Particulars relating to held-to-maturity securities are as follows: Federal Government Securities - Government guaranteed Pakistan Investment Bonds 2020 2019 Cost/Amortized Cost ---------(Rupees in ‘000)--------11,100 5,700 50,000 66,800 11,100 5,700 16,800 2020 2019 Cost ---------(Rupees in ‘000)--------- 13,666,853 9,592,335 16,269 16,269 14,285 69,825 84,110 49,078 69,825 118,903 100,379 135,172 Non Government debt Securities Listed - Unrated Unlisted - A+, A, A- Unrated Non Government debt Securities - Total 8.15 8.7.1 The market value of securities classified as held-to-maturity as at 31 December 2020 amounted to Rs. 13,901.468 million (31 December 2019 : Rs. 9,597.332 million). 8.8 Investments include certain approved government securities which are held by the Bank to comply with the Statutory Liquidity Requirement determined on the basis of the Bank's demand and time liabilities as set out under section 29 of the Banking Companies Ordinance, 1962. 8.9 Federal Government Securities include Pakistan Investment Bonds having book value of Rs. 18.400 million (2019: Rs. 18.400 million) pledged with the State Bank of Pakistan and National Bank of Pakistan to facilitate T. T. discounting facility for the branches of the Bank. Market Treasury Bills and Pakistan Investment Bonds under Federal Government Securities, are eligible for discounting with the State Bank of Pakistan. 8.10 As at 31 December 2020, 1,500,000 shares (31 December 2019: 1,500,000 shares) of Hub Power Company Limited have been pledged by the Bank with National Clearing Company of Pakistan Limited as security against its exposure margins in terms of Circular No. 11 dated 23 October 2007 issued by the Securities and Exchange Commission of Pakistan. 8.11 DHA Cogen Limited shares were received under the enforcement of a pledge of third party shares by the consortium banks. These shares were recorded at NIL value and the break-up value of these shares as per the latest available audited financial statements is Rs. (29.10) per share. 8.12 This denotes shares of ISE Towers REIT Management Company Limited, [formerly Islamabad Stock Exchange Limited (ISEL)], acquired in pursuance of corporatisation and demutualisation of ISEL as a public company limited by shares. 8.13 This investment is fully provided. As per the "shares subscription agreement", it can only be sold to an existing investor. 8.14 This represents shares of 1-Link Private Limited, issued by the company during the year. Previously, this amount was reported as part of other assets being advance against subscription of shares. 8.15 This includes 4,000 sukuk certificates of WAPDA. These certificates were purchased by the Bank on 29 September 2009 through a market based transaction for a cash consideration of Rs. 19.8 million having a face value of Rs. 20 million. These certificates were available in the seller's CDC account and on completion of the transaction were transferred to the Bank's CDC account. The Bank through a legal notice clarified the position that it had purchased the aforesaid sukuk certificates from the market for a valuable consideration when these sukuk certificates were already entered in the CDC's Register of seller's account. However, the Bank has made full provision against the same. The Bank has filed a recovery suit which is pending before the Honourable High Court of Sindh, Karachi. 140 NAVIGATING OUR WAY TO SUCCESS
  90. 9 ADVANCES Performing 2020 Non-performing 2019 2020 Total 2019 2020 2019 --------------------------------------- (Rupees in ‘000) --------------------------------------Loans, cash credits, running 148,810,537 185,839,786 9,342,768 10,222,302 158,153,305 196,062,088 Islamic financing and related assets finances, etc. 7,602,553 8,671,248 1,442,638 579,396 9,045,191 9,250,644 Bills discounted and purchased 5,494,147 7,102,282 100,900 5,494,147 7,203,182 161,907,237 201,613,316 10,785,406 10,902,598 172,692,643 212,515,914 (8,106,586) (7,573,063) (8,106,586) (7,573,063) Advances - gross - Provision against advances - Specific - - General Advances - net of provision 9.1 - (41,538) (41,538) - (41,538) (41,538) (8,106,586) 161,865,699 201,571,778 2,678,820 - (41,538) (41,538) (7,573,063) (8,148,124) (7,614,601) 3,329,535 164,544,519 204,901,313 2020 2019 ---------(Rupees in ‘000)--------- Particulars of advances (Gross) In local currency In foreign currencies 9.2 165,360,354 7,332,289 172,692,643 202,463,690 10,052,224 212,515,914 Advances include Rs. 10,785.406 million (31 December 2019 Rs. 10,902.598 million) which have been placed under non-performing status as detailed below: 2020 2019 Note Category of Classification NonNonperforming Provision performing Provision loans loans ----------------------- (Rupees in ‘000) ----------------------Other Assets Especially Mentioned Substandard Doubtful Loss 9.2.1 28,219 763,631 141,849 9,851,707 10,785,406 99,243 28,580 7,978,763 8,106,586 23,420 571,577 376,992 9,930,609 10,902,598 18,851 50,014 7,504,198 7,573,063 9.2.1 The 'Other Assets Especially Mentioned' category pertains to agriculture finance, small enterprise finance and consumer finance amounting to Rs. 4.513 million (31 December 2019: Rs. 10.690 million), Rs. 5.706 million (31 December 2019: Rs. 1.500 million) and Rs. 18.000 million (31 December 2019: Rs. 11.230 million) respectively. 9.3 Particulars of provision against advances Note 2020 2019 Specific General Total Specific General Total ---------------------------------------- (Rupees in ‘000) ---------------------------------------- Opening balance 7,573,063 41,538 7,614,601 8,314,484 41,538 8,356,022 Charge for the year Reversals 1,352,331 (678,845) 673,486 (139,963) 8,106,586 41,538 1,352,331 (678,845) 673,486 (139,963) 8,148,124 1,155,305 (1,827,932) (672,627) (68,794) 7,573,063 41,538 1,155,305 (1,827,932) (672,627) (68,794) 7,614,601 Amounts written off Transfers Closing balance 9.4 9.3.1 The general provision against consumer financing is required to be maintained at varying percentages based on the non-performing loan ratio present in the portfolio. These percentages range from 1% to 2.5% for secured and 4% to 7% for unsecured portfolio. 9.3.2 The Bank has maintained general provision against housing finance portfolio at the rate of 0.50% of the performing portfolio. The State Bank of Pakistan vide its circular no. 9 of 2017 dated 22 December 2017 abolished the requirement of maintaining general reserve of 1% against secured Small Enterprise (SE) portfolio, while general reserve to be maintained against unsecured SE portfolio has been reduced from 2% to 1%. Currently, the Bank does not have any unsecured SE portfolio. ANNUAL REPORT 2020 141
  91. 9 .3.3 Particulars of provision against advances 2020 2019 Specific General Total Specific General Total ---------------------------------------- (Rupees in ‘000) ---------------------------------------In local currency In foreign currency Total 8,106,586 8,106,586 41,538 41,538 8,148,124 8,148,124 7,573,063 7,573,063 41,538 41,538 7,614,601 7,614,601 9.3.4 The Bank has availed the benefit of forced sale value of pledged stocks, mortgaged residential and commercial properties held as collateral against non-performing advances as allowed under the Prudential Regulations issued by the State Bank of Pakistan. Had the benefit not been taken by the Bank, the specific provision against non-performing advances would have been higher by Rs. 1,962.296 million (31 December 2019: Rs. 2,643.128 million. The additional profit arising from availing this benefit - net of the tax amounts to Rs. 1,275.492 million (31 December 2019: Rs. 1,718.033 million). The FSV benefit is not available for distribution either as cash or stock dividend to shareholders and bonus to employees. 9.3.5 The SBP has granted relaxation in provisioning requirements in respect of exposures in Dewan Mushtaq Group (DMG). Had this relaxation not been available, provision against loans and advances would have been higher by Rs. 44.930 million (2019: Rs. 44.930 million). 9.3.6 The Bank has made provision against its non-performing portfolio as per the category of classification of the loans. However, the Bank still holds enforceable collateral realisable through litigation. This enforceable collateral includes mortgage charge etc. against various tangible assets of the borrower including land, building and machinery, stock in trade, etc. 9.4 Particulars of write offs: 9.4.1 Against provisions Directly charged to profit and loss account 9.3 139,963 24 139,987 68,794 199 68,993 9.4.2 Write offs of Rs. 500,000/- and above Write offs of below Rs. 500,000/- 9.5 139,938 49 139,987 68,927 66 68,993 9.5 Details of loan write off of Rs. 500,000/- and above 10 In terms of sub-section (3) of Section 33A of the Banking Companies Ordinance, 1962 the statement in respect of written-off loans or any other financial relief of five hundred thousand rupees or above allowed to a person(s) during the year ended 31 December 2020 is given in Annexure - I to the financial statements. However, these write offs do not affect the Bank's right to recover the outstanding debts from these customers, unless the write off / waiver has been mutually agreed between the borrower and the Bank as part of the settlement terms. Note 2020 2019 ---------(Rupees in ‘000)--------FIXED ASSETS Note Capital work-in-progress Right-of-use assets Property and equipment 10.1 10.1 10.2 10.3 219,375 1,943,868 6,165,662 8,328,905 122,408 118,411 13,095 253,914 129,310 79,269 10,796 219,375 1,943,868 1,700,929 (550,180) 3,094,617 1,944,125 291,340 (291,597) 1,943,868 Right-of-use assets Opening balance Additions during the year Depreciation for the year Closing balance 142 253,914 3,094,617 8,562,394 11,910,925 Capital work-in-progress Civil works Advances to suppliers and contractors Consultant's fee and other charges 10.2 2020 2019 ---------(Rupees in ‘000)--------- 28 NAVIGATING OUR WAY TO SUCCESS
  92. 10 .3 Property and equipment 2020 Electrical, Building on Building on Freehold Leasehold Leasehold Furniture office and Freehold Leasehold land land Improvements and fixtures computer land land equipment Vehicles Total --------------------------------------------------------- (Rupees in ‘000) --------------------------------------------------------At 01 January 2020 Cost / revalued amount Accumulated depreciation Net book value 1,333,280 1,333,280 349,047 349,047 231,512 (61,504) 170,008 4,043,295 (1,821,303) 2,221,992 1,424,036 (417,040) 1,006,996 469,863 (286,307) 183,556 2,895,759 (2,065,593) 830,166 267,237 11,014,029 (196,620) (4,848,367) 70,617 6,165,662 Year ended 31 December 2020 Opening net book value 1,333,280 Additions 601,915 Movement in surplus on assets revalued during the year 385,877 Disposals / write-offs - cost Disposals / write-offs - Accumulated Depreciation Disposals / write-offs - net Depreciation charge Impairment reversal against fixed assets 11,220 Closing net book value 2,332,292 349,047 - 170,008 96,394 2,221,992 61,793 1,006,996 241,615 183,556 60,464 830,166 401,465 70,617 84,318 6,165,662 1,547,964 122,511 471,558 32,464 (8,954) 12,168 302,080 870,114 (114,413) 891 3,040,377 (12,277) 3,306 (8,971) (76,153) 1,163,487 (3,492) 3,103 (389) (38,894) 204,737 (143,938) 141,659 (2,279) (300,059) 929,293 (27,085) 26,535 (550) (35,815) 118,570 1,410,966 (186,792) 174,603 (12,189) (574,288) 24,279 8,562,394 At 31 December 2020 Cost / revalued amount Accumulated depreciation Net book value 471,558 471,558 372,538 (70,458) 302,080 4,976,093 (1,935,716) 3,040,377 1,653,374 (489,887) 1,163,487 526,835 (322,098) 204,737 3,153,286 (2,223,993) 929,293 3-7 3-7 5 10 20 - 33 Rate of depreciation (percentage) 2,332,292 2,332,292 - - 324,470 13,810,446 (205,900) (5,248,052) 118,570 8,562,394 20 2019 Electrical, Building on Building on Freehold Leasehold Leasehold Furniture office and Freehold Leasehold land land Improvements and fixtures computer land land equipment Vehicles Total --------------------------------------------------------- (Rupees in ‘000) --------------------------------------------------------At 01 January 2019 Cost / revalued amount Accumulated depreciation Net book value 1,333,280 1,333,280 349,047 349,047 195,097 (54,181) 140,916 3,811,425 (1,486,314) 2,325,111 1,345,199 (357,593) 987,606 434,835 (255,000) 179,835 2,591,509 (1,899,607) 691,902 349,047 - 140,916 36,415 2,325,111 11,042 987,606 102,649 179,835 41,175 691,902 419,083 75,135 26,049 6,082,832 636,413 (7,323) - (113,718) 220,828 (23,813) 8,826 (14,987) (68,715) 1 (6,128) 5,351 (777) (36,677) (19) (114,854) 111,074 (3,780) (277,039) 21 (20,790) 20,694 (96) (30,471) 1 (165,585) 145,945 (19,640) (533,943) 220,832 (1) 70,617 (220,832) 6,165,662 Year ended 31 December 2019 Opening net book value 1,333,280 Additions Movement in surplus on assets revalued during the year Disposals / write-offs - cost Disposals / write-offs - Accumulated Depreciation Disposals / write-offs - net Depreciation charge Adjustments / Reclassification - cost Adjustments / Reclassification - Accumulated Depreciation Adjustments / Reclassification - net Closing net book value 1,333,280 349,047 170,008 (221,271) (443) 2,221,992 442 443 1,006,996 19 183,556 (21) 830,166 At 31 December 2019 Cost / revalued amount Accumulated depreciation Net book value 349,047 349,047 231,512 (61,504) 170,008 4,043,295 (1,821,303) 2,221,992 1,424,036 (417,040) 1,006,996 469,863 (286,307) 183,556 2,895,759 (2,065,593) 830,166 3-7 3-7 5 10 20 - 33 Rate of depreciation (percentage) 1,333,280 1,333,280 - - - 261,977 10,322,369 (186,842) (4,239,537) 75,135 6,082,832 267,237 11,014,029 (196,620) (4,848,367) 70,617 6,165,662 20 10.3.1 The cost of fully depreciated property and equipment still in use amounts to Rs.1,783.640 million (2019: Rs. 1,602.437 million). 10.3.2 The Bank's freehold / leasehold land and building on freehold / leasehold land were revalued at 31 December 2020, in line with the Bank's policy, by M/s Harvester Services (Private) Limited (Valuation and Engineering Consultants) on the basis of their professional assessment of the present market value. As a result of revaluation, the market value of freehold / leasehold land was determined at Rs.2,803.850 million and building on freehold / leasehold land was determined at Rs. 3,342.457 million. Had there been no revaluation, the carrying amount of freehold / leasehold land and building on freehold / leasehold land as at 31 December 2020 would have been Rs.1,689.365 million and Rs. 675.204 million respectively (2019: Rs. 1,087.450 million and Rs. 543.489 million respectively). ANNUAL REPORT 2020 143
  93. 10 .3.3 Details of disposals / write offs of property and equipment to executives and other persons with original cost or book value in excess of Rs. 1 million or Rs. 250,000/- respectively (whichever is less) are given in Annexure - III which is an integral part of these financial statements. 11 INTANGIBLE ASSETS At 01 January 2020 Cost Accumulated amortisation Net book value Year ended 31 December 2020 Opening net book value Additions: - directly purchased Amortisation charge Closing net book value At 31 December 2020 Cost Accumulated amortisation Net book value Rate of amortisation (percentage) Useful life 2020 Computer Trademark Total software --------------------(Rupees in ‘000)------------------1,321,756 (855,297) 466,459 6,315 (6,088) 227 1,328,071 (861,385) 466,686 466,459 227 466,686 107,478 (165,747) 408,190 (143) 84 107,478 (165,890) 408,274 1,429,234 (1,021,044) 408,190 6,315 (6,231) 84 1,435,549 (1,027,275) 408,274 20 to 33.33 33.33 3 to 5 3 2019 Computer Trademark Total software --------------------(Rupees in ‘000)------------------At 01 January 2019 Cost Accumulated amortisation Net book value Year ended 31 December 2019 Opening net book value Additions: - directly purchased Amortisation charge Closing net book value At 31 December 2019 Cost Accumulated amortisation Net book value Rate of amortisation (percentage) Useful life 11.1 144 1,173,188 (719,059) 454,129 6,084 (5,677) 407 1,179,272 (724,736) 454,536 454,129 407 454,536 148,568 (136,238) 466,459 231 (411) 227 148,799 (136,649) 466,686 1,321,756 (855,297) 466,459 6,315 (6,088) 227 1,328,071 (861,385) 466,686 20 to 33.33 33.33 3 to 5 3 The cost of fully amortised intangible assets still in use amounts to Rs. 712.309 million (2019: Rs. 688.847 million). NAVIGATING OUR WAY TO SUCCESS
  94. 12 OTHER ASSETS Income / mark-up accrued in local currency Income / mark-up accrued in foreign currencies Dividend receivable Advances, deposits, advance rent and other prepayments Advance taxation (payments less provisions) Non-banking assets acquired in satisfaction of claims Branch adjustment account Cash margin against margin trading Stationery and stamps on hand Due from the State Bank of Pakistan Advance against subscription of shares Advance against subscription of term finance certificates / sukuks Acceptances Claims against fraud and forgeries Others Other assets Less: provision held against other assets Other assets - net of provision Surplus on revaluation of non-banking assets acquired in satisfaction of claims Other assets - total Note 12.1 12.2 12.3 12.4 2020 2019 ---------(Rupees in ‘000)--------6,571,289 12,390 6,223 291,067 1,283,681 1,115,729 5,870 41,810 8,678 250,000 5,471,061 143,443 340,153 15,541,394 (227,311) 15,314,083 23,648 15,337,731 7,665,866 22,929 256,151 1,269,290 843,839 8,994 60,000 35,783 58,794 50,000 25,000 3,999,235 143,443 271,473 14,710,797 (237,160) 14,473,637 76,041 14,549,678 1,139,377 919,880 12.1 Market value of non-banking assets acquired in satisfaction of claims 12.1.1 The non-banking assets acquired in satisfaction of claims by the Bank were revalued by independent and professional valuers in August 2020 and December 2020. The valuations were carried out by M/s Harvester Services (Pvt) Ltd, M/s Arch-e-Decon, M/s. K.G. Traders, M/s. Oceanic Surveyors, M/s Indus Surveyors, M/s. Amir Evaluators,M/s Al Hadi Financial and Legal Consultants and M/s Asrem (Private) Limited on the basis of professional assessment of present market values and the revalued amount is disclosed in note 12.1.2 to these financial statements. 2020 2019 Note Non-banking assets acquired in satisfaction of claims -------(Rupees in ‘000)--------- 12.1.2 Opening balance Acquired during the year Revaluation Depreciation Closing balance 12.1.1 12.1.3 12.1.1 919,880 198,220 23,648 (2,371) 1,139,377 76,027 770,840 76,041 (3,028) 919,880 12.1.3 These represent assets acquired as a result of debt asset swap arrangements entered into by the Bank and certain borrowers. Debt asset swap arrangements entered into during the year resulted in provision reversals against non-performing loans amounting to Rs. 57.457 million (2019: Rs. 770.840 million), and a reduction in non-performing loans amounting to Rs. 198.220 million (2019: Rs. 770.840 million). 12.2 This represents advance against subscription of term finance certificates of Bank Alfalah Limited amounting to Rs. 250 million (2019: Bank Islami Pakistan Limited amounting to Rs. 25 million). The term finance certificates are expected to be issued in the year 2021. 12.3 This represents amount in respect of fraud and forgery claims relating to cash embezzlement made in the Bank. The Bank has initiated legal proceedings against the alleged and has also taken necessary steps to further strengthen its internal control system. 12.4 Provision held against other assets Provision held against receivable against fraud and forgeries Others 12.4.1 2020 2019 -------(Rupees in ‘000)--------143,443 83,868 227,311 143,443 93,717 237,160 237,160 (9,849) 227,311 156,077 81,083 237,160 Movement in provision held against other assets Opening balance Charge for the year Amount written-off Closing balance ANNUAL REPORT 2020 145
  95. 13 CONTINGENT ASSETS There were no contingent assets as at the balance sheet date . Note 14 BILLS PAYABLE In Pakistan Outside Pakistan 15 6,707,581 6,707,581 3,960,957 3,960,957 15.2.1 15.2.2 15.2.3 15.2.4 15.2.5 15.2.6 15.2.7 17,307,129 1,807,212 2,711,913 5,886 150,281 79,562 22,061,983 14,153,891 1,699,827 7,848 152,528 41,310,410 57,324,504 15.2.8 15.2.9 15.2.10 22,521,876 41,379,320 85,963,179 4,968,895 24,116,589 4,800,276 91,210,264 15.2.11 1,008,512 48,848 1,057,360 4,405,698 89,147 4,494,845 87,020,539 95,705,109 86,971,691 48,848 87,020,539 90,815,686 4,889,423 95,705,109 BORROWINGS Secured Borrowings from State Bank of Pakistan Under export refinance scheme Long term financing facility for plant and machinery Refinance scheme for payment of wages and salaries Modernisation of SME-Rice Husking Financing facility for storage of agriculture produce Financing facitlity for Renewable Energy Repurchase agreement borrowings Repurchase agreement borrowings - other banks Borrowings from other financial institutions - local Borrowings from other financial institutions - foreign Total secured Unsecured Call borrowings Overdrawn nostro accounts Total unsecured 15.1 2020 2019 ---------(Rupees in ‘000)--------- Particulars of borrowings with respect to currencies In local currency In foreign currencies 15.2.1 The Bank has entered into an agreement with SBP for extending export finance to its customers. Borrowings under the export refinance scheme of SBP carry interest at rates ranging from 1% to 2% per annum (2019: 1.00% to 2.50% per annum). These are secured against demand promissory notes and are due to mature latest by 29 June 2021 (2019: latest by 29 June 2020). 15.2.2 These represent borrowings from SBP under scheme for long-term financing facility at rates ranging from 2.0% to 4.5% per annum (2019: 3.00% to 6.00% per annum) and have varying long term maturities due by 30 June 2032 (2019: due by 20 June 2028). Under the agreement, SBP has a right to recover the outstanding amount from the Bank at the respective maturity dates of each finance by directly debiting the current account of the Bank maintained with SBP. 15.2.3 These represent borrowings from SBP under the scheme for payment of wages and salaries introduced during the year - having 0% rates for Active Tax Payers and 2% for Non-Filer. At present, the Bank does not have above borrowing portfolio of Non-Filers. The facilities are due to mature latest by 02 January 2023. 15.2.4 These represent borrowings from SBP under the scheme for Modernisation of SME Rice Husking Mills in Sindh at the rates ranging from 4.25% to 6.25% per annum (2019: 4.25% to 6.25% per annum) and are due to mature latest by 29 September 2023 (2019: latest by 29 September 2023). 15.2.5 These represent borrowings from SBP under the scheme for Finance Facility for Storage of Agricultural Produce at the rates of 2.00% (2019: 6.50%) and are due to mature latest by 28 March 2026 (2019: 28 March 2026). 15.2.6 These represent borrowings from SBP under the scheme for renewable energy at rates ranging from 2.00% to 3.00% per annum (2019: Nil) and are due to mature latest by 30 June 2032 (2019: Nil). 146 NAVIGATING OUR WAY TO SUCCESS
  96. 15 .2.7 As at 31 December 2020, there was no repurchase agreements borrowing with SBP. At 31 December 2019, such borrowing carried mark up rates of 13.38% per annum and were due to mature latest by 03 January 2020. 15.2.8 These represent repurchase agreements borrowings executed with local financial institutions at the rate ranging from 7.00% to 7.02% per annum (2019: 13.30% to 13.80% per annum) and are due to mature latest by 08 January 2021 (2019: latest by 06 January 2020). The market value of securities given as collateral against these borrowings as given in note 8.2.1. 15.2.9 These represent borrowings executed with the local financial institutions secured against government securities which carry mark up at rates ranging between 6.70% to 6.95% per annum (2019: ranging from 12.50% to 13.50% per annum) and are due to mature latest by 10 May 2021 (2019: latest by 08 September 2020). The market value of securities given as collateral against these borrowings as given in note 8.2.1. 15.2.10 As at 31 December 2020, there was no borrowing against foreign bills. At 31 December 2019, such borrowing carried mark up rates ranging from 3.29% to 3.50% per annum and were due to mature latest by 23 June 2020. 15.2.11 This represent borrowings from a commercial bank in the inter bank money market, carrying mark-up at the rate of 6.85% per annum (2019: 12.30% to 12.60% per annum) with maturity due on 11 January 2021 (2019: latest by 30 April 2020). 16 DEPOSITS AND OTHER ACCOUNTS 2020 In local currency Customers Current deposits Savings deposits Term deposits Others Financial Institutions Current deposits Savings deposits Term deposits 16.1 2019 Total In local currency In foreign currencies Total ----------------------------------------(Rupees in ‘000)---------------------------------------78,044,230 97,777,707 98,963,570 4,921,675 279,707,182 7,372,950 6,339,080 1,754,341 15,466,371 85,417,180 104,116,787 100,717,911 4,921,675 295,173,553 62,024,716 78,036,025 98,240,692 3,799,191 242,100,624 6,980,411 5,947,992 6,491,247 19,419,650 69,005,127 83,984,017 104,731,939 3,799,191 261,520,274 1,010,867 41,310,831 7,582,846 49,904,544 329,611,726 420,671 420,671 15,887,042 1,431,538 41,310,831 7,582,846 50,325,215 345,498,768 690,437 33,080,927 6,241,425 40,012,789 282,113,413 549,922 549,922 19,969,572 1,240,359 33,080,927 6,241,425 40,562,711 302,082,985 Composition of deposits - Individuals - Government (Federal and Provincial) - Public Sector Entities - Banking Companies - Non-Banking Financial Institutions - Private Sector 16.2 In foreign currencies 2020 2019 ---------(Rupees in ‘000)-------134,957,518 33,360,028 41,829,379 5,499,496 44,945,645 84,906,702 345,498,768 116,173,214 36,304,593 38,817,695 8,243,502 15,012,349 87,531,632 302,082,985 Deposits eligible under Insurance arrangements In 2018, the SBP set up a fully owned subsidiary – the Deposit Protection Corporation (DPC), with an aim to provide protection to small depositors of banks operating in Pakistan. The Corporation has been set up through promulgation of the Deposit Protection Corporation Act, 2016, (the Act) and commenced its business with effect from 01 June 2018. Membership of the Deposit Protection Corporation is compulsory for all banks scheduled under sub-section (2) of section 37 of the State Bank of Pakistan Act, 1956. Under the arrangement, the objective of DPC would be to protect the depositors to the extent of the guaranteed amount, in case a member bank is notified as a failed institution by SBP. The framework provided by DPC lays down the methodology for arriving at Eligible Deposits, as well as determining the premium amount payable under the regulations. The premium amount so determined are required to be deposited by all banks with DPC on a quarterly basis. As at 31 December 2020, the deposits eligible to be covered under insurance arrangements amount to Rs. 142,792 million. (2019 : Rs. 122,985 million). ANNUAL REPORT 2020 147
  97. 17 SUBORDINATED DEBT Note Listed Term Finance Certificates - Additional Tier I Listed Term Finance Certificates - Tier II 17 .1 17.1 17.2 2020 2019 -------(Rupees in ‘000)--------4,000,000 2,994,000 6,994,000 4,000,000 2,995,200 6,995,200 Listed Term Finance Certificates - Additional Tier I This denotes rated, listed and unsecured Term Finance Certificates (TFCs) issued as instrument of redeemable capital of Rs. 4,000 million issued under Section 66 of the Companies Act, 2017. The funds raised by the Bank through the issuance of these TFCs have contributed towards the Bank’s Additional Tier 1 Capital for meeting its capital adequacy requirements as per Basel III Guidelines set by SBP under BPRD Circular Number 6 dated 15 August 2013. The instrument is sub-ordinated as to the payment of principal and profit to all other indebtedness of the Bank (including the listed term finance certificates - Tier II previously issued by the Bank) and is not redeemable before maturity without prior approval of SBP. Furthermore, these funds are intended to be utilized for the Bank’s ongoing business operations in accordance with the Bank’s Memorandum and Articles of Association. The key features of the issue are as follows: Issue amount Rs. 4,000 million Issue date 06 December 2018 Maturity date Perpetual Rating (Note 37) "A" by PACRA on 25 June 2020 Security Unsecured Profit payment frequency Semi-annually 17.2 Redemption No fixed or final redemption date Mark-up 6 Months KIBOR + 2.00% per annum Call option The Bank may call the TFCs (either partially or in full), after five (5) years from the date of issuance with the prior approval of SBP. Moreover, and as per Clause iv(b) of Annexure 2 of the Basel III Circular, the Issuer shall not exercise a call option unless the called instrument is replaced with capital of same or better quality. The Call must be subject to a prior notice of not less than 60 days given by the Bank to the investors. The Call Option once announced will not be revocable. Lock-in-clause (if any) The TFCs contain a lock-in clause which stipulates that no profit payments would be made if such payments result in a shortfall in the Bank’s Minimum Capital Requirement (MCR) or Capital Adequacy Requirement (CAR) or increase any existing shortfalls in MCR and / or CAR. Loss absorbency clause The TFCs are also subject to loss absorbency and / or any other requirements under SBP’s Basel III Capital Rules. Upon the occurrence of a Point of Non-Viability event as defined by SBP’s Basel III Capital Rule, SBP may at its option, fully and permanently convert the TFCs into common shares of the Bank and / or have them immediately written off (either partially or in full). Number of shares to be issued to TFC Holders at the time of conversion will be equal to the ‘Outstanding Face Value of the TFC’ divided by market value per share of the Bank’s common equity on the date of trigger of the non-viability event as declared by SBP, subject to a cap of 360,000,000 shares. Listed Term Finance Certificates - Tier II This denotes rated, listed and unsecured Term Finance Certificates (TFCs) issued as instrument of redeemable capital with a tenor of 8 years. The instrument is sub-ordinated as to the payment of principal and profit to all other indebtedness of the Bank, except Listed Term Finance Certificates - Additional Tier I as recently issued; and is not redeemable before maturity without prior approval of SBP. The key features of the issue are as follows: 148 Issue amount Rs. 3,000 million Issue date 07 July 2015 Maturity date 07 July 2023 NAVIGATING OUR WAY TO SUCCESS
