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Soneri Bank: Annual Report 2021

IM Insights
By IM Insights
2 weeks ago
Soneri Bank: Annual Report 2021

Arif, Fiqh, Halal, Ijara, 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 Initiatives of Green Banking Office (RMD) The Green Banking Office, under the ambit of the Risk Management Division, has been established in line with the State Bank of Pakistan’s instructions and guidelines. The GB Office has successfully developed a green banking policy that has been approved by the Board of Directors. The following are the measures that have been taken to comply with the guidelines: Environmental awareness through email circulation The Green Banking Office is circulating emails bank-wide with respect to the Green Banking Guidelines to educate the bank staff on environmental issues. Green Advisory Services We have incorporated details of the Green Banking Office and green advisory services on Soneri Bank’s official website, to create awareness amongst the visitors, of our going Green activities. Green Business Facilitation We have developed a Green Business Facilitation product, i.e., renewable energy financing. The tentative plan for the launch of this product is March end 2022. Environmental Trainings Green Banking Office has conducted trainings through HR Learning and Development to educate employees to apply an own-impact reduction in their workplace, keep emphasising the customers to use more of digital tools, to discourage paper-based documents for the betterment of the environment. Resource consumption targets We have assigned resource consumption targets to one of our branches, under which electricity, water, fuel, and paper were covered. Furthermore, the Green Banking Office has prepared a Key Performance Indicators report for the branches, head offices, and regional offices for dissemination of the knowledge that is essential for the Bank’s staff to comply with the allocated targets. Environmental Risk Rating (ERR) The Environmental Risk Rating (ERR) Model has been deployed and implemented on CAPS. Credit approvals are being rated by the ERR Model, under which around 856 cases have been performed according to the Green Banking Guidelines. Pledge for Kindness Like every year, this year too Soneri Bank continued its Pledge for Kindness Campaign which embodies the spirit of giving in the holy month of Ramadan. We partnered with multiple NGOs, such as Layton Rahmatulla Benevolent Trust (LRBT), Aga Khan University Hospital (AKUH), Shaukat Khanum Memorial Cancer Hospital (SKMCH), and Make a Wish Foundation, to create a difference in the lives of those in need. To initiate the campaign, Soneri Bank integrated a pledge counter on its official website where anyone visiting the site could mark their pledge by clicking on the counter. For every pledge received, Soneri Bank donated Rs. 10/- to each NGO. Through this campaign, we were able to generate 59,331 pledges and Soneri Bank donated PKR 593,310/- to the respective NGOs to bring a smile to the faces of many. The campaign was advertised on our social media pages and several emailers were sent out to raise awareness for the good cause. Layton Rahmatulla Benevolent Trust LRBT, through its purpose-built and appropriately-equipped hospitals, provides comprehensive eye treatments for the visually impaired. The Trust aims to provide those in need with quality eye treatment facilities and help them lead a normal life. Soneri Bank, through its Pledge for Kindness campaign, supported the organisation to bring light to the lives of many underprivileged people. The Aga Khan University Hospital The Aga Khan University Hospital in Karachi, established in 1985, was founded by the Aga Khan. The hospital provides a broad range of secondary and tertiary care, including diagnosis of disease and team management of patient care. Soneri Bank contributed to the organisation’s cause through its digital campaign #PledgeForKindness, whereby generous funds were donated for welfare. 14
  2. Shaukat Khanum Memorial Cancer Hospital The Shaukat Khanum Memorial Trust has established a number of centres all over Pakistan that help in the awareness , diagnosis, and treatment of cancer in Pakistan. Soneri Bank supported them through its digital campaign #PledgeForKindness where it generously donated to the organisation and helped raise awareness about cancer. Make-A-Wish Foundation Make-A-Wish Pakistan is an affiliate member of Make-A-Wish Foundation Int’l, dedicated to granting the most cherished wishes of critically ill children. Since its inception, Make-A-Wish Foundation, Pakistan, has granted thousands of wishes of critically ill children, thereby enriching their lives with hope, strength, and joy. Soneri Bank’s Pledge for Kindness Campaign helped generate funds to sponsor and fulfil the wishes of many terminally ill children and bring a smile on their faces. Pakistan Hindu Council The Pakistan Hindu Council represents the Pakistani Hindu community on social and political issues and aims to protect the basic rights and freedom, especially of worship and assembly, of Hindus all over Pakistan. Soneri Bank made a generous contribution to the Combined Marriages Program hosted by the Pakistan Hindu Council, showcasing the open and progressive culture of the Bank and its forward vision for a diverse and inclusive Pakistan. Supporting a Golfer In the spirit of promoting new talent and helping ambitious people to achieve their dreams, Soneri Bank continued its sponsorship of an inspiring golfer, who would represent the Bank in various tournaments nationwide, and unite people through sport. Sindh Literature Festival The 4th Sindh Literature Festival was held at the Arts Council of Pakistan and was open for all. The festival continued for three days. It was packed with informative sessions on literature, cultural and political developments, and Pakistan’s economic prosperity. Book launches, musical performances, dance, and poetry were also part of the event. Soneri Bank supported and sponsored this festival wholeheartedly, to showcase our rich culture and heritage. Breast Cancer Awareness Soneri Bank donated generously to the Shaukat Khanum Memorial Hospital for the treatment of Breast Cancer patients as part of its Pinktober campaign, to prevent and fight Breast cancer in Pakistan. It also partnered with the hospital for an awareness session to spread awareness about the prevention, symptoms, and treatment of Breast Cancer in Pakistan. 15
  3. PRODUCT & SERVICES At Soneri Bank, we strive to offer the most vibrant range of products and services to exceed our customers’ expectations. Our commitment to the customers is to leverage our brand promise “Roshan Har Qadam” by constantly innovating our products’ suite to best match the personal and business needs of our customers, including Commercial, Retail, Corporate and Islamic segments. With our corporate vision "To better serve the customers to help them and the society grow”, and our mission "To provide innovative and efficient financial solutions to our customers", we serve them with excellent solutions and constantly raise our performance standards. Current Account Customers can open any current account for their transactional needs and enjoy banking convenience offered from over 360 branches and ATMs across the country. Our current accounts include: 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 fulfil their daily banking needs. This account offers numerous free facilities, including: Issuance of Banker’s Cheques, Online Banking, Cheque Books, Debit Cards 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. Soneri Ladies First Account An exclusive banking platform is one such current account targeted 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 that is truly accessible for all the Pakistani Ladies. 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. ASAAN REMITTANCE Soneri Asaan Remittance Account Customers can now instantly receive remittance from their loved ones living anywhere around the globe, directly in their Soneri Asaan Remittance Account. This account can be opened with utmost ease through a simplified account opening process and is designed as a secure and reliable means, for the purpose of receiving home remittances. 18 ACCOUNT