  98. Rating (Note 37) "A+" by PACRA on 18 December 2020 Security Unsecured Profit payment frequency Semi-annually 18 Redemption Principal is redeemable semi-annually in such a way that 0.30% of the principal will be redeemed in the first 90 months and the remaining principal of 99.70% at maturity at the end of the 96th month in July 2023. Mark-up 6 Months KIBOR + 1.35% per annum Call option (if any) The Bank may call the TFCs, in part or full, on any profit payment date from the 60th month from last day of public subscription and on all subsequent profit payment dates, subject to SBP's approval and not less than 45 days prior notice being given to the Trustee. Lock-in-clause (if any) The TFCs contain a lock-in clause which stipulates that neither interest nor principal may be paid (even at maturity) if such payments will result in shortfall in the Bank’s Minimum Capital Requirement (MCR) or Capital Adequacy Requirement (CAR) or increase any existing shortfall in MCR and CAR. Loss absorbency clause The instrument will be subject to loss absorbency and / or any other requirements under SBP’s Basel III Capital Rules. Upon the occurrence of a Point of Non-Viability event as defined by SBP’s Basel III Capital Rule, SBP may at its option, fully and permanently convert the TFCs into common shares of the Bank and / or have them immediately written off (either partially or in full). Number of shares to be issued to TFC Holders at the time of conversion will be equal to the ‘Outstanding Face Value of the TFC’ divided by market value per share of the Bank’s common equity on the date of trigger of the non-viability event as declared by SBP, subject to the cap of 225,000,000 shares. DEFERRED TAX LIABILITIES - NET 2020 Recognised At 31 in Other December Comprehensive 2020 income ------------------------------(Rupees in ‘000)---------------------------At 1 January 2020 Deductible temporary differences on - Post retirement employee benefits - Deficit on revaluation of investments - Provision against advances, off balance sheet etc. Taxable temporary differences on - Surplus on revaluation of fixed assets - Surplus on revaluation of investments - Accelerated tax depreciation Recognised in the profit and loss account (14,471) (340) (55,307) (70,118) (20,632) (20,632) 2,549 340 2,889 (11,922) (75,939) (87,861) 645,401 376,176 1,021,577 951,459 (34,069) 29,846 (4,223) (24,855) 320,473 283,299 603,772 606,661 931,805 283,299 406,022 1,621,126 1,533,265 2019 Recognised Recognised in At 31 in Other the profit and December Comprehensive loss account 2019 income ------------------------------(Rupees in ‘000)---------------------------At 1 January 2019 Deductible temporary differences on - Post retirement employee benefits - Deficit on revaluation of investments - Provision against advances, off balance sheet etc. Taxable temporary differences on - Surplus on revaluation of fixed assets - Accelerated tax depreciation ANNUAL REPORT 2020 (13,941) (725,166) (193,973) (933,080) 138,666 138,666 530) 724,826 724,296 (14,471) (340) (55,307) (70,118) 683,807 369,327 1,053,134 120,054 (38,406) 6,849 (31,557) 107,109 724,296 645,401 376,176 1,021,577 951,459 149
  99. 19 OTHER LIABILITIES Note Mark-up / return / interest payable in local currency Mark-up / return / interest payable in foreign currencies Unearned commission and income on bills discounted Accrued expenses Acceptances Unclaimed dividends Mark to market loss on forward foreign exchange contracts Charity fund balance Provision against off-balance sheet obligations Payable to workers' welfare fund Lease liability against right-of-use assets Sundry deposits Others 19.1 2020 2019 ---------(Rupees in ‘000)--------- 19.1 19.2 3,302,012 28,461 113,390 492,676 5,471,061 75,613 201,321 18 27,475 345,763 3,350,017 516,018 510,207 14,434,032 4,653,543 91,281 96,134 476,539 3,999,235 66,579 49,196 13 260,045 2,023,516 451,534 463,862 12,631,477 Movement in provision held against off-balance sheet obligations Opening balance Charge for the year Amount written-off Closing balance 19.1.1 19.1.1 This represents provision held against non-fund based obligations of a borrower classified as doubtful. 19.2 Movement in lease liability against right-of-use assets Opening balance Additions during the year Finance cost of lease liability Repayments Closing balance 20 SHARE CAPITAL 20.1 Authorized Capital 24.2 27,475 27,475 - 2,023,516 1,674,538 373,470 (721,507) 3,350,017 1,944,125 291,340 271,575 (483,524) 2,023,516 18,000,000 18,000,000 3,873,977 7,150,659 11,024,636 3,873,977 7,150,659 11,024,636 809,426 3,777,073 99,608 4,686,107 (972) 2,463,447 76,041 2,538,516 (283,299) (931,805) (1,215,104) 3,471,003 340 (645,401) (645,061) 1,893,455 2020 2019 ----- (Number of shares) ----1,800,000,000 20.2 1,800,000,000 Ordinary shares of Rs. 10 /- each Issued, subscribed and paid-up capital 2020 2019 ----- (Number of shares) ----387,397,655 387,397,655 715,065,828 715,065,828 1,102,463,483 1,102,463,483 21 150 Ordinary shares Fully paid in cash Issued as bonus shares SURPLUS / (DEFICIT) ON REVALUATION OF ASSETS Surplus / (deficit) on revaluation of - Available-for-sale securities - Fixed assets - Non-banking assets acquired in satisfaction of claims 8.1 21.1 21.2 Deferred tax on (surplus) / deficit on revaluation of - Available-for-sale securities - Fixed assets 21.1 NAVIGATING OUR WAY TO SUCCESS
  100. 21 .1 Surplus on revaluation of fixed assets Note Surplus on revaluation of fixed assets as at 01 January Recognised during the year Transferred to unappropriated profit in respect of incremental depreciation charged during the year - net of deferred tax Related deferred tax liability on incremental depreciation charged during the year Related deferred tax liability on surplus realised on disposal Surplus on revaluation of fixed assets as at 31 December 2,463,447 1,410,966 2,573,180 - (63,271) (71,327) (34,069) 3,777,073 (38,406) 2,463,447 (645,401) (320,473) 34,069 (931,805) 2,845,268 (683,807) 38,406 (645,401) 1,818,046 76,041 23,648 76,041 (81) 99,608 76,041 17,677,531 154,084,937 3,041,804 174,804,272 18,230,691 223,141,435 3,493,455 244,865,581 4,671,493 12,121,177 884,861 17,677,531 5,937,446 11,889,655 403,590 18,230,691 31,755,753 26,348,782 114,269,483 2,549,990 187,259,290 5,378,806 399,466 17,325 22.2.3 & 22.2.4 5,092,920 154,084,937 94,274 17,401 4,042,882 223,141,435 57,715,311 56,554,172 96,944,495 90,314,795 10.3 Less: related deferred tax liability on - revaluation as at 01 January - revaluation recognised during the year - surplus realised on disposal during the year - incremental depreciation charged during the year 21.2 Surplus on revaluation of non-banking assets acquired in satisfaction of claims Surplus on revaluation as at 01 January Recognised during the year Transferred to unappropriated profit in respect of incremental depreciation charged during the year Surplus on revaluation as at 31 December 22 CONTINGENCIES AND COMMITMENTS - Guarantees - Commitments - Other contingent liabilities 22.1 22.1 22.2 22.3 Guarantees - Financial guarantees - Performance guarantees - Other guarantees 22.2 Commitments Documentary credits and short-term trade-related transactions - letters of credit Commitments in respect of - forward foreign exchange contracts - forward lending Commitments for acquisition of - operating fixed assets - intangible assets Other commitments 22.2.1 2020 2019 ---------(Rupees in ‘000)--------- 22.2.1 22.2.2 Commitments in respect of forward foreign exchange contracts Purchase Sale The maturities of the above contracts are spread over a period of one year. ANNUAL REPORT 2020 151
  101. 22 .2.2 Commitments in respect of forward lending Undrawn formal standby facilities, credit lines and other commitments to lend Note 22.2.2.1 2020 2019 ---------(Rupees in ‘000)--------2,549,990 5,378,806 22.2.2.1 These represent commitments that are irrevocable because they cannot be withdrawn at the discretion of the Bank without the risk of incurring significant penalty or expense. The Bank has certain other commitments to extend credit that represent revocable commitments and do not attract any significant penalty or expense in case the facility is withdrawn unilaterally. 22.2.3 Commitment in respect of forward government securities transactions Purchase Sale 22.2.4 2020 2019 ---------(Rupees in ‘000)--------4,996,920 - 4,042,882 Other commitments Donation 96,000 - 22.3 Other contingent liabilities 22.3.1 (a) The income tax returns of the Bank have been filed up to tax year 2020 (accounting year ended 31 December 2019). The income tax authorities have issued amended assessment orders for tax years 2011, 2015 and 2016, thereby creating additional tax demands of Rs. 210.72 million against which payments have been made as required under the law. The Bank has filed appeals before various appellate forums against these amendments. Assessments from tax year 2001 up to tax year 2010 have been decided at the level of Appellate Tribunal Inland Revenue. The department has filed tax references in respect of certain matters with the Honourable Lahore High Court which are currently pending. In case of any adverse decision, an additional tax liability of Rs. 617.120 million (which includes impact of certain timing differences as well) may arise. Further, assessments for tax years 2012, 2013, 2014, 2017, 2018 and 2019 have been decided at the level of Commissioner Inland Revenue (Appeals). The department has filed appeals for tax years 2012 and 2013 with Appellate Tribunal Inland Revenue which are currently pending and in case of any adverse decision, an additional tax liability of Rs. 866.384 million (which include impact of certain timing differences as well) may arise. The Bank has decided to file appeal for tax years 2014, 2018 and 2019 with Appellate Tribunal Inland Revenue, which in case of any adverse decision may create an additional tax liability of Rs. 73.78 million. However, the management is confident that these matters will be ultimately decided in favor of the Bank and the Bank may not be exposed to any additional tax liability in such matters. 3,041,804 3,493,455 (b) Tax authorities have passed orders for tax years 2008 to 2012, levying Federal Excise Duty on certain items. The Bank filed appeals against these assessments before Appellate Tribunal Inland Revenue, which have been decided in favor of Bank and tax demand has been deleted in full. However, provision to the extent of Rs. 81.083 million, created on the recommendation of the State Bank of Pakistan, is still being maintained in the accounts. Management is confident that SBP will allow reversal of this provision based on orders passed by Appellate Tribunal Inland Revenue. (c) Tax authorities have passed order for fiscal years 2016 and 2017, levying sales tax and penalty amounting to Rs. 17.18 million on disposal of fixed assets. The Bank filed appeal against the assessment order before Commissioner Inland Revenue (Appeals), which is currently pending. However, the management is confident that the matter will be ultimately decided in favor of the Bank and the Bank may not be exposed to any additional tax liability in this matter. (d) Tax authorities have passed order for tax year 2016 under section 161/205 of the Income Tax Ordinance 2001, creating demands of Rs. 43.52 million, for non-deduction of tax at source. Against the said demand, the Bank has already filed appeal before the Commissioner Inland Revenue (Appeals), which is currently pending. The department has filed appeals for tax years 2014, 2015 and 2017 with Appellate Tribunal Inland Revenue which are currently pending and in case of any adverse decision an additional tax liability of Rs. 216.49 million may arise. However, the management is confident that the matter will be ultimately decided in favor of the Bank and the Bank may not be exposed to any additional tax liability in this matter. (e) Punjab Revenue Authority has passed orders for years 2015 and 2016 under section 14 and 19 of the Punjab Sales Tax on Services Act, 2012, creating demands of Rs. 144.688 million and 46.9 million respectively, on non-deduction of withholding tax. The Bank has filed appeals before Commissioner Inland Revenue (Appeals) against these orders, which are currently pending. However, the management is confident that these matters will be ultimately decided in favor of the Bank and the Bank may not be exposed to any additional tax liability in such matters. 152 NAVIGATING OUR WAY TO SUCCESS
  102. (f) Sindh Revenue Board has passed orders for years 2012 and 2014 under section 23 of the Sindh Sales Tax on Services Act, 2011, creating demands of Rs. 213.43 million and Rs.142.18 million respectively, on non-deduction of Sindh Sales Tax. The Bank has filed appeals before Commissioner Inland Revenue (Appeals) against these orders, which are currently pending. Further, Commissioner Appeals has passed order for year 2013 creating a demand of Rs. 19.89 million. Appeal against this order has been filed in Appellate Tribunal, which is still pending. However, the management is confident that these matters will be ultimately decided in favor of the Bank and the Bank may not be exposed to any additional tax liability in such matters. (g) The income tax authorities in Azad Jammu & Kashmir region have issued amended assessment orders for Tax Years 2013 to Tax Year 2019, thereby creating additional tax demands which have been paid by the Bank as required under the law. The Bank had filed appeals before Commissioner Inland Revenue (Appeals) against these orders which were decided in favour of the Bank except for Tax Years 2013 and 2016. The Bank will file appeal against orders for Tax Year 2013 & 2016 in Appellate Tribunal. In case of any adverse decision, an additional tax liability of Rs. 43.75 million may arise. Department has filed appeals against orders for Tax Year 2014 to 2019 in Appellate Tribunal, which are still pending. However, the management is confident that these matters will ultimately be decided in favor of the Bank and the Bank may not be exposed to any additional tax liability in such matters. 22.3.2 Claims against the Bank which are not acknowledged as debts amounted to Rs. 10.832 million (31 December 2019: Rs. 8.133 million). 22.3.3 The Assistant Commissioner, Inland Revenue vide orders under section 182/140 of the Income Tax Ordinance, 2001 has levied penalties against staff of the Bank amounting to Rs. 30 million. The action taken by the Bank in this case was backed by legal opinion of the customers' lawyer / stay order of the Islamabad High Court. Currently, the matter is pending before Commissioner Inland Revenue (Appeals) subsequent to appeal filed by the staff. In case of any adverse decision in appeals, the Bank reserves the right of recourse on customers for re-imbursement. However, the management is confident that these matters will be ultimately decided in favor of the Bank and the Bank may not be exposed to any additional tax liability on this account. 22.3.4 A penalty of Rs. 50 million had been imposed by the Competition Commission of Pakistan ("the Commission") on the Bank on account of uncompetitive behaviour and imposing uniform cost on cash withdrawal from ATM transactions. The Bank along with other Banks had filed a constitutional petition before the Competition Appellate Tribunal which has set aside the order of the Commission. Against the said order of the Competition Appellate Tribunal, the Commission has filed an appeal before the Supreme Court of Pakistan, the hearing of which is currently pending. The management of the Bank is confident that the appeal will be decided in the favor of the Bank. 22.3.5 Through the Finance Act, 2008 an amendment was made in the Employees Old Age Benefits Act, 1976 whereby the exemption available to banks and their employees was withdrawn by omission of clause (e) of Section 47 of the said Act and banks and their employees were made liable for contribution to Employee Old Age Benefit Institution. The Lahore High Court, subsequently, nullified the amendments made through the Finance Act, 2008. Subsequently, several other banks also filed the Constitutional Petition before the Sindh High Court which decided the matter in favor of the banks. As a result of the decision of the Lahore High Court and Sindh High Court, the Bank stopped EOBI contribution w.e.f. February 2012. An appeal was filed by the EOBI in the Supreme Court of Pakistan which has been disposed of by the Honorable Court vide its order dated 10 November 2016 in favor of the Banks. However, EOBI has filed review Petition on 07 March 2019 before the Supreme Court of Pakistan which is currently pending. In case of any adverse decision by the Supreme Court of Pakistan, a contribution of Rs. 213.857 million (upto 31 December 2019: Rs.183.788 million) will become payable by the Bank to the EOBI. The said amount of Rs. 213.857 million has not been provided in these financial statements as the Bank is confident that the case may be decided in the Bank's favour. ANNUAL REPORT 2020 153
  103. Note 23 MARK-UP / RETURN / INTEREST EARNED Loans and advances Investments Lendings to financial institutions Balances with banks Placement and call lendings Income on bai muajjal placements 24 24.1 A corresponding income of the same amount is recognised in foreign exchange income. 24.2 This represents finance cost of lease liabililty against right-of-use assets. 25 FEE & COMMISSION INCOME 24.1 24.2 Branch banking customer fees Consumer finance related fees Debit card related fees Investment banking / arrangement fees Credit related fees Commission on trade Commission on guarantees Commission on cash management Commission on remittances including home remittances Commission on bancassurance Rebate income Others 26.1 8.1 154 22,463,093 6,474,014 955,174 700,391 271,575 30,864,247 390,667 48,400 86,119 61,232 88,829 632,560 77,530 4,982 31,322 95,033 238,662 19,505 1,774,841 463,311 45,260 92,794 57,820 55,076 648,759 81,050 7,563 17,916 159,049 227,842 18,007 1,874,447 810,043 8,125 225 818,393 (526,289) 2,139 319 (523,831) 458,191 363,285 (11,433) 810,043 48,857 (551,240) (23,906) (526,289) 17,193 10,800 12,539 2,150 42,682 10,247 9,562 17,002 36,811 OTHER INCOME Gain on sale of fixed assets-net Insurance claim recovered Staff notice period and other recoveries Rental income on properties 27.1 21,103,983 8,562,657 839,616 693,203 373,470 31,572,929 Realised gain / (loss) on Federal Government securities Shares Mutual funds 27 23,794,082 14,366,048 466,336 61,443 91,132 11,372 38,790,413 GAIN / (LOSS) ON SECURITIES - NET Realised Unrealised - held for trading Unrealised - forward purchase of government securities 26.1 18,826,212 23,086,990 125,559 8,686 73,071 107,667 42,228,185 MARK-UP / RETURN / INTEREST EXPENSED Deposits Borrowings Subordinated debt Cost of foreign currency swaps against foreign currency deposits / borrowings Finance cost of lease liability 26 2020 2019 -------- (Rupees in ‘000) -------- 27.1 Rental income on properties represents rent earned through certain properties acquired in satisfaction of claim. NAVIGATING OUR WAY TO SUCCESS
  104. Note 28 OPERATING EXPENSES Total compensation expense Property expense Rent & taxes Insurance Utilities cost Security (including guards) Repair & maintenance (including janitorial charges) Depreciation on right-of-use assets Depreciation - Property Information technology expenses Software maintenance Hardware maintenance Depreciation on computer equipments Amortisation of intangibles Network charges Others Other operating expenses Directors' fees and allowances Fees and allowances to Shariah Board Legal & professional charges Outsourced services costs Travelling & conveyance NIFT clearing charges Depreciation Training & development Postage & courier charges Communication Stationery & printing Marketing, advertisement & publicity Donations Auditors' Remuneration Brokerage and commission Entertainment Fees and subscription Motor vehicles running expenses Service charges Insurance Repair & maintenance Deposit protection insurance premium Others ANNUAL REPORT 2020 28.1 28.2 28.2 10.2 10.3 10.3 11 28.2 & 38.1 10.3 28.3 28.4 28.5 2020 2019 -------- (Rupees in ‘000) -------3,696,675 3,312,917 215,409 25,332 313,010 353,080 248,381 550,180 199,516 1,904,908 390,554 23,855 355,279 319,789 225,237 291,597 189,752 1,796,063 326,308 163,723 181,490 165,890 230,123 89,502 1,157,036 240,071 127,126 169,979 136,649 212,398 85,666 971,889 18,461 5,100 54,440 119,415 12,705 40,780 193,279 6,323 59,480 61,470 178,654 66,849 44,000 10,150 44,811 188,608 54,763 207,935 116,099 74,037 165,732 196,777 179,055 2,098,923 8,857,542 16,469 5,100 60,346 136,366 32,966 39,578 174,212 13,551 69,638 60,832 208,764 66,060 16,000 8,794 27,943 195,462 62,874 212,953 115,961 86,355 167,535 170,047 161,791 2,109,597 8,190,466 155
  105. Note 28 .1 Total compensation expense Fees and Allowances etc. Managerial Remuneration i) Fixed ii) Variable a) Cash Bonus / Awards etc. b) Bonus & Awards in Shares etc. Charge for defined benefit plan Contribution to defined contribution Plan Rent & house maintenance Staff Car Allowance Utilities Medical Conveyance Entertainment Group Insurance Staff Welfare Others Sub-total Sign-on Bonus Severance Allowance Grand Total 2020 2019 -------- (Rupees in ‘000) -------- 28.1.1 28.1.2 - 1,913,913 1,755,098 230,629 109,956 140,550 734,968 174,635 1,616 182,573 16 14,409 89,372 3,119 919 3,596,675 100,000 3,696,675 225,614 96,881 127,229 681,709 158,091 3,079 166,799 31 24,108 69,895 3,404 979 3,312,917 3,312,917 28.1.1 This includes bonus accrual in respect of current performance year (net of reversal), payout for which shall be made in the following year. The aggregate amount of bonus paid in the current year out of accrual held till last year to Directors, Key Management Personnel and other MRTs / MRCs has been disclosed in note 41.1 to these financial statements. 28.1.2 This represents charge in respect of Ex-gratia, for the Bank's outgoing CEO, as approved by the Board of Directors. The amount paid during the year was subjected to retention criteria in accordance with the Bank's approved remuneration framework. 28.2 Total cost for the year relating to outsourcing activities included in operating activities is Rs. 661.744 million (2019: Rs 639.604 million) being paid to companies incorporated in Pakistan. The material outsourcing arrangement as specifically disclosed in note 28 along with their nature of services is as follows: 2020 2019 Name of company Nature of Service -------- (Rupees in ‘000) -------Prime Human Resource services 28.3 Business Development Services 28.4 156 5,000 5,000 24,000 10,000 44,000 15,000 500 500 16,000 Directors or their spouse have no interest in any of the donee in current and prior year. However, the Bank's Deputy CEO is on the Governance Board of the Aga Khan Medical and University Hospital. 2020 2019 Auditors' remuneration -------- (Rupees in ‘000) -------Audit fee Fee for other statutory certifications Fee for audit of employee funds Special certifications and sundry advisory services Out-of-pocket expenses 28.5 136,366 Details of the donations given during the year are as follows: Donee The Aga Khan Education Service, Pakistan The Aga Khan Health Service, Pakistan The Aga Khan Medical & University Hospital The Aga Khan Foundation, Pakistan Layton Rahmatullah Benevolent Trust Pakistan Red Crescent Society 28.3.1 119,415 2,420 4,553 157 1,455 1,565 10,150 2,200 4,139 143 1,322 990 8,794 This represents the insurance premium paid to the State Bank of Pakistan’s Depositors Protection Corporation (DPC) during the year. NAVIGATING OUR WAY TO SUCCESS
  106. The premium amount was worked out in accordance with the mechanism specified by DPC during the year , based on eligible deposits position of the Bank as at 31 December 2019. The premium amount payable for the financial year ending 2021 is determined in accordance with the eligible deposits (note 16.2) as at 31 December 2020 and amounts to Rs. 228.47 million (2019: Rs. 196.77 million). Note 29 WORKERS' WELFARE FUND - NET Workers' Welfare Fund - net 29.1 29.1 OTHER CHARGES Penalties imposed by State Bank of Pakistan (SBP) 31 (120,733) 2020 2019 -------- (Rupees in ‘000) -------83,033 59,748 717,214 673,486 27,475 7,783 (24,279) 24 1,401,703 2,034 (672,627) 412 81,083 199 (588,899) 1,659,338 (24,855) 1,634,483 1,114,113 119,500 107,109 1,340,722 PROVISIONS / (REVERSALS) & WRITE OFFS - NET Provisions for diminution in the value of investments Provisions / (Reversals) against loans & advances - net Provision against off-balance sheet obligations Fixed assets written off Provision against other assets Impairment reversal against fixed assets Bad debts written off directly 32 85,718 The bank considers a charge for Workers Welfare Fund (WWF) based on profits earned for respective years, adjusted for any change in expectation of provisions required to be held, in the light of relevant orders / judgements, and legal opinions. Note 30 2020 2019 -------- (Rupees in ‘000) -------- 8.4 9.3 12.4.1 10.3 9.4 TAXATION Current Prior years Deferred 32.1 32.1 The Finance Act, 2019 has carried forward the amendments introduced in Finance Act, 2018 relating to taxation of banking companies. These amendments required that, super tax at the rate of 4 percent of the taxable income is levied for tax year 2021 (accounting year ended 31 December 2020). Accordingly, an amount of Rs.168.008 million (2019: Rs. 113.972 million) has been recognised in these financial statements. 32.2 Tax related contingencies are disclosed in note 22.3.1 to these financial statements. 32.3 Relationship between tax expense and accounting profit 33 2020 2019 -------- (Rupees in ‘000) -------- Profit before taxation 4,034,755 3,246,746 Tax at the applicable tax rate of 35% (2019: 35%) Tax effect on permanent differences Super tax / prior years Others 1,412,164 50,325 168,008 3,986 1,634,483 1,136,361 (23,801) 233,472 (5,310) 1,340,722 2,400,272 1,906,024 BASIC EARNINGS PER SHARE Profit for the year ------- (Number of Shares) ------Weighted average number of ordinary shares 1,102,463,483 1,102,463,483 ------------- (Rupees) ------------Basic earnings per share ANNUAL REPORT 2020 2.1772 1.7289 157
  107. 34 2020 2019 ------- (Rupees in ‘000) ------- DILUTED EARNINGS PER SHARE Profit for the year 2,400,272 1,906,024 ------- (Number of Shares) ------- Weighted average number of ordinary shares (adjusted for the effects of all dilutive potential ordinary shares) 1,102,463,483 1,102,463,483 ------------- (Rupees) ------------Diluted earnings per share 2.1772 1.7289 SubOrdinated Loans 35 Other Liabilities Mark-up Payable* ------- (Rupees in ‘000) ------- NET DEBT RECONCILIATION Net debt as at 01 January 2020 6,995,200 Other non-cash movements Mark-up accrued - Cash Flows Principal paid Issuance of new debt Mark-up paid (1,200) (1,200) 6,994,000 Net debt as at 31 December 2020 254,482 839,616 (949,318) (949,318) 144,780 * Mark-up is covered under cash flow from operating activities. Note 36 CASH AND CASH EQUIVALENTS Cash and balances with treasury banks Balance with other banks Overdrawn nostro accounts 37 5 6 15 2020 2019 -------- (Rupees in ‘000) -------29,963,954 4,268,063 (48,848) 34,183,169 33,961,308 2,074,533 (89,147) 35,946,694 CREDIT RATING The Pakistan Credit Rating Agency (PACRA) has maintained the long term credit rating of 'AA-' (Double A Minus) and short term rating of 'A1+' (A One Plus) with Stable Outlook of the Bank through its notification dated 25 June 2020 [2019: long term 'AA-' (Double A Minus): short term 'A1+' (A One Plus)]. PACRA has also maintained the credit rating of the Bank's unsecured, subordinated and listed Term Finance Certificates (TFC – 2) issue of Rs 3,000 million at 'A+' (Single A plus) with Stable Outlook through its notification dated 18 December 2020. Furthermore the Bank's unsecured, subordinated, rated, listed perpetual and non-cumulative Term Finance Certificates of Rs 4,000 million have been assigned a rating of 'A' (Single A) with Stable Outlook by PACRA through their notification dated 25 June 2020. 38 STAFF STRENGTH Permanent On Bank contract Bank's own staff strength at the end of the year 2020 2019 -- (Number of employees) -3,097 175 3,272 3,026 87 3,113 38.1 In addition to the above, 372 (2019: 403) employees of outside contractor / agency were posted in the Bank as at the end of the year to perform services other than guarding and janitorial services. 38.2 Further, 737 (2019: 713) employees of outside contractor / agency were posted in the Bank as at the end of the year to perform janitorial services. 158 NAVIGATING OUR WAY TO SUCCESS
  108. 39 DEFINED BENEFIT PLAN 39 .1 General description As mentioned in note 4.12.1, the Bank operates an approved funded gratuity scheme for all its permanent employees. The benefits under the gratuity scheme are payable on retirement at the age of 60 or earlier cessation of service, in lump sum. The benefit (for all employees other than the President) is equal to one month's last drawn basic salary for each year of eligible service with the Bank subject to a minimum qualifying period of service of five years. For the President, the benefit is determined as per the terms of his employment. The plan assets and defined benefit obligations are based in Pakistan. For deceased cases, the qualifying period is at least one year in service. 39.2 Number of employees under the scheme The number of employees covered under the following defined benefit schemes are: 39.3 2020 2019 -- (Number of employees) -- Gratuity fund 3,213 3,031 Principal actuarial assumptions The actuarial valuation was carried out as at 31 December 2020 using the following significant assumptions: 2020 2019 --------- (Per annum) --------Discount rate Expected rate of return on plan assets Expected rate of salary increase Mortality rates (for death in service) 8.5% 8.5% 6.5% SLIC (2001-05)-1 Special Rate of employee turnover Note 39.4 Reconciliation of payable to defined benefit plan Present value of obligation Fair value of plan assets 39.5 879,604 (879,604) - 819,805 (819,805) - 819,805 109,956 97,610 (106,577) (41,190) 879,604 729,104 96,881 71,820 (71,987) (6,013) 819,805 819,805 97,610 (3,904) (33,907) 879,604 729,104 71,820 26,408 (7,527) 819,805 109,956 (102,673) 96,881 (98,395) (7,283) - 1,514 - Movement in fair value of plan assets Fair value at the beginning of the year Interest income on plan assets Contribution by the Bank - net Re-measurements: net return on plan assets over interest income gain / (loss) Fair value at the end of the year 39.7 2020 2019 -------- (Rupees in ‘000) -------- Movement in defined benefit obligation Obligation at the beginning of the year Current service cost Interest cost Benefits paid by the Bank Re-measurement loss / (gain) Obligation at the end of the year 39.6 12% 12% 10% SLIC (2001-05)-1 Special 39.8.2 Movement in payable under defined benefit schemes Opening balance Charge for the year Contribution by the Bank - net Re-measurement loss / (gain) recognised in other comprehensive income during the year Closing balance ANNUAL REPORT 2020 39.8.2 159
  109. 39 .8 Charge for defined benefit plan 39.8.1 Cost recognised in profit and loss Current service cost Net interest on defined benefit asset / liability Expected return on plan assets 39.8.2 39.10 96,881 71,820 (71,820) 96,881 (10,028) (31,162) 33,907 (7,283) 5,205 (11,218) 7,527 1,514 472,738 193,042 130,236 40,218 43,370 879,604 451,969 175,453 120,078 38,935 33,370 819,805 Components of plan assets Cash and cash equivalents - net Mutual funds Government securities Shares Term Finance Certificates 39.9.1 109,956 97,610 (97,610) 109,956 Re-measurement recognised in other comprehensive income during the year Loss / (gain) on obligation -Demographic assumptions -Financial assumptions -Experience adjustment Return on plan assets over interest income Total re-measurements recognised in other comprehensive income 39.9 2020 2019 -------- (Rupees in ‘000) -------- The funds primarily invests in government securities (Market Treasury Bills, Pakistan Investment Bonds and Special Savings Certificates) and accordingly do not carry any credit risk. These are subject to interest rate risk based on market movements. Equity securities and units of mutual funds are subject to price risk whereas non-Government debt securities are subject to credit risk and interest rate risk. These risks are regularly monitored by Trustees of the employee fund. 2020 2019 Sensitivity analysis on significant assumptions: Actuarial Liability -------- (Rupees in ‘000) -------1% increase in discount rate 1% decrease in discount rate 1 % increase in expected rate of salary increase 1 % decrease in expected rate of salary increase (42,747) 47,233 49,865 (45,871) (37,652) 41,471 43,815 (40,421) 39.11 The expected gratuity expense / contribution to the fund for the next year commencing 01 January 2021 works out to be Rs. 117.432 million (2020: Rs 109.956 million). 39.12 Gratuity expense for the year ended 31 December 2021 -- (Rupees in ‘000) -- Service Cost Net interest on the net defined benefit liability / (asset) (i) Interest cost on defined benefit obligation (ii) Interest income on plan assets (iii) Net interest cost Gratuity cost to be recognised in the profit and loss account 39.13 Maturity profile The weighted average duration of the obligation (in years) 39.14 117,432 73,909 (73,909) 117,432 2020 5.10 2019 4.81 Funding Policy The Bank's funding policy for the scheme is given in note 4.12.1 39.15 The Gratuity scheme exposes the bank to the following risks: Mortality risks This is the risk that the actual mortality experience is different. The effect depends on the beneficiaries’ service / age distribution and the benefit. 160 NAVIGATING OUR WAY TO SUCCESS
  110. Investment risks This is the risk of the investment underperforming and not being sufficient to meet the liabilities . Final salary risks This is the risk that the final salary at the time of cessation of service is greater than what was assumed. Since the benefit is calculated on the final salary, the benefit amount increases similarly. Withdrawal risks This is the risk of higher or lower withdrawal experience than assumed. The final effect could go either way depending on the beneficiaries’ service / age distribution and the benefit. 40 DEFINED CONTRIBUTION PLAN The Bank operates an approved funded provident fund scheme for all its permanent confirmed employees. Equal monthly contributions are made, both by the Bank and its employees, to the fund at the rate of 8.33 percent (2019: 8.33 percent) of basic salaries of the employees. The contribution made by the Bank during the year amounted to Rs. 140.550 million (2019: Rs. 127.229 million). The total number of employees as at 31 December 2020 eligible under the scheme were 2,778 employees (2019: 2,573 employees). 41 COMPENSATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL 41.1 Total Compensation Expense Directors Item s 2020 Executives NonChairman (other than Executives CEO) Members Shariah Board Other Key Material Risk President / Management Takers/ CEO Personnel Controllers ------------------------------------------------- (Rupees in ‘000) ------------------------------------------------Fees and Allowances etc. Managerial Remuneration i) Fixed ii) Variable a) Cash Bonus / Awards* b) Bonus & Awards in Shares Charge for defined benefit plan Contribution to defined contribution plan Rent & house maintenance Car allowance Utilities Medical Entertainment allowance Others Total Number of Persons 2,130 - 3,703 - - 16,331 5,100 - - - - 1,936 30,285 91,502 171,244 - 90 90 85,000 85,000 24,143 24,143 29,353 29,353 2,130 336 309 1,482 718 125 440 259 144 7,516 16,331 161 161 774 182 194 136 27 8,761 3,620 2,523 13,628 252 1,491 418 2,275 139,492 8,270 7,622 37,426 32,881 1,158 9,362 6,405 1,098 219,867 15,557 14,060 67,571 94,243 16,893 11,825 3,037 423,782 1 1** 6*** 3 2**** 16 84 * This represents cash bonus for performance year 2019, paid out in the year 2020. In addition to this payout, an amount of Rs. 22.059 million (2019: Rs. Nil) remains accrued and not yet paid, and has been retained as part of deferred remuneration as per the Bank's remuneration policy and framework. This amount will be paid out over the next three years, together with accrued earnings thereon. **Mr. Amin A Feerasta served as Executive Director till 28 March 2020. His remuneration after being designated as Deputy CEO has been disclosed under Key Management Personnel. ***Number of non-executive directors includes all directors who served on the Board during the year. ****Mr. Aftab Manzoor served as President and CEO till 31 March 2020. Mr. Muhtashim Ahmad Ashai succeeded him as the new President and CEO. ANNUAL REPORT 2020 161
  111. 2019 Directors Item s Fees and Allowances etc . Managerial Remuneration Executives NonChairman (other than Executives CEO) Members Shariah Board Other Key Material Risk President / Management Takers/ CEO Personnel Controllers ------------------------------------------------- (Rupees in ‘000) ------------------------------------------------8,125 i) Fixed ii) Variable a) Cash Bonus / Awards b) Bonus & Awards in Shares Charge for defined benefit plan Contribution to defined contribution plan Rent & house maintenance Car allowance Utilities Medical Entertainment allowance Others Total - 8,345 5,100 - - - - 14,812 - 1,784 36,062 76,336 168,156 - 5,000 5,000 - 75 75 7,000 7,000 21,100 21,100 30,904 30,904 8,125 1,143 1,234 5,925 2,796 1,377 1,749 1,037 131 35,204 8,345 149 149 714 192 178 25 123 8,489 4,562 3,023 16,228 1,702 510 1,225 49 70,361 7,106 6,359 30,534 28,643 7,634 5,343 601 183,656 14,336 13,873 68,488 93,216 16,816 11,771 3,609 421,169 1 1 5 3 1 14 81 Number of Persons In addition to the above, all Directors and Key Management Personnel are entitled to ticketing / boarding and lodging for official travel, the expenses of which are borne by the Bank. Furthermore, the Bank also provides Club membership fee to its President / Chief Executive Officer and certain key management personnel. The amount charged in respect of club membership fee during the year amounted to Rs. 1.621 million (2019: Rs. 1.708 million). Also, the Bank's President and Chief Executive Officer and Deputy Chief Executive Officer are also provided with free use of the Bank maintained car in accordance with their entitlements. Additionally, in line with the SBP's BPRD Circular No. 03 dated 17 August 2009, and as approved by the shareholders of the bank, certain administrative expenses pertaining to the office, staff and security have been allowed to the Chairman of the Board. Key Management Personnel include all Group Heads, EVPs, and Executives having a direct reporting line to the President and Chief Executive Officer or the Deputy Chief Executive Officer. The MRT / MRC inclusion criteria has been developed in accordance with the Bank's approved Remuneration Guidelines and applicable best practices and has been approved by the BHRRC. The inclusion is based on qualitative as well as quantitative criteria and includes the Chief Executive Officer, Deputy Chief Executive Officer, Key Management Personnel, members of critical management committees and heads of critical functions responsible for managing business, risks and controls, that subject the Bank to significant risks. In addition, the Bank carries out detailed assessment of individuals subjecting the Bank to significant risks, the materiality which is determined through an approved quantitative criteria for each major risk type. The aggregate remuneration paid during the year to executives as defined under the Companies Act, 2017 amounted to Rs. 1,363.930 million (2019: Rs. 1,193.182 million). The remuneration framework policy has been detailed in note 4.12.3 to the financial statements. 41.2 Remuneration paid to Directors for participation in Board and Committee Meetings Sr. No. Nam e of Director 2020 Meeting Fees and Allow ances Paid For Board Com m ittee Meetings Board Hum an Board Board Board Risk Com m ittee of Resource and Inform ation For Board Board Audit Total Credit Managem ent Independent Rem uneration Technology Am ount Paid Meetings Com m ittee Com m ittee Com m ittee Directors Com m ittee Com m ittee ------------------------------------------------------- (Rupees in ‘000) ------------------------------------------------------1 2 3 4 5 6 7 8 162 Mr. Alauddin Feerasta Mr. Nooruddin Feerasta Mr. Ahmed Feerasta Mr. Muhammad Rashid Zahir Mr. Manzoor Ahmed Mr. Inam Elahi Mr. Jamil Hassan Hamdani Ms. Navin Salim Merchant Total Amount Paid 1,440 1,200 750 1,200 1,200 150 1,200 750 7,890 600 600 180 690 300 2,370 690 720 600 600 2,610 720 600 450 1,770 450 994 244 843 2,531 180 150 330 360 300 300 960 2,130 2,520 1,560 2,400 3,814 574 3,813 1,650 18,461 NAVIGATING OUR WAY TO SUCCESS
  112. Sr . No. 2019 Meeting Fees and Allow ances Paid For Board Com m ittee Meetings Board Hum an Board Board Board Risk Com m ittee of Resource and Inform ation For Board Board Audit Total Credit Managem ent Independent Rem uneration Technology Am ount Paid Meetings Com m ittee Com m ittee Com m ittee Directors Com m ittee Com m ittee Nam e of Director ------------------------------------------------------- (Rupees in ‘000) ------------------------------------------------------1 2 3 4 5 6 41.3 Mr. Alauddin Feerasta Mr. Nooruddin Feerasta Mr. Muhammad Rashid Zahir Mr. Manzoor Ahmed Mr. Inam Elahi Mr. Jamil Hassan Hamdani Total Amount Paid 5,625 469 844 844 844 750 9,375 281 375 375 375 1,406 2,500 281 375 281 3,437 281 281 281 843 281 281 94 656 94 94 188 188 188 188 564 Chairman Resident Member 8,125 1,031 1,594 1,875 2,063 1,782 16,469 Remuneration paid to Shariah Board Members 2020 Item s Chairm an 2019 NonResident Mem ber(s) Resident Member NonResident Mem ber(s) ------------------------------------------- (Rupees in ‘000) ------------------------------------------a. Meeting Fees and Allowances b. Remuneration (note 41.1) 2,700 - 3,661 2,400 - 2,700 - 3,389 2,400 - Total Amount 2,700 3,661 2,400 2,700 3,389 2,400 1 1 1 1 1 1 Total Number of Persons The Chairman and the Non Resident Member are entitled to Consultancy Allowance, while the resident member is under regular employment. 42 FAIR VALUE MEASUREMENTS The fair value of quoted securities other than those classified as held to maturity, is based on quoted market price. Quoted securities classified as held to maturity are carried at cost. The fair value of unquoted equity securities is determined on the basis of the break-up value of these investments as per their latest available audited financial statements. The fair value of unquoted debt securities, fixed term loans, other assets, other liabilities, fixed term deposits and borrowings cannot be calculated with sufficient reliability due to the absence of a current and active market for these assets and liabilities and reliable data regarding market rates for similar instruments. In the opinion of the management, the fair value of the remaining financial assets and liabilities are not significantly different from their carrying values since these are either short term in nature or, in the case of customer loans and deposits, are frequently repriced. 42.1 Fair value of financial assets The Bank measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements: Level 1: Fair value measurements using quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: Fair value measurements using input for the asset or liability that are not based on observable market data (i.e. unobservable inputs). The table below analyses financial instruments measured at the end of the reporting period by the level in the fair value hierarchy into which the fair value measurement is categorised: ANNUAL REPORT 2020 163
  113. 2020 On balance sheet financial instruments Financial assets - measured at fair value Investments Federal Government securities Shares Non-Government debt securities Units of mutual fund Level 1 Level 2 Level 3 Total ------------------------ (Rupees in ‘000) ---------------------- 3,043,730 416,016 228,765,187 3,954,306 - 61,100 - 228,765,187 3,104,830 3,954,306 416,016 14,281 13,887,187 14,281 Financial assets - disclosed but not measured at fair value Investments Federal Government securities Non-Government debt securities - 13,887,187 - Off-balance sheet financial instruments - measured at fair value Forward purchase of foreign exchange Forward sale of foreign exchange Forward purchase of government securities - 56,457,444 55,497,626 4,996,695 Non - Financial Assets Land and Building (operating fixed assets & non-banking assets)* 3,459,746 - 363,558,445 7,285,684 7,361,065 56,457,444 55,497,626 4,996,695 7,285,684 374,379,256 2019 On balance sheet financial instruments Financial assets - measured at fair value Investments Federal Government securities Shares Non-Government debt securities Units of mutual fund Level 1 Level 2 Level 3 Total ------------------------ (Rupees in ‘000) ---------------------- 3,634,681 205,914 160,173,913 3,389,095 - 11,100 - 160,173,913 3,645,781 3,389,095 205,914 50,239 9,478,123 50,239 Financial assets - disclosed but not measured at fair value Investments Federal Government securities Non-Government debt securities - 9,478,123 - Off-balance sheet financial instruments - measured at fair value Forward purchase of foreign exchange Forward sale of foreign exchange Forward purchase of government securities - 95,155,941 88,575,437 4,042,563 Non - Financial Assets Land and Building (operating fixed assets & non-banking assets)* 3,840,595 360,815,072 - 4,994,207 5,055,546 95,155,941 88,575,437 4,042,563 4,994,207 369,711,213 * The Bank carries out periodic valuation of these assets for reasons disclosed in note 4.5.1 to these financial statements. The Bank's policy is to recognise transfers into and out of the different fair value hierarchy levels at the date the event or change in circumstances that caused the transfer occurred. There were no transfers between levels 1 and 2 during the year. (a) Financial instruments in level 1 Financial instruments included in level 1 comprise of investments in listed ordinary shares and units of mutual funds. (b) Financial instruments in level 2 Financial instruments included in level 2 comprise of GoP Ijarah Sukuks, Pakistan Investment bonds, Market Treasury bills, Corporate bonds, Term Finance and Sukuk certificates. 164 NAVIGATING OUR WAY TO SUCCESS
  114. (c) Financial instruments in level 3 Financial instruments included in level 3 comprise of fixed assets (land and building) and unlisted securities. Valuation techniques and inputs used in determination of fair values 42.2 Item Valuation techniques and input used Fully paid-up ordinary shares Fair values of investments in listed equity securities are valued on the basis of closing quoted market prices available at the stock exchange. Pakistan Investment Bonds / Market Treasury Bills Fair values of Pakistan Investment Bonds and Treasury Bills are determined on the basis of rates / prices sourced from Reuters. Government of Pakistan Ijarah Sukuks Fair values of GoP Ijarah Sukuks are derived using the PKISRV rates announced by the Financial Market Association (FMA) through Reuters. These rates denote an average of quotes received from pre-defined / approved dealers / brokers. Term Finance, Bonds and Sukuk certificates Investments in debt securities (comprising term finance certificates, bonds, sukuk certificates and any other security issued by a company or a body corporate for the purpose of raising funds in the form of redeemable capital) are valued on the basis of the rates announced by the Mutual Funds Association of Pakistan (MUFAP) in accordance with the methodology prescribed by the Securities and Exchange Commission of Pakistan. In the determination of the rates, MUFAP takes into account the holding pattern of these securities and categorises them as traded, thinly traded and non-traded securities. Units of mutual funds Fair values of investments in units of mutual funds are determined based on their net asset values as published at the close of each business day. Land and Buildings (operating fixed assets & non-banking assets) Land and buildings are revalued on a periodic basis using professional valuers. The valuation is based on their assessment of the market value of the assets. The effect of changes in the unobservable inputs used in the valuations cannot be determined with reasonable certainty. Accordingly, a qualitative disclosure of sensitivity has not been presented in these financial statements. The following table presents the changes in level 3 items for the years ended 31 December 2019 and 31 December 2020 for recurring fair value measurements: Freehold land Leasehold land Building on freehold land Building on leasehold land Non-Banking assets Total ------------------------------------- (Rupees in ‘000) ------------------------------------Opening balance 1 January 2019 Acquisitions Amounts recognised in the profit or loss for depreciation and impairment Other adjustments / transfers Closing balance 31 December 2019 1,333,280 - 349,047 - 140,916 36,415 2,325,111 11,042 76,027 770,840 4,224,381 818,297 1,333,280 349,047 (7,323) 170,008 (113,718) (443) 2,221,992 (3,028) 76,041 919,880 (124,069) 75,598 4,994,207 Acquisitions Amounts recognised in the profit or loss as depreciation and impairment Other adjustments / transfers Closing balance 31 December 2020 601,915 96,394 61,793 198,220 958,322 (8,954) 44,632 302,080 (114,413) 871,005 3,040,377 (2,371) 23,648 1,139,377 (125,738) 1,458,893 7,285,684 ANNUAL REPORT 2020 397,097 2,332,292 122,511 471,558 165
  115. 43 SEGMENT INFORMATION 43 .1 Segment details with respect to business activities 2020 Retail Banking Corporate Trading and Sales Islamic Others Total Profit and loss ------------------------------------- (Rupees in ‘000) ------------------------------------- Net mark-up / return / profit Inter segment revenue - net Non mark-up / return / interest income Total income (13,483,658) 18,353,502 1,881,817 6,751,661 11,160,536 (9,127,518) 377,780 2,410,798 393,169 81,931 475,100 13,571,741 (11,060,389) 2,259,831 4,771,183 (986,532) 1,834,405 (793,864) 54,009 10,655,256 3,807,495 14,462,751 5,734,555 182,585 5,917,140 561,453 273,068 191,229 3,004 194,233 (48,301) 2,264,866 435,936 11,689 447,625 174,596 (147,121) 172,729 701 173,430 717,214 3,880,539 2,491,844 (197,979) 2,293,865 (3,259) (2,236,597) 9,026,293 9,026,293 1,401,703 4,034,755 27,133,734 239,785,881 49,843,017 1,168,528 5,217,854 323,149,014 1,420,947 163 100,297,671 213,386 4,744,848 106,677,015 1,822,076 11,098,217 1,981,286 7,602,553 1,262,458 994,373 24,760,963 3,855,260 238,857,291 (255,683,508) 6,974,800 3,291,112 (2,705,045) 15,897,627 4,122,458 34,448 13,408,743 33,463,276 34,232,017 249,955,671 8,956,086 161,865,699 2,678,820 27,656,930 485,345,223 13,289,403 293,849,764 16,009,847 323,149,014 8,228,957 29,535,523 67,328,379 1,584,156 106,677,015 543,623 22,113,481 1,261,824 842,035 24,760,963 64,958,556 (68,590,203) 926,602 (2,705,045) 323,149,014 106,677,015 24,760,963 (2,705,045) 6,994,000 3,312,238 10,306,238 23,157,038 33,463,276 87,020,539 6,994,000 345,498,768 22,674,878 462,188,185 23,157,038 485,345,223 31,586,598 31,586,598 16,833,762 2,549,990 19,383,752 1,012,924 1,012,924 114,269,483 4,996,920 119,266,403 416,791 96,000 3,041,804 3,554,595 49,433,284 114,269,483 2,549,990 416,791 4,996,920 96,000 3,041,804 174,804,272 Segment direct expenses Inter segment expense allocation Total expenses Provision /(Reversal) Profit before tax Balance sheet Cash & bank balances Investments Net inter segment lending Lendings to financial institutions Advances - performing - non-performing Others Total assets Borrowings Subordinated debt Deposits & other accounts Net inter segment borrowing Others Total liabilities Equity Total equity & liabilities Contingencies & commitments In respect of letter of credit / guarantees In respect of forward foreign exchange contracts In respect of forward lendings In respect of fixed assets In respect of government securities In respect of other commitments In respect of other contingencies Total 2019 Retail Banking Profit and loss Net mark-up / return / profit Inter segment revenue - net Non mark-up / return / interest income Total income Segment direct expenses Inter segment expense allocation Total expenses (Reversal) / Provision Profit before tax Balance sheet Cash & bank balances Investments Net inter segment lending Lendings to financial institutions Advances - performing - non-performing Others Total assets 166 Corporate Trading and Sales Islamic Others Total ------------------------------------- (Rupees in ‘000) ------------------------------------(12,841,977) 19,310,019 1,683,056 8,151,098 13,858,612 (11,926,745) 355,588 2,287,455 437,634 92,115 529,749 7,462,098 (9,211,031) 1,201,145 (547,788) (990,201) 1,827,757 (470,742) 366,814 7,926,166 2,861,162 10,787,328 5,162,426 196,193 5,358,619 (812,034) 3,604,513 192,052 2,913 194,965 136,406 1,956,084 376,949 11,509 388,458 5,646 135,645 146,849 400 147,249 (695,037) 2,251,205 (211,015) 2,040,190 81,083 (1,754,459) 8,129,481 8,129,481 (588,899) 3,246,746 29,871,014 193,930,193 49,859,753 1,880,149 4,974,762 280,515,871 3,047,352 25,278 139,121,580 855,267 2,401,247 145,450,724 1,564,720 5,163,153 1,001,861 8,671,254 545,530 3,263,772 20,210,290 1,552,755 171,867,685 (209,605,120) 200,382 3,038,727 (32,945,571) 15,674,927 3,919,191 48,589 9,666,761 29,309,468 36,035,841 177,056,116 1,202,243 201,571,778 3,329,535 23,345,269 442,540,782 NAVIGATING OUR WAY TO SUCCESS
  116. 2019 Retail Banking Islamic Corporate Trading and Sales Others Total ------------------------------------- (Rupees in ‘000) ------------------------------------Borrowings Subordinated debt Deposits & other accounts Net inter segment borrowing Others Total liabilities Equity Total equity & liabilities Contingencies & commitments In respect of letter of credit / guarantees In respect of forward foreign exchange contracts In respect of forward lendings In respect of fixed assets In respect of government securities In respect of other contingencies Total 8,853,307 260,916,663 10,745,901 280,515,871 280,515,871 6,795,807 23,803,470 111,911,617 2,939,830 145,450,724 145,450,724 364,979 17,362,852 1,699,362 783,097 20,210,290 20,210,290 79,691,016 (113,610,979) 974,392 (32,945,571) (32,945,571) 6,995,200 2,100,673 9,095,873 20,213,595 29,309,468 95,705,109 6,995,200 302,082,985 17,543,893 422,327,187 20,213,595 442,540,782 27,410,443 27,410,443 16,116,715 5,378,806 21,495,521 1,052,315 1,052,315 187,259,290 4,042,882 191,302,172 111,675 3,493,455 3,605,130 44,579,473 187,259,290 5,378,806 111,675 4,042,882 3,493,455 244,865,581 43.1.1 The operations of the Bank are currently based only in Pakistan, therefore, geographical segment is not relevant. 44 TRUST ACTIVITIES The Bank commonly acts as a trustee and in other fiduciary capacity that results in the holding or placing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions. These are not the assets of the Bank and, therefore, are not included in the Statement of Financial Position, neither are these treated as transactions with related parties, except to the extent of actual custodial charges received against such services provided. The following is the list of assets held under trust: Category Type No. of IPS accounts 2020 Face Value 2019 2020 2019 ----- (Rupees in ‘000) ----Asset Management Companies Asset Management Companies Asset Management Companies Asset Management Companies Asset Management Companies Asset Management Companies Employee Funds / NGO's Employee Funds / NGO's Employee Funds / NGO's Employee Funds / NGO's Employee Funds / NGO's Employee Funds / NGO's Individuals Individuals Individuals Individuals Individuals Individuals Individuals Corporate Staff retirement funds - related parties Staff retirement funds - related parties PIB 3 years PIB 5 years PIB 10 years MTB 6 months MTB 3 months MTB 12 months PIB 3 years PIB 5 years PIB 10 years MTB 3 months MTB 6 months MTB 12 months MTB 3 months MTB 6 months MTB 6 months MTB 12 months PIB 5 years PIB 10 years PIB 20 years MTB 3 months PIB 3 years PIB 20 years 8 2 6 6 1 1 - 1 1 3 1 1 1 3 1 1 - 2 2 24 17 3,919,300 858,900 934,000 174,900 25,000 147,000 2,151,500 3,241,000 2,742,035 100,000 63,500 1,400 19,000 45,500 5,400 10,000 250,000 250,000 10,000 14,948,435 1,750,000 50,000 200,000 1,000,000 1,450,000 147,000 1,451,500 3,216,000 50,000 50,000 36,000 9,000 45,500 5,400 10,000 250,000 10,000 9,730,400 Numbers of IPS Accounts for Assets Management Companies include 2 accounts (2019 : 2 accounts) for funds managed by NIT (Related Party), with securities held under trust having of face value of Rs. 3,325 million (2019 : Rs. 4,450 million) 45 RELATED PARTY TRANSACTIONS The Bank has related party transactions with its related group companies, major shareholders, staff retirement funds, directors and their close family members (inculding their associates) and key management personnel. ANNUAL REPORT 2020 167
  117. The Bank enters into transactions with related parties in the ordinary course of business and on substantially the same terms as for comparable transactions with person of similar standing . Contributions to and accruals in respect of staff retirement benefits and other benefit plans are made in accordance with the actuarial valuations / terms of the contribution plan as disclosed in note 39 & 40. Remuneration to the executives / officers is determined in accordance with the terms of their appointment and is disclosed in note 41 to the financial statements. Details of transactions with related parties during the year, other than those which have been disclosed elsewhere in these financial statements are as follows: 2020 2019 Particulars Statement of financial position Investments Opening balance Investment made during the year Investment redeemed / disposed during the year Closing balance Advances Opening balance Addition during the year Repaid during the year Transfer in / (out) - net Closing balance Other assets Interest / mark-up accrued Other receivable against E-banking settlement against investment Deposits and other accounts Opening balance Received during the year Withdrawn during the year Transfer in / (out) - net Closing balance Other liabilities Interest / mark-up payable Contingencies and Commitments Guarantees Directors (a) Key* management Other related personnel parties (a) Directors (a) Key* management Other related personnel parties (a) --------------------------------------- (Rupees in ‘000) --------------------------------------- - - 215,213 573,185 (348,114) 440,284 - - 259,268 69,263 (113,318) 215,213 65,000 244,570 (160,570) 149,000 176,995 59,543 (65,968) (29,217) 141,353 - 3,000 65,000 (3,000) 65,000 169,576 90,327 (77,581) (5,327) 176,995 - 4,464 56 - 1,136 64 - 4,464 56 656,418 656,418 1,136 64 10,013 5,425,540 696,483 87,591,751 (547,530) (87,787,473) (70,310) 88,656 5,229,818 247,127 2,870,469 (2,514,602) 602,994 602,994 1,804,933 (1,831,907) (42,736) 533,284 1,981 - 752 - 29,424 - 9,331 - 234,818 50,000 284,818 25,704 4,993,206 506,179 126,202,027 (523,748) (125,769,693) 1,878 10,013 5,425,540 139 - 64,483 - Profit and loss account Income Mark-up / return / interest earned Fee and commission income Dividend income 9,726 42 - 11,484 68 - 467 12,155 1,182 36 - 11,804 98 - 281 4,826 Expense Mark-up / return / interest paid Directors' fees and allowances Rent expense ** ATM and ADC charges Charge for staff retirement funds 36,406 18,461 - 4,470 - 469,004 15,225 8,352 250,506 34,680 16,469 - 636 - 583,281 12,195 15,934 224,110 * including President and CEO (a) including their relatives ** Actual rent expense is disclosed as part of related party transactions. While accounting for branches / locations on lease for the purpose of financial statements, the bank applies the requirements of IFRS 16 - Leases. 168 NAVIGATING OUR WAY TO SUCCESS
  118. 2020 46 ----- (Rupees in ‘000) ----- Minimum Capital Requirement (MCR): Paid-up capital (net of losses) 11,024,636 11,024,636 Capital Adequacy Ratio (CAR): Eligible Common Equity Tier 1 (CET 1) Capital Eligible Additional Tier 1 (ADT 1) Capital Total Eligible Tier 1 Capital Eligible Tier 2 Capital Total Eligible Capital (Tier 1 + Tier 2) 19,260,436 3,584,770 22,845,206 4,610,533 27,455,739 17,710,250 3,441,320 21,151,570 3,767,475 24,919,045 134,385,533 8,610,225 18,789,518 161,785,276 132,201,073 8,492,414 17,105,251 157,798,738 Common Equity Tier 1 Capital Adequacy ratio Tier 1 Capital Adequacy Ratio Total Capital Adequacy Ratio 11.90% 14.12% 16.97% 11.22% 13.40% 15.79% National minimum capital requirements prescribed by SBP CET1 minimum ratio Tier 1 minimum ratio Total capital minimum ratio 6.00% 7.50% 11.50% 6.00% 7.50% 12.50% Leverage Ratio (LR): Eligible Tier-1 Capital Total Exposures Leverage Ratio - percentage 22,845,206 566,685,566 4.03% 21,151,570 563,698,550 3.75% Liquidity Coverage Ratio (LCR): Total High Quality Liquid Assets Total Net Cash Outflow Liquidity Coverage Ratio - percentage 155,353,599 125,268,638 124.02% 106,798,772 95,942,809 111.32% Net Stable Funding Ratio (NSFR): Total Available Stable Funding Total Required Stable Funding Net Stable Funding Ratio - percentage 235,312,708 161,201,255 145.97% 224,485,675 206,869,663 108.52% Risk Weighted Assets (RWAs): Credit Risk Market Risk Operational Risk Total 46.1 The Bank follows the below mentioned approach for determining credit risk, market risk and operational risk exposures in the capital adequacy calculation: Risk Type Credit Risk Market Risk Operational Risk 46.2 2019 CAPITAL ADEQUACY, LEVERAGE RATIO & LIQUIDITY REQUIREMENTS Approach adopted by Bank Standardized Approach Standardized Approach Basic Indicator Approach Capital Management The Bank’s policy is to maintain a strong capital base so as to maintain investor, depositor, creditor and market confidence and to sustain future development of the business, while providing adequate returns to shareholders. The SBP sets and monitors capital requirements for the Bank as a whole. The SBP, through BSD Circular No. 07 dated April 15, 2009 has required that Banks should maintain a minimum paid-up capital of Rs. 10 billion (net of accumulated losses). The paid-up capital of the Bank as at 31 December 2020 stood at Rs 11.025 billion (2019: Rs. 11.025 billion) and is in compliance with the SBP requirements. The Bank is also required to maintain the following minimum Capital Adequacy Ratios (CAR) as at 31 December 2020: ANNUAL REPORT 2020 169
  119. - Common Equity Tier 1 (CET1) ratio of 7.50% including Capital Conservation Buffer (CCB) of 1.50% - Tier 1 ratio of 9.00% including CCB of 1.50% - Total Capital Adequacy Ratio (CAR) of 11.50% including CCB of 1.50% The Bank and its individually regulated operations have complied with all capital requirements throughout the year. The Bank’s regulatory capital is classified as follows: - Tier 1 capital comprises of Common Equity Tier 1 (CET 1) and Additional Tier 1 (AT 1) capital. - CET1 capital includes fully paid-up capital, balance in share premium account, reserves (excluding foreign exchange translation reserves) and unappropriated profits meeting the eligibility criteria. - AT 1 capital includes instruments meeting the prescribed SBP criteria e.g. perpetual non-cumulative preference shares. - Tier 2 capital includes general provisions for loan losses, surplus on revaluation of fixed assets and investments, foreign exchange translation reserves and subordinated debts (meeting the eligibility criteria). Banking operations are categorised as either trading book or banking book, and risk-weighted assets are determined according to specified requirements that seek to reflect the varying levels of risk attached to on and off-balance sheet exposures. - On and off-balance sheet exposures in the banking book are segregated into various asset classes for the calculation of credit risk. Ratings for assets reflecting the credit worthiness of counterparties are applied using various External Credit Assessment Institutions (ECAIs) and aligned with appropriate risk buckets. Collateral, if any, is used as an outflow adjustment. Risk weights notified, are applied to arrive at net adjusted exposure. Eligible collateral used includes Government of Pakistan guarantees for advances, investments in GOP / PSE, bank guarantees, deposits / margins, lien on deposits and saving certificates. - The Bank calculates capital requirements for market risk in its trading book based on the methodology provided by the SBP which takes account of specific and general market risk, capital charge for interest rate risk using the maturity method, foreign exchange risk and equity position risk. 46.3 The full disclosures on the capital adequacy, leverage ratio and liquidity requirements as per SBP instructions issued from time to time shall be placed on the website. The link to the full disclosures shall be short and clear and be provided within this note such as, The link to the full disclosure is available at https://www.soneribank.com/wp-content/uploads/2021/04/additional information.pdf 47 RISK MANAGEMENT The primary goal of risk management is to identify, assess and monitor risks inherent in the activities of the Bank and take adequate measures to manage and control these risks on a timely basis. This will help in achieving sustainable business growth, financial and non-financial targets with better protection and soundness. The Bank’s aim is to achieve an appropriate balance between risk and return and to minimize potential adverse effects on the Bank’s financial performance. The Bank's risk management framework encompasses the culture, processes and structure and is directed towards the effective management of potential opportunities and threats to the Bank. The prime objective of the Bank's risk management strategy is to abandon the traditional approach of 'managing risk by silos' and to put in place integrated risk and economic capital management capabilities that will enable the Bank to achieve integrated view of risks across its various business operations and to gain strategic advantage from its risk management capabilities. The Board of Directors (BOD) keeps an oversight on the Bank-wide risk management framework and approves the risk management strategy and policies of the Bank. The Board Risk Management Committee (BRMC), ensures that the Bank maintains a complete and prudent integrated risk management framework at all times and ensures that the risk exposures are maintained within acceptable levels. Moreover, the Credit Risk Management Committee (CRMC), Operational Risk Management Committee (ORMC) and all other senior management committees are mainly responsible for ensuring the compliance of the BOD approved risk management policy and for monitoring and managing risk levels in relevant areas of the Bank. The Bank's risk management policy, formulated on regulatory guidelines, covers all major types of risk that the Bank is exposed to. The policy is laid down on key risk management principles which includes management oversight and control culture, risk recognition and assessment, control activities and segregation of duties, information and communication and monitoring activities and correcting deficiencies. 170 NAVIGATING OUR WAY TO SUCCESS