  4. Basic Banking Account It is a non-profit bearing account with no minimum balance requirement . Initial deposit for account opening is PKR 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 Pensioners Account Soneri Bank’s branch network across Pakistan facilitates in the opening of Pensioners Account. Branches effectively coordinate with various pension disbursing departments to ensure hassle-free disbursement/credit of pension in the respective pensioner’s account. Savings Accounts Soneri Bank offers a complete range of savings products with attractive returns. These accounts are designed to cater to the specific needs of individuals, senior citizens and corporates. Our savings’ product suite includes: PLS Savings 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 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 on this account. Soneri Youngsters Minor Savings Account YOUNGSTERS MINOR SAVINGS ACCOUNT Start Savings Early! Soneri Bank offers Youngsters Minor Savings Account to attract the children of today, so they can obtain their first debit card, learn about budgeting and take their first steps towards financial independence. Soneri Sahara Account A savings account for senior citizens to meet their basic banking needs. The account can be opened singly or jointly (husband & wife), provided one of them is of 60 years or above. They can enjoy high returns on their savings every month with the flexibility of withdrawing profits anytime. 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, with attractive profit rates. The depositor has the option to reinvest the deposit automatically with or without the profit. 19
  5. PINK RI ANCE UR ON INS BB Soneri Ladies First Term Deposit (TDR) A product for ladies to invest in long-term savings, ranging from 1 year to 3 years. Soneri Ladies First Term Deposit not only offers high returns, but is also bundled with Free Pink Ribbon Insurance cover (of up to PKR 500,000) to make it more useful for our female customers. 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, up to 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 Dealing in foreign currencies is no more a hassle. Soneri Bank offers FCY Current, Savings and Term Deposit accounts to cater to the foreign currency transactional and savings’ 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 and Retail Banking Soneri Bank ensures meeting all the banking needs of its customers by offering a variety of financing products to facilitate them to grow their businesses and also contribute their share towards the industrial growth of the country. The Bank is also committed to playing its role towards strengthening the SME sector by encouraging quality players to avail credit facilities through its branches, nationwide, 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 specific financing products to help its customers to operate their businesses without worrying about funding requirements. Soneri Speed Finance Soneri Speed Finance is focused on providing quick and flexible financing solutions to its customers while keeping their savings secure. This product is offered to Individuals, Small and Medium Enterprises, Commercial/Corporate businesses, to meet their financing 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 customers. It is primarily secured against liquid security, including Soneri Bank’s deposits (LCY and FCY Term Deposits, Cash Margin, Lien on Account) and Government Securities (DSC/SSC/RIC). 20
  6. SBP ’s Incentive Schemes In line with the initiatives of the 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 a wide range of SBP’s refinancing schemes through its designated branches: • • • • • • • • • • • PM’s Kamyab Jawan Youth Entrepreneurship Scheme Credit Guarantee Scheme for Small and Rural Enterprises Refinancing Facility for Modernisation of SMEs Refinance and Credit Guarantee Scheme for Women Entrepreneurs SE Financing and Credit Guarantee Scheme for Special Persons Mark-up Subsidy and Guarantee Facility for the Rice Husking Mills in Sindh Financing Facility for Storage of Agricultural Produce Export Refinance Scheme SBP Financing Scheme for Renewable Energy Refinancing Scheme for Working Capital Financing Long-Term Financing Facility for Plant and Machinery Consumer Financing Soneri Bank Limited offers various kinds of financing options to choose from to its customers, depending on their needs. Our range of consumer financing products includes Soneri Car Finance, Soneri Ghar Finance, Mera Pakistan Mera Ghar (a Government Mark-up Subsidy Scheme for Low-Cost Housing Finance), and Soneri Personal Finance. Soneri Car Finance Soneri Car Finance is designed to let the customers regulate their plan, to select a new or used locally assembled/manufactured vehicle, at a reasonable mark-up rate. The Car Finance facility is available for up to PKR 3 million, with a repayment plan of up to 5 years in equal monthly instalments for vehicles that are above 1000cc engine capacity. For locally assembled/manufactured vehicles that are 1000cc and below, the repayment plan of up to 7 years in equal monthly instalments is available. Processing of applications is fast and hassle-free. Partial payment and early settlement options are also available, to lower the customer’s burden, at any point in time. Moreover, insurance coverage along with a tracker makes the facility secured, which is very lucrative for Soneri Bank’s valuable customers. Soneri Ghar Finance Now the dream of owning a beautiful house can become a reality with Soneri Ghar Finance, with comfort, peace, and security. 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 a maximum financing limit of up to PKR 75 million, with flexible tenors for repayment of up to 20 years, can be availed. Mera Pakistan, Mera Ghar (Government Mark-up Subsidy Scheme for Low-Cost Housing Finance) Soneri Bank promotes the spirit of patriotism and advocates an affordable government mark-up subsidy scheme by the State Bank of Pakistan for low-cost housing finance that enables every Pakistani to own a house at subsidised mark-up rates, as per the vision of our honourable Prime Minister. 21
  7. 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 PKR 2 million with flexible repayment tenors of up to 4 years. It is an easy solution to the customers' cash/liquid requirement for emergency funds, plan their children’s higher education, make their daughter's wedding the talk of the town, or take that dream vacation. Agriculture Financing Agriculture contributes a handsome share in the GDP of our country and the livelihood of a large number of rural populations is based on this. Soneri Bank’s wide range of Agri Products is available to support the Agri Economy and to grow Agriculture Produce as well as the livelihood of the Farming Community. Farmers may avail any facility to fulfil their needs out of the below given Agriculture Financing Products: • • • • • • • • • • • • • Farm Production Loans –Revolving Credit Farm Development Loans for Farm Machinery Tractor and 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 Financing against Ware House Receipts Home Remittance Soneri Bank Limited (SBL) under the guidance of Pakistan Remittance Initiative (PRI) (a joint venture of the State Bank of Pakistan, Ministry of Finance, and Ministry of Overseas Pakistanis) started Home Remittance Payments’ Disbursement Initiative in July 2012. With exceptional customer support and meeting service delivery standards, the Bank managed to make a significant contribution towards the Home Remittance business. Soneri Bank recognised the potential in the Home Remittance business and thereby brands this business with the service name of “Soneri Mehnat Wasool Remittance”. Soneri Mehnat Wasool Remittance rendered unmatched services for overseas Pakistanis, who are sending money to their family members across Pakistan through their extensive network of over 360 branches in more than 175 cities. To facilitate the overseas Pakistanis, Soneri Bank has tie-ups with renowned money service providers i.e., MoneyGram, RIA Money Transfer, Al Ansari Exchange, Small World, Xpress Money, Ebixcash, Worldwide Cash Express, and Trans-Fast, covering GCC, UK, Europe, and North American regions, including Canada. In a further step towards this initiative, the Bank has launched a deposit product titled “Soneri Asaan Remittance Account”. The account can be opened with utmost ease through a simplified account opening process and is designed as a secure and reliable means for the purpose of receiving home remittance directly into the account. Please find the features of the account. • • • • • • • PayPak Debit Card for One Year First Cheque Book of 25 Leaves SMS Alert and e-Statements for staying informed Soneri Digital (Internet and Mobile Banking) No Service Charges No Withholding Tax on Cash Withdrawal ATM Cash Withdrawal Insurance - Soneri Tahaffuzuz 22