  120. Board of Directors Approves risk management strategy and policy Board Audit Committee Board Credit Committee Board Risk Management Committee Considers the adequacy & effectiveness of Internal Control framework • Reviews risk profile • Reviews RM strategies, policies systems and procedures • Ensures Credit, Market, Liquidity, Operational & other risk are maintained at an acceptable level C Assessment & Monitoring The committee reviews lending policies, procedures & establishes strategy to strengthen & monitor the loan portfolio Shari’ah Board The Shari’ah Board ensures that all the procedure manuals, product programs / structures, process flows, related agreements, marketing advertisements, sales illustrations and brochures are in conformity with the rules and principles of Shari’ah. President & Chief Executive Officer (CEO) Asset Liability Committee • Monitors Liquidity Risk; Credit Risk Mangement Committee • Monitors interest rate risk; • Ensures implementation of CRM policy/strategy; • Develops strategies to manage Liquidity needs in view of current economic political situation; • Ensures compliance with regulatory requirements & internal policies and compliance with limits respect to credit; • Regulates structure / composition of assets & liabilities and decide pricing of loans & advances. • Reviews and assesses the credit portfolio structure; • Analyzes market, conditions and economic sectors in which the Bank has exposure or is willing to take exposure; Operation Risk Management Committee • Reviews Operational Risk Management Framework and ensures its compliance; • Reviews and analyzes NPLs portfolio; • Ensures adequacy of credit assessment and monitoring mechanism; • Assesses the effectiveness and efficiency of internal controls environment of the Bank; • Assesses adequacy of credit risk rating / scoring systems of the Bank. • Monitors Bank-wide operational risks; • Ensures adequacy of capital with respect to required operational risk charge; Market Risk Management Committee • Monitors and ensures compliance with regulatory and internal policies covering foreign exchange risk, interest rate risk, equity price risk, and liquidity risk; • To conduct risk and control assessment exercise for processes / products / systems. • Reviews the profitability objectives and investment strategies; BCP Steering Committee • Establishes business continuity plan and ensures its effective implementation; • Discusses and/or devise strategies to mitigate risks and ensures optimum level of risk-return relationship is maintained. • Ensures the protection and availability of critical business processes and supporting technology in case of crises; Investment Committee • Sponsors the execution and maintenance of risk assessment business impact analysis, crises recovery plans and training programs; • To manage Capital Market risk • Ensures the adequacy of plans; I.T. Security Steering Committee • Ensures that alternate sites and/or spaces are available for critical process; Chief Risk Officer • To manage I.T. Security risk Risk Management Group • Ensures that proper training sessions are conducted. • Develops risk framework / policies & procedures for management of Credit Market, Liquidity, Operational I.T. security and other inherent risks; • Development of system & procedures for identification assessment, monitoring & control of Credit, Market, Liquidity, Operational and other inherent risks; • Monitoring of risk on a portfolio basis. Assurance C Internal Audit Compliance • Assesses the adequacy of Risk Management processes • Assesses the adequacy of Internal Control Framework • Ensures compliance with all statutory and regulatory requirements • Ensures compliance with Bank’s policies The Bank has a well-established risk management structure, with an active Board of Directors and Board Risk Management Committee supported by an experienced senior management team and a centralized risk management group which is independent of the business lines. RISK MANAGEMENT FUNCTION BOD / BRMC President & CEO Chief Risk Officer I.T. Security Risk Management Department Head of Risk Management Credit Risk Management / Review Department ANNUAL REPORT 2020 Market & Liquidity Risk Management Department Risk Analytics & Economic Capital Department Basil II / III Implementation & Policy Review Operational Risk / BCP Management Department 171
  121. 47 .1 Credit risk The Bank has undertaken a number of initiatives in the areas of assessment, measurement and monitoring of credit risk, market risk, funding liquidity risk,operational risk and IT security risks. These measures are providing competitive advantage to the Bank besides preparing the Bank for the full implementation of Basel-III. Credit Risk Management Objectives and Organisation Lending of money is the core business activity, a major source of revenue and a significant exposure for the Bank. Lendings are mainly funded from depositors' money. Therefore, in order to protect the stakeholders' wealth, the Bank has deployed considerable resources and adequate controls to manage, monitor and control credit risk throughout the Bank. The main objective of the credit risk management process is to identify, assess, measure and monitor credit risk in all the financial exposures of the Bank. The Bank has established a rigorous credit risk management framework to timely and effectively manage credit risk in each and every credit transaction as well as at portfolio level. Enterprise Risk Management (ERM) solution of SAS provides information / analysis in making better credit decisions, measured risk-taking, better loan pricing and efficient capital allocation thereagainst thus resulting in efficient and effective use of funds and increase in profitability of the Bank. The Bank has an organisational structure for managing credit risk, established on internal control environment and equipped with adequate level of expertise and resources. CREDIT RISK MANAGEMENT STRUCTURE Board of Directors Board Credit Committee Board Risk Management Committee President & CEO Chief Risk Officer Executive Credit Committee Credit Risk Management Committee Credit Risk Management Department Credit Division Credit Policy and Credit manual Credit Approval & Monitoring Head of Risk Management Credit Administration Credit Risk Review Department Corporate, ME, SE, Agriculture Risk Review Consumer Risk Review Credit Approval Authorities and Credit Standards The Board of Directors has delegated lending powers to different tiers of credit approving authorities, constituted at central and regional levels. Extension of credit is executed, in strong internal control environment, in the light of the Bank's credit policies and procedures and regulatory requirements. The approval mechansim also accounts for Internal Raitng of the borrower, thus high risk clients are only approved at senior level. Credit Portfolio Management Besides managing credit risk at transaction level, the Bank regularly monitors credit risk at portfolio level and ensures that no undue concentration of risk is present in the overall credit exposure at Bank level. The Bank has a well established and rigorous management information set-up which allows efficient and effective assessment, monitoring and management of its credit risk profile in various dimensions. Credit Risk Rating The Credit risk Rating System provides solid grounds for the assessment and measurement of credit risk against each obligor in addition to fulfilling regulatory requirements. The SAS based Internal Obligor Risk Rating System for Agriculture, Corporate, ME/SE and Consumer borrowers have been approved by the BoD of the Bank. This rating system is an empirical risk rating system which will help to assess the Probability of Default (PD) of these obligors; risk based pricing, risk diversification and portfolio management as per the requirement of SBP/Basel Accords and also has the capability to track historical defaults and loss experiences. Bank has also signed up recently with a Bahrain based vendor having international repute for validation and development of scorecards and probability of default (P.D) modelling. 172 NAVIGATING OUR WAY TO SUCCESS
  122. These Credit Risk Rating Systems are now incorporated with Bank 's Credit Approval Processing Systems (CAPs) for its Corporate, SE/ME, Agri and Consumer borrowers; resultantly this facility would reduce the TAT in Credit Risk Review process and approvals and establish a single platform for initiation and monitoring the Bank's portfolio. The ORR assigns risk grades to customers, in accordance with the regulatory requirements, in twelve grades, out of which top nine grades refer to regular customers whereas remaining three grades pertain to defaulted ones. Whereas, FRR assigns each loan facility in six categories, in accordance with regulatory requirements. Business Units assign credit risk rating to every customer and loan facility as an integral part of the Bank's credit approval process. Credit Risk Management Policy A sound credit risk management framework forms part of the overall business strategy and credit operations of the Bank. The principles for credit risk management have been laid down in the Bank's credit policy, credit manual, and credit risk procedural manual. The policy has been developed in accordance with the requirements of the State Bank of Pakistan and is reviewed and updated (where required) on a periodic basis. Credit Risk Assessment The Bank has a well established and rigorous pre-approval evaluation process of credit risk embedded in each credit transaction executed by the Business Units. The entire process broadly encompasses, gathering relevant information on the borrower, credit investigations and visits, detailed credit appraisal and credit risk assessment / measurement. Credit Risk Limit Structure In addition to monitoring credit limits specified in the Prudential Regulations of the State Bank of Pakistan, the credit limit structure of the Bank includes internal limits as established by the senior management and the BOD. Internal limits include limits with respect to BOD approved risk appetite, industry / sector, credit approval authority, large exposures limits, linkage ratio limits for corporate borrowers, exposure with banks and NBFIs, exposure with insurance companies and foreign countries. All these limits are monitored on a regular basis and any exceptions are reported to the relevant authorities for their timely action where necessary. Collateral Collateral act as mitigants in case of default by the borrower. Therefore, most of the facilities extended by the Bank are backed by appropriate and quality collaterals. Similarly, lendings to financial institutions and DFIs are backed by securities viz., Treasury Bills and Pakistan Investment Bonds. Clean facilities are provided, under strict control environment, only to the extent permissible under the Prudential Regulations of the State Bank of Pakistan. The credit manual of the Bank contains list of approved collaterals that the Bank can take and internal control standards for the management of collaterals obtained against credit facilities. Early Warning System The Bank has an effective early warning system which enables the Business Units / credit managers / credit administration personnel to identify and report problem loans on a prompt basis. Reports are received from Business Units on a regular basis, which are escalated to the concerned authority for necessary action on a timely basis. Remedial Management and allowances for impairment The Bank has standards for identification and classification of credit facilities, restructuring as well as related provisioning requirements and write-off policy, with clear responsibilities pertaining to all processes that are required to be followed. Non-performing loans beyond certain aging / classification category are required to be referred to Remedial Management Group which initiates recovery proceedings against the borrowers in accordance with the applicable laws. Particulars of Bank's significant on-balance sheet and off-balance sheet credit risk in various sectors are analysed as follows: 47.1.1 Lendings to financial institutions Credit risk by public / private sector Gross lendings Non-performing lendings Provision held 2020 2019 2020 2019 2020 2019 ------------------------------------------ (Rupees in ‘000) -----------------------------------------Public / Government Private ANNUAL REPORT 2020 3,000,000 5,956,086 8,956,086 1,202,243 1,202,243 - - - - 173
  123. 47 .1.2 Investment in debt securities Credit risk by industry sector Gross investments Non-performing investments Provision held 2020 2019 2020 2019 2020 2019 ------------------------------------------ (Rupees in ‘000) -----------------------------------------Textile Chemical and Pharmaceuticals Services Construction Power (electricity), Gas, Water, Sanitary Financial 52,234 52,234 7,440 7,440 440,444 470,000 6,560 6,560 2,088,662 1,539,814 243,925,579 171,214,467 246,520,919 173,290,515 52,234 7,440 6,560 19,860 86,094 52,234 7,440 6,560 19,860 86,094 52,234 7,440 6,560 19,860 86,094 52,234 7,440 6,560 19,860 86,094 Credit risk by public / private sector Gross investments Non-performing investments Provision held 2020 2019 2020 2019 2020 2019 ------------------------------------------ (Rupees in ‘000) -----------------------------------------Public / Government Private 47.1.3 243,494,228 171,014,218 3,026,691 2,276,297 246,520,919 173,290,515 86,094 86,094 86,094 86,094 86,094 86,094 86,094 86,094 Advances Credit risk by industry sector Gross advances 2020 2019 Non-performing advances 2020 2019 Provision held 2020 2019 ------------------------------------------ (Rupees in ‘000) -----------------------------------------Agriculture, Forestry, Hunting and Fishing Food and Allied Textile Chemical and Pharmaceuticals Cement Sugar Footwear and Leather garments Automobile and transportation equipment Electronics and electrical appliances Construction Power (electricity), Gas, Water, Sanitary Wholesale and Retail Trade Exports/Imports Financial Services Individuals Education Iron & Steel Paper & Printing Plastic Products Ship Breaking Others 174 2,622,705 2,369,292 30,709,114 64,450,550 26,940,779 28,748,118 6,942,734 7,128,648 1,891,846 2,205,011 6,768,573 6,895,983 1,673,182 1,840,328 1,585,306 2,173,810 3,709,311 4,014,139 4,750,985 4,745,050 25,599,370 27,134,901 19,605,766 21,138,428 9,598,205 9,034,293 869,791 967,098 7,148,405 7,887,436 7,928,632 7,649,927 1,888,895 2,045,478 5,439,354 4,404,180 1,469,973 1,698,585 817,460 1,864,674 1,884,276 1,360,697 2,847,981 2,759,288 172,692,643 212,515,914 181,502 1,452,257 4,428,419 573,804 85,704 61,321 54,312 33,581 839,183 254,445 228,864 132,167 305,466 182,263 340,447 48,920 364,297 1,087,246 131,208 10,785,406 179,359 151,185 1,237,357 473,791 4,773,782 4,006,948 574,860 552,417 415,539 85,704 66,521 61,321 54,312 54,312 36,908 32,582 149,871 224,960 266,937 145,442 443,490 87,148 133,499 132,167 422,405 245,681 159,637 133,808 267,842 246,802 48,920 48,920 465,368 326,190 1,090,746 1,004,056 115,245 93,152 10,902,598 8,106,586 149,682 263,390 4,127,279 543,795 144,420 66,521 54,312 34,757 149,871 156,109 125,606 133,499 362,620 91,698 215,456 48,920 236,748 585,608 82,772 7,573,063 NAVIGATING OUR WAY TO SUCCESS
  124. Credit risk by public / private sector Gross advances Non-performing advances Provision held 2020 2019 2020 2019 2020 2019 ------------------------------------------ (Rupees in ‘000) -----------------------------------------Public/ Government Private 47.1.4 Contingencies and Commitments Credit risk by industry sector Agriculture, Forestry, Hunting and Fishing Food and Allied Textile Chemical and Pharmaceuticals Cement Sugar Footwear and Leather garments Automobile and transportation equipment Electronics and electrical appliances Construction Power (electricity), Gas, Water, Sanitary Wholesale and Retail Trade Exports/Imports Financial Services Education Iron & Steel Paper & Printing Plastic Products Ship Breaking Others 43,813,940 78,503,801 128,878,703 134,012,113 172,692,643 212,515,914 10,785,406 10,785,406 10,902,598 8,106,586 10,902,598 8,106,586 7,573,063 7,573,063 2020 2019 ------ (Rupees in ‘000) -------233,007 216,548 9,201,400 6,862,623 6,335,128 5,159,739 3,560,440 2,345,900 317,014 1,792,231 221,542 1,005,937 325,808 215,351 756,562 355,901 2,226,289 1,701,729 2,618,876 2,766,477 6,100,543 6,733,032 7,475,828 9,139,680 1,866,685 1,565,782 117,332,855 189,949,268 10,812,612 10,686,022 104,571 104,571 1,808,043 1,799,597 810,454 854,498 1,588,724 657,317 116,707 401,707 991,184 551,671 174,804,272 244,865,581 Credit risk by public / private sector Public / Government Private 47.1.5 1,232,133 1,693,865 173,572,139 243,171,716 174,804,272 244,865,581 Concentration of advances The Bank's top 10 exposures on the basis of total (funded and non-funded exposures) aggregated to Rs. 56,101 million (2019: Rs. 87,780 million) and are as following: 2020 2019 ------- (Rupees in ‘000) ------Funded Non-funded Total exposure 54,219,037 1,881,771 56,100,808 85,048,475 2,731,441 87,779,916 The sanctioned limits against these top 10 exposures aggregated to Rs. 105,476 million (2019: Rs. 104,950 million). As at 31 December 2020, none of the top 10 exposures are classified and no provision is required / held thereagainst. ANNUAL REPORT 2020 175
  125. 47 .1.6 Advances - province / region-wise disbursement & utilization 2020 Utilization Province / region Disbursements Punjab Sindh AJK including KPK including Balochistan Gilgit-Baltistan FATA Islamabad ----------------------------------------------- (Rupees in ‘000) ----------------------------------------------Punjab Sindh KPK including FATA Balochistan AJK including Gilgit-Baltistan Islamabad Total 258,684,087 298,075,877 5,379,520 228,897 4,519,369 47,232,195 614,119,945 248,089,300 6,519,354 112,229 12,941,102 267,661,985 1,235,310 285,439,847 7,308,875 293,984,032 2,679,552 1,914,468 5,229,245 8,989,237 18,812,502 3,137,965 228,897 3,366,862 3,744,284 4,519,369 8,263,653 2,935,641 1,064,243 38,046 17,992,981 22,030,911 2019 Utilization Province / region Disbursements Punjab Sindh AJK including KPK including Balochistan Gilgit-Baltistan FATA Islamabad ----------------------------------------------- (Rupees in ‘000) ----------------------------------------------Punjab Sindh KPK including FATA Balochistan AJK including Gilgit-Baltistan Islamabad Total 252,936,960 231,706,076 3,748,789 124,065 2,859,644 47,527,305 538,902,839 239,416,246 5,777,430 53,580 17,193,187 262,440,443 3,930,613 211,057,343 6,623,192 221,611,148 2,776,470 401,167 3,695,209 21,906 7,613,013 14,507,765 2,656,962 124,065 2,781,027 1,117,573 2,837,738 3,955,311 5,696,058 11,813,174 16,097,913 33,607,145 Disbursements mean the amounts disbursed by banks either in Pak Rupee or in foreign currency against loans. Disbursements of Province/Region wise” refers to the place from where the funds are being issued by scheduled banks to the borrowers. Utilization of Province/Region wise” refers to the place where the funds are being utilized by borrower. 47.2 Market Risk 47.2.1 Market risk is the risk that the value of on and off-balance sheet positions of a financial institution will be adversely affected by movements in market rates or prices such as interest rates, foreign exchange rates, equity prices and / or commodity prices resulting in a loss to earnings and capital. Market risk management objective and organisation The Risk Management Framework requires that strong risk management practices are integrated in key strategic, capital and financial planning processes and day-to-day business processes across the Bank. The Bank has established a rigorous market risk management framework to efficiently and effectively monitor and manage market risk in every transaction as well as on a portfolio level. The Bank has a sound organisation structure for managing market risk, established on strong internal control environment and equipped with adequate level of expertise and resources. The Risk Management Committee (RMC), a BOD level sub-committee, is primarily responsible to monitor and manage market risk in all the financial exposures of the Bank, supported by senior management committees namely Asset and Liability Management Committee (ALCO). 176 NAVIGATING OUR WAY TO SUCCESS
  126. MARKET RISK MANAGEMENT STRUCTURE Board of Directors Board Risk Management Committee President & CEO ALCO Chief Risk Officer Market Risk Management Committee Head of Risk Management Market Risk Management Department Market Risk Monitoring The Bank’s market risk policies set out risk management parameters, governance and control frameworks as well as reporting arrangements for key risk indicators. The Bank has a well-established structure of internal limits with respect to its treasury and investment operations. The Treasury Middle Office (TMO), within the Market Risk Management Department, monitors each and every transaction executed through treasury, monitors risk limits, reports breaches, off market rates, rate reasonability against benchmark rates, tolerance PV01 limits and assesses market risk in money market transactions, investments in equity securities, monitors impairments in equity securities and its stop loss limit and foreign exchange transactions. In order to mitigate unnecessary risk and ensure minimum business losses, Earmarking Policy has also been implemented to ensure risk migration from high risk to low risk transactions. Portfolio Analysis and Management Besides managing market risk at transaction level, the Bank regularly monitors market risk at portfolio level and ensures that no undue concentration of risk and adverse correlation is present in the overall financial exposures at the Bank level. The Bank has a well established management information set-up which allows efficient and effective assessment, monitoring and management of its market risk profile in various dimensions. Marking-to-Market The Bank is marking-to-market (MTM) its investment in tradable and available for sale securities, i.e., equity securities, debt securities and foreign exchange ready and forward transactions, on a regular basis. The same is independently reviewed by the Risk Management Group. Market Risk Assessment and Measurement The Bank is assessing and measuring market risk in all of its financial exposures using various types of measurement and analytical tools like Value at Risk (VaR), duration and convexity, interest rate gap and duration gap. The Bank is using Standardized Approach for exposures in its balance sheet, to calculate market risk capital charge and risk weighted asset for Capital Adequacy Ratio (CAR) calculation purposes. The Bank's principle market risk measurement methodology are VAR and stress testing. Historical financial market rates, prices and volatility serve as the basis for the statistical VAR model underlying the potential loss estimation. The Bank uses ten days as well as 30 days holding period at 99% confidence level to model risk in different portfolios. The main assumptions and scenarios of our stress analysis includes: ANNUAL REPORT 2020 177
  127. 47 .2.2 1. Parallel shift in yield curve by 2%, 3% and 4%. 2. Change in the slope of yield curve by changing short-term, medium-term and long-term maturities by different rates. 3. Gain or loss depending on net long or net short position in foreign currency exposure. 4. Fall in general equity price upto 50%. Statement of financial position split by trading and banking books 2020 Banking book Trading book 2019 Total Banking book Trading book Total --------------------------------------- (Rupees in ‘000) --------------------------------------Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances Fixed assets Intangible assets Other assets 47.2.3 29,963,954 4,268,063 8,956,086 244,562,058 164,544,519 11,910,925 408,274 15,337,731 479,951,610 29,963,954 33,961,308 4,268,063 2,074,533 8,956,086 1,202,243 5,393,613 249,955,671 167,510,061 9,546,055 - 164,544,519 204,901,313 11,910,925 8,328,905 408,274 466,686 15,337,731 14,549,678 5,393,613 485,345,223 432,994,727 9,546,055 33,961,308 2,074,533 1,202,243 177,056,116 204,901,313 8,328,905 466,686 14,549,678 442,540,782 Foreign exchange risk Foreign exchange risk is the probability of loss resulting from adverse movements in exchange rates. Exchange position arising from trading activities is monitored through foreign exchange limits on aggregate and individual currency basis. Hedging strategies and mark-to-market valuations are used to mitigate exchange risk resulting from open position. Overall exchange position risk is maintained in accordance with the regulatory requirements prescribed by the State Bank of Pakistan. 2020 2019 Net foreign Foreign foreign Foreign Foreign Foreign Off-balance Off-balance Net currency Currency currency Currency Currency Currency sheet items sheet items exposure Liabilities exposure Liabilities Assets Assets --------------------------------------------- (Rupees in ‘000) ----------------------------------------------United States dollar Great Britain pound Japanese Yen Euro Chinese Yuan Other currencies 19,149,249 356,517 14,210 868,402 206,233 37,446 20,632,057 17,199,154 2,336,963 74 1,029,297 199,186 20,042 20,784,716 (1,153,574) 1,975,913 (10,848) 151,229 1 962,721 796,521 (4,533) 3,288 (9,666) 7,047 17,405 810,062 20,014,429 616,799 15,916 1,138,012 137,875 27,001 21,950,032 24,724,332 2,357,868 21,126 907,806 136,705 20,028 28,167,865 4,738,536 1,744,678 6,415 (222,625) (1) 3,255 6,270,258 2020 Banking book 28,633 3,609 1,205 7,581 1,169 10,228 52,425 2019 Trading book Banking book Trading book ------------------ (Rupees in ‘000) -----------------Impact of 1% change in foreign exchange rates on - Profit and loss account - Other comprehensive income 47.2.4 - 8,101 - - 524 - Equity position risk The Bank invests mainly in blue chip securities depending upon market mispricing through arbitrage. Further, the risk arising from investments in equity securities lies in both its banking and trading books which is measured and assessed using the Value at Risk (VaR) approach. The VaR of the portfolio is reported to the BRMC, ALCO/MRMC and other authorities on a periodical basis. 2020 2019 Banking book Impact of 5% change in equity prices on - Profit and loss account - Other comprehensive income 178 Trading book Banking book Trading book ------------------ (Rupees in ‘000) ------------------ 172,987 - 192,030 NAVIGATING OUR WAY TO SUCCESS
  128. 47 .2.5 Yield / Interest rate risk in the Banking book (IRRBB) - Basel II Specific Interest rate risk is the risk that the fair value of a financial instrument will fluctuate because of changes in interest rates, including changes in the shape of the yield curve. Interest rate risk is inherent in the Bank’s business and arises due to the mismatches in the contractual maturities or repricing of on- and off-balance sheet assets and liabilities. The Bank is exposed to interest rate risk in both the Trading and Banking Books. The Bank uses duration gap models to measure and monitor the interest rate sensitivity on the potential earnings and the Bank’s economic value of equity. Overall potential impact of the mismatches on the earnings in short term is not material and is being managed within the tolerance limits approved by the Board. 2020 2019 Banking book Banking book Trading book ------------------ (Rupees in ‘000) ------------------ Impact of 1% change in interest rates on - Profit and loss account - Other comprehensive income 47.2.6 Trading book 2,777,543 - 24,932 - 1,312,209 - 75,839 - Mismatch of Interest Rate Sensitive Assets and Liabilities Yield risk is the risk of decline in earnings due to adverse movement of the yield curve. Interest rate risk represents the risk that value of financial instruments will fluctuate due to change in market interest rates. The Bank is exposed to yield / interest rate risk as a result of mismatches or gaps in the amounts of assets and liabilities and off-balance sheet instruments that mature or re-price in a given period. The Bank manages this risk by matching the re-pricing of assets and liabilities and off-balance sheet instruments. The Bank's yield / interest rate sensitivity position for on-balance sheet instruments is based on the earlier of contractual re-pricing or maturity date and for off-balance sheet instruments is based on settlement date. The Bank quantifies the yield curve risk via duration, PVBP and convexity for rate sensitive assets and liabilities held in banking and trading book. The bank also measure impact on net worth depending on duration gap of rate sensitive assets and liabilities. 2020 Effective Yield/ Interest rate Exposed to Yield/ Interest risk Total Upton 1 Month Over 1 to 3 Months Over 3 to 6 Months Over 6 Months to 1 Year Over 2 to 3 Years Over 1 to 2 Years Over 5 to 10 Years Over 3 to 5 Years Above 10 Years Non-interest bearing financial instruments ----------------------------------------------------------------------------- (Rupees in ‘000) ----------------------------------------------------------------------------- On-balance sheet financial instruments Assets Cash and balances with treasury banks 0.00% 29,963,954 2,740,850 - - - - - - - - 27,223,104 Balances with other banks 7.96% 4,268,063 450 - - - - - - - - 4,267,613 Lending to financial institutions 8.12% 8,956,086 4,000,000 1,008,777 3,947,309 - - - - - - 10.42% 249,955,671 5,308,660 56,741,211 37,595,761 77,339,189 164,544,519 118,646,270 20,935,213 9,103,733 4,075,993 Investments Advances 9.89% Other assets 0.00% 15,233,565 - 472,921,858 130,696,230 78,685,201 50,646,803 81,415,182 9,156,248 40,373,746 2,817,413 - 230,895 - 11,973,661 40,604,641 11,934,051 7,985,959 479,836 2,354,547 12,413,887 10,340,506 3,221,799 3,221,799 3,520,846 2,678,820 15,233,565 52,923,948 Liabilities Bills payable 0.00% 6,707,581 Borrowings 8.02% 87,020,539 Deposits and other accounts 6.74% Liabilities against assets subject to finance lease Subordinated debt Other liabilities 0.00% - - - - - 2,222 2,761,403 18,635 100,130 345,498,768 107,115,229 112,365,892 18,978,772 13,553,775 1,117,879 198,307 398,520 6,994,000 0.00% 13,070,233 13,630,737 Non financial net assets 9,526,301 Total net assets 23,157,038 ANNUAL REPORT 2020 - 10,277,794 2,994,000 - - 459,291,121 143,725,607 150,688,557 On-balance sheet gap - 38,322,665 12.00% 33,616,378 4,000,000 - 1,832,206 40,258 - - - - - - - - - - - - - - - - - - - - 33,256,566 13,555,997 3,879,282 216,942 498,650 1,832,206 (13,029,377) (72,003,356) 17,390,237 67,859,185 8,094,379 40,387,699 11,915,237 8,508,300 6,707,581 48,848 91,770,394 13,070,233 40,258 111,597,056 3,181,541 (58,673,108) 179
  129. 2020 Effective Yield / Interest rate Exposed to Yield/ Interest risk Total Upton 1 Month Over 1 to 3 Months Over 3 to 6 Months Over 6 Months to 1 Year Over 2 to 3 Years Over 1 to 2 Years Over 5 to 10 Years Over 3 to 5 Years Above 10 Years Non-interest bearing financial instruments ----------------------------------------------------------------------------- (Rupees in ‘000) ----------------------------------------------------------------------------- Off-balance sheet financial instruments Documentary credits and short-term trade-related transactions 49,433,284 15,647,937 15,672,075 4,373,311 5,631,352 4,328,358 1,105,549 978,302 1,108,474 587,926 - Commitments in respect of: - forward foreign exchange contracts purchase 57,715,311 31,633,447 20,369,628 4,886,219 826,017 - - - - - - - forward foreign exchange contracts sale 56,554,172 29,607,346 17,093,843 9,127,151 725,832 - - - - - - - forward government securities transactions - - forward lending - acquisition of fixed assets - acquisition of intangibles - - - - - - - - 2,549,990 - - - 2,549,990 - - - - - - 399,466 - - - 399,466 - - - - - - 17,325 Off-balance sheet gap 166,669,548 - - - - 17,325 76,888,730 53,135,546 18,386,681 10,149,982 Total yield/ interest risk sensitivity gap 63,859,353 (18,867,810) 35,776,918 78,009,167 Cumulative yield / interest risk sensitivity gap 63,859,353 44,991,543 4,328,358 - - - - 1,105,549 978,302 1,108,474 587,926 12,422,737 41,493,248 12,893,539 9,616,774 3,769,467 80,768,461 158,777,628 171,200,365 212,693,613 (58,673,108) 225,587,152 235,203,926 238,973,393 2019 Effective Yield/ Interest rate Exposed to Yield/ Interest risk Total Upton 1 Month Over 1 to 3 Months Over 3 to 6 Months Over 6 Months to 1 Year Over 2 to 3 Years Over 1 to 2 Years Over 5 to 10 Years Over 3 to 5 Years Above 10 Years Non-interest bearing financial instruments ----------------------------------------------------------------------------- (Rupees in ‘000) ----------------------------------------------------------------------------- On-balance sheet financial instruments Assets Cash and balances with treasury banks 0.56% 33,961,308 2,947,077 - - - - - - - - 31,014,231 Balances with other banks 2.44% 2,074,533 181,203 - - - - - - - - 1,893,330 Lending to financial institutions 11.47% 1,202,243 1,020,239 182,004 - - - - - - - Investments 11.09% 177,056,116 6,054,541 20,414,422 20,137,752 73,372,086 46,600,377 2,760,558 3,010,225 854,460 Advances 12.38% 204,901,313 163,179,760 18,154,349 11,232,718 3,149,105 68,516 189,026 497,193 2,056,086 Other assets 0.00% 12,229,364 - 431,424,877 173,382,820 38,750,775 31,370,470 76,521,191 46,668,893 2,949,584 3,507,418 2,910,546 3,045,025 3,045,025 3,851,695 3,329,535 12,229,364 52,318,155 Liabilities Bills payable 0.00% 3,960,957 Borrowings 9.76% 95,705,109 Deposits and other accounts Liabilities against assets subject to finance lease Subordinated debt Other liabilities 10.89% 0.00% - Non financial net assets Total net assets 180 - - - - - 12,030,784 13,376,056 13,023,278 21,630 46,518 71,329 302,082,985 117,144,588 64,834,063 12,727,272 31,497,729 483,703 1,053,652 297,300 - 13.65% 6,995,200 0% 12,258,221 2,995,200 - 421,002,472 175,476,909 On-balance sheet gap - 55,337,121 10,422,405 - 4,000,000 - - - 1,709,246 89,147 - - 74,044,678 - - - - - - - - - - - - - - - - - - 76,864,847 30,103,328 44,521,007 505,333 1,100,170 368,629 (2,094,089) (38,114,072) 1,267,142 32,000,184 46,163,560 1,849,414 3,138,789 1,709,246 1,201,300 3,960,957 - 3,045,025 12,258,221 90,353,003 (38,034,848) 9,791,190 20,213,595 NAVIGATING OUR WAY TO SUCCESS
  130. 2019 Effective Yield / Interest rate Off-balance sheet financial instruments Exposed to Yield/ Interest risk Total Upton 1 Month Over 1 to 3 Months Over 3 to 6 Months Over 6 Months to 1 Year Over 2 to 3 Years Over 1 to 2 Years Over 5 to 10 Years Over 3 to 5 Years Above 10 Years Non-interest bearing financial instruments ----------------------------------------------------------------------------- (Rupees in ‘000) ----------------------------------------------------------------------------- Documentary credits and short-term trade-related transactions 44,579,473 15,377,943 12,872,781 2,942,010 3,675,182 2,651,147 2,229,531 1,256,771 508,563 3,065,545 - - forward foreign exchange contracts purchase 96,944,495 27,202,159 35,717,778 28,215,261 5,809,297 - - - - - - - forward foreign exchange contracts sale (90,314,795) (24,980,355) (34,118,802) (30,188,012) (1,027,626) - - - - - - Commitments in respect of: - forward government securities transactions 4,042,882 - - - - - - - - - forward lending 5,378,806 - - - 5,378,806 - - - - - - - acquisition of fixed assets 94,274 - - - 94,274 - - - - - - - acquisition of intangibles 17,401 - - - 17,401 - - - - - Off-balance sheet gap 60,742,536 4,042,882 - 21,642,629 14,471,757 969,259 13,947,334 2,651,147 2,229,531 1,256,771 508,563 3,065,545 Total yield/ interest risk sensitivity gap 19,548,540 (23,642,315) 2,236,401 45,947,518 48,814,707 4,078,945 4,395,560 1,709,863 6,110,570 Cumulative yield / interest risk sensitivity gap 19,548,540 (4,093,775) (1,857,374) 44,090,144 92,904,851 96,983,796 (38,034,848) 101,379,356 103,089,219 109,199,789 (a) The effective interest rate is a historical rate (for December month) for a fixed rate instrument carried at amortised cost and a current market rate for a floating rate instrument. (b) The effective interest rate has been computed by excluding non-performing advances. (c) The effective interest rate has been computed by excluding non-remunerative deposits. 47.2.7 Liquidity risk Liquidity risk is the potential inability to meet contractual and contingent financial obligations, either on or off balance sheet, as they become due. Primary liquidity objective of the Bank is to provide adequate funding for businesses throughout market cycles, including periods of financial stress. Liquidity Management Day to day funding, is managed by Treasury Division through net cash flows from payment systems, fresh deposits mobilised by branches, maturing money market deposits, etc. The Bank maintains a portfolio of highly marketable assets viz., Market Treasury Bills and Pakistan Investment Bonds, that can either be sold in the open market or funds can be arranged there against under repo arrangements. This is further supported by investments in short term securities viz., Certificate of Investments etc. In line with its liquidity risk management policy, the Bank maintains a cushion over and above the minimum statutory liquidity requirement prescribed by SBP for maintaining liquidity reserves to ensure continuity of cash flows. Liquidity risk monitoring The Bank monitors its liquidity risk through various liquidity ratios and liquidity risk indicators and any deviations or breaches are reported to the relevant authorities for timely action. Moreover, Asset and Liability Management Committee (ALCO), a senior management committee, also reviews the liquidity position of the Bank on at least monthly basis and takes appropriate measures where required. Liquidity risk assessment The Bank uses liquidity gap ladder to assess the liquidity gaps and liquidity needs in different time buckets, under normal and stressed scenarios. Whereas, the Contingency Funding Plan (CFP) of the Bank is also tested on the basis of the results of liquidity stress testing. Sources of liquidity are regularly reviewed / monitored by the Asset and Liability Management Committee (ALCO). The ALCO reviews the current economic situation, projected cash flows and asset / liability mix and approves strategy for managing appropriate liquidity. The liquidity risk management policy of the Bank encompasses liquidity contingency plan for actions to be taken in case of liquidity crises. Mandatory stress tests of SBP are conducted, on a periodic basis, to test the adequacy of liquidity contingency plan and to identify the extent of liquidity stress that the Bank is able to take in current conditions. Liquidity management framework allows the Bank to run stress analysis on the balance sheet and off-balance positions, which include, but are not limited to, the following: 1. 2. 3. 4. Significant withdrawals from corporate clients deposits. Withdrawal of top ten, top fifteen, and top twenty deposits. Loss in the funding value of unencumbered assets. Availability of secure lending is subject to significant over collateralisation. ANNUAL REPORT 2020 181
  131. 47 .2.8 Operational risk Operational risk 'OpRisk' is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or external events. This includes legal risk as well as the reputational consequences of failures in operational risk management. The Bank uses Basic Indicator approach for assessing capital charge for operational risk. Operational Risk Management Objective and Organisation OPERATIONAL RISK MANAGEMENT STRUCTURE Board of Directors Board Risk Management Committee Operational Risk Management Committee President & CEO BCP Steering Committee Chief Risk Officer Head of Risk Management Operational Risk Management Department The main objective of the operational risk management is to minimise expected and unexpected losses arising out of operational activities of the Bank. The Bank has established a rigorous operational risk management framework to efficiently and effectively monitor and manage operational risk in each business and support activity of the Bank as well as those arising from external events like from natural disasters, outsourcing, etc. The Bank has a sound organisation structure for managing operational risk, established on strong internal control environment and equipped with adequate level of expertise and resources. The Bank has also formed an Operational Risk Management Committee (ORMC), a senior management committee to assist the Board Risk Management Committee (RMC), to ensure the compliance of BoD approved operational risk management framework, supported by the Risk Management Division (RMD) Operational risk assessment The Bank has been conducting risk and control self assessment (RCSA) exercise for each business and support function of the Bank in order to identify and assess operational risks inherent in existing activities, processes and systems. Through the RCSA exercise, the Bank has been able to develop inventory of risks, controls and key risk indicators (KRI) and has identified gaps in its operating activities which are rectified on a priority basis. Operational risk monitoring Operational risk monitoring is conducted through KRIs, identified in the RCSA exercise for each process. All branches, offices, Groups / departments furnish KRI reports on a periodical basis to the Operational Risk Management Department (within the Risk Management Group). Operational risk measurement The Bank keeps a detailed track of its operational loss events and maintains a database. This helps the Bank to step towards advanced approach of Basel II accord and also allows the Bank to formulate strategy to rectify the gap of reoccurrence of the incident. The Bank has, in compliance of BPRD Circular No. 04 of 2014 "Implementation of Operational Risk Management Framework" created separate Op-Loss general ledgers in the Bank's system which are being used for reporting of operational losses and are bifurcated into 7 operational loss categories as per the requirement of Basel II accord. Operational risk assessment for new products and services Operational risk in all new products, systems and processes are identified and assessed by the RMG so that risk associated can be mitigated to an acceptable level. Assessment comprises of: - review of new process flows and their control activities; - conduct RCSA exercise; and - identification, adequate assessment and ranking of all risks and controls. 182 NAVIGATING OUR WAY TO SUCCESS
  132. Business Continuity Plan In order to ensure continuity of the Bank 's operations, the Bank has in place a well developed, BoD approved Business Continuity Plan (BCP) which has been implemented across the Bank. The BCP has been well communicated down the line and regular trainings and testing is conducted across the country. Permanent back up sites have also been established and related testing carried out by critical staff to their designated back up sites. The BCP Steering Committee, a senior management committee, is responsible to ensure the adequacy of the BCP of the Bank as well as to ensure its effective implementation and compliance. The committee reports to the Board Risk Management Committee. 47.2.9 Maturities of Assets and Liabilities - based on contractual maturity of the assets and liabilities of the Bank 2020 Total Upton 1 Day Over 9 Over 1 to 7 Over 7 to 14 Over 14 days Over 1 to 2 Over 2 to 3 Over 3 to 6 Over 6 to 9 Over 1 to 2 Over 2 to 3 Over 3 to 5 months to 1 days days to 1 Month Months Months Months Months years years Years year Over 5 Years -------------------------------------------------------------------------------------------- (Rupees in ‘000) ------------------------------------------------------------------------------------------Assets Cash and balances with treasury banks Balances with other banks Lending to financial institutions Investments Advances Fixed assets Intangible assets Other assets Liabilities Bills payable Borrowings Deposits and other accounts Subordinated debt Deferred tax liabilities Other liabilities Net assets 29,963,954 29,963,954 4,268,063 4,268,063 8,956,086 249,955,671 164,544,519 59,281,037 11,910,925 3,029 408,274 490 15,337,731 7,803,406 485,345,223 101,319,979 3,000,000 1,551,727 18,169 2,936 295,594 4,868,426 3,026,730 2,076,417 21,197 3,425 123,774 5,251,543 1,000,000 1,008,777 - 23,855,096 31,953,054 4,725,654 13,487,250 8,446,778 51,478 93,677 93,380 8,318 15,168 15,126 986,997 1,775,736 1,541,111 6,772,447 39,226,927 43,058,226 6,707,581 6,707,581 87,020,539 43,948 24,680,911 12,863,251 3,355,685 8,617,216 6,264,399 345,498,768 238,995,217 11,914,019 4,259,781 16,430,415 19,089,154 20,562,929 6,994,000 600 1,533,265 14,434,032 5,461,082 304,083 133,678 1,011,050 1,819,680 1,585,055 462,188,185 251,207,828 36,899,613 17,256,710 20,797,150 29,526,050 28,412,383 23,157,038 (149,887,849) (32,031,187) (12,005,167) (14,024,703) 9,700,877 14,645,843 3,947,309 33,488,398 72,641,967 12,549,253 3,921,415 277,022 526,358 45,377 44,836 226,216 745 50,533,575 77,135,321 13,421,690 18,978,772 358,048 32,758,510 17,775,065 2,871,054 2,284,968 268,208 42,529 1,441,609 6,908,368 12,950,593 40,853,188 18,048,661 10,266,930 8,095,482 14,759,890 12,779,303 20,585,345 1,036,882 962,067 1,457,338 7,102,120 158,104 67,871 4,094 2,979 2,979 12,185 1,124,400 22,244,040 56,645,995 32,301,581 39,078,795 13,018,585 2,222 2,761,403 18,636 100,130 1,872,463 3,977,727 9,576,048 1,117,879 198,307 398,520 600 1,200 2,991,600 - 4,000,000 1,533,265 132,577 809,068 530,308 517,132 807,342 964,929 17,129,489 11,920,603 4,410,790 3,725,675 1,305,992 6,837,392 60,005,832 (5,012,235) 17,833,250 52,920,320 30,995,589 32,241,403 Share capital 11,024,636 Reserves 2,970,486 Surplus on revaluation of assets 3,471,003 Unappropriated profit 5,690,913 23,157,038 2019 Total Assets Cash and balances with treasury banks Balances with other banks Lending to financial institutions Investments Advances Fixed assets Intangible assets Other assets Liabilities Bills payable Borrowings Deposits and other accounts Subordinated debt Deferred tax liabilities Other liabilities Net assets Share capital Reserves Surplus on revaluation of assets Unappropriated profit ANNUAL REPORT 2020 Over 9 Over 1 to 7 Over 7 to 14 Over 14 days Over 1 to 2 Over 2 to 3 Over 3 to 6 Over 6 to 9 Over 1 to 2 Over 2 to 3 Over 3 to 5 Upton 1 Day months to 1 days days to 1 Month Months Months Months Months years years Years year Over 5 Years -------------------------------------------------------------------------------------------- (Rupees in ‘000) ------------------------------------------------------------------------------------------- 33,961,308 33,961,308 2,074,533 2,074,533 1,202,243 177,056,116 204,901,313 101,378,869 8,328,905 1,513 466,686 416 14,549,678 8,607,808 442,540,782 146,024,447 435 1,895,404 9,088 2,483 240,405 2,147,815 1,019,804 182,004 5,668,805 4,922,245 14,155,950 18,668,086 51,699,881 21,867,361 49,948,791 4,017,313 3,769,525 2,338,159 2,562,937 4,143,440 11,812,725 8,385,816 15,806,754 3,814,819 2,548,465 3,500,690 7,573,281 19,542,474 21,935,639 10,603 51,393 72,530 72,208 208,632 206,041 422,982 774,963 705,136 1,069,016 4,724,800 2,897 7,036 12,830 12,355 36,823 36,778 36,743 142,330 122,231 53,764 410,641 1,085,924 1,253,416 636,567 104,314 16,765 1,269,810 2,078 2,078 10,384 909,488 2,987,078 11,976,402 18,255,750 23,262,896 34,824,609 55,774,284 26,145,361 54,368,852 12,420,039 24,445,163 29,908,086 3,960,957 3,960,957 95,705,109 89,147 47,305,644 7,185,842 845,634 4,337,915 7,685,022 13,097,095 13,275,640 26,599 21,630 46,518 79,177 1,709,246 302,082,985 191,189,266 6,236,093 3,230,479 14,972,068 17,324,623 23,070,800 12,727,272 27,051,950 4,445,779 483,703 1,053,652 297,300 6,995,200 600 600 1,200 1,200 2,991,600 4,000,000 951,459 951,459 12,631,477 6,601,436 240,371 410,602 1,111,472 1,278,886 662,037 180,723 93,174 336,976 307,715 300,069 468,465 639,551 422,327,187 201,840,806 53,782,708 10,826,923 16,929,174 22,941,424 31,417,859 26,005,090 40,421,364 5,760,813 814,248 1,401,439 3,836,542 6,348,797 20,213,595 (55,816,359) (51,634,893) (7,839,845) (4,952,772) (4,685,674) (8,154,963) 8,819,519 15,352,920 20,384,548 53,554,604 11,018,600 20,608,621 23,559,289 11,024,636 2,490,432 1,893,455 4,805,072 20,213,595 183
  133. 47 .2.10 Maturities of assets and liabilities - based on expected maturities of the assets and liabilities of the Bank 2020 Total Up to 1 Month Over 6 Over 1 to 3 Over 3 to 6 Over 1 to 2 Over 2 to 3 Over 3 to 5 Over 5 to 10 Above 10 Months to 1 Months Months Years Years Years Years Years Year ------------------------------------------------------------------- (Rupees in ‘000) -----------------------------------------------------------------Assets Cash and balances with treasury banks Balances with other banks Lending to financial institutions Investments Advances Fixed assets Intangible assets Other assets Liabilities Bills payable Borrowings Deposits and other accounts Subordinated debt Deferred tax liabilities Other liabilities Net assets Share capital account Reserves Surplus on revaluation of assets Unappropriated profit 29,963,954 15,210,229 6,222,020 4,001,865 4,529,840 4,268,063 4,268,063 8,956,086 4,000,000 1,008,777 3,947,309 249,955,671 3,026,730 55,808,150 33,488,398 75,513,021 12,950,593 40,853,188 18,048,661 10,266,930 164,544,519 24,000,421 32,268,495 22,309,582 20,559,809 17,281,675 14,759,890 12,779,303 13,542,405 7,042,939 11,910,925 96,191 191,694 283,977 808,476 1,064,701 989,886 1,512,976 2,213,927 4,749,097 408,274 15,170 30,293 45,377 87,365 158,104 67,871 4,094 15,337,731 9,209,772 3,316,846 226,216 1,442,354 2,979 2,979 12,185 14,894 1,109,506 485,345,223 59,826,576 98,846,275 64,302,724 102,940,865 31,458,052 56,673,814 32,357,219 26,038,156 12,901,542 6,707,581 6,707,581 87,020,539 40,943,796 14,881,615 13,421,689 13,020,807 2,761,403 18,635 100,130 1,832,206 40,258 345,498,768 72,689,314 69,992,169 45,017,405 50,956,654 53,195,145 18,837,937 30,508,691 4,301,453 6,994,000 600 600 1,200 2,991,600 4,000,000 1,533,265 1,533,265 14,434,032 6,909,895 3,404,734 358,048 941,645 530,308 517,132 807,342 964,928 462,188,185 127,251,186 88,278,518 58,797,142 66,452,971 56,488,056 22,365,304 31,416,163 11,098,587 40,258 23,157,038 (67,424,610) 10,567,757 5,505,582 36,487,894 (25,030,004) 34,308,510 941,056 14,939,569 12,861,284 11,024,636 2,970,486 3,471,003 5,690,913 23,157,038 2019 Total Assets Cash and balances with treasury banks Balances with other banks Lending to financial institutions Investments Advances Fixed assets Intangible assets Other assets Liabilities Bills payable Borrowings Deposits and other accounts Subordinated debt Deferred tax liabilities Other liabilities Net assets Share capital account Reserves Surplus on revaluation of assets Unappropriated profit 184 Up to 1 Month Over 6 Over 1 to 3 Over 3 to 6 Over 1 to 2 Over 2 to 3 Over 3 to 5 Over 5 to 10 Above 10 Months to 1 Months Months Years Years Years Years Years Year ------------------------------------------------------------------- (Rupees in ‘000) -----------------------------------------------------------------33,961,308 2,074,533 1,202,243 177,056,116 204,901,313 8,328,905 466,686 14,549,678 442,540,782 15,947,919 7,107,893 3,902,696 7,002,800 2,074,533 1,020,239 182,004 5,668,805 19,078,195 18,668,086 73,567,242 49,948,791 37,100,445 37,689,789 33,298,003 30,656,686 17,104,995 72,597 144,738 208,632 629,023 774,963 12,832 25,184 36,823 73,522 142,330 10,344,778 1,889,983 104,314 1,286,575 2,078 72,242,148 66,117,786 56,218,554 113,215,848 67,973,157 3,960,957 95,705,109 302,082,985 6,995,200 951,459 12,631,477 422,327,187 20,213,595 3,960,957 55,426,268 12,030,784 13,376,056 13,023,278 21,630 59,956,365 61,357,309 33,689,157 60,450,115 41,248,782 600 600 1,200 951,459 8,363,879 1,940,923 180,723 430,150 307,715 127,708,069 75,329,016 47,245,936 74,855,602 41,579,327 (55,465,921) (9,211,230) 8,972,618 38,360,246 26,393,830 4,017,313 3,769,525 2,338,159 7,573,281 19,542,474 11,917,905 10,017,735 705,136 1,069,016 1,543,039 3,181,761 122,231 53,764 2,078 10,384 10,391 899,097 12,420,039 24,445,163 15,809,494 14,098,593 46,518 71,329 17,275,343 28,105,914 1,200 2,991,600 300,069 468,465 17,623,130 31,637,308 (5,203,091) (7,192,145) 1,709,246 4,000,000 639,553 6,348,799 9,460,695 14,098,593 11,024,636 2,490,432 1,893,455 4,805,072 20,213,595 NAVIGATING OUR WAY TO SUCCESS
  134. 48 GENERAL 48 .1 Comparative Comparative information has been re-classified, re-arranged or additionally incorporated in these financial statements, wherever necessary to facilitate comparison and better presentation. There were no significant reclassifications during the current year. 48.2 Figures have been rounded off to the nearest thousand rupees unless otherwise stated. 49 EVENTS AFTER THE REPORTING DATE 49.1 The Board of Directors in its meeting held on 17 February 2021 has proposed a cash dividend in respect of the year ended 31 December 2020 of Rs. 1.25 per share (2019: Rs. 1.00 per share). This appropriation will be approved in the forthcoming Annual General Meeting. The financial statements for the year ended 31 December 2020 do not include the effect of this appropriation which will be accounted for in the financial statements of the Bank for the year ending 31 December 2021. 50 DATE OF AUTHORISATION FOR ISSUE These financial statements were authorised for issue on 17 February 2021 by the Board of Directors of the Bank. Alauddin Feerasta Muhtashim Ahmad Ashai Mirza Zafar Baig Muhammad Rashid Zahir Jamil Hassan Hamdani Chairman President & Chief Executive Officer Chief Financial Officer Director Director ANNUAL REPORT 2020 185
  135. STATEMENT SHOWING WRITTEN-OFF LOANS OR ANY OTHER FINANCIAL RELIEF OF FIVE HUNDRED THOUSAND RUPEES AND ABOVE PROVIDED Annexure - I DURING THE YEAR ENDED 31 DECEMBER 2020 (Rs. in million) Outstanding liabilites at beginning of the year S. No. 1 1 Name and address of borrower 2 Huffaz Seamless Pipes Industries Ltd 207-210, Mashriq Centre, Block 14, Gulshan-e-Iqbal, Karachi Name of Individuals/ partners/ directors (with CNIC No.) Father/ Husband’s Name 3 4 Principal Mark-up Others Total Other Mark-up Principal Financial Written off/ Written off Relief Waived Provided 5 6 7 8 9 - 15.210 - 15.210 - 15.210 Mr. Muhammad Ayub - 2.668 0.219 2.887 - 2.667 0.219 2.886 - 0.701 1.049 1.750 - 0.671 1.049 1.720 - 4.680 0.337 5.017 - 4.680 0.337 5.017 Mr. Hafiz Abdul Majeed CNIC No. 42201-0485927-7 Mr. Hafiz Abdul Waheed CNIC No. 35202-2198501-3 Mr. Hafiz Abdul Aleem CNIC No. 35202-2198613-9 Mr. Hafiz Abdul Haseeb CNIC No. 35200-4203002-1 Mr. Hafiz Abdul Sami CNIC No. 35202-2198502-1 Mr. Muhammad Hafeez CNIC No. 42201-9310167-1 Mr. Arshad Ahmed NICOP. 914000-155402-3 Syed Arslan Saddiq CNIC No. 42101-1364553-1 Mr. Hafiz Muhammad Hussain Mr. Mirajul Shams CNIC No. 42501-3397484-1 10 11 Total - 12=9+10+11 15.210 Mr. Hafiz Muhammad Hussain Mr. Hafiz Muhammad Waheed Mr. Hafiz Abdul Majeed Mr. Hafiz Abdul Waheed Chudhry Fazal Muhammad Mr. Shabir Hussain Mr. Muhammad Sadiq 2 Elite Screener Carring Business C-21-22 Block-9, AEECHS, Gulshan-e-Jauhar, Karachi 3 Sony Enterprises Mr. Nand Lal Office No. 413, 4th Floor Poonawala Trade Tower, CNIC No. 42301-3075116-5 Chabba Street, Opposite City Court, Karachi Mr. Kailash Kumar CNIC No. 43103-1396367-3 Mr. Pars CNIC No. 42301-7441696-9 Mr. Dewan Reliance Cotton Industries & Oil Mills Mirpur Khas Road, Deh Rahuki Tappa Tando Qaiser Taluka Hyderabad Mr. Dayo Mal CNIC No. 41306-3300997-5 Mr. Rajesh Kumar CNIC No. 41306-3792813-7 Mr. Asha Raam 5 Stanza Safety Wears 10KM, Daska Road, Sajo Kala, Model Town, Sialkot Mr. Arif Mahmood CNIC No. 34603-7965736-9 Mr. Iftikhar Ahmed 2.000 0.805 0.050 2.855 - 0.805 0.050 0.855 6 IAT Sports Corporation Ugoki Road, Sialkot Mr. Imran Mehmood CNIC No. 34603-1449100-3 Mr. Iftikhar Ahmed CNIC No. 34603-9639987-7 Mr. Arif Mehmood CNIC No. 34603-7965736-9 Mr. Tariq Mehmood CNIC No. 34603-1807912-5 Mr. Iftikhar Ahmed 3.200 1.254 0.065 4.519 - 1.254 0.065 1.319 2.668 - 0.981 3.257 - 2.657 0.540 - 0.540 - 0.540 5.598 - 4.098 - 4.098 4 7 Shaikh Diagnostic Centre & Seema Ultrasound Ms. Seema Shaikh Shop No. 3, Plot No.1, Civic Centre, Anwar Central, CNIC No. 41304-9533733-8 Unit No.7, Latifabad, Hyderabad 8 Khurshid & Co. Khurshid Plaza, Chowk Yadgar, Peshawar 9 Mir Textile Mills Mir Street, Mir Muhammad Younis Road, Sialkot Mr. Dewan Mr. Rooshan Lal Mr. Gurmukh Das Mr. Nazir Ahmed Mr. Iftikhar Ahmed Mr. Iftikhar Ahmed - 2.668 Mr. Rana Muhammad Sadiq Khurshid Mr. Khurshid Muhammad Khan CNIC No. 17301-1639775-7 - 3.157 Mr. Mir Muhammad Imran CNIC No. 34603-2215566-9 Mr. Mir Muhammad Younas - 0.540 Mr. Noor Ahmed CNIC No. 35404-8447677-5 Mr. Sadat Nawaz CNIC No. 35404-2525871-9 Mr. Shahzad Nawaz CNIC No. 35404-5765789-7 Mr. Haji Hadayat Ali - 5.131 11 ONM Traders Chak No. 138/EB, Burewala Mr. Ali Iqtidar Khalid CNIC No. 366016-038377-5 Mr. Umer Imtiaz CNIC No. 33100-0981461-9 Ch. Manzor Ahmed Lali 12 Uzma Mehmood H # 20, Street No.52, Sant Nagar Hadbust, Khasra Bearing No.1746, Muza Sheesh Mahal, Tehsil City, Distt: Lahore Ms. Uzma Mehmood CNIC No. 35202-1859768-8 13 Erum Enterprises Office No. 268/B, Ist Floor Latif Cloth Market M.A. Jinnah Road Karachi 10 Haji Hadayat Ali & Company Ghala Mandi, Sheikhupura Mr. Nisar Ahmed Shaikh - 0.100 - 0.467 - 0.100 0.981 2.757 Mr. Haji Hadayat Ali Mr. Noor Ahmed 0.500 0.808 - 1.308 - 0.737 - 0.737 Mr. Mehmood Ahmed 3.128 0.800 - 3.928 - 0.600 - 0.600 Mr. Abdul Ghaffar CNIC No. 42301-5897263-5 Mr. Haji Habib 8.204 2.386 0.370 10.960 8.204 2.386 0.370 10.960 14 Muhammad Enterprises Office No. 268/B, Ist Floor Latif Cloth Market M.A. Jinnah Road Karachi Mr. Zeeshan Abdul Ghaffar CNIC No. 42301-1614120-9 Mr. Abdul Ghaffar 29.927 1.188 0.313 31.428 29.927 1.188 0.313 31.428 15 Ghulam Rasool Enterprises 57/16, Shershah Road, Lake View Homes Multan Cantt. Mr. Muhammad Aleem CNIC No. 36201-2951654-1 Mr. Kashif Rasool Khan CNIC No. 36302-6725454-9 Mr. Manzoor Ahmed 111.171 165.789 3.915 280.875 111.171 165.789 3.915 280.875 16 Sohail Kashif Cotton Factory Shahnal, Lodhran Mr. Kashif Rasool Khan CNIC No. 36302-6725454-9 Mrs. Najma Firdous CNIC No. 36302-7537021-0 Mr. Ghulam Rasool Khan 5.288 0.492 5.780 - 5.288 0.492 5.780 17 Hassan Traders 55-L, Gulberg II, Ghalib Market, Lahore Mr. Shahid Mehmood CNIC No. 35202-2209790-5 Sheikh Ahmed Baksh 5.992 1.228 0.245 7.465 - 1.228 0.245 1.473 18 Rafaqat Marketing 194/E, Block N, Model Town, Lahore Mr. Rafaqat Ali CNIC No. 35202-1308254-5 Mr. Rasheed Ahmed 0.754 4.272 5.026 - 4.272 19 United Holding House No. 224-C, Satellite Town, Gujranwala Mr. Munib Munir CNIC No. 34101-6651307-1 Sheikh Muhammad Munir 0.485 0.233 186 Mr. Imtiaz Tariq Mr. Ghulam Rasool Khan - W/O. Ghulam Rasool Khan - 0.065 0.783 0.485 0.233 - 0.065 4.272 0.783 NAVIGATING OUR WAY TO SUCCESS
  136. Annexure - I (Rs. in million) Outstanding liabilites at beginning of the year S. No. Name and address of borrower 1 2 20 First Capital Equities Ltd 4th Floor, Lakson Square Building No.1, Sarwar Shaheed Road, Karachi Name of Individuals/ partners/ directors (with CNIC No.) Father/ Husband’s Name 3 4 Mr. Mian Ehsan UL Haq CNIC No. 42301-7045034-9 Mr. Abdul Samad CNIC No. 42101-1950059-7 Mr. Raja Sohail Qurban CNIC No. 42000-7573045-7 Mr. Safeer Raza Awan CNIC No. 35202-3028538-3 Mr. Azhar Ahmed Batla CNIC No. 42301-6334463-3 Mr. Muhammad Ahmed Soraya CNIC No. 35200-7273358-5 Mr. Muhammad Tariq CNIC No. 42501-8784796-9 Mr. Mian Munawar UL Haq Mrs. Amna Taseer CNIC No. 35201-1566773-0 Mr. Shehryar Ali Taseer CNIC No. 35201-9042306-3 Ms. Shehrbano Taseer CNIC No. 35201-2124264-0 Mr. Shahbad Ali Taseer CNIC No. 35201-7312405-1 Sheikh Suleman Ahmed Said ul Hoqani Passport No. A1395217 Kanwar Latafat Ali Khan CNIC No. 42301-8974036-9 Syed Abid Raza CNIC No. 42101-4651884-1 Mr. Muhammad Imran Chaudhry CNIC No. 35201-9441541-3 W/O. Salman Taseer Mr. Ahmed Bin Said Al Hoqani 22 Nazir Ahmed Cheema Kot Banghsa Kalasskay, Tehsil Wazirabad, District Gujranwala Mr. Nazir Ahmed Cheema CNIC No. 34104-0833673-9 23 Ghulam Fareed Madina Chowk Classky, Dak Khana Khas, Tehsil Wazirabad, District Gujranwala Mr. Ghulam Fareed CNIC No. 34104-2340417-7 24 Muhammad Amjad Hasan Qureshi House No. 242-E/48, Street No. 3, Kamalabad, Bakra Mandi, Rawalpindi 21 Pace Pakistan Ltd 2nd & 3rd Floor, PACE Mall, Fortress Stadium, Lahore Principal Total Other Mark-up Principal Financial Written off/ Written off Relief Waived Provided Mark-up Others 5 6 7 8 9 - 73.861 - 73.861 - 73.861 10 11 - Total 12=9+10+11 73.861 Mr. Abdul Wahab Mr. Raja Qurban Hussain Mr. Malik Nawazish Hussain Sheikh Noor Ahmed Mr. Muhammad Arshad Mr. Mian Salahuddin 13.996 21.645 0.092 35.733 - 21.645 Mr. Ghulam Muhammad Cheema 0.345 1.234 0.045 1.624 - 1.006 - 1.006 Mr. Muhammad Ramzan 0.698 1.151 0.075 1.924 - 1.042 - 1.042 Mr. Muhammad Amjad Hasan Qureshi Mr. Ghulam Dastighir Qurashi CNIC No. 37405-7929017-1 3.497 1.085 - 4.582 - 0.616 - 0.616 25 Gemtek Associates 59-A, Street no.17, Cavalary Ground, Lahore Mr. Khalid Rehman CNIC No. 35201-1535391-1 Ch. Abdul Rehman 3.075 0.520 - 3.595 - 3.719 - 3.719 26 Kohsar Industries Rice Mills Plot No. H-5-B, SITE Area, Kotri Mr. Lal Chand CNIC No. 44203-9781662-5 Mr. Haresh Kumar CNIC No. 41306-7572470-3 Mr. Relu Mal 14.999 2.381 0.107 17.487 - 5.006 - 5.006 27 Masood Naseem Tyabji House No.23, P Street DHA Phase 7, Karachi Mr. Masood Naseem Tyabji CNIC No. 42000-3428801-5 Mr. Naseem M.H.B. Tyabji 25.750 3.459 0.006 29.215 - 1.459 28 Alam Cotton Mills (Pvt) Ltd 6KM, Manga Raiwind Road, Lahore Mr. Shahzada Alam CNIC No. 42201-0547819-5 Mr. Faraz Shafiq Alam CNIC No. 42000-0503055-9 Mr. Shafiq Alam CNIC No. 42201-0547606-5 Mr. Adeel Shafiq Alam CNIC No. 42000-0503449-9 Mr. Hammad Shafiq CNIC No. 42201-7410183-7 Mr. M. Rafique 27.570 3.168 - 30.738 - 7.300 - 7.300 29 Asad Ali Sultan Vinelay Road, Street # 3, Mohallah Taj Colony, Hafizabad Mr. Asad Ali Sultan CNIC No. 34301-4568747-9 Mr. Sultan Pervaiz 2.446 0.813 - 3.259 - 0.813 - 0.813 30 Hassan Marketing P.O Box 17, Lyallpur Cotton Mills, Factory Area, Faisalabad Mr. Abdul Manan CNIC No. 33100-0549069-5 Mr. Haji Abdul Rehman CNIC No. 33102-1808964-5 Mr. Abdul Rehman Al Rai 70.000 53.456 1.003 124.459 - 48.004 31 Muhammad Saleem Chak No. 507, PO Burewala Mr. Muhammad Saleem CNIC No. 36601-9819761-3 Mr. Faiz Ahmed Chishti 0.600 0.631 0.065 1.296 - 0.631 - 0.631 32 Sheikh Muhammad Ali House No. 19, Timber Market, Khanewal Sheikh Muhammad Ali CNIC No. 36103-1072059-3 Sheikh Sodagar Ali 1.501 1.539 0.065 3.105 - 1.539 - 1.539 33 Zaidi Traders Sahiwal Road, Market Committee, Shop No.7, Okara Syed Abu Turab Zaidi CNIC No. 35302-1960260-7 Syed Mazhar Hussain Zaidi - 1.267 0.170 1.437 - 1.100 34 Salman Dairy Farm Madina Park, Bucheki, Nankana Sahib Mr. Muhammad Suhail Aslam CNIC No. 35402-1956639-3 Mr. Muhammad Aslam - 0.691 0.060 0.751 - 0.691 - 0.691 35 Muhammad Yaseen P-33, Nasrullah Block, Saeed Colony No. 2, East Canal Road, Faisalabad Mr. Muhammad Yaseen CNIC No. 33301-8046232-1 Mr. Muhammad Rafique 4.336 1.014 0.040 5.390 - 1.014 - 1.014 334.174 386.721 9.415 730.310 TOTAL ANNUAL REPORT 2020 0.092 21.737 Mr. Salman Taseer Mr. Salman Taseer Mr. Salman Taseer Mr. Kanwar Liaqat Ali Khan Syed Muhammad Mr. Imran Saeed Chaudhry Mr. Lal Chand 0.006 1.465 Mr. Shafiq Alam Mr. M. Rafique Mr. Shafiq Alam Mr. Shafiq Alam 1.003 49.007 Mr. Haji Abdul Haq 149.787 384.730 0.170 8.491 1.270 543.008 187