  8. Alternate Delivery Channel ATMs With the growing number of 360 + ATMs across the country, withdraw cash with convenience, transfer funds to bank account, pay your bills, and much more Soneri Debit Card With Soneri Bank Mastercard Debit Card, your bank account is accessible at more than 1 million ATMs and 25 million Points of Sale around the world. Soneri Bank PayPak Debit Card is accepted at all ATMs and Points of Sale across Pakistan. Internet Banking A wide range of services including Account Balances, Bill Payments, Fund Transfers to Soneri and other bank accounts, and many more at your desktop. Mobile Banking Talk about convenience at your fingertips, Soneri Mobile App is the right choice. Manage your account, transfer funds to any domestic bank account, Mobile Top-Ups, Bill Payments, School Fees, Govt. Payments and a lot more. SMS Alerts Stay secure and keep up to date about your transactional activities by getting instant alerts on your registered cell phone. Phone Banking: Customers can access their accounts 24/7 with distinctive services through Soneri Phone Banking, including ATM Debit Card Replacement, Stop Cheque Request, Banker’s Cheque, ATM Debit Card Account Linking/De-Linking, Cheque Book Request, and e-Statement request. Simply dial +92-21-111-SONERI (766374) to avail easy access to your account-based services. Bancassurance - Protection & Coverage products We can't predict the future but we can help you protect you or your loved ones. Our customers can get peace of mind with a variety of exclusively designed Bancassurance conventional and Takaful products that cater to their protection, savings and investment needs. Bancassurance is one of the best purchases for the future of customers’ family. Soneri Bank offers advice from certified professionals with expertise to help customize coverage plans for customers’ family's individual needs. Few of these products are: 23
  9. Sunehra Saver & Sunehra Saver Takaful These 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. Roshan Aghaz & Roshan Aghaz Takaful 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. Roshan Takmeel This is a savings plan especially designed for those individuals who wish to have financial independence 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. 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 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. Sunehra Income Builder Multi-Purpose Savings Plan Sunehra Income Builder 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. 24
  10. Sunehra Ehad Takaful This plan offers a unique combination of savings , investment & protection. It provides Takaful coverage that is in line with Shari’ah Principles. Sunehra Ehad enables customers to build income for events like child education, daughter’s marriage, building / renovation of house or planning for carefree life after retirement. Capital Plus & Capital Plus Takaful This plan is designed for High Net Worth (HNW) customers of SNBL, it offers higher investment returns along with benefit of family’s financial protection (insurance coverage). Loyalty bonus starts from fifth year (commonly start from 10th year) Wealth Management Soneri Bank is constantly innovating its products suite to best match the personal and business needs of its customers. To ensure all banking needs are met we offer a variety of investments products to facilitate our customers. The role of the Wealth Management is to provide tailored investments solutions and help the client develop, implement and monitor an entire investment portfolio which will enable the client to manage present and future financial needs. Currently, we are offering All Open Ended Mutual Funds in which an investor can invest and Redeem as and when he or she desires. 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. Benefits of Investing in Mutual Funds • Professional Management • Diversification • Small Amount of Investments • Less Volatility • Mix 'n' Match Risk and Rewards • Advantage of huge funds • liquidity • Regulatory protection • Protection through Trustee 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 realized are also sources of revenue. Balanced Scheme 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. 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. 25
  11. 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. Income 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. Pension Fund These funds focus on providing a secure source of savings and regular income after retirement to the investor. Soneri Bank Wealth Management – Product Menu In partnership with reliable Asset Management Company, we offer you 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 Voluntary Pension Schemes (VPS) • Pakistan Pension Fund • Alhamra Islamic Pension Fund HBL Asset Management Company Mutual Funds • • • • • • • • • 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 Voluntary Pension Schemes (VPS) • HBL Pension Fund • HBL Islamic Pension Fund 26
  12. 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 AMC’s website the fund manager and Soneri Bank Limited is the Distributor of these funds in Pakistan. Soneri Mustaqeem Islamic Banking Soneri Mustaqeem Islamic Banking offers a broad range of 100% Shariah-compliant financial solutions for its customers. Our Islamic Portfolio includes: Deposit Products Current Accounts Soneri Mustaqeem - Jari Account Jari Account is the kind of Current Account (No Profit and Loss account) that provides the convenience of putting your money in an account and accessing it without any restrictions on withdrawals, and at the same time enjoying a host of professional conveniences from our bank. This account is based on the Islamic principle of Qard. 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 fulfil their daily banking needs. This account offers numerous free facilities. Soneri Mustaqeem - Jari Foreign Currency Accounts Soneri Mustaqeem Jari offers a Foreign Currency Current account to cater to the foreign currency transactional and saving needs of the customers with a host of attractive features. Savings Accounts Soneri Mustaqeem - Bachat Account Bachat account is a 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, where the depositor acts as an Investor (Rab-ul-Maal) and the bank acts as the Manager (Mudarib) of the funds deposited by the customers. It also offers a wide range of services to cater the banking needs. Soneri Mustaqeem - Munafa Account Soneri Mustaqeem - Munafa account provides a regular stream of monthly income with the same convenience and service as a regular savings account. Through this, our valued customers can manage their short-term as well as long-term savings without any transactional restrictions. 27