  137. Annexure - II ISLAMIC BANKING BUSINESS The Bank is operating with 30 Islamic Banking branches (31 December 2019: 25). The statement of financial position and profit and loss account of these branches (including Islamic Banking Division) are as follows: BSD circular letter No. 03 dated January 22, 2013 requires all Islamic Banks and Banks with Islamic Banking Branches to present all financing, advances for assets under Islamic modes of financing and any other related items pertaining to Islamic mode of financing under the caption Islamic Financing and Related Assets in the Statement of Financial Position. Note ASSETS Cash and balances with treasury banks Balances with other banks Due from financial institutions Investments Islamic financing and related assets- net Fixed assets Intangible assets Due from head office Other assets Total assets LIABILITIES Bills payable Due to financial institutions Deposits and other accounts Due to head office Other liabilities Total liabilities 1 2 3 4 NET ASSETS REPRESENTED BY: Islamic banking fund Accumulated profit* Surplus on revaluation of assets - net of tax CONTINGENCIES AND COMMITMENTS 6 2020 2019 --------(Rupees in ‘000)-------1,420,207 401,869 1,981,286 11,098,217 8,858,713 577,849 439,592 416,525 25,194,258 1,243,184 321,536 1,001,861 5,163,153 9,199,707 406,055 2,405,243 452,474 20,193,213 318,544 543,623 22,113,481 529,789 23,505,437 328,765 364,979 17,362,852 437,255 18,493,851 1,688,821 1,699,362 1,750,000 (147,121) 85,942 1,688,821 1,500,000 135,645 63,717 1,699,362 7 * This represents profit for the year, as last year's profit is remitted back to the head office at the start of the year. The profit and loss account of the Bank's Islamic banking branches for the year ended 31 December 2020 is as follows: Note Profit / return earned Profit / return expensed Net profit / return 1,804,347 1,411,178 393,169 1,793,786 1,356,152 437,634 62,370 20,563 (2,008) 1,006 81,931 475,100 61,843 29,160 (238) 1,350 92,115 529,749 Other expenses Operating expenses Other charges Total other expenses 445,253 2,372 447,625 387,978 480 388,458 Profit before provisions Provisions and write offs - net Profit before tax 27,475 (174,596) (147,121) 141,291 (5,646) 135,645 Other income Fee and commission Income Foreign exchange income Loss on securities Other income Total other income 188 8 9 2020 2019 --------(Rupees in ‘000)-------- NAVIGATING OUR WAY TO SUCCESS
  138. Annexure - II 1 Due from Financial Institutions 2020 In local Currency 2019 In foreign currencies In local currency Total In foreign currencies Total ---------------------------------------------- (Rupees in ‘000) --------------------------------------------Bai Muajjal receivable from other financial institutions Musharaka placement 2 1,981,286 - - 1,981,286 - 501,861 500,000 - 501,861 500,000 1,981,286 - 1,981,286 1,001,861 - 1,001,861 Investments by segments: 2020 2019 Cost/ Cost / Provision for Surplus / Carrying Provision for Surplus / Carrying amortised amortised diminution (deficit) value diminution (deficit) value cost cost ----------------------------------------------------------- (Rupees in ‘000) ---------------------------------------------------------Federal Government securities -Ijarah sukuks -Bai muajjal from Government of Pakistan (GoP) Non-Government debt securities -Listed -Unlisted 3 5,500,000 - 800 5,500,800 385,000 - (3,850) 381,150 2,603,856 8,103,856 - 800 2,603,856 8,104,656 2,338,960 2,723,960 - (3,850) 2,338,960 2,720,110 150,000 2,816,553 2,966,553 (19,860) (19,860) 1,515 45,353 46,868 151,515 2,842,046 2,993,561 250,000 2,183,610 2,433,610 (19,860) (19,860) 1,477 27,816 29,293 251,477 2,191,566 2,443,043 11,070,409 (19,860) 47,668 11,098,217 5,157,570 (19,860) 25,443 5,163,153 Islamic financing and related assets Note Ijarah Murabaha Musharaka Diminishing Musharaka Istisna Salam Other islamic modes Advances against islamic assets Murabaha Ijarah Diminishing musharakah Salam Istisna Gross Islamic financing and related assets 3.1 3.2 Less: Provision against Islamic financing - Specific - General Islamic financing and related assets - net of provision ANNUAL REPORT 2020 2020 2019 ---------(Rupees in ‘000)--------309,196 1,120,620 1,127,082 4,245,096 469,622 162,522 - 381,302 1,092,299 1,093,421 4,156,980 427,358 73,268 5 149,476 81,707 882,321 491,251 9,038,893 381,981 6,897 1,106,862 513,200 9,233,573 180,180 180,180 8,858,713 33,866 33,866 9,199,707 189
  139. Annexure - II 3 .1 Ijarah 2020 Cost As at 01 January 2020 Additions/ (deletions)/ adjustment Depreciation As at 31 December 2020 As at 01 January 2020 Charge for the year As at 31 December 2020 Book Value as at 31 December 2020 ------------------------------------------- (Rupees in ‘000) ------------------------------------------Plant & Machinery - Vehicles 558,863 Total 558,863 89,501 (113,784) 89,501 (113,784) - - 534,580 177,561 534,580 177,561 - - 120,038 (72,215) 120,038 (72,215) - 225,384 309,196 225,384 309,196 As at 31 December 2019 Book Value as at 31 December 2019 2019 Cost As at 01 January 2019 Additions/ (deletions)/ adjustment Depreciation As at 31 December 2019 As at 01 January 2019 Charge for the year ------------------------------------------- (Rupees in ‘000) ------------------------------------------Plant & Machinery 3.1.1 24,961 Vehicles 596,087 Total 621,048 (24,961) 155,974 (193,198) 155,974 (218,159) - 17,864 - - (17,864) 558,863 179,391 558,863 197,255 126,402 (128,232) 126,402 (146,096) 177,561 381,302 177,561 381,302 Future ijarah payments receivable ----------------------- 2020 ----------------------Later than Not later 1 year and than 1 less than 5 year years Over five years Total ----------------------- 2019 ----------------------Later than Not later 1 year and than 1 year less than 5 years Over five years Total ------------------------------------------------- (Rupees in 000) -------------------------------------------------Ijarah rental receivables 3.2 3.2.1 190 72,772 Murabaha 222,287 14,137 309,196 50,916 330,386 Note - 381,302 2020 2019 --------(Rupees in ‘000)-------- Murabaha financing Advances for Murabaha 3.2.1 1,120,620 149,476 1,270,096 1,092,299 381,981 1,474,280 Murabaha receivable - gross Less: Deferred murabaha income Murabaha financings 3.2.2 3.2.4 1,126,919 6,299 1,120,620 1,109,376 17,077 1,092,299 NAVIGATING OUR WAY TO SUCCESS
  140. Annexure - II 3 .2.2 2020 2019 ---------(Rupees in ‘000)--------- The movement in Murabaha financing during the year is as follows: Opening balance Sales during the year Adjusted during the year Closing balance 1,109,376 1,989,754 (1,972,211) 1,126,919 924,334 2,813,605 (2,628,563) 1,109,376 3.2.3 Murabaha sale price Murabaha purchase price 1,989,754 (1,928,553) 61,201 2,813,605 (2,688,515) 125,090 3.2.4 Deferred murabaha income 17,077 61,201 (71,979) 6,299 43,854 125,090 (151,867) 17,077 Opening balance Arising during the year Less: Recognised during the year Closing balance 4 2020 Deposits and other accounts In local currency In foreign currencies 2019 Total In local currency In foreign currencies Total --------------------------------------- (Rupees in ‘000) ---------------------------------------Customers Current deposits Savings deposits Others Term deposits Financial Institutions Current deposits Savings deposits Term deposits 2,299,835 5,225,076 356,889 2,947,308 10,829,108 348,347 348,347 2,648,182 5,225,076 356,889 2,947,308 11,177,455 1,742,827 4,124,869 255,224 2,249,802 8,372,722 375,743 375,743 2,118,570 4,124,869 255,224 2,249,802 8,748,465 30,520 9,349,564 1,522,500 10,902,584 21,731,692 33,442 33,442 381,789 63,962 23,386 9,349,564 7,599,416 1,522,500 944,500 10,936,026 8,567,302 22,113,481 16,940,024 47,085 47,085 422,828 70,471 7,599,416 944,500 8,614,387 17,362,852 2020 2019 ---------(Rupees in ‘000)--------4.1 Composition of deposits - Individuals - Government / Public Sector Entities - Public Sector Entities - Banking Companies - Non-Banking Financial Institutions - Private Sector 5,279,207 1,736,487 698,246 35 10,945,991 3,453,515 22,113,481 4,489,659 2,039,805 33 6,005,008 4,828,347 17,362,852 4.2 This includes deposits eligible to be covered under insurance arrangements amounting to Rs 5,736 million (2019: 5,288 million) . 5 Charity Fund Opening balance Additions during the year Received from customers on account of delayed payment Payments / utilization during the year Health Closing balance ANNUAL REPORT 2020 2020 2019 ---------(Rupees in ‘000)--------13 - 695 708 4,731 4,731 708 708 - 4,718 4,718 13 191
  141. Annexure - II 6 2020 2019 -------- (Rupees in ‘000)-------- Islamic Banking Business - Unappropriated Profit Opening balance Add: Islamic Banking profit for the year Less: Transferred / remitted to Head Office Closing balance 7 135,645 (147,121) (135,645) (147,121) 129,190 135,645 (129,190) 135,645 306,772 706,152 1,012,924 421,517 630,798 1,052,315 873,988 786,193 144,166 1,804,347 1,145,635 620,441 27,710 1,793,786 1,352,350 5,944 52,884 1,411,178 1,248,502 2,983 104,667 1,356,152 CONTINGENCIES AND COMMITMENTS -Guarantees -Other contingent liabilities 8 Profit / Return Earned of Financing, Investments and Placement Financing Investments Placements 9 Profit on Deposits and Other Dues Expensed Deposits and other accounts Due to financial institutions Others 9.1 Deposits and other accounts include redeemable capital of Rs. 19,044.448 million (31 December 2019: Rs.14,918.587 million) and deposits on Qard basis of Rs. 3,069.033 million (31 December 2019: Rs. 2,444.265 million). Remunerative deposits which are on Mudaraba basis are considered as Redeemable capital and non-remunerative deposits are classified as being on Qard basis. 10 Pool Management Chemical and Pharmaceuticals Textile Cement Sugar GOP Bai Muajjal / Ijarah Sukuk Automobile and transportation equipment Financial Electronics and electrical appliances Production and transmission of energy Exports Imports Wholesale & Retail Trade Construction Food and allied Services Iron & Steel Individual Others 2020 2019 Normal Special Normal Special Total Total Pool Pool Pool Pool ----------------------------------- (Rupees in ‘000) ----------------------------------488,962 23,525 588,720 4,666,946 79,179 65,143 827,722 94,165 63,222 787,492 399,600 141,139 8,225,815 998,060 410,153 87,463 120,000 8,402,457 3,800 2,055 171,443 2,190,284 205,418 86,791 176,583 659,310 368,664 13,882,481 1,487,022 433,678 87,463 708,720 13,069,403 3,800 81,234 236,586 3,018,006 205,418 180,956 239,805 787,492 659,310 399,600 509,803 22,108,296 1,126,285 453,869 157,168 1,109,818 8,806 40,496 285,805 2,546,883 109,896 88,919 266,673 1,194,355 1,214,019 400,000 196,476 9,199,468 2,720,110 473,597 1,499,447 470,000 5,163,154 1,126,285 453,869 157,168 1,109,818 2,720,110 8,806 514,093 285,805 4,046,330 109,896 88,919 266,673 1,194,355 1,684,019 400,000 196,476 14,362,622 Musharaka investments from the SBP under Islamic Export Refinance Scheme (IERS) are channelled towards the export sector of the economy and other financings as per SBP guidelines. 192 NAVIGATING OUR WAY TO SUCCESS
  142. Annexure - II 10 .1 Key features and risk and reward characteristics of all pools The 'Mudaraba Pool' for Local Currency caters to all Soneri Bank Limited - Islamic Banking depositors and provides profit / loss based on Mudaraba. The IERS Pool caters to the 'Islamic Export Refinance' requirements based on the guidelines issued by the SBP. The risk characteristic of each pool mainly depends on the asset and liability profile of each pool. Jointly financed by the Bank and unrestricted investments / PLS deposit account holders This represents all earning assets of the Bank except those tagged to the Islamic Export Refinance Scheme. Major categories include: Funded Income Total ------------------- (Rupees in ‘000) ------------------861,648 861,648 786,193 786,193 36,499 36,499 107,667 (7,526) (2,008) 98,133 1,792,007 (7,526) (2,008) 1,782,473 Islamic financing and related assets Investments Due from financial institutions Others 10.2 Expenses Gains / (loss) on sale of securities Incentive profits (Hiba) The Bank paid an aggregate amount of Rs 74.707 million as incentive profits (Hiba), which includes Rs 3.735 million for normal pool and Rs. 70.973 million for special pool during the year ended 31 December 2020. The following guidelines are approved by the Bank's Sharia Advisor for determination of incentive profits (Hiba): - Special weightage deposits in designated tiers / slabs in Mudaraba Pool shall be offered extra weightages outside the Mudaraba Pool, provided the specified parameters are met ; - The deposit deal shall be at least of Rs 100 thousands ; - In case a Term Deposit is pre-maturely encased, profit shall be paid at the expected rate of completed tenor; - The payment of Hiba on deposits will be at the sole discretion of the Bank and could be decreased or / and removed any time during the tenure of the deposit, under intimation to the customer, if the customer fails to meet the prerequisites at any time during the tenure of the deposit and / or the profit rate no longer remains sustainable from Bank's share; and 10.3 The Bank shall ensure that all the operational procedures and controls to the satisfaction of Shariah are in place. Contractual maturities of mudaraba based deposit accounts 2020 Particulars Total Up to 1 Month Over 6 Over 1 to 3 Over 3 to 6 Over 1 to 2 Over 2 to 3 Over 3 to 5 Months to Months Months Years Years Years 1 Year ----------------------------------------------- (Rupees in ‘000) -------------------------------------------Fixed Deposits Savings Deposits 4,469,808 1,228,500 12,528,790 12,528,790 1,310,400 329,150 1,507,694 78,800 15,264 - - - - - - - Current Account - Remunerative 2,045,850 2,045,850 19,044,448 15,803,140 ANNUAL REPORT 2020 - - - - - - 1,310,400 329,150 1,507,694 78,800 15,264 - 193
  143. Annexure - II 10 .4 Profit / (loss) distribution to depositor's pool General Remunerative Depositor’s Pools Profit Sharing Ratio (Depositor: Mudarib) Mudarib Mudarib Share Share transferred Mudarib Profit transferred to the share Net of rate return to the Depositors Hiba (Rs. in earned Depositors through ‘000) through Hiba Hiba (Rs. in ‘000) (Percentage) Mudarib share Net of Hiba Percent Profit rate and weightage announcement period Profit rate return distributed Mudaraba Pool Normal Pool 72.13% 3.60% 3,735 11.15% 29,753 24.77% Monthly 2.65% Special Pool 79.66% 10.17% 70,973 23.59% 229,861 15.54% Monthly 8.54% Total 79.09% 8.92% 74,708 22.35% 259,614 16.24% Monthly 7.42% IERS Musharaka Pool Profit Share of Ratio of rate and Profit rate profit to HIBA weightage weightage return SBP (Rupees in of Bank to announc- earned by (Rupees in ‘000) SBP ement SBP ‘000) period Musharaka Pool SBP's Islamic Export Refinance Scheme 0.1133 1,669 - Quarterly 0.1392 2,112 - Quarterly 1.63% 1.71% 0.1488 1,419 - Quarterly 1.58% 0.1829 1,833 - Quarterly 1.69% Parameters used for allocation of profit, charging expenses and provisions, etc. along with a brief description of their major components: Income generated from relevant assets, calculated at the end of each month is first set aside for the Musharaka pool arrangement between the Bank and the State Bank of Pakistan. It is then allocated between the participants of the pool as per the agreed weightages and rates. The Mudaraba Pool profit is divided between the Bank and depositors in the ratio of Bank’s average equity (pertaining to Islamic banking branches) and average depositors balances commingled in each pool on a pro-rata basis. The depositors' share of profit is allocated amongst them on the basis of weightages declared before start of each month, after deduction of a mudarib fee. During the year ended 31 December 2020, the Bank charged 21% (2019: 25%) of the profit as Mudarib fee. These weightages are declared by the Bank in compliance with the requirements of the SBP and Shariah. The allocation (of income and expenses to different pools) is made on a pre-defined basis and accounting principles / standards. Provisions against any non-performing assets of the pool are not passed on to the pool. 10.5 Allocation of Income and Expenses to Depositors' Pools a) Following are material items of revenues, expenses, gains and losses 2020 2019 ------(Rupees in ‘000)--------1,792,007 1,789,694 Other income (including other charges) Profit / return earned on financings, investments and placements 81,931 92,115 Directly related costs attributable to pool (7,526) (5,033) 1,866,412 1,876,776 The Bank shares all its revenue generated through banking operations with the deposit account (pertaining to Islamic Operation) holders. 194 NAVIGATING OUR WAY TO SUCCESS
  144. Annexure - II b ) Following weightages have been assigned to different products under the Mudaraba Pool during the year: Percentage of total Mudaraba based deposits Minimum weightage Maximum weightage Savings - Soneri Munafa Account 68% 0.4167 0.9167 Savings - Soneri Bachat Account 1% 0.4167 0.4167 0.4167 Savings - Assan Account 0% 0.4167 Current Account - Remunerative 10% 0.0069 0.0069 Time Deposits - Soneri Meadi 21% 0.4861 1.0139 ANNUAL REPORT 2020 195
  145. Annexure - III Disposal of fixed assets (refer note 10.3.3) Disposals / deletions of property and equipment with original cost or book value in excess of rupees one million or two hundred fifty thousand respectively (whichever is less): Particulars Leasehold Improvement Cost Sale price/ Mode of Book value insurance settlement / proceeds disposal Particulars of buyers / insurance companies ---------- (Rupees in ‘000) ---------- ------------- do ------------- 1,711 1,416 - write off ------------- do ------------- 1,382 1,143 - write off ------------- do ------------- 1,311 1,085 - write off ------------- do ------------- 1,043 863 - write off ------------- do ------------- 950 625 681 ------------- do ------------- 674 558 - write off ------------- do ------------- 936 503 - write off ------------- do ------------- 605 500 - write off ------------- do ------------- 757 407 - write off ------------- do ------------- 485 401 - ------------- do ------------- 782 395 256 ------------- do ------------- 354 293 - write off various various various various Insurance Claim Jubilee General Insurance write off Insurance Claim Jubilee General Insurance Items with WDV of below Rs. 250,000/and cost of less than Rs. 1,000,000/- 1,287 782 307 12,277 8,971 1,244 Furniture and fixtures Items with WDV of below Rs. 250,000/and cost of less than Rs. 1,000,000/- 3,492 389 267 3,492 389 267 ------------- do ------------- 20,724 - 30 Tender Blue Star Traders ------------- do ------------- 17,347 - 25 Tender Blue Star Traders ------------- do ------------- 5,646 - 47 Tender Blue Star Traders ------------- do ------------- 1,397 - 94 Tender Rajab ali and Co. ------------- do ------------- 1,311 - 12 Trade off Touch Point ------------- do ------------- 1,175 - 12 Trade off Touch Point ------------- do ------------- 1,050 - 30 Trade off Power Technology ------------- do ------------- 1,050 - 30 Trade off Power Technology ------------- do ------------- 1,044 - 12 Trade off Touch Point ------------- do ------------- 1,042 - 12 Trade off Touch Point ------------- do ------------- 1,042 - 12 ------------- do ------------- 1,038 - 238 ------------- do ------------- 1,038 - ------------- do ------------- 1,038 - ------------- do ------------- 1,032 ------------- do ------------- Electrical office and computer equipment Trade off Touch Point Insurance Claim Jubilee General Insurance 12 Trade off Touch Point 12 Trade off Touch Point - 12 Trade off Touch Point 1,031 - 12 Trade off Touch Point ------------- do ------------- 1,031 - 12 Trade off Touch Point ------------- do ------------- 1,026 - 12 Trade off Touch Point ------------- do ------------- 1,026 - 12 Trade off Touch Point ------------- do ------------- 1,011 - 12 Trade off Touch Point 81,839 2,279 6,937 various various 143,938 2,279 7,587 Items with WDV of below Rs. 250,000/each and cost of less than Rs. 1,000,000/- 196 NAVIGATING OUR WAY TO SUCCESS
  146. Annexure - III Particulars Cost Sale price / Mode of Book value insurance settlement / proceeds disposal Particulars of buyers / insurance companies ---------- (Rupees in ‘000) ---------Motor vehicles ------------- do ------------- 8,214 - - Bank Policy Muhammad Aftab Manzoor ------------- do ------------- 2,198 550 586 Bank Policy Muhammad Aftab Manzoor ------------- do ------------- 1,838 - 1,330 Tender M.Asif Rana ------------- do ------------- 1,821 - 1,313 Tender Sajid Qadri ------------- do ------------- 1,542 - 1,227 Tender M.Amir Khan ------------- do ------------- 1,497 - 1,159 Tender Hafiz M.Umais ------------- do ------------- 1,014 - 780 Tender M.Amir Khan various various Items with WDV of below Rs. 250,000/each and cost of less than Rs. 1,000,000/- ANNUAL REPORT 2020 8,961 - 6,106 27,085 550 12,501 186,792 12,189 21,599 197
  147. NOTICE OF THE ANNUAL GENERAL MEETING Notice is hereby given that Twenty Ninth (29th) Annual General Meeting (“AGM”) of Soneri Bank Limited will be held on Friday, 26 March 2021 at 10:30 a.m. through video-link (Zoom). Additionally arrangements have also been made to attend the meeting in-person at 1st Floor 90-B/C-II, Liberty Market Gulberg-III, Lahore, to transact the following business: Ordinary Business 1) To confirm the minutes of last Annual General Meeting held on 26 March 2020. 2) To receive, consider and adopt Annual Audited Accounts together with the Directors' and Auditors' Reports thereon, for the year ended 31 December 2020. 3) To approve and declare the final cash dividend of Rs.1.25/- per share (i.e.12.50%) for the financial year ended 31 December 2020, as recommended by the Board of Directors in its 183rd meeting held on 17 February 2021. 4) To appoint Auditors of the Bank for the year ending 31 December 2021 till the conclusion of next Annual General Meeting and fix their remuneration. The retiring auditors, M/s. KPMG Taseer Hadi & Company, Chartered Accountants, being eligible, have offered themselves for re-appointment. 5) To transact such other ordinary business as may be placed before the meeting with the permission of the Chair. BY ORDER OF THE BOARD Muhammad Altaf Butt Company Secretary Lahore: 17 February 2021 NOTES: 1. Share Transfer Books of Soneri Bank Limited (“the Bank”) will remain closed from 19 March 2021 to 26 March 2021 (both days inclusive). Transfers received in order at the office of our Shares Registrar M/s. THK Associates (Pvt.) Ltd., Plot No. 32-C, Jami Commercial Street 2, DHA, Phase - 7, Karachi-75500, Pakistan, by the close of business on 18 March 2021 will be considered in time for the purpose of attending and voting in AGM as well as entitled to the payment of cash dividend. 2. For Attending the Meeting: In view of the current situation of COVID-19 pandemic and instructions issued by the Securities and Exchange Commission of Pakistan (“SECP”) and Pakistan Stock Exchange Limited (“PSX”) vide their Circular No. 5 dated 17 March 2020 and PSX/N-372 dated 19 March 2020 respectively, the AGM will be primarily conducted virtually via video-link (Zoom) for the safety and well-being of participants of the meeting. In order to attend the meeting through video-link, members and their proxies are requested to register themselves by providing the following information along with a valid copy of Computerised National Identity Card (“CNIC”) both sides/Passport, attested copy of board resolution/power of attorney (in case of corporate shareholders) through email at cs@soneribank.com by 24 March 2021. Name of Shareholder Folio/CDS A/c No. CNIC No. Cell No. Email Address Post due verification of the information, the members who are registered with us shall be sent a video-link by the Bank along with meeting material including last year’s minutes of the meeting, on their registered email address. The Login facility will remain open from start of the meeting till its proceedings are concluded. The shareholders who wish to send their comments/suggestions on the agenda of the AGM can email us at cs@soneribank.com. The Bank shall ensure that the comments/suggestions of the shareholders will be read out at the meeting and the responses will be made part of the minutes of the meeting. Further, while complying with instructions of the SECP’s Circular No. 4 dated 15 February 2021, necessary arrangements have also been made to attend the meeting physically at 1st Floor, 90-B/C-II, Liberty Market, Gulberg-III, Lahore. Complete COVID-19 related SOPs shall be strictly followed. 3. For Appointing Proxies: A member of the Bank entitled to attend and vote at this meeting may appoint another member as his/her proxy to attend and vote on his/her behalf. Proxies, in order to be effective, must be received at our email cs@soneribank.com or at the Registered Office of the Bank located at 241-242 Upper Mall Scheme, Anand Road, Lahore not less than 48 hours before the time of the meeting. Proxy form shall be duly signed and stamped and witnessed by two persons whose names, addresses and CNIC numbers shall be mentioned on the form. Proxy form, both in English and Urdu language is being separately sent to the shareholders, along with Notice of AGM. 198 NAVIGATING OUR WAY TO SUCCESS
  148. 4 . Shareholders are requested to notify change in their addresses, if any, to our Share Registrar M/s. THK Associates (Pvt.) Ltd., Plot No. 32-C, Jami Commercial Street 2, DHA, Phase - 7, Karachi-75500, Pakistan. 5. CNIC/NTN Number on Electronic Dividend (Mandatory) As per S.R.O.831(1)/2012 dated 05 July 2012 issued by SECP, the electronic Dividend should also bear the CNIC number of the registered shareholder. As per Regulation No. 6 of S.R.O. 1145(1)/2017 dated 06 November 2017, the Bank shall be constrained to withhold the payment of dividend to the shareholders, in case of non-availability of identification number (CNIC or NTN) of the shareholder or the authorised person. Accordingly, the shareholders, who have not yet submitted a copy of their valid CNIC or NTN, are once again requested to immediately submit the same to the Share Registrar. 6. Transmission of Audited Financial Statements and Notice of Annual General Meeting through E-Mail and CD/DVD SECP through its Notification S.R.O. No. 787(1)2014 dated 08 September 2014, has allowed companies to circulate their annual balance sheet and profit & loss account, auditor’s report and directors’ report, etc. (“Audited Financial Statements”) along with Notice of AGM (“Notice”) to their shareholders through email. The shareholders who wish to receive Annual Audited Financial Statements and Notice of AGM through email are requested to fill the consent form given in the link mentioned below and return it to our Share Registrar. https://www.soneribank.com/about-us/investor-relations/shareholders-information/ In terms of SECP S.R.O. No. 470(I)/ 2016 dated 31 May 2016 and its subsequent approval in the 25th AGM of the Bank held on 28 March 2017, the Annual Report is being transmitted to shareholders through CD/DVD instead of sending in book form/hard copy. However, the Bank will provide one hard copy free of cost to the requesting shareholder at their registered address within one week of the request. 7. Deduction of Tax on Cash Dividend Income The shareholders are hereby informed that pursuant to amendments in Section 150 of the Income Tax Ordinance, 2001 through Finance Act, 2020, Income Tax will be deducted at source @15% for person appearing in Active Tax Payer List (“ATL”) and @30% for person not appearing in ATL [determined as per ATL available on Federal Board of Revenue’s (“FBR”) website] from the dividend amount, if any. In case of joint account, each holder is to be treated individually as either a filer or non-filer, and tax will be deducted on the basis of shareholding of each joint holder as may be notified by the shareholder, in writing as follows, to our Share Registrar. In case no such notification is received by us, equal deduction of tax will be made where proportionate holding is not available with us. Principal Shareholder Bank Name Folio/CDS A/c No. Total Shares Name and CNIC No. Shareholding Proportion (No. of Shares) Joint Shareholder Name and CNIC No. Shareholding Proportion (No. of Shares) The CNIC number/NTN details are now mandatory and are required for checking the tax status as per the ATL issued by FBR from time to time. 8. Payment of Cash Dividend through Electronic Mode (Mandatory) In terms of Section 242 of the Act and Companies (Distribution of Dividends) Regulations, 2017, every listed company is required to pay dividend, if any, to their shareholders compulsorily through electronic mode directly crediting the same in their bank account. In this respect, the Bank has previously communicated this requirement to the shareholders individually along with newspaper publications requesting to provide the International Bank Account Number (“IBAN”); however response from very few shareholders was received. Shareholders are again requested to update their record. In this connection, CDC shareholders may submit their IBAN details to their investor account services or their brokers where shares are placed electronically. In case of physical holding, the shareholders are requested to submit their bank mandate details to the Bank’s Share Registrar. For providing the Bank Mandate details to CDC/Share Registrar, the requisite form may be downloaded from the Bank’s website, direct link of which is: https://www.soneribank.com/wp-content/uploads/2020/03/Mandate_Form.pdf ANNUAL REPORT 2020 199
  149. 9 . Unclaimed Dividend and Shares Pursuant to Section 244 of the Act, any shares issued or dividends declared by the Bank, which remain unclaimed or unpaid for a period of three years from the date they became due and payable shall rest with the Federal Government after compliance of procedures prescribed under the Act. In this respect, we had already initiated the process and concerned shareholders were advised vide our letter dated 04 October 2017 to claim their unclaimed dividends/shares. Post submission of this notice, every year shareholders have been continuously communicated requirements of Section 244 to claim their pending entitlements vide Notice of AGM, but only few shareholders have lodged their claims. In order to further this process, a “Final Notice of Unclaimed Shares and Dividends to vest with the Federal Government” was published in the daily Business Recorder and the Nawa-i-Waqt on 01 February 2021 in their countrywide circulations. This notice was also posted to the PSX for the information of all the stakeholders in addition to placement of the same on the website of the Bank. Shareholders are again advised to approach the Bank’s Share Registrar to claim their pending entitlements at the earliest, failing which the Bank shall proceed ahead in terms of requirement of Section 244(2) (a) & (b) of the Act. Statement of such unclaimed dividends/shares is available on the Bank’s website, which may be accessed by surfing the following link: https://www.soneribank.com/about-us/investor-relations/shareholders-information/ 10. Deposit of Physical Shares into CDC Account The shareholders having shares in physical form are advised to open CDC sub-account with any of the brokers or Investor Account directly with the CDC, to place their shares in scrip-less form, this will facilitate them in many ways, including safe custody and sale of shares at any time they want, as the trading of physical shares is not permitted as per existing regulations of PSX. Further, Section 72 of the Act states that after the commencement of this Act from a date notified by the Commission, a company having share capital, shall have shares in book-entry form only. Every existing company shall be required to replace its physical shares with book-entry form in a manner as may be specified and from the date notified by the Commission, within a period not exceeding four years from the commencement of this Act. 11. Video Conference Facility for Attending Annual General Meeting The members who wish to attend AGM via video conference, may send their consent on the below format to the Bank at its registered office address. If the Bank receives consent from members holding in aggregate 10% or more shareholding residing at a geographical location, to participate in the meeting through video conference at least seven (7) days prior to date of the meeting, the Bank will arrange video conference facility in that city subject to availability of such facility in that city. The Bank will intimate members regarding venue of video-link facility at least five (5) days before the date of the AGM along with complete information necessary to enable them to access such facility. Consent Form for Video Conference Facility “I/We ----------------------------------------of----------------------, being a member of Soneri Bank Limited, holder of -------------------Ordinary shares as per registered Folio/CDC Account No.-------------------hereby opt for video conference facility at ---------------------------------------(geographical location). __________________ Signature of Member 12. Requirement of Companies (Postal Ballot) Regulations, 2018 Pursuant to Companies (Postal Ballot) Regulations, 2018, for any other agenda item subject to the requirements of Section 143 and 144 of the Act, members present in person, through video-link or by proxy, and having not less than one-tenth of the total voting power can also demand a poll and exercise their right of vote through postal ballot, that is voting by post or through any electronic mode, in accordance with requirements and procedure contained in the aforesaid regulations. 13. Placement of AGM Notice on the Bank’s website Notice of 29th AGM has also been made available on the Bank’s website www.soneribank.com, in addition to its dispatch to the shareholders through CD/DVDs, as well as publication in the newspapers and by PSX through companies announcements. Inspection of Documents: The copies of the latest annual audited financial statements, Memorandum & Articles of Association and other documents/information have been kept at the registered office of the Bank, which may be inspected on any working day during business hours till the date of 29th AGM. 200 NAVIGATING OUR WAY TO SUCCESS
  150. FINANCIAL CALENDAR 2020 1st Quarter Results issued on 23 April 2020 2nd Quarter Results issued on 26 August 2020 3rd Quarter Results issued on 28 October 2020 Annual Results issued on 17 February 2021 29th Annual General Meeting scheduled for 26 March 2021 2019 1st Quarter Results issued on 24 April 2019 2nd Quarter Results issued on 28 August 2019 3rd Quarter Results issued on 24 October 2019 Annual Results issued on 13 February 2020 28th Annual General Meeting held on 26 March 2020 ANNUAL REPORT 2020 201
  151. PATTERN OF HOLDING OF THE SHARES HELD BY THE SHAREHOLDERS AS ON 31 DECEMBER 2020 No . of Shareholders 939 1252 1045 2026 1428 575 145 64 41 33 23 13 18 22 11 8 6 7 10 4 1 4 18 3 1 4 2 4 3 2 3 3 2 2 3 1 3 2 3 3 1 2 1 1 1 1 1 1 1 1 1 202 From 1 101 501 1001 5001 10001 15001 20001 25001 30001 35001 40001 45001 50001 55001 60001 65001 70001 75001 80001 85001 90001 95001 100001 105001 110001 115001 120001 130001 135001 140001 145001 150001 155001 160001 165001 170001 185001 195001 200001 210001 225001 230001 235001 240001 250001 285001 290001 295001 345001 350001 To Total Shares Held Percentage 100 500 1000 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 55000 60000 65000 70000 75000 80000 85000 90000 95000 100000 105000 110000 115000 120000 125000 135000 140000 145000 150000 155000 160000 165000 170000 175000 190000 200000 205000 215000 230000 235000 240000 245000 255000 290000 295000 300000 350000 355000 32,523 347,149 825,862 4,653,638 11,700,834 6,782,944 2,524,392 1,461,238 1,136,894 1,092,000 866,745 560,363 874,675 1,165,217 631,478 493,839 399,965 511,314 776,916 330,780 85,470 368,389 1,786,334 307,229 107,241 448,563 235,791 488,026 402,224 277,875 426,164 447,502 309,976 318,012 492,056 170,000 515,940 379,835 600,000 606,202 214,864 458,571 232,268 235,962 243,269 254,493 287,342 291,035 295,838 349,000 353,709 0.0030 0.0315 0.0749 0.4221 1.0613 0.6153 0.2290 0.1325 0.1031 0.0991 0.0786 0.0508 0.0793 0.1057 0.0573 0.0448 0.0363 0.0464 0.0705 0.0300 0.0078 0.0334 0.1620 0.0279 0.0097 0.0407 0.0214 0.0443 0.0365 0.0252 0.0387 0.0406 0.0281 0.0288 0.0446 0.0154 0.0468 0.0345 0.0544 0.0550 0.0195 0.0416 0.0211 0.0214 0.0221 0.0231 0.0261 0.0264 0.0268 0.0317 0.0321 NAVIGATING OUR WAY TO SUCCESS
  152. No . of Shareholders 1 2 1 1 1 3 1 1 1 1 1 1 1 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Total 7,803 ANNUAL REPORT 2020 From To Total Shares Held Percentage 365001 405001 435001 570001 585001 600001 620001 635001 640001 695001 795001 900001 1040001 1095001 1125001 1170001 1560001 1615001 1990001 1995001 2095001 2150001 2765001 2995001 3440001 3590001 3630001 4480001 4645001 4650001 4995001 5490001 7660001 8430001 9475001 13020001 13545001 22290001 24630001 37280001 37505001 43070001 51385001 53695001 54015001 86005001 103185001 109085001 307425001 370000 410000 440000 575000 590000 605000 625000 640000 645000 700000 800000 905000 1045000 1100000 1130000 1175000 1565000 1620000 1995000 2000000 2100000 2155000 2770000 3000000 3445000 3595000 3635000 4485000 4650000 4655000 5000000 5495000 7665000 8435000 9480000 13025000 13550000 22295000 24635000 37285000 37510000 43075000 51390000 53700000 54020000 86010000 103190000 109090000 307430000 366,300 815,134 440,000 571,046 588,500 1,811,661 620,500 636,427 645,000 699,000 800,000 905,000 1,040,500 2,200,000 1,129,647 1,170,500 1,565,000 1,618,500 1,994,000 2,000,000 2,100,000 2,150,650 2,766,216 3,000,000 3,441,416 3,591,580 3,633,022 4,481,000 4,649,000 4,650,500 10,000,000 5,494,500 7,661,500 8,430,965 9,477,018 13,020,500 13,546,734 22,291,500 24,631,642 37,280,242 37,508,988 43,072,005 51,386,588 53,700,000 54,017,000 86,008,806 103,186,549 109,085,193 307,425,706 0.0332 0.0739 0.0399 0.0518 0.0534 0.1643 0.0563 0.0577 0.0585 0.0634 0.0726 0.0821 0.0944 0.1996 0.1025 0.1062 0.1420 0.1468 0.1809 0.1814 0.1905 0.1951 0.2509 0.2721 0.3122 0.3258 0.3295 0.4065 0.4217 0.4218 0.9071 0.4984 0.6949 0.7647 0.8596 1.1810 1.2288 2.0220 2.2342 3.3815 3.4023 3.9069 4.6611 4.8709 4.8997 7.8015 9.3596 9.8947 27.8853 1,102,463,481 100.000 203
  153. Categories of Shareholders No . of Shareholders Shares Held Percentage Directors, Chief Executive Officer and their spouses and minor children DIRECTORS Mr. Alauddin Feerasta 2 10,080,679 0.9144 Mr. Nooruddin Feerasta 1 14,048 0.0013 Mr. Ahmed A. Feerasta 1 5,401 0.0005 Mr. Muhammad Rashid Zahir 1 10,065 0.0009 Mr. Jamil Hassan Hamdani 1 1,000 0.0001 Ms. Navin Salim Merchant 1 1,000 0.0001 - - 1 5,401 0.0005 1 7,021 0.0006 9 10,124,615 0.9184 Trustees Alauddin Feerasta Trust 2 393,434,512 35.6869 Trustees Feerasta Senior Trust 2 160,471,781 14.5557 Trustees Alnu Trust 2 80,352,247 7.2884 Mr. Amir Feerasta 2 62,140,630 5.6365 2 625,901 0.0568 NIT 2 103,885,549 9.4230 ICP 1 74 0.0000 CHIEF EXECUTIVE OFFICER Mr. Muhtashim Ahmad Ashai DIRECTORS' SPOUSES AND MINOR CHILDREN Mrs. Aziza A. Feerasta w/o Mr. Alauddin Feerasta Mrs. Amyna N. Feerasta w/o Mr. Nooruddin Feerasta Associated Companies, undertakings and related parties Executives National Investment Trust Limited (NIT) and ICP Banks, Development Financial Institutions, Non Banking Financial Institutions. 11 76,133,947 6.9058 Insurance Companies 3 13,562,912 1.2302 Modarabas 2 1,792 0.0002 CDC - Trustee AKD Opportunity Fund 1 1,994,000 0.1809 Safeway Mutual Fund Ltd. 1 6,820 0.0006 Tri-Star Mutual Fund Ltd. 1 276 0.0000 First Tri-Star Modaraba 1 86 0.0000 Crescent Standard Business Mgt. (Pvt.) Ltd. 1 1 0.0000 49 85,699,657 7.7735 Foreign Companies 6 45,216 0.0041 Others 9 8,871,558 0.8047 a) Local 6,527 96,273,455 8.7326 b) Foreign 1,169 8,838,452 0.8017 7,803 1,102,463,481 100.0000 Mutual Funds Joint Stock Companies General Public: Total: 204 NAVIGATING OUR WAY TO SUCCESS
  154. Shareholders Holding Five Percent or More Voting Interest in the Bank Shares Held Percentage Trustees Alauddin Feerasta Trust 393 ,434,512 35.6869% Trustees Feerasta Senior Trust 160,471,781 14.5557% National Investment Trust Limited (NIT) and ICP 103,885,623 9.4230% Trustees Alnu Trust 80,352,247 7.2884% Mr. Amir Feerasta* 62,140,630 5.6365% * Voting rights on shares are restricted up to five percent only. -:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:Trading in shares during the year 2020: During the year, the following executive has purchased shares of the Bank: Mr. Muhammad Merajuddin Ahmed - Head of HR, Legal & General Service 620,500 ** Apart from the above, there has been no trade in the shares of the Bank carried out by its Directors, CEO, CFO, HOA, Company Secretary, Executives, their spouses and minor children, and substantial shareholders. *** For the purposes of clause 5.6.1 and 5.6.4 of the Rule Book of Pakistan Stock Exchange Ltd. (PSX), the expression "executive" means the CEO, Chief Operating Officer, Chief Financial Officer, Head of Internal Audit and Company Secretary by whatever name called, and other employees of the Bank with banking grade EVP and above. ANNUAL REPORT 2020 205
  155. CODE OF CONDUCT This Code of Conduct (Code) outlines the principles, policies and laws that govern the activities of Soneri Bank Limited (Bank), and to which the Board members, employees and others who work with the Bank, or represent the Bank directly or indirectly must adhere. All employees are required to read, understand, sign and follow the Code of Conduct. Bank employee who is qualified to vote at such election may exercise his/her right to vote. 7. An Employee must not peruse such outside business activity(ies) and relationships using Banks resources (including but not limited to physical space, office supplies, office communication equipment or time) or allow any outside business, civic or charitable activities to interfere with his/her job performance. Employee must never compromise on integrity, either for personal or professional benefit. Each employee is also personally responsible for the integrity of the information, reports and records under his/her control. 8. Employee shall not commit any act of subversion or misconduct or misbehaviors; and will also not act in any manner, which could be prejudicial or detrimental to the interest of the Bank. The Bank shall be entitled to dispense with the services of any employee, any time per the law of his/her employment and/or repeated negligence, disobedience, dishonesty, breach of trust, acts of any other misconduct or subversion without any notice. 9. All Employees shall avoid, during his/her employment or thereafter to disclose or divulge to any person whomsoever any information relating to the Bank or its customers, suppliers, employees or any confidential information which he/she may have access to while being in the service of the Bank. All Employees shall be bound to protect the confidentiality of the non-public information at all times. Soneri Bank Limited (Bank) expects all of its employees to act in full compliance with the policies & guidelines set forth in this Code of Conduct. It is employee’s responsibility to make oneself familiar with the following and other policies related to their own business unit: 1. 2. 3. No employees shall engage directly or indirectly, in any other business but shall faithfully and diligently, perform the duties entrusted to him /her from time to time and devote maximum time and attention to work of the Bank, and ensure his/her best endeavors to promote its interest and welfare. Neither shall take up any activity which will bring him/her any reward or remuneration or benefit, directly or indirectly other than from the job at the Bank. No employee or his/her immediate family shall enter into speculative and trading activity in stocks, shares, bonds, or any other securities or commodities, either on his/her own account or that of any other person, firm, company, nor shall involve in other speculative activity (ies) including betting/gambling. Further, an employee and his/her immediate family shall not derive any benefit or assist others to derive any benefit from the access to and possession of information about the Bank, which is not in the public domain and thus constitutes inside information. All the employees are required to comply with the applicable company law on prevention of inside trading. No employee shall accept any presents either in cash or kind from Bank clients, suppliers, vendors and contractors or others, by way of illegal gratification or otherwise. Any such instance where business judgment has been compromised due to such monetary or non-monetary gifts will be considered as a violation of this code. Accepting gifts and benefits that may appear as engaging others in bribery or influencing for a consideration for an official or business favor is prohibited. 4. No Employee shall give or take bribe or engage in any form of corruption. 5. No payment or transaction should be made or undertaken, by an employee or authorized or instructed to be made or undertaken by any other person or the Bank if the consequence of that transaction or payment would be the violation of any law in force. 6. 206 No employee shall take part in, subscribe in any aid of, assist in or take part in any political activity whatsoever. No employee shall canvass or otherwise, interfere or use his/her influence in connection with or take part in any election to a legislative or local body, whether in Pakistan or elsewhere. Provided that a 10. Notwithstanding anything contained hereinabove every employee will abide by all the laws of the land including Labor Laws where applicable. 11. Employees are expected to be at work on time every business day. In the event that employee is absent or late due to illness, accident or personal reasons, he/she is required to inform his/her supervisor as soon as possible so that the department may make other arrangements for substitute help while the employee is away. 12. In case of resignation every employee will have to attend his/her duties until the resignation is accepted and employee is properly relieved by the competent authority. In case he/she fails to attend his/her duty after tendering resignation, the resignation will not be considered and he/she may be dealt according to the relevant HR Policy. 13. All employees are expected to comply with ethical standards as a critical element of their responsibilities. It is encouraged to raise possible ethical issues and Bank prohibits any retaliatory action against any individual for raising legitimate concerns regarding ethics, discrimination or harassment matters or for reporting suspected violations. In case of any issue that has been reported, investigation / inquiry shall be held, and all employees are required to fully cooperate with any appropriately authorized internal or external investigations. NAVIGATING OUR WAY TO SUCCESS
  156. 14 . Employees are expected to dress in a manner consistent with the nature of work performed. While at work, all employees are expected to dress neatly and appropriately in normal office as per the Dress code policy of the Bank. Use of Jeans, Tshirts, shirts without collar, fancy color shirts and see-through fabrics, clothes with advertising logos or logos promoting offensive messages i.e. cigarettes, alcohol and/or drugs, joggers, sandals and slippers are strictly prohibited. 15. All employees are expected to abide with the personal hygiene requirements. This includes taking care of body odor, bad breath, teeth, nails, ears, eyes, nose, hair, hands, feet and health. 16. All employees are responsible for safeguarding the tangible and intangible assets of Bank and its customers, suppliers and distributors that are under their control. Bank assets may be used only for proper company purpose. Misappropriation, carelessness or waste of Bank assets is a breach of one’s duty to the Bank and should be avoided at all cost. 17. 18. 19. An employee must not: - steal, embezzle or misappropriate money, funds or anything of value from the Bank, doing so shall subject him/her to potential disciplinary action according to the bank policy - use Bank assets for personal gain or advantage - remove bank assets from their premises and facilities unless properly authorized by the relevant competent authority - use Bank’s stationery or corporate documents, Bank’s brand name for nonofficial purposes since such implies endorsement from Soneri Bank. Employee at the time of separation from Bank should return Bank assets, facilities (blackberry, laptop, mobile etc.), visiting and Identity cards, stamps etc. the records in accordance with their importance and applicable statutory record retention requirements and Bank policies. 22. The Bank is also committed to accuracy in tax related records and tax reporting in compliance with the overall intent and applicable laws. Tax returns must be filed on a timely basis and taxes due paid in time. 23. The Bank believes that diversity in the staff is critical to its success and is fully committed to equal employment opportunity, compliance with fair employment practices and nondiscrimination laws. The Bank prohibits sexual or any other kind of discrimination, harassment or intimidation, whether committed by or against a supervisor, coworker, customer, vendor or visitor. 24. Where husbands, wives or other relatives are employed in the same or related areas, no employee should allow personal and/or domestic circumstances to impinge upon or affect either working relationships or the breach of bank’s employment regulations regarding confidentiality and fidelity. 25. An employee must never use Bank systems to transmit or receive electronic images or text of a sexual nature or containing ethnic slurs, racial epithets or any other material of a harassing, offensive or lewd nature. 26. Selling, manufacturing, distributing, possessing, using or being under the influence of illegal drugs on the job is prohibited. 27. To protect the wellbeing of Bank’s valued customers and employees, smoking and eating betel leaf within the premises of Bank is strictly prohibited. 28. All employees must comply with all applicable health and safety policies. 29. No employee may take unfair advantage of anyone through manipulation, concealment, abuse of confidential information, misrepresentation of facts or other unfair dealing practices. If employees are supplied with an identification card, this must be worn visibly when on Bank’s premises. Each employee is also responsible for the safekeeping of his/her ID card. 20. Bank’s telephone, e-mail, voice-mail, computer, systems etc. are primarily for business purposes. Employees may not use these systems in a manner that could be harmful or embarrassing to Bank. Personal communications using these systems must be kept to a minimum. In case of his/her separation from the Bank, all rights to property and information generated or obtained as part of an employment relationship remains the exclusive property of the Bank only. 21. Records are very important business assets. The Bank is committed to managing its records in a consistent, systematic and reliable manner; records provides evidence for business activities and decisions and are often required to meet legal and regulatory requirements. Employees are required to retain ANNUAL REPORT 2020 30. No employee other than the authorized personnel is allowed to publish, make speech, give interviews or make public appearance that are connected to Bank’s business interests, else an approval is required from HR, Head of Compliance and President. 31. Employees responsible for buying assets on Bank’s behalf should purchase all goods and services on the basis of quality, price, availability, terms and service. Employees responsible for customer relationship must never lead a supplier or customer to believe that they can inappropriately influence any procurement decisions at Bank. Employees shall ensure to abide by all the provision of the Fixed Asset Management and Expenditure Control Policies of the Bank. 207
  157. 32 . Real or perceived conflicts of Interest in any process or form should be disclosed and avoided. An employee or any of his/her relatives / associates should not derive any undue personal benefit or advantage by virtue of his/her position or relationship with the Bank. Any dealings with a related party must be conducted in such a way that no preferential treatment is given and adequate disclosures are made as required by the law and as per the applicable policies of the Bank. 33. Employees should also take steps to ensure that business related paper work and documents are produced, copied and faxed are properly filed and stored or if not needed, should be properly discarded to minimize the risk that an unauthorized person might obtain an access to confidential information. Access to work areas and systems should also be properly controlled. 34. Employees of the Bank are strictly prohibited to disclose the fact to the customer or any other quarter that a suspicious transaction or related information is being or has been reported to any authority, except if required by law. 35. Employees must be sensitive to any activities, interests or relationships that might interfere with or even appear to interfere with his/her ability to act in the best interests of Bank and its customers. 36. If any personal investment that affects or appears to affect an employee’s ability to make an unbiased business decision for Bank, should be avoided. 37. An employee must notify authorized person or HR of any business relationship or proposed business transaction Bank may have with any company in which he/she or a related party has a direct or indirect interest or from which he/she or related party may drive a benefit. Even if related party or relative is employed, this may raise conflict of interest. Therefore, it should be avoided. 38. Bank employee and their families are encouraged to use Bank for their personal financial services needs. 39. The Code of Conduct is subject to variances, modifications, and amendments, from time to time through the resolution of the Board of Directors. ID/Password) with other employees, both the parties would be accountable and liable to strict disciplinary action which may result in termination from employment. Failure to observe these policies may result in a disciplinary action, up to and including immediate termination of employment or any other relationship with the Bank. Furthermore, violations of this Code may also be violations of the law and may result in civil or criminal penalties. 40. In case of the breach of any of the above ‘Code of Conduct’, the employee shall be liable to disciplinary action. This shall be without prejudice’ to any other rights and remedies of the Bank. 41. 208 All employees are responsible to safeguard their password and ensure that they maintain honesty and integrity at all times. Password is unique to an individual and its sharing is strictly prohibited. In an event where it is reported that employees have shared their login credentials (User NAVIGATING OUR WAY TO SUCCESS
  158. LIST OF BRANCHES AS AT 31 DECEMBER 2020 REGISTERED OFFICE Rupali House , 241-242 Upper Mall Scheme, Anand Road Lahore-54000 - Pakistan Tel. No.: (042) 35713101-2 & 35792180 CENTRAL OFFICE 10th Floor, PNSC Building, M. T. Khan Road Karachi Tel. No.: (021) 32444401-5 & 111-567-890 Swift: SONEPKKAXXX 23. Badian Road Branch, Lahore Tel. No.: (042) 37165390-2 48. Safari Garden Branch, Lahore Tel. No.: 0317-4484537-9 24. Mughalpura Branch, Lahore Tel. No.: (042) 36880892-4 49. 25. Upper Mall (Corporate) Branch, Lahore Tel. No.: (042) 35789346, 49, 51 & 55 Raiwind Branch, District Lahore Tel. No.: (042) 35398661-2 & 0317-4484562-4 50. 26. Islampura Branch, Lahore Tel. No.: (042) 37214394-7 Main Boulevard Branch, Gulberg, Lahore Tel. No.: (042) 35759924-5 & 0316-8226086-9 27. Circular Road Branch, Lahore Tel. No.: (042) 37670483, 86, 89 & (042) 37379319 Garhi Shahu Branch, Lahore Tel. No.: (042) 36294201-3 & (042) 36376096 28. 5. Model Town Branch, Lahore Tel. No.: (042) 35889311-2 & 35915666 Zarrar Shaheed Road Branch, Lahore Tel. No.: (042) 36635167-8 29. 6. Peco Road Branch, Lahore Tel. No.: (042) 35222306-7, (042) 35203050-1,35177804 & (042) 35173392 Hamdard Chowk Kot Lakhpat Branch, Lahore Tel. No.: (042) 35140261-3 CENTRAL REGION 1. Main Branch, Lahore Tel. No.: (042) 36368141-8 & (042) 111-567-890 2. Defence Branch, Lahore Tel. No.: (042) 35730760-1, 3574616 & (042) 35691037-9 3. 4. 7. Gulberg Branch, Lahore Tel. No.: (042) 35713445-8, 35759273 & (042) 35772294-5 Cavalry Ground Branch, Lahore Tel. No.: (042) 36653728-30 & (042) 36619702 30. Kana Kacha Branch, Lahore Tel. No.: (042) 35472222 & 0316-8226316-8 31. Sabzazar Branch, Lahore Tel. No.: (042) 37830881-6 32. DHA Phase-IV Branch, Lahore Tel. No.: (042) 35694156-7 33. 55. Islamic Banking Allama Iqbal Town Branch, Lahore Tel. No.: 0310-4031793 & 0310-4031781 59. Main Branch, Gujranwala Tel. No.: (055) 3843560-2 & (055) 111-567-890 35. 11. Thokar Niaz Baig Branch, Lahore Tel. No.: (042) 35313651, 3 & 4 0317-4484542-3 Badami Bagh Branch, Lahore Tel. No.: (042) 37731601, 2 & 4 36. Montgomery Road Branch, Lahore Tel. No.: (042) 36291013-4 12. Ghazi Chowk Branch, Lahore Tel. No.: (042) 35188505-7 & (042) 35185661-3 37. Islamic Banking DHA Phase: VI Branch, Lahore Tel. No.: (042) 37180535-7 38. Bahria Town Branch, Lahore Tel. No.: (042) 35976354 & 0316-8226346-9 39. Expo Centre Branch, Lahore Tel. No.: (042) 35314087, 88, 90 & 91 40. Wapda Town Branch, Lahore Tel. No.: (042) 35187611-2 41. Shah Alam Market Branch, Lahore Tel. No.: (042) 37376213-4 & 0316-8226277-8 42. DHA Phase-V Branch, Lahore Tel. No.: (042) 35695678 & 0316-8226322-3 43. Chauburji Branch, Lahore Tel. No.: (042) 37112228 & 0316-8226325-7 16. Johar Town Branch, Lahore Tel. No.: (042) 35204191-3 17. Wahdat Road Branch, Lahore Tel. No.: (042) 37424821-7 & (042) 37420591 18. Gunpat Road Branch, Lahore Tel. No.: (042) 37361607-9 19 Airport Road Branch, Lahore Tel. No.: (042) 35700115-8 44. Walton Road Branch, Lahore Tel. No.: (042) 36672305 & 0316-8226339, 40 & 41 20. Timber Market Branch, Lahore Tel. No.: (042) 37725353-8 45. 21. Shahdara Branch, Lahore Tel. No.: (042) 37920085, 37941741-3 & (042) 37921743-8 22. Manga Mandi Branch, Lahore Tel. No.: (042) 35383516-9 ANNUAL REPORT 2020 Sundar Industrial Estate Branch, Lahore Tel. No.: 0315-4980731 & 0315-4980742 Muridke Branch Tel. No.: (042) 37166511-4 & (042) 37981100 Jail Road Branch, Lahore Tel. No.: (042) 35408936-8 Faisal Town Branch, Lahore Tel. No.: (042) 35170540 & 0316-8226335, 7 &8 46. Karim Block Branch, Lahore Tel. No.: (042) 35417757 & 0316-8226412, 3 &4 47. 54. 58. 34. Baghbanpura Branch, Lahore Tel. No.: (042) 36832811-3 Chungi Amer Sadhu Branch, Lahore Tel. No.: (042) 35922182,184 & 186 Lake City Branch, Lahore Tel. No.: 0318-4178739 'K' Block Model Town Branch, Lahore Tel. No.: (042) 35880241-5 10. 15. 53. 57. Allama Iqbal Town Branch, Lahore Tel. No.: (042) 37812395-7 DHA Phase-III Branch, Lahore Tel. No.: (042) 35734081, 2, 3 & 5 EME Housing Society Branch, Lahore Tel. No.: 0318-4178733-4 Azam Cloth Market Branch, Lahore Tel. No.: (042) 37662203-7 9. 14. 52. Canal View Co-Operative Housing Society Branch, Lahore Tel. No.: 0315-4304582-5 Islamic Banking Temple Road Branch, Lahore Tel. No.: (042) 36376341, 2 & 6 Islamic Banking New Garden Town Branch, Lahore Tel. No.: (042) 35940611-616 Islamic Banking Township Branch, Lahore Tel. No.: (042) 35113105 56. 8. 13. 51. Defence Road Branch, Lahore Tel. No.: 0316-8226415-8 Islamic Banking 60. Gujranwala Cantt. Branch, Gujranwala Tel. No.: (055) 3861931-3 & 5 61. Wapda Town Branch, Gujranwala Tel. No.: (055) 4291136-7 62. Kamokee Branch, District Gujranwala Tel. No.: (055) 6813501-6 63. Wazirabad Branch Tel. No.: (055) 6603703-4 & 6608555 64. Ghakkar Mandi Branch Tel. No.: (055) 3832611-2 65. Main Branch, Faisalabad Tel. No.: (041) 2639873, 7-8 & (041) 111-567-890 66. Peoples Colony Branch, Faisalabad Tel. No.: (041) 8555714 & 8555720 67. Ghulam Muhammadabad Branch, Faisalabad Tel. No.: (041) 2680114, 110 & 117 68. Islamic Banking East Canal Road Branch, Faisalabad Tel. No.: (041) 2421381-2 69. Civil Lines Branch, Faisalabad Tel. No.: (041) 2648105, 8 & 11 70. Madina Town Branch, Faisalabad Tel. No.: (041) 8735551-2 & 0316-8226451-3 209