  13. Soneri Mustaqeem - Meaadi Account Soneri Mustaqeem - Meaadi Account is an alternative to 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. The product has been structured on the Islamic principles of Mudarabah. Soneri Mustaqeem - Asaan Account Soneri Asaan Account offers a simple and convenient way to fulfill 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. Consumer Products Soneri Mustaqeem - Car Ijarah Soneri Mustaqeem Car Ijarah is an excellent auto financing facility that enables our valuable customers to get a car not only quickly and conveniently, but also in a Shari’ah-compliant manner. Soneri Mustaqeem – Car Ijarah is an interest-free car financing product, which 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. 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 dreams. Soneri Mustaqeem – Ghar Finance is based on the concept of Diminishing Musharakah, where the customer participates with Soneri Bank in joint ownership of property. The Bank’s ownership share of the house/flat/land is divided into a number of units. The customer undertakes to purchase the bank’s share in the property periodically until the ownership of the property is completely transferred to the customer. Till the complete ownership is transferred, the customer is required to pay agreed rentals for using the bank’s share in the house/flat/land. Soneri Mustaqeem - Mera Pakistan Mera Ghar Soneri Mustaqeem – Mera Pakistan Mera Ghar is a Shariah-compliant home finance facility that will enable every Pakistani to own a house at subsidised rental rates, as per the vision of our honourable Prime Minister. The said product has been designed and developed in line with the instructions laid down by the State Bank of Pakistan (SBP) and Pakistan Banks’ Association (PBA) from time to time. The purpose of the product is to facilitate our low-income segment group. Corporate and Investment Banking Soneri Bank’s Corporate and Investment Banking is well equipped to meet the requirements of our corporate clients. We have regional offices in Karachi, Lahore, and Islamabad which offer extensive coverage. Our team of Relationship Managers and Team Leaders is fully geared to establish meaningful relationships with our corporate and 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: 28
  14. Working Capital and 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. Supply Chain Management Being a provider of financial services, we offer end-to-end supply chain financing solutions to dealers and vendors of our corporate customers to meet their business requirements. Cash Management SNBL’s Cash Management services coupled with our web-based Cash Management System ‘Soneri Trans@ct’, provides our valued customers with a 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 a full array of products and services, designed and tailored to enable our Corporate, Commercial, and SE/ME customers to securely exchange funds and financial information in real-time with their trading partners, for optimal management of working capital. China Desk China-Pakistan Economic Corridor (CPEC) is a framework of regional connectivity. CPEC will not only benefit China and Pakistan but will have a positive impact on the region. The enhancement of geographical linkages having improved road, rail, and air transportation system with frequent and free exchanges of growth and people to people contact, enhancing understanding through academic, cultural, and regional knowledge and culture, the activity of higher volume of flow of trade and businesses, producing and moving energy to have more optimal businesses and enhancement of co-operation by the win-win model will result in well connected, an integrated region of shared destiny, harmony and development. China Pakistan Economic Corridor is the hope of a better region of the future with peace, development, and growth of the economy. The Bank is very much focused on developing new business relationships under CPEC. The Bank’s Chinese Business Unit in Islamabad and Lahore have witnessed progressive growth over the period. 29
  15. CUSTOMER EXPERIENCE Customer experience has changed quite a bit over the past year . With social distancing norms and lockdown restrictions becoming commonplace, there’s been a drastic shift in how banks and customers interact. A major trend for 2021 was the use of a digital customer experience. COVID-19 accelerated the use of technology, putting us three to five years ahead into the future. Soneri Bank is also on the way to digitising and automating its customer experience. The Bank is pushing to use digital and self-service solutions to create an easier, low-or-no friction process for its customers. The Bank is always striving to enhance the customer experience. Relatable and convenient interactions are key to winning over customer loyalty and standing out amidst the competition. In the year 2021, the Customer Experience Department has devised and initiated various programs. DIGITAL BANKING-A NEW ERA Digital Banking Survey: An in-house comprehensive survey was conducted from SNBL customers in 2021 to analyse their interaction with the Bank, usage of branches or alternate delivery channels (ADCs), and their reception to new age banking. A significant rise of 58% ADC user enrolment was observed. Queue Management System (QMS): Live portal access has been given to the branches, which allows live monitoring of the cash counter-performance. In the Year 2021, 26 new Qmatic machines were installed, making the total of 126 branches having Qmatic machines installed pan country. Online Product Knowledge: CE has introduced a dynamic online portal, “INFOPEDIA” to enable the front desk staff to keep our products/services suite available/updated at all times and work in a paper-free environment. Further to keep our front-liners “up-to-date” about new products, an intensive online product knowledge quiz has also been initiated by the CE team in 2021. Competitive Scan - Soneri Digital Banking App: A Competitive Scan was conducted after the launch of the Soneri Bank Digital App for customers in November 2021. The objective of this exercise was to gauge the experience of Soneri Bank Digital App viz-a-viz competitor banks’ app in real-time. The exercise consisted of users logging the app and going through the paces on each experiential indicator. The SNBL app’s performance is found at par with the industry. SNBL users’ overall experience has logged at 0:24 seconds compared to other banks who logged at 0:28 seconds. CUSTOMER SATISFACTION SURVEY (CSS): With reference to the CPD Circular No. 4 of 2014 on Conduct Assessment Framework, all the banks were advised to conduct independent research, undertaken to probe customers’ perception about being fair and honest with its customers. SNBL partnered with one of the leading agencies, to execute CSS where ~3,000 customers were surveyed from different segments. Overall, the Bank’s loyalty has logged at 75% and Net Promoter Score at 40%. Soneri Bank has been rated 95% on the perception of being Fair and Honest with its customers. EMPLOYEE SATISFACTION SURVEY (ESS): As per the SBP directive via BC and CPD Circular No. 3 of 2016 on “Conduct Assessment Framework” which instructed the banks to conduct “Employee Satisfaction Survey” periodically, in order to gauge staff satisfaction towards their work environment and awareness regarding fair treatment of customers. An online survey was conducted to gauge the gaps and devise a strategy to improve key aspects that affect overall employee satisfaction. The overall employee satisfaction score in 2021 logged at 92.56%. CONDUCT ASSESSMENT FRAMEWORK (CAF): In line with the SBP Circular No. 4 of 2014; requisite deliverables related to Financial Consumer Protection (FCP) and Prohibited Banking Conduct (PBC) Framework were further strengthened. FCP and PBC framework trainings were conducted for all front-end and relevant support functions across the country, the objective was to ensure that staff is conversant with the fundamentals of customer handling, fair treatment of customers, and customer retention skills. A robust financial literacy program is running through our social media and the Bank’s website for customer awareness. Furthermore, the Customer Experience team has circulated FCP and PBC guidelines’ bulletins as an internal communication to enhance employees’ awareness with the key learning and action points. As an attestation of FCP and PBC Framework, an annual self-assessment (CAF) is conducted and submitted to the regulator. SNBL attained an overall rating of 1.84 (Cautious/Average Zone) in CAF for the year 2021. COMPLAINT STATISTICS 2021: To further strengthen the existing controls, SBP has introduced certain changes via BC and CPD Circular Letter No. 02 of 2021 dated July 13, 2021, regarding Consumer Grievances Handling Mechanism (CGHM). The circular reinforced to adhere the key components; ‘ease of lodgement’, ‘capacity and resources’, ‘recording and processing’ and ‘monitoring’. All the required components have been complied successfully by Soneri Bank in 2021. 32
  16. Below are the key complaint statistics of Soneri Bank for the year : Total Complaints Received: 19,958 Problem Incident Ratio (PIR): Total Complaints Resolved: 19,953 (As of December 31, 2021) Average within TAT Resolution: 3.2% 94% Average Complaint Resolution Satisfaction Ratio (CRS): Average Complaint Resolution Time: (Total Book) 85.6% 4.1 (working days) CUSTOMER EXPERIENCE (CE) CLINIC PROGRAM: As part of the SNBL Customer Experience (CE) mandate, we have relaunched the “Customer Experience (CE) Clinics” in 2021. CE Clinics were conducted for all the front-end and relevant support functions across the country. The objective is to ensure the staff is conversant with the fundamentals of customer handling and retention skills The workshop covered Grooming Guidelines, Customer Handling, Internal Customer/Stakeholder Management, SNBL Service Standards, Complaint Management, Customer Engagement, SNBL Service Evaluation Platform and provide an in-depth understanding of how the customer experience cycle works at SNBL and how our Front-End and Support staff is expected to make a difference. CONTACT CENTRE: In 2021, SBP had conducted a thematic review to further assess the call centre management of banks. In light of the findings of the review, consolidated regulatory instructions were issued on call centre management via BC and CPD Circular No. 03 of 2021. The key features attributed to this circular were; Policy and Standard Operating Procedures (SOPs) on Call Centre Management, Ease of Lodgement/Convenience/Fairness, Integration with Complaint Management, Confidentiality of Customers' Data, Call Centre Resources and Performance Review/Management of Call Centre. Most of the requisite components have been complied successfully by Soneri Bank in 2021. Below are the key statistics of the Contact Centre for the year 2021: Service Level: Total Calls Landed: Total Calls Answered: Abandoned Call Ratio: 83.13% 462,505 429,095 2.05% Average Call Handling Time: Customer Satisfaction Score via IVR: 0:03:50 (HH:MM:SS) Average Speed of Call Answering: 83.13% 96.42% Average Queue Wait Time (Card Blocking and Cheque Stop): 0:00:04 (HH:MM:SS) 33
  17. YEAR AT A GLANCE Soneri Bank Secures Certificate of Merit Pledge for Kindness Campaign Pinktober- Breast Cancer Awareness Launch of Soneri Digital Soneri Bank is proud to have been awarded the prestigious Certificate of Merit in the Banking category for the Best Corporate Report 2020 Awards . The awards are presented jointly by the Institute of Chartered Accountants of Pakistan (ICAP) and Institute of Cost and Management Accountants of Pakistan (ICMAP). Soneri Bank received this appreciation for soundness of financial reporting for the Banking Sector category. This certificate of merit reflects the Bank’s commitment to establishing active corporate governance and projecting reliability, responsibility, and transparency in its communications. Each year in Ramadan, under its #PledgeforKindness campaign, Soneri Bank sponsors multiple NGOs dedicated to the welfare of society in the fields of education and health. This year, the campaign embodied the spirit of giving in the holy month of Ramadan. The Bank sponsored various organisations such as Aga Khan University Hospital (AKUH), Shaukat Khanum Memorial Hospital, LRBT, and Make a Wish Foundation, to aid them in their continuous efforts towards the betterment of society. To initiate this activity a pledge counter was set up in which people voluntarily pledged online and Soneri Bank donated the equivalent funds for every pledge received. The month of October was marked as Pinktober at Soneri Bank, where all employees were requested to wear Pink ribbons in order to show solidarity with Breast Cancer victims. The Bank also partnered with Shaukat Khanum Memorial Hospital for an informative session directed at disseminating awareness about the prevention, symptoms, and treatment of Breast Cancer amongst employees. The Soneri Bank Head Office was also illuminated in Pink, to mark Breast Cancer Awareness month and informative emailers were circulated amongst employees and customers. In addition, social media competitions were held to encourage viewers to spread awareness about the cause, participate in quizzes, and win exciting prizes. Soneri Bank proudly launched Soneri Digital - a new chapter in the Bank’s ongoing journey towards digitalisation. This digital platform was launched focusing on providing customers with a seamless, secure, and convenient banking experience. With an increased demand for digital banking solutions, the Bank has been swift in redefining its strategy and adapting to changing consumer needs by keeping customer experience as a top priority. The new digital platform offers customers a full suite of digital banking services including Seamless Registration, Account Management, Card Management, Account Statements, Funds Transfers, Utility Bill Payments, and various school/university and government payments. Women’s Day Celebrations Covid-19 Vaccination Drive Soneri Bank believes in promoting and appreciating women at work. Gender equality remains a priority for us to ensure that we live in an environment free of discrimination. This year we celebrated Women’s Day with full zeal and zest and the day was all about promoting equality within the workplace and appreciating women in line with the global campaign #ChoosetoChallenge. The Bank offered exclusive Women’s Day discounts to all customers and distributed giveaways to employees as a token of appreciation to acknowledge their contribution towards a better work environment. To combat the spread of Covid-19 and ensure the safety and good health of its employees and their family members, Soneri Bank, in collaboration with the Government of Pakistan, organised a vaccination drive at its Central Office in Karachi. #VaccinatetoEradicate was the initiative taken by Soneri Bank to certify the well-being of all. Health workers were available for three days at the PNSC Building to guide visitors on how to stay safe during the pandemic and vaccinate them on the spot. Soneri Bank encouraged its employees and all customers to stay safe during the pandemic and follow all Covid-19 protocols in order to prevent the spread of the deadly virus. 14th August Celebrations With the spirits of patriotism soaring high for Independence Day, Soneri Bank launched the #HarQadamHumAzadHain social media campaign, encouraging viewers to participate in our online quiz and get a chance to win exciting prizes. Internally, the Bank celebrated the spirit of independence by distributing flag badges amongst employees and dressing up in green and white to showcase the festive spirit. Soneri Bank Continues Its Partnership with Quetta Gladiators for PSL 6 Sports can act as a foundation for building healthier and more diverse societies and can generate energy and solidarity amongst people. This year, Soneri Bank continued its partnership with the Quetta Gladiators for Season 6 of PSL. We believe resilience, passion, and commitment to a cause are what steer any team towards success and that is what Soneri Bank stands for. New year Employee Testimonials Soneri Bank celebrated the New Year by encouraging customers and social media visitors to share their New Year's resolutions. Employee testimonials were filmed and shared on social media in which Sonerians revealed their New Year's resolutions and pledged to improve their personal lives, work environment, and country. The viewers participated wholeheartedly in this campaign and shared their resolutions promising to contribute positively towards society.
  18. BOARD OF DIRECTORS Mr . Alauddin J. Feerasta Mr. Muhtashim Ahmad Ashai Mr. Nooruddin Feerasta Mr. Ahmed A. Feerasta 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 Fibre, 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 was set up to meet the ever-growing demand for 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. Muhtashim Ahmad Ashai joined Soneri Bank Limited on 01 April 2020, as President & Chief Executive Officer. Before joining Soneri Bank, he was the President & Chief Executive Officer of MCB Islamic Bank Limited. He is a seasoned banker with an overall experience of more than 29 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 Finance and International Banking for more than 11 years. He has vast experience in the field of Corporate Banking, Transaction, and Investment Banking. 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 the industry’s operational activities, such as marketing, finance, manufacturing, plant operations, and legal and corporate management. He is the Chairman of the Board’s Credit Committee and a member of the Audit Committee. A young, energetic entrepreneur with a lot of ambition and sound business acumen, Mr. Ahmed Feerasta is the driving force behind Rupali Foods’ business setup. After completion of his graduation in the Bachelors 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. Before being appointed as the Chief Executive Officer of Rupali Foods, Mr. Ahmed was engaged in the business of manufacturing and the sale of Polyester Yarn with an 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. Chairman/Non-Executive Director President & Chief Executive Officer Non-Executive Director Under his dynamic leadership, Rupali Foods sets its eye on becoming one of the leading food brands in the country. He graduated with a BSc degree from the University of Engineering & Technology and completed his MBA from LUMS. Mr. Muhammad Rashid Zahir Mr. Manzoor Ahmed Non-Executive Director Non-Executive Director (NIT Nominee) Mr. Muhammad Rashid Zahir is a Non-Executive Director of the Bank and is also a Member of 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 the re-organisation of Public Sector Enterprises in 1978. Mr. Zahir is an Advisor at JCR-VIS Credit Rating Company Limited, as well as a Director on the Board of Rupali Polyester Limited. He is the author of the book, Legacy of a Manager. He did his MBA from the 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. Manzoor Ahmed represents the interest of the National Investment Trust (“NIT”) as its nominee on the Board of the Bank. He is Chief Operating Officer (COO) of National Investment Trust Limited (NIT). As COO, he has been successfully managing the operations and investment portfolio worth over Rs. 150bn. He has experience of over 30 years of the Mutual Fund industry and has been placed at many key positions within NIT that include capital market operations, investment management, research, and liaising with the regulatory authorities. He has also served NIT as its Managing Director (Acting) twice from May 2013 to May 2014 and September 2017 to February 2019. He is M.B.A. and also holds D.A.I.B.P. He has also been the Council Member of The Institute of Bankers Pakistan. Presently, he is pursuing the Chartered Financial Analyst (CFA) qualification Level III. Mr. Manzoor Ahmed has vast experience of serving on the Boards of various top-ranking companies of Pakistan, belonging to the diverse sectors of the economy. Mr. Ahmed has also attended various training courses organised by institutions of international repute, like the London Business School (LBS), UK, Institute of Directors, London and Financial Markets World, New York (USA). Represents NIT as Nominee Director on the Board of Directors of many leading national and multinational companies of Pakistan. Mr. Ahmed is also a Certified Director from the Pakistan Institute of Corporate Governance, and a member of the Defence Authority Country and Golf Club - Karachi. At Soneri, he chairs the Board’s Human Resource and Remuneration Committee and the Board’s Risk Management Committee. He is also a member of the Board’s Credit and IT Committees. Non-Executive Director Mr. Jamil Hassan Hamdani Independent Director Mr. Hamdani is an Independent Director of the Bank. He has 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 a 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. 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-five years of experience in the practice of law. She has also worked internationally for 7 years as an ADR Expert with as International Finance Corporation (Member of the World Bank Group) and successfully undertook the task of establishing effective dispute resolutions systems in the Middle East and North Africa (MENA). She received her Bachelors of Law and Bachelors of Art from S.M. Law College and the University of Karachi, 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 Directorships in Soneri Bank Limited, Otsuka Pakistan Limited, and Exide Pakistan Limited, as an Independent Director and is a Certified Director from IBA. 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 Honorary Secretary of the Board of Governors of the Aga Khan Hospital and 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.
  19. SENIOR MANAGEMENT From left to right 1 . Ali Hassan Shah Head of Operations 5. Tariq Yar Khan 2. Mohammad Amin Tejani Head of Islamic Banking 3. Aamir Nawaz Karim Head of Audit 6. Muhammad Merajuddin Ahmed Head of HR, Legal & General Services 4. Muhtashim Ahmad Ashai 8. Mirza Zafar Baig 9. Muhammad Qaisar 10. Amin A. Feerasta 7. Muhammad Salman Ali 11. Abdul Aleem Qureshi 12. Mubarik Ali 13. Shahid Abdullah President & Chief Executive Officer Head of Commercial & Retail Banking Group Head of Corporate & Investment Banking Group Head of Treasury, Capital Markets, FI & PRI
  20. ORGANISATIONAL STRUCTURE Head of Commercial & Retail Banking Group Board Audit Committee Chief Risk Officer Head of Corporate & Investment Banking Group Chief Compliance Officer Head of Islamic Banking Head of Audit Head of Treasury, FI, PRI & Capital Markets Company Secretary Chief Financial Officer Board of Director Head of Remedial Management President & CEO Chief Information Officer Shariah Board Head of HR, Legal & General Services Deputy CEO Head of Operations Head of Customer Experience
  21. CORPORATE INFORMATION CHAIRMAN MR . ALAUDDIN FEERASTA PRESIDENT & 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 COMPANY SECRETARY MR. MUHAMMAD ALTAF BUTT AUDITORS KPMG TASEER HADI & CO. CHARTERED ACCOUNTANTS SHARIAH BOARD MUFTI EHSAN WAQUAR AHMAD - CHAIRMAN MUFTI MUHAMMAD ZAHID - RSBM MUFTI BILAL AHMED QAZI MUFTI SYED ABID SHAH MUFTI SAMI ULLAH LEGAL ADVISORS M/S MANNAN LAW ASSOCIATES 52 REGISTERED OFFICE 2ND FLOOR, 307 – UPPER MALL SCHEME, LAHORE, PUNJAB – 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
  22. 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. Nooruddin Feerasta Mr. Alauddin Feerasta Mr. Muhtashim Ahmad Ashai Mr. Muhammad Rashid Zahir Mr. Manzoor Ahmed Mr. 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. Manzoor Ahmed Mr. Muhtashim Ahmad Ashai Mr. Jamil Hassan Hamdani Mr. Ahmed A. Feerasta Mr. 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. 4. Mr. Ahmed A. Feerasta Mr. Manzoor Ahmed Mr. Jamil Hassan Hamdani Mr. Muhtashim Ahmad Ashai Mr. Muhammad Salman Ali Chairman Member Member Member Secretary 53
  23. BOARD SUB-COMMITTEES Audit Committee Terms of Reference Constitution : Mr. Jamil Hassan Hamdani Chairman Audit Committee has been mandated the responsibilities to determine the appropriateness of measures taken by the management to safeguard the Bank’s assets, ensure consistency of accounting policies, review financial statements and recommend the 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 effective internal audit functions are 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 the strategies for their further strengthening, and monitor 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 the implementation of IFRS-9, as per the regulatory requirement. The Committee also ensures that an organisational 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 the 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 the 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 ensure 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 program 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 The Committee of Independent Directors is responsible for providing an independent opinion on the 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 the I.T. Strategy, as approved by the Board. Mr. Jamil Hassan Hamdani Member Mr. Muhtashim Ahmad Ashai Member 54
  24. BOARD AND COMMITTEES ’ MEETINGS Details of the meetings of the Board of Directors and its Committees held during the year 2021 and the attendance by each Director/Committee member is given as under:- Held during the year Attended** Held during the year Attended** Held during the year Attended** Held during the year Attended** Held during 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 Directors’ Committee Committee Remuneration Management Committee Committee Committee Meetings Meetings Meetings Meetings Meetings Attended** Board of Directors Meetings Held during the year 1 Mr. Alauddin Feerasta 7 7 * * 4 4 * * * * * * * * 2 Mr. Muhtashim Ahmad Ashai 7 7 * * 4 4 * * 4 4 * * 2 1 3 Mr. Nooruddin Feerasta 7 6 4 3 4 4 * * * * * * * * 4 Mr. Ahmed A. Feerasta 7 6 * * * * * * 4 4 * * 2 2 5 Mr. Muhammad Rashid Zahir 7 7 4 4 4 4 * * * * * * * * 6 Mr. Manzoor Ahmed (NIT Nominee) 7 7 * * 4 4 4 4 4 4 * * 2 2 7 Mr. Jamil Hassan Hamdani 7 7 4 4 * * 4 4 4 4 1 1 2 2 8 Ms. Navin Salim Merchant 7 6 4 4 * * 4 4 * * 1 1 * * Total Number of meetings held during the year Held during the year 7 4 4 4 4 1 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. Also, the CEO was onboarded as a member of the Board’s IT Committee effective 15 July 2021 and his attendance is reflected in the above table accordingly. (Note: The Profiles of the Board Members and the composition of the Board/Committees and their TOR, forms part of this Annual Report). 55
  25. 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 the 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 Policymaking. 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. Board reviews 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 the Chief Executive Officer have separate and distinct roles. The Chairman has all the powers vested under the Banking laws, Companies Act, and Listed Companies (Code of Corporate Governance) Regulations and presides the Board meetings. The principal role of the Chairman is to manage and to provide leadership to the Board of Directors of the Bank. He/She acts as a leading figure for both the Board of Directors as well as the management and is entrusted with numerous roles and responsibilities ranging from monitoring Board-level decision-making activities to safeguarding the Bank’s commercial interests. Other responsibilities include: • Serving as a leader and a driving agent of the Board of Directors (BOD), monitoring and managing all of its activities, aligning the Board’s goals and decisions with that of the management. The Chairman also ensures that the Board stays in the right direction with respect to achieving its objectives; • Presiding over Board meetings and General meetings, 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/her under enabling laws and promoting to the highest standards of corporate governance. The Chief Executive Officer at Soneri Bank Limited also plays a critical and significant role and is entrusted with numerous responsibilities, subject to the control and supervision of the Board of Directors. Key responsibilities include: • Managing and administrating the affairs of the Bank in accordance with the laws, rules and regulations and the Memorandum and Articles of Association of the Bank; • Complying with and arranging for implementation and compliance within the Bank, of all 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 deployment in a prudent manner in line with the Board’s approved strategy. • To make sure strong Compliance Culture and Internal Control within the organisation. 56
  26. MECHANISM ADOPTED FOR BOARD ’S PERFORMANCE EVALUATION Soneri Bank Limited (the Bank) has put in place a mechanism whereby the Performance of the overall Board is evaluated annually. The 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 “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 sections. After which, the final result is presented to the Board for their review. This year, Board evaluation was due to be carried out externally in line with the requirements of the SBP BPRD Circular No. 11 dated 22 August 2016, as well as the Listed Companies (Code of Corporate Governance) Regulations, 2019. Accordingly, the Bank engaged the Pakistan Institute of Corporate Governance (PICG) to independently conduct Board’s Performance Evaluation. PICG conducted Board Evaluation where it directly collected feedback from each director via online participation. Feedback so collected was then sent by PICG to the “Corporate L.I.F.E. Centre International Inc.” (“CLCI”) – their project partner based in Canada for analysis and assessment. Performance Evaluation report for the year 2021 received from PICG, was then presented to the Board in its 190th meeting convened on 17 February 2022 and the challenges identified by them have been duly noted to be addressed. This mechanism disclosure on the evaluation process adopted by the Bank, is being published for all the stakeholders in compliance with the BPRD Circular No.11, dated 22 August 2016 and the Listed Companies (Code of Corporate Governance) Regulations, 2019 and shall form part of the Director’s Report to the Shareholders. 57
  27. 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 a 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. • 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, the number of shares, form of share certificates (i.e., whether physical or electronic within the Central Depository System), and nature of the 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 at half-yearly intervals 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 a 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 a personal conflict of interest, or which may appear to be in conflict with any of the stakeholders as prescribed by the statutes and in probable cases, 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 the 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/her 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 decisions 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/her official capacity or in the due performance of the duties assigned to him/her. • 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. 58
  28. 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 encouraged 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 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 to the investors about the business environment and economic indicators of the country, explain its financial performance, 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 helps them in making their investment decisions. Accordingly, the Bank’s Corporate Briefing Session for the year 2021 was arranged on 24 December 2021 in compliance with 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 2021. 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. 59
  29. SHARIAH BOARD PROFILE The Shariah Board is comprised of Five qualified Shariah Scholars namely Mufti Ehsan Waquar Ahmad (Chairman Shariah Board), Mufti Bilal Ahmed Qazi (Shariah Board Member), Mufti Syed Abid Shah (Shariah Board Member), Mufti Sami Ullah (Shariah Board Member), and Mufti Muhammad Zahid (Resident Shariah Board Member-RSBM). Mufti Ehsan Waquar Ahmad (Chairman Shariah Board) Mufti Ehsan has 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 in people and projects management, with a rich experience of working with the board of directors and senior management of banks, regulators, auditors, and legal counsels. Alhamdulillah, Mufti Ehsan has exclusively served Islamic Financial Industry with institutions like World Bank-IFC, National Bank of Pakistan, ABL, Soneri Bank, NAFA, Askari General Insurance Company Takaful Window (AGICO), Emirates Global Islamic Bank, now Al Baraka Bank Pakistan, UBL, Yasaar Ltd.-UAE and UK, Minhaj Advisory-UAE, Arif Habib, for more than a decade now. He has structured several Sukuk 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. He also served as a member of the Technical Committee for Developing Accounting and Auditing Standard for Islamic Financial Institution at the Institute of Chartered Accountants of Pakistan (ICAP). As a member of SAF at the State Bank of Pakistan (SBP), he worked actively with SBP in matters pertaining to Islamic Banks, including drafting of Shariah Standard on Shirkat-ul-Milk usually used for Housing Finance, Tawarruq, Commodity Murabaha, Treasury, Trade Finance, and Agricultural Financing Products. At ESAAC, he has the privilege to work on a project of World Bank-IFC for developing Islamic Re-Mortgage Finance. He has also worked with the SECP team on Takaful Rules 2012 with its insurance division. He possesses a unique combination of religious and contemporary education that is very relevant to Islamic Banking. He has strong communication skills combined with knowledge of several languages. He graduated and accomplished Masters in Business Administration (MBA) with specialisation in Finance and Masters in Economics (MA) from IoBM and Karachi University respectively. He also completed traditional Islamic studies and graduated as a Mufti, achieving Masters in Islamic Studies (MA) and specialising in Islamic Jurisprudence (PGD-Mufti) from a leading Islamic School in Pakistan, Jamia-tur-Rasheed. He has also accomplished Bachelors in Law and Legislation (LLB). This unique blend of educational combination gives him an edge over many others to understand, correlate and align modern-day banking practices with Shariah principles. Besides 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. Mufti Bilal Ahmed Qazi (Shariah Board Member) Mufti Bilal Ahmed Qazi has done his Al-Aalamiyyah (a degree recognised by the Higher Education Commission Pakistan, as a Masters in Arabic and Islamic Studies) in 2003 from Jamia-tul-Uloom-ul-Islamiyah Banori Town. Then he completed his specialisation in Islamic Jurisprudence from Jamia Darul-Uloom, Karachi. He has also completed his MBA from IBA (Institute of Business Administration) in Karachi, Pakistan. Prior to joining SNBL Islamic Banking, he used to work for Meezan Bank Ltd as Shariah Scholar. He was the Shariah Advisor of NAFA Islamic Mutual Funds and the Shariah Board Member at Albaraka Bank. He is currently Shariah Board Member of Soneri Bank Islamic Banking and Summit Bank. He is also associated as Shariah Advisor with Shaheen and TPL Life Window Takaful Operations. Mufti Muhammad Zahid (Resident Shariah Board Member-RSBM) Mufti Muhammad Zahid completed his dissertation in Islamic Jurisprudence with an outstanding record throughout his academic career, winning numerous awards. Well-versed in the sciences of Islamic Jurisprudence. He has done his Al-Aalamiyyah (a degree recognised by the Higher Education Commission Pakistan as a Masters in Arabic and Islamic Studies) in 2005 from Jamia Darul-Uloom, Karachi. Then he completed his specialisation in Islamic Jurisprudence (Al-Takhassus fi al-Iftaa) in 2008 from the same institution i.e., Jamia Darul-Uloom, Karachi. Currently, He is pursuing his M.Phil. degree in Islamic Studies from the Quran-o-Sunnah Department at Karachi University. Prior to joining Soneri Bank Limited Islamic Banking, he used to work for Pak-Qatar Family Takaful Ltd. as a Head of Shariah Compliance from 2008 till Oct-2016. He has been the Shariah Board Member of Pak-Qatar Family Takaful Ltd. till September 2018. Mufti Muhammad Zahid is a visiting faculty at the Institution of Business Administration-IBA and Al-Emaan and Al-Hikmah Institute, Karachi. he focuses on presenting Islamic solutions to problems related to modern existence, thereby applying his acumen in bringing the modern world abreast with the Shariah. He provides Islamic Finance, Takaful, and Risk Management trainings at different forums. At the same time, he is responsible as Resident Shariah Board Member (RSBM) at Soneri Bank, Islamic Banking, as well as serves as Shariah Board Member at TPL Life and Shaheen, Window Takaful Operations. 60
  30. Mufti Syed Abid Shah (Shariah Board Member) Mufti Syed Abid Shah is a recognised Shariah Scholar and researcher having a strong comprehension of all aspects of Islamic Law, specialised in Islamic Jurisprudence and Islamic Finance. He has done his Al-Aalamiyyah (a degree recognised by the Higher Education Commission Pakistan as a Masters in Arabic and Islamic Studies) and Al-Takhassus fi al-Iftaa (specialisation in Islamic Jurisprudence) from Jamia Darul-Uloom, Karachi. Further, he is currently pursuing his M.Phil. degree from Karachi University. He is associated with Jamia-tur-Rasheed, Karachi as a senior Mufti in Darul Iftaa and lecturer in the Department of Fiqh ul Muamlat. He has been teaching Islamic studies including Fiqh and Fatwa for years. He has undertaken research work in various topics, including economic thoughts in Islam, modern economics, Islamic banking and finance, and Halal Food Standards. His research works includes Islamic Laws of Trade and Business in the light of Majallatul Ahkam Al-Adaliya (The Ottoman Law of Economics), Sale and Purchase of Money in Islam” under the supervision of Mufti Muhammad Taqi Usmani, and Basic Islamic Laws/Principles regarding Halal and Haram. Mufti Sami Ullah (Shariah Board Member) Sami Ullah graduated from Jamia Darul-Uloom, Karachi. He obtained Shahadat-ul-Aalamia (Masters in Arabic and Islamic Studies) from Jamia Darul-Uloom, Karachi, and Takhassus Fil Fiqh il Muamlat (Specialisation in Islamic Commercial Law from Jamia-tur-Rasheed, Karachi. He has also completed his MBA (Finance) from the University of Karachi and currently pursuing his MS in Islamic Banking and Finance from the Institute of Business Administration (IBA), Karachi. He has about five years’ experience of working in the Islamic Banking Industry, along with approximately eight years’ experience in research and issuing Fatawa. He has drafted more than a hundred fatawa regarding trade, banking, finance, inheritance, etc. He has also conducted in depth research of several practical issues in Islamic Banking from the Shariah aspect. 61
  31. HUMAN RESOURCE PRACTICES At Soneri Bank Ltd ., we value staff’s experience and strive to take steps that improve staff’s satisfaction. Our HR policies aim to promote a climate where the 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 the staff’s well-being, we enacted Coronavirus protocols, which helped ensure the safety of our staff and customers, and minimised the disruption to the business. To avoid close interaction, 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, we have supported staff in avoiding and detecting Covid-19 infection by investing in all advisable protocols. In collaboration with IT, HR Learning and Development developed the infrastructure required to conduct online training sessions using e-learning systems, developed user guides, and distributed I.T. equipment to branches, where it was required. This made it possible for all the trainings to be conducted online. Furthermore, the Bank invested in a Learning Management System (LMS), which will be launched in February 2022. This LMS will allow staff the flexibility to undergo training at their available time. 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. To boost staff 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. The Bank has successfully implemented an online testing system to assess candidates on their technical knowledge resulting in a substantial reduction in the turnaround time and costs. Despite the uncertainty and obstacles faced in 2021, we were able to prove our resilience. Through quick and effective adjustments, we were able to circumvent the negative impact of Covid-19. The Human Resources Department will continue to contribute to the success of the Bank. Headcount status Permanent Headcount Headcount December 2021 3,477 Average HC 2021 3,358 Outsourced Headcount Headcount December 2021 1,112 Average HC 2021 1,133 As of 31 December 2021 62
  32. I .T. GOVERNANCE Soneri Bank’s I.T. Governance Policy has been developed as a guide, model and decision-making reference for the Bank's I.T. Division to accomplish all level(s) of regulatory compliance. Our Policy is an integral part of enterprise governance and consists of leadership and organisational structure and processes that ensure that the Bank’s I.T. Division sustains and extends the organisation’s strategies and objectives. This Policy provides a platform for the attainment of the strategic objectives of the core business streams and to align I.T. with the Business Strategy. The management of I.T. 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, I.T. Steering Committee, Board I.T. 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 ensure 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 I.T. Infrastructure with adequate hardware and high availability of the 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 I.T. Services are designed to benefit 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, an independent I.T. audit of I.T. infrastructure services, policies, and operations is being conducted to evaluate that all I.T. 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, processes and technology is the foundation of effective information governance. In these emerging technological trends, our I.T. people are equipped with the necessary skillset and tools and regularly go 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 the successful implementation of information and technology. They create, use, and interpret data. They manage information systems and administer access rights and pre-emptively identify risks to prevent incidents and crises from occurring. At the simplest level, our policy outlines how Soneri Bank meet a designed set of objectives and focuses on how Soneri Bank intends to use and organise technology to meet its business objectives. 63
  33. SUCCESSION PLANNING POLICY Policy Statement