  159. 71 . Jaranwala Branch, District Faisalabad Tel. No.: (041) 4312201-6 99. Satellite Town Branch, Bahawalpur Tel. No.: (062) 2280602-3 - 126. Hafizabad Branch Tel. No.: (0547) 541641-4 72. Samundri Branch, District Faisalabad Tel. No.: (041) 3423983-4 127. Pattoki Branch Tel. No.: (049) 4422435-6 73. Painsera Branch, District Faisalabad Tel. No.: (041) 2557100-11 & 2574300 100. Ahmedpur Sharqia Branch District Bahawalpur Tel. No.: (062) 2271345 & 0316-8226404, 6 & 8 74. Killianwala Branch, Distt. Faisalabad Tel. No.: (041) 3214151-5 75. Khurrianwala Branch Tel. No.: (041) 4360701-2 101. Hasilpur Branch Tel. No.: (062) 2441481-7 & 2441478 102. Club Road Branch, Sargodha Tel. No.: (048) 3726021-3 128. Ellahabad Branch Tel. No.: (049) 4751130 129. Khudian Branch Tel. No.: (049) 2791595-6 130. Sambrial Branch Tel. No.: (052) 6523451-3 76. Chiniot Branch Tel. No.: (047) 6333840-4 103. Pull-111 Branch, District Sargodha Tel. No.: (048) 3791403-4 & 0316-8226449 & 50 77. Jhang Branch Tel. No.: (047) 7651601-2 104. Jauharabad Branch, District Khushab Tel. No.: (0454) 723011-2 132. Mailsi Branch, District Vehari Tel. No.: (067) 3750140-5 78. Shorkot City Branch, Distt. Jhang Tel. No: 0316-8226093, 95, 97 & 98 105. Khushab Branch, District Khushab Tel. No.: (0454) 710294, 5 & 6 79. Small Industrial Estate Branch, Sialkot Tel. No.: (052) 3242607-9 106. Bhalwal Branch Tel. No.: (048) 6642224 & 0316-8226331-2 133. Burewala Branch, District Vehari Tel. No.: (067) 3773110 & 20 & (067) 3355779 80. Pasrur Road Branch, Sialkot Tel. No.: (052) 3521655, 755 & 855 & (052) 3611655 & 755 107. Khanewal Branch Tel. No.: (065) 2551560-3 81. Islamic Banking Sialkot Cantt Branch, Sialkot Tel. No.: (052) 4560023-7 82. Godhpur Branch, Sialkot Tel. No.: (052) 4563932-3 83. Daska Branch, District Sialkot Tel. No.: (052) 6617847-8 84. Daska Road Branch, Addah, District Sialkot Tel. No.: (052) 3525337 & 9 85. Sheikhupura Branch Tel. No.: (056) 3810933 & 3813133 86. Nankana Sahib Branch Tel. No.: (056) 2876342-3 87. Main Branch, Multan Tel. No.: (061) 4504018, 4504118, (061) 4519927 & 4512884 88. Islamic Banking Shah Rukn-e-Alam Branch, Multan Tel. No.: (061) 6784051-4 & 6782081 89. Bosan Road Branch, Multan Tel. No.: (061) 6210690-2 108. Kabirwala Branch, District Khanewal Tel. No.: (065) 2400910-3 109. Abdul Hakeem Branch, District Khanewal Tel. No.: (065) 2441888 & 0316-8226310-2 110. Mian Channu Branch Tel. No.: (065) 2662201-2 111. Depalpur Branch Tel. No.: (044) 4541341-2 112. Okara Branch Tel. No.: (044) 2553012-4 & 2552200 113. Hujra Shah Muqeem Branch District Okara Tel. No.: (044) 4860401-3 & 0316-8226419-21 131. Gagoo Mandi Branch, District Vehari Tel. No.: (067) 3500311-2 134. Mandi Bahauddin Branch Tel. No.: (0546) 507602, 3 & 8 135. Bahawalnagar Branch Tel. No.: (063) 2274795-6 136. Haroonabad Branch, District Bahawalnagar Tel. No.: (063) 2251664-5 137. Toba Tek Singh Branch Tel. No.: (046) 2513203-4 138. Gojra Branch, District Toba Tek Singh Tel. No.: (046) 3516392 & 3515577 139. Kamalia Branch, District Toba Tek Singh Tel. No.: (046) 3411405-6 140. Pir Mahal Branch Tel. No.: (046) 3361690 & 5 141. Gujrat Branch Tel. No.: (053) 3520591, 2 & 4 114. Haveli Lakha Branch Tel. No.: (044) 4775412-3 142. Kotla Arab Ali Khan, District Gujrat Tel. No.: (053) 7575501 & 3 115. Sahiwal Branch Tel. No.: (040) 4467742-3 143. Kharian Branch Tel. No.: (053) 7602904, 5 & 7 116. Farid Town Branch, Sahiwal Tel. No.: (040) 4272173, 4 & 5 144. Pak Pattan Branch, District Pak Pattan Tel. No.: (0457) 371781-5 117. 145. Arif wala Branch, District Pak Pattan Tel. No.: (0457) 834013, 5 & 6 Chichawatni Branch, District Sahiwal Tel. No.: (040) 5484852-3 90. Mumtazabad Branch, Multan Tel. No.: (061) 6760212-4 118. Layyah Branch Tel. No.: (060) 6414205-7 91. Gulgasht Colony Branch, Multan Tel. No.: (061)-6222701 & 0316-8226393-5 119. Jampur Branch, District Rajanpur Tel. No.: (060) 4567787 & 4567325 92. Wapda Town Branch, Multan Tel. No.: (061) 6213011 & 0316-8226441-2 120. Kharoor Pacca Branch Tel. No.: (0608) 341041-2 93. Azmat Road Branch, Dera Ghazi Khan Tel. No.: (064) 2471630-6 121. Muzafargarh Branch Tel. No.: (066) 2422901, 3 & 5 148. Narowal Branch Tel. No.: (0542) 411405 & 0316-8226328-30 94. Lodhran Branch Tel. No.: (0608) 364766-7 149. Rajanpur Branch Tel. No.: (0604) 688108 & 0316-8226396 95. Rahim Yar Khan Branch Tel. No.: (068) 5886042-4 122. Fazal Garh Sanawan Branch, District Muzafargarh Tel. No.: (066) 2250214-5 96. Liaqatpur Branch, District Rahim Yar Khan Tel. No.: (068) 5792041-4 97. 98. 210 Sadiqabad Branch Tel. No.: (068) 5702162, 5800161, (068) 5800661 & 5801161 Bahawalpur Branch Tel. No.: (062) 2731703-1 123. Sheikho Sugar Mills Branch District Muzafargarh Tel. No.: 0345-8530242-4 124. Shahbaz Khan Road Branch, Kasur Tel. No.: (0492) 764890-3 125. Jalalpur Bhattian Branch, District Hafizabad Tel. No.: (0547) 500848-50 146. Chishtian Branch Tel. No.: (063) 2501141-2 & 0316-8226304-6 147. Khanpur Branch Tel. No.: (068) 5577719-20 & 0316-8226307-9 150. Mianwali Branch Tel. No.: (0459) 230825, 6 & 7 SOUTH REGION 151. Main Branch, Karachi Tel. No.: (021) 32436990 & 32444401-5 & (021) 111-567-890 152. Clifton Branch, Karachi Tel. No.: (021) 35877773-4, 35861286 & (021) 35375448 NAVIGATING OUR WAY TO SUCCESS
  160. 153 . Garden Branch, Karachi Tel. No.: (021) 32232877-8 177. Apwa Complex Branch, Karachi Tel. No.: (021) 32253143 & 32253216 205. Khayaban-e-Ittehad Branch, Karachi Tel. No.: (021) 35347413-6 154. F. B. Area Branch, Karachi Tel. No.: (021) 36373782-3 & (021) 36811646 178. Clifton Block-2 Branch, Karachi Tel. No.: (021) 35361115-7 206. Bahria Complex-III (Corporate) Branch, Karachi Tel. No.: (021) 35640731-6 35640235-7 155. Korangi Industrial Area Branch, Karachi Tel. No.: (021) 35113898-9, (021) 35113900-1 & 0316-8226189-92 156. AKU Branch, Karachi Tel. No.: (021) 34852251-3 & (021) 33102498-9 157. Haidery Branch, Karachi Tel. No.: (021) 36638617, (021) 36630409-410 & 0316-8226231-8 158. Jodia Bazar Branch, Karachi Tel. No.: (021) 32441786, 32442208 & (021) 32463894 & 0316-8226202-10 159. Shahrah-e-Faisal Branch, Karachi Tel. No.: (021) 34316128, 34316395, (021) 34322150, 34398430 & (021) 34535545-46, 53-54 160. DHA Branch, Karachi Tel. No.: (021) 35852209, 35845211 & (021) 35340825 161. Gulshan-e-Iqbal Branch, Karachi Tel. No.: (021) 34811830-33 & 0316-8226239-45 162. SITE Branch, Karachi Tel. No.: (021) 32568330, 32550997 & (021) 32550903-4 163. Zamzama Branch, Karachi Tel. No.: (021) 35375835 & 35293435 164. Gole Market Branch, Karachi Tel. No.: (021) 36618932, 36618925 & 0316-8226154-62 165. Gulistan-e-Jauhar Branch, Karachi Tel. No.: (021) 34020943-5 166. M. A. Jinnah Road Branch, Karachi Tel. No.: (021) 32213972 & 32213498 167. Gulbahar Branch, Karachi Tel. No.: (021) 36607744 & 0316-8226434-5 168. North Karachi Branch, Karachi Tel. No.: (021) 36920140-5 & 0316-8226171-2 169. Block-7 Gulshan-e-Iqbal Branch, Karachi Tel. No.: (021) 34815811-2, 34833728 & 777 Islamic Banking 170. Cloth Market Branch, Karachi Tel. No.: (021) 32442961 & 32442977 179. Malir Branch, Karachi Tel. No.: (021) 34517982-3 180. Bahadurabad Branch, Karachi Tel. No.: (021) 34135842-3 181. New Challi Branch, Karachi Tel. No.: (021) 32625246 & 32625279 182. Shah Faisal Colony Branch, Karachi Tel. No.: (021) 34602446-7 183. Zaibunissa Street Saddar Branch, Karachi Tel. No.: (021) 35220025-7 184. Liaquatabad Branch, Karachi Tel. No.: (021) 34860723-25 185. Lea Market Branch, Karachi Tel. No.: (021) 32526193-4 186. Korangi Township No: 2 Branch, Karachi Tel. No.: (021) 35058041 & 35071181 187. North Karachi Ind. Area Branch, Karachi Tel. No.: (021) 36962851, 52 & 55 188. F. B. Industrial Area Branch, Karachi Tel. No.: (021) 36829961-4 189. Napier Road Branch, Karachi Tel. No.: (021) 32713539-40 190. Gulshan-e-Hadeed Branch, Karachi Tel. No.: (021) 34710252 & 256 191. Metroville Branch, Karachi Tel. No.: (021) 36752206-7 192. Defence Phase-II Extension Branch, Karachi Tel. No.: (021) 35386910-12 193. North Karachi Township Branch, Karachi Tel. No.: (021) 36968604-7 194. Stock Exchange Branch, Karachi Tel. No.: (021) 32414003-4 & (021) 32415927-8 ANNUAL REPORT 2020 211. Clifton Block-08 Branch, Karachi Tel. No.: (021) 35867435-6 & 0316-8226425-7 212. Block-02 Gulshan-e-Iqbal Branch, Karachi Tel. No.: (021) 34988781-2 213. Garden Market Branch, Karachi Tel. No.: (021) 32244195-6 & 0316-8226431-3 214. Block-N North Nazimabad Branch, Karachi Tel. No.: (021) 36641623-4 & 0316-8226436-38 215. Marriot Road Branch, Karachi Tel. No.: (021) 32461840-42 & 0316-8226428-30 216. Gulshan-e-Maymar Branch, Karachi Tel. No.: (021) 36881235-6 & 0316-8226445-47 217. Shersha Branch, Karachi Tel. No.: (021) 32583001-3 & 0317-4484534-6 218. DHA Phase-VIII Branch, Karachi Tel. No.: 0315-4979265, 328 & 445 219. Khalid Bin Waleed Road Branch, Karachi Tel. No.: (021) 34522044, 5 & 6 221. 26th Commercial Street Branch, Karachi Tel. No.: (021) 35290094, 5 & 6 197. Saudabad Branch, Malir, Karachi Tel. No.: (021) 34111901-5 222. Bahria Town Branch, Karachi Tel. No.: 0318-4304576-7 198. Shireen Jinnah Colony Branch, Karachi Tel. No.: (021) 34166262-4 Islamic Banking 223. Gulistan-e-Jauhar Branch, Karachi Tel. No.: - 200. Barkat-e-Haidery Branch, Karachi Tel. No.: (021) 36645688-9 Islamic Banking 176. Waterpump Branch, Karachi Tel. No.: (021) 36312113 & 36312108, (021) 36312349 & 36311908 210. New Sabzi Mandi Branch, Karachi Tel. No.: (021) 36870506-7 & 0316-8226409-11 196. Alyabad Branch, Karachi Tel. No.: (021) 36826727 & 36332517 172. Suparco Branch, Karachi Tel. No.: (021) 34970560, 34158325-6, (021) 37080810 & 0316-8226457 175. Nishtar Road Branch, Karachi Tel. No.: (021) 32239711-3 & 32239678 209. Gulberg Branch, Karachi Tel. No.: (021) 36340553, 549 & 0316-8226291-2 220. Bokhari Commercial Branch, Karachi Tel. No.: (021) 35170651, 2 & 3 Islamic Banking 199. Al-Tijarah Centre Branch, Karachi Tel. No.: (021) 34169251-3 174. Allama Iqbal Road Branch, Karachi Tel. No.: (021) 34387673-4 208. DHA Phase-IV Branch, Karachi Tel. No.: (021) 35311491-2 & 0316-8226285-7 195. Gulshan-e-Jamal Branch, Karachi Tel. No.: (021) 34682682-4 171. Paria Street Kharadar Branch, Karachi Tel. No.: (021) 32201059, 60 & 61 173. Chandni Chowk Branch, Karachi Tel. No.: (021) 34937933 & 34141296 207. New M. A. Jinnah Road Branch, Karachi Tel. No.: (021) 34894941-3 201. Shadman Town Branch, Karachi Tel. No.: (021) 36903038-9 202. Enquiry Office Nazimabad No: 2 Branch, Karachi Tel. No.: (021) 36601502-5 Islamic Banking 203. Rashid Minhas Road Branch, Karachi Tel. No.: (021) 34983878 & 34837443-4 204. Timber Market Branch, Karachi Tel. No.: (021) 32742491-2 Islamic Banking 224. North Karachi Township Branch, Karachi Tel. No.: (021) 36948010-2 Main Branch, Hyderabad 225. Tel. No.: (022) 2781528-9, 2782347 & (022) 111-567-890 226. F. J. Road Branch, Hyderabad Tel. No.: (022) 2728131 & 2785997 (022) 2780205 227. Latifabad Branch, Hyderabad Tel. No.: (022) 3816309 & 3816625 228. Qasimabad Branch, Hyderabad Tel. No.: (022) 2651968 & 70 Islamic Banking 229. Isra University Branch, District Hyderabad Tel. No.: (022) 2032322 & 2030161-4 211
  161. 230 . Prince Ali Road Branch, Hyderabad Tel. No.: (022) 2638514 & 2622122 258. Larkana Branch Tel. No.: (074) 4058211-13 284. Pindora Branch, Rawalpindi Tel. No.: (051) 4419020-22 231. S.I.T.E. Branch, Hyderabad Tel. No.: (022) 3886861-2 259. Panjhatti Branch Tel. No.: (0243) 552183-6 285. Gulraiz Branch, Rawalpindi Tel. No.: (051) 5595148-9 & 5974073 232. Faqir Jo Pir Branch, Hyderabad Tel. No.: (022) 2612685-6 260. Ghotki Branch Tel. No.: (0723) 680305-6 233. Auto Bhan Road Branch, Hyderabad Tel. No.: (022) 2100062-3 & 0316-8226313-4 261. Deharki Branch Tel. No.: (0723) 644156, 158 & 160 Islamic Banking 286. Peshawar Road Branch, Rawalpindi Tel. No.: (051) 5460113-7 234. Matyari Branch, District Matyari Tel. No.: (022) 2760125-6 235. Tando Allah Yar Branch Tel. No.: (022) 3890260-4 236. Sultanabad Branch, District Tando Allah Yar Tel. No.: (022) 3404101-2 237. Tando Muhammad Khan Branch Tel. No.: (022) 3340371-2 & 0316-8226267-8 238. Sukkur Branch Tel. No.: (071) 5622382, 5622925 & 0316-8226055-63 239. Pano Aqil Branch, District Sukkur Tel. No.: (071) 5690081, 2 & 3 240. Sanghar Branch, District Sanghar Tel. No.: (0235) 543376-7 & 0316-8226246-7 241. Tando Adam Branch, District Sanghar Tel. No.: (0235) 571640-44 242. Shahdadpur Branch, District Sanghar Tel. No.: (0235) 841982-4 262. Thull Branch Tel. No.: (0722) 610150-1 263. Kandkhot Branch Tel. No.: (0722) 572883-6 264. Jacobabad Branch Tel. No.: (0722) 654041-5 287. Bahria Town Branch, Rawalpindi Tel. No.: (051) 5733772-3 & 5733768-9 Islamic Banking 288. Chaklala Scheme-III Branch, Rawalpindi Tel. No.: (051) 5766345-7 289. Adyala Road Branch, Rawalpindi Tel. No.: (051) 5569091, 96, 97 & 99 265. Shahdadkot Branch, District Qamber Shahdadkot Tel. No.: (074) 4012401-2 290. Bahria Town Phase-VII Branch, Rawalpindi Tel. No.: (051) 5400259-60 & (051) 5400255 & 58 266. Dadu Branch Tel. No.: (025) 4711417-8 & 0316-8226294-6 291. Bahria Town Phase-VIII Branch, Rawalpindi Tel. No.: (051) 5195232, 4, 5 & 6 267. Mehar Branch, District Dadu Tel. No.: - Islamic Banking 292. Faisal Town Branch, Rawalpindi Tel. No.: (051) 2720670-5 268. Bhan Sayedabad Branch, District Jamshoro Tel. No.: 0316-8226296-7 269. Shikarpur Branch Tel. No.: (0726) 540381-3 & 0316-8226319-21 270. Moro Branch, District Naushero Feroze Tel. No.: (0242) 4102000, 1 & 2 293. Bewal Branch, District Rawalpindi Tel. No.: (051) 3360274-5 294. Wah Cantt. Branch, District Rawalpindi Tel. No.: (051) 4511140-1 & 0317-4484551-3 295. Kallar Syedan Branch, District Rawalpindi Tel. No.: (051) 3570903 & 0316-8226106 271. Mithi Branch, District Tharparkar Tel. No.: (0232) 261291-3 296. Main Branch, Islamabad Tel. No.: (051) 2348174 & 78 & (051) 111-567-890 272. Main Branch, Quetta Tel. No.: (081) 2821610 & 2821641 297. G-9 Markaz Branch, Islamabad Tel. No.: (051) 2850171-3 245. Talhar Branch, District Badin Tel. No.: (0297) 830387-9 Islamic Banking 273. Shahrah-e-Iqbal Branch, Quetta Tel. No.: (081) 2820227-30 & 37 Islamic Banking 298. I-10 Markaz Branch, Islamabad Tel. No.: (051) 4101733-5 246. Deh. Sonhar Branch, District Badin Tel. No.: (0297) 870729 & 870781-3 274. Chamman Branch Tel. No.: (0826) 613685 & 0316-8226342-4 299. I-9 Markaz Branch, Islamabad Tel. No.: (051) 4858101-3 247. Matli Branch Tel. No.: (0297) 840171-2 275. Khuzdar Branch Tel. No.: (0848) 412861-3 & 0316-8226466-68 300.E-11 Branch, Islamabad Tel. No.: (051) 2228757-8 243. Shahpur Chakar Branch, District Sanghar Tel. No.: (0235) 846010-12 244. Golarchi Branch, District Badin Tel. No.: (0297) 853192-4 248. Tando Bago Branch, District Badin Tel. No.: (0297) 854554-6 249. Buhara Branch, District Thatta Tel. No.: 0316-8226439-40 250. Dhabeji Branch, District Thatta Tel. No.: (021) 34420030, 31 & 39 251. Makli Branch, District Thatta Tel. No: (0298) 581807, 8 & 9 252. Hub Branch, District Lasbela Tel. No.: (0853) 310225-7 253. Umerkot Branch Tel. No.: (0238) 571350 & 356 276. Gawadar Branch Tel. No.: (0864) 211103-5 & 0316-8226454, 5&6 NORTH REGION 277. Main Branch, Peshawar Tel. No.: (091) 5277914-8 & 5277394 278. Chowk Yadgar Branch, Peshawar Tel. No.: (091) 2573335-7 & 2220006 Islamic Banking 279. Khyber Bazar Branch, Peshawar Tel. No.: (091) 2566811-3 254. Nawabshah Branch Tel. No.: (0244) 363918-9 280. Main Branch, Rawalpindi Tel. No.: (051) 5123123, 4, 5 & 8 & (051) 5123136-7 255. Nawab Wali Muhammad Branch District Shaheed Benazirabad Tel. No.: (0244) 311069, 70 & 71 281. Chandni Chowk Branch, Rawalpindi Tel. No.: (051) 4571160, 63, 86 & 87 & (051) 4571301 256. Mirpurkhas Branch Tel. No.: (0233) 821221 & 821317-8 282. 22 Number Chungi Branch, Rawalpindi Tel. No.: (051) 5563576-7 257. Digri Branch, District Mirpurkhas Tel. No.: (0233) 869661-3 283. Muslim Town Branch, Rawalpindi Tel. No.: (051) 5405506 & 4931112-3 212 301. DHA Phase-II Branch, Islamabad Tel. No.: (051) 5161967-9 & (051) 5161970-72 Islamic Banking 302. F-8 Markaz Branch, Islamabad Tel. No.: (051) 2818019-21 303. G-11 Markaz Branch, Islamabad Tel. No.: (051) 2363366-68 304. F-11 Markaz Branch, Islamabad Tel. No.: (051) 2101076-7 & 0316-8226282-4 305. DHA Phase-II (Corporate) Branch, Islamabad Tel. No.: (051) 2826573-4 & 0316-8226303 306. PWD Branch, Islamabad Tel. No.: (051) 5708789, 90 & 91 307. I-8 Markaz Branch, Islamabad Tel. No.: (051) 2719242-44 308. Gulberg Greens Branch, Islamabad Tel. No.: 0312-4015609, 0312-4019186 & 0312-4015629-30 NAVIGATING OUR WAY TO SUCCESS
  162. 309 . Lathrar Road Branch, Tarlai, District Islamabad Tel. No.: (051) 2241661-5 310. Soan Garden Branch, District Islamabad Tel. No.: (051) 5738940-2 311. Gujar Khan Branch Tel. No.: (051) 3516328, 29 & 30 312. Waisa Branch, District Attock Tel. No.: (057) 2651068-9 Islamic Banking 313. Swabi Branch, District Swabi Tel. No.: (0938) 221741-45 314. Mirpur Branch, (AJK) Tel. No.: (05827) 444488 & 448044 336. Kohat Branch, District Kohat Tel. No.: (0922) 511011 & 511033 Islamic Banking 337. Nowshera Branch, District Nowshera Tel. No.: (0923) 611545-8 Islamic Banking 338. Shakas Branch, District Khyber Agency Tel. No.: 0316-8226101 & 0316-8226091, 92 & 99 339. Batkhela Branch Tel. No.: (0932) 411115, 6 & 7 Islamic Banking 340.Timergara Branch, District Lower Dir Tel. No.: (0945) 822081-3 315. Islamgarh Branch, (AJK) Tel. No.: (05827) 423981-2 316. Jattlan Branch, District Mirpur (AJK) Tel. No.: (05827) 403591-4 317. Gilgit Branch Tel. No.: (05811) 453749, 450504, (05811) 450498 & 451838 318. NLI Market (Sub Branch), Gilgit Tel. No.: (05811) 450802, 4 & 5 319. Denyore Branch, District Gilgit Tel. No.: (05811) 459986-7 320. Jutial Branch, District Gilgit Tel. No.: (05811) 457233-5 321. Aliabad Branch, Hunza Tel. No.: (05813) 455000, 455001 & (05813) 455022 322. Gahkuch Branch Tel. No.: (05814) 450409-10 323. Skardu Branch Tel. No.: (05815) 450327 & 450188-9 324. Abbottabad Branch Tel. No.: (0992) 385231-3 & 383073-75 325. Jhelum Branch Tel. No.: (0544) 625794-5 326. Dina Branch, District Jhelum Tel. No: 0310-4755851, 2 & 6 327. Chitral Branch, District Chitral Tel. No.: (0943) 412078-9 328. Chakwal Branch Tel. No.: (0543) 543128-30 & 0316-8226045 329. Mardan Branch Tel. No.: (0937) 864753-7 330. Muzaffarabad Branch Tel. No.: (0582) 2920025-6 Islamic Banking 331. Chillas Branch, District Diamer Tel. No.: (05812) 450631-2 Islamic Banking 332. Mingora Branch, Swat Tel. No.: (0946) 714355, 714400 & 0316-8226273-75 333. Battagram Branch Tel. No.: (0997) 311044-6 334. Mansehra Branch Tel. No.: (0997) 301931-6 Islamic Banking 335. Dera Ismail Khan Branch Tel. No.: (0966) 718010-4 ANNUAL REPORT 2020 213
  163. FOREIGN CORRESPONDENTS 214 Country Name of Bank Argentina Banco Credicoop Cooperativo Limitado Banco De Galicia Y Buenos Aires Australia Citigroup PTY Limited , Sydney Commonwealth Bank Of Australia JP Morgan Chase Bank, N.A., Sydney Branch National Australia Bank Limited Standard Chartered Bank, Australia Austria Erste Bank Der Oesterreichischen Sparkassen AG Erste Group Bank AG Oberbank AG Bahrain Al Baraka Islamic Bank B.S.C Allied Bank Limited, Wholesale Banking Branch Bank Al Habib Limited Bank Alfalah Limited Bahrain Habib Bank Limited United Bank Limited JS Bank Bahrain Branch Askari Bank Bahrain Branch Bangladesh Bank Alfalah Limited (Bangladesh - Dhaka Branch) Brac Bank Limited Eastern Bank Limited Habib Bank Limited Jamuna Bank Limited Southeast Bank Limited Standard Chartered Bank United Commercial Bank Limited Belarus Belarus Bank Belgium Belfius Bank SA/NV Byblos Bank Europe S.A. Commerzbank AG,The,Brussels Branch Deutsche Bank A.G. KBC Bank NV Brazil Banco Do Brasil S.A. Banco Fibra S.A. ITAU Unibanco S/A (Successor Of Banco Itau Bba S.A.) Bulgaria Citibank Europe PLC, Bulgaria Branch Unicredit Bulbank AD Canada Canadian Imperial Bank of Commerce Federation Des Caisses Desjardins DU Quebec Habib Canadian Bank Royal Bank Of Canada Chile Banco De Credito E Inversiones China Agricultural Bank of China, THE Agricultural Development Bank of China, THE Bank of Beijing Bank of China Bank of Communications Bank of Jiangsu Co. Limited Bank of Ningbo Bank of Shanghai Changshu Rural Commercial Bank China Citic Bank China Construction Bank Corporation NAVIGATING OUR WAY TO SUCCESS
  164. Country Name of Bank China Everbright Bank China Merchants Bank Citibank (China) Co., Limited Commerzbank A.G. HSBC Bank (China) Company Limited HUA Xia Bank Industrial and Commercial Bank of China Jiangsu Jiangyin Rural Commercial Bank Jiangsu Suzhou Rural Commercial Bank Co., Ltd (Formerly Jiangsu Wujiang Rural Commercial Bank) Jinan Rural Commercial Bank Co.,Ltd(Formerly Shandong Jinan Runfeng Rural Cooperative Bank) JP Morgan Chase Bank (China) Company Limited KBC Bank NV Qilu Bank Co., Limited Shandong Zhangdian Rural Commercial Bank Shanghai Pudong Development Bank Standard Chartered Bank (China) Limited Sumitomo Mitsui Banking Corporation (China) Limited Hangzhou Branch Weifang Rural Commercial Bank Co., Limited Zhejiang Tailong Commercial Bank Zhejiang Xiaoshan Rural Commercial Bank Company Limited Zhongshan Rural Commercial Bank Company Limited Colombia Bancolombia S.A. Cyprus Hellenic Bank Public Company Limited Czechia Ceskoslovenska Obchodni Banka, A.S. Citibank Europe PLC, Organizacni Slozka Commerzbank A.G. Unicredit Bank Czech Republic and Slovakia, A.S. Denmark Danske Bank A/S Egypt Banque Misr Citibank Cairo Mashreq Bank Ethiopia Dashen Bank S.C. Finland Danske Bank A/S, Finland Branch OP Corporate Bank PLC France Banque Palatine CM - CIC Banques Credit Du Nord Credit Mutuel - CIC Banques National Bank of Pakistan Societe Generale Germany Commerzbank A.G. (Formerly Dresdner Bank A.G.) Danske Bank DB Privat-Und Firmenkundenbank A.G. (Formerly Deutsche Bank PGK A.G.) Deutsche Bank A.G. DZ Bank A.G. (Formerly WGZ Bank A.G.) Hamburg Commercial Bank A.G. Hamburger Sparkasse A.G. JP Morgan A.G. Landesbank Baden-Wuerttemberg M.M.Warburg U. Co (A.G. U. Co.) KGAA National Bank of Pakistan, Frankfurt Sparkasse Dortmund Sparkasse Krefeld - Zweckverbandssparkasse Der Stadt Krefeld Und Des Kreises Viersen Sparkasse Westmuensterland Standard Chartered Bank A.G. ANNUAL REPORT 2020 215
  165. 216 Country Name of Bank Greece Alpha Bank AE Citibank Europe PLC Greece Branch Piraeus Bank SA Hong Kong Bank of America , N.A. Hong Kong CIMB Bank Berhad Hong Kong Branch Citibank N.A. Deutsche Bank A.G. Habib Bank Zurich (Hong Kong) Limited Hongkong And Shanghai Banking Corporation Limited, The JP Morgan Chase Bank, N.A., Hong Kong Branch (Organized Under The Laws of U.S.A. With Limited Liability) KBC Bank NV, Hong Kong Mashreqbank PSC., Hong Kong Branch National Bank of Pakistan, Hong Kong Shinhan Bank, Hong Kong Branch Standard Chartered Bank (Hong Kong) Limited Sumitomo Mitsui Banking Corporation The Bank of New York Mellon, Hong Kong Branch Unicredit Bank A.G. Hong Kong Branch Incorporated in Germany with Limited Liability Wells Fargo Bank, N.A., Hong Kong Branch (Organized Under The Laws Of U.S.A. with Limited Liability) Hungary CIB Bank Ltd. (Formerly Central-European Int.Bank Limited) Raiffeisen Bank ZRT. Unicredit Bank Hungary ZRT. India Citibank N.A. Deutsche Bank A.G. ICICI Bank Limited JP Morgan Chase Bank, N.A., Mumbai Branch Mashreq Bank Punjab National Bank Standard Chartered Bank The Kalupur Commercial Co-Operative Bank Limited Indonesia Bank Mandiri (Persero), PT Citibank, N.A. JP Morgan Chase Bank, N.A., Jakarta Branch MUFG Bank, Limited Jakarta Branch Standard Chartered Bank Ireland Citibank Europe PLC Danske Bank A/S Italy Banca Carige SPA - Cassa Di Risparmio Di Genova e Imperia Banca Di Credito Popolare Banca Monte Dei Paschi Di Siena Banca Popolare Di Sondrio Banca Ubae S.P.A Banco Bpm S.P.A Bper Banca S.P.A. Cassa Di Risparmio Di Fermo Spa Commerzbank A.G. Credito Valtellinese Deutsche Bank S.P.A. Iccrea Banca - Istituto Centrale Del Credito Cooperativo Odea Bank AS UBL Banca S.P.A. Unicredit S.P.A. Unipol Banca S.P.A Japan Citibank N.A., Tokyo Branch JP Morgan Chase Bank, N.A., Tokyo Branch Mizuho Bank, Ltd. NAVIGATING OUR WAY TO SUCCESS
  166. Country Name of Bank MUFG Bank , Ltd. National Bank of Pakistan Resona Bank, Limited, Tokyo Saitama Resona Bank, Limited Standard Chartered Bank Sumitomo Mitsui Banking Corporation Jordan Citibank N.A. Kenya Habib Bank AG Zurich Kenya KCB Bank Kenya Limited Republic Of Korea Busan Bank Citibank Korea INC. Daegu Bank, Limited,The Industrial Bank of Korea JP Morgan Chase Bank, N.A., Seoul Branch Keb Hana Bank Kookmin Bank National Bank of Pakistan, Seoul Branch Korea Nonghyup Bank (Formerly Known as National Agricultural Cooperative Federation) Shinhan Bank Standard Chartered Bank Korea Limited Suhyup Bank Woori Bank, Seoul Kuwait Citibank N.A. Commercial Bank of Kuwait KPSC,The National Bank of Kuwait S.A.K.P. Latvia SC Citadele Banka Lebanon Banque Libano Francaise Malaysia Alliance Bank Malaysia Berhad Citibank Berhad Hong Leong Bank Berhad JP Morgan Chase Bank Berhad MUFG Bank (Malaysia) Berhad Standard Chartered Bank Malaysia Berhad Mauritius Habib Bank Limited Mauritius Standard Chartered Bank (Mauritius) Limited Mexico Banco Nacional De Mexico S.A. Morocco Attijariwafa Bank (Formerly Banque Commerciale Du Maroc) Nepal Himalayan Bank Limited Netherlands ABN Amro Bank N.V. Citibank Europe PLC Netherlands Branch Commerzbank A.G. Kantoor Amsterdam Deutsche Bank A.G. New Zealand Bank of New Zealand Norway Danske Bank A/S DNB Bank ASA Oman Bank Dhofar (S.A.O.G.) Habib Bank Oman Oman Arab Bank S.A.O.G ANNUAL REPORT 2020 217
  167. Country Name of Bank Sohar International Bank S .A.O.G Standard Chartered Bank 218 Panama Banesco S.A. Philippines Asian Development Bank MUFG Bank, Limited, Manila Branch Standard Chartered Bank Poland Bank Handlowy W Warszawie SA Portugal Banco BPI SA Caixa Central Credito Agricola Mutuo Qatar Barwa Bank Doha Bank Mashreq Bank Standard Chartered Bank The Commercial Bank (Q.S.C) United Bank Limited, Doha Romania Banca Comerciala Romana S.A Citibank Europe PLC, Dublin-Sucursala Romania Unicredit Bank SA Russian Federation Credit Bank of Moscow (Public Joint Stock Company) Saudi Arabia Al Inma Bank Bank Al Bilad Bank Al-Jazira Emirates NBD PJSC JP Morgan Chase Bank, N.A. Riyadh National Bank of Pakistan National Commercial Bank The Riyad Bank Samba Financial Group The Saudi British Bank Serbia Unicredit Bank Srbija A.D. Singapore Bank Mandiri (Persero)TBK. PT Bank of America, N.A. Singapore Citibank,N.A. Commerzbank A.G., Singapore Branch Credit Suisse A.G., Singapore Private Banking Deutsche Bank A.G. Habib Bank Limited JP Morgan Chase Bank, N.A. KBC Bank N.V. Singapore Branch Mizuho Bank, Limited Singapore Branch MUFG Bank, Limited Standard Chartered Bank Sumitomo Mitsui Banking Corporation The Hongkong and Shanghai Banking Corporation Limited Toronto Dominion Bank Wells Fargo Bank, NA Slovakia Ceskoslovenska Obchodna Banka, A.S. Slovenia Unicredit Banka Slovenija D.D. South Africa Citibank South Africa Firstrand Bank Limited NAVIGATING OUR WAY TO SUCCESS
  168. Country Name of Bank HBZ Bank Limited Standard Chartered Bank Spain Banco De Sabadell , S.A. Banco Santander S.A. Caixabank, S.A. Citibank Europe PLC Spain Branch Commerzbank A.G. Deutsche Bank Sociedad Anonima Espanola Kutxabank, S.A. Sri Lanka Bank of Ceylon Commercial Bank of Ceylon PLC Habib Bank Limited Hatton National Bank PLC MCB Bank Ltd. People'S Bank,Head Office Standard Chartered Bank Sweden Danske Bank Svenska Handelsbanken AB Switzerland Arab Bank (Switzerland) Limited Banque Cantonale Vaudoise Banque De Commerce ET De Placements S.A. Barclays Bank (Suisse) S.A. Ca Indosuez (Switzerland) S.A. Habib Bank A.G. Zurich Luzerner Kantonalbank UBL (Switzerland) A.G. Zuercher Kantonalbank Taiwan Citibank Taiwan Limited HSBC Bank (Taiwan) Limited JP Morgan Chase Bank, N.A., Taipei Branch Mizuho Bank, Limited,Taipei Branch Standard Chartered Bank (Taiwan) Limited Tajikistan NBP Pakistan Subsidiary Bank Thailand Bank of Ayudhya Public Company Limited Citibank N.A. Kasikornbank Public Company Limited Krung Thai Bank Public Company Limited Mizuho Bank, Limited, Bangkok Branch SIAM Commercial Bank PCL., The Standard Chartered Bank (Thai) PCL Sumitomo Mitsui Banking Corporation Tunisia Tunis International Bank Turkey Akbank T.A.S. Aktif Yatirim Bankasi A.S. Albaraka Turk Participation Bank Alternatifbank A.S. Citibank A.S. Denizbank A.S. Habib Bank Limited Kuveyt Turk Katilim Bankasi A.S. QNB Finansbank A.S. Turkiye Cumhuriyeti Ziraat Bankasi A.S. Turkiye Garanti Bankasi A.S. Turkiye Vakiflar Bankasi T.A.O. ANNUAL REPORT 2020 219
  169. Country Name of Bank Yapi VE Kredi Bankasi A .S. United Arab Emirates Abu Dhabi Commercial Bank Bank Alfalah Limited (Dubai Branch) Citibank N.A. Deutsche Bank A.G. Dubai Islamic Bank Emirates Islamic Bank First Abu Dhabi Bank PJSC Habib Bank AG Zurich Habib Bank Limited Mashreqbank PSC. MCB Bank Limited National Bank of Fujairah National Bank of Ras Al-Khaimah, THE Standard Chartered Bank United Bank Limited United Kingdom Bank of America, N.A. London Bank of Ireland (Trade Finance Belfast) Bank of Ireland (UK) PLC Citibank N.A. Danske Bank Deutsche Bank A.G. Emirates NBD Bank (P.J.S.C) Habib Bank Zurich PLC HBL Bank UK Limited HSBC Bank PLC HSBC UK Bank PLC JP Morgan Chase Bank, N.A. Mashreq Bank PSC. Northern Bank Limited (Trading As Danske Bank) Standard Chartered Bank United National Bank United States Of America Bank of America, N.A. Bokf, N.A. Branch Banking and Trust Company Capital One, N.A. Citibank N.A. Citizens Bank, N.A. Comerica Bank Deutsche Bank Trust Company Americas East-West Bank First Tennessee Bank N.A. Habib American Bank International Finance Corporation Keybank National Association Mashreqbank PSC., New York Branch MUFG Bank Limited. MUFG Union Bank N.A. National Bank of Pakistan New York Community Bank Peoples United Bank, N.A. PNC Bank, N.A. Regions Bank Standard Chartered Bank The Bank of New York Mellon U.S. Bank N.A. Wells Fargo Bank, N.A. 220 NAVIGATING OUR WAY TO SUCCESS
  170. Country Name of Bank Viet Nam Asia Commercial Bank Citibank N .A. Kookmin Bank Shinhan Bank Vietnam Limited Standard Chartered Bank (Vietnam) Limited Vietnam Export Import Commercial Joint-Stock Bank Vietnam Public Joint Stock Commercial Bank – Pvcombank Luxembourg JP Morgan Bank Luxembourg S.A. Luxembourg ANNUAL REPORT 2020 221
  171. PROXY FORM 29th Annual General Meeting I /We of being member(s) of SONERI BANK LIMITED ordinary shares. and holder of Register Folio No.: CDC Participant I.D. No.: Sub-Account No.: CNIC No.: or Passport No.: hereby appoint of or failing him/her of who is/are also member(s) of SONERI BANK LIMITED as my/our proxy to attend and vote for me/our behalf at the 29th Annual General Meeting of the Bank to be held on 26 March 2021 or at any adjournment thereof. (Signatures should agree with the specimen signature registered with the Bank) Affix Rs. 5 Revenue Stamp Dated this day of 2021 Signature of Shareholder Signature of Proxy 1. WITNESS 2. WITNESS Signature: Signature: Name: Name: Address: Address: CNIC No.: CNIC No.: or Passport No.: or Passport No.: IMPORTANT: 1. This Proxy Form, duly completed and signed, must be received at the Registered Office of the Bank at SONERI BANK LIMITED, Rupali House, 241-242, Upper Mall Scheme, Anand Road, Lahore-54000, not less than 48 hours before the time of holding the meeting. 2. No person shall act as Proxy unless he/she himself/herself is a member of the Company, except that a corporation may appoint a person who is not a member. 3. If a member appoints more than one proxy and more than one instruments of proxy are deposited by a member with the Company, all such instruments of proxy shall be rendered invalid. 4. CDC Shareholders and their Proxies should attach an attested photocopy of their Computerised National Identity Card (CNIC) or Passport with the Proxy Form before submission to the Company. (Original CNIC/Passport is required to be produced at the time of the meeting). 5. In case of corporate entity, the Board of Directors' Resolution/Power of Attorney with specimen signature of the nominee shall be submitted along with the Proxy Form to the Company.
  172. Soneri Bank Limited AFFIX CORRECT POSTAGE The Company Secretary Soneri Bank Limited Rupali House 241-242 Upper Mall Scheme Anand Road Lahore-54000
  173. Bank Mandate Form I Mr ./Ms./Mrs.__________________________ s/o, d/o, w/o, ________________________ hereby authorise Soneri Bank Limited to send/directly credit cash dividends declared by it, in my bank account as detailed below: (i) Shareholder’s Information Name of Shareholder Folio No./Participant & Account No./CDC Investor No. CNIC No. NTN Passport No. (in case of foreign shareholder) Address Cell Number Landline Number Email ID (ii) Dividend Mandate Information Title of Bank Account International Bank Account Number (IBAN) - Mandatory Bank’s Name Bank’s Address It is stated that the above particulars given by me are correct to the best of my knowledge and I shall keep the Company/Share Registrar informed in case of any changes in the said particulars in future. Shareholder’s signature Note: Bank Mandate details must be verified by the concerned Bank Branch to avoid any error. Shareholders holding shares in physical form should send this form to Share Registrar, THK Associates (Pvt.) Ltd. Whereas CDC Shareholders should send it to Investor Account Services or Broker where shares are placed in electronic form, along with legible photocopy of valid CNIC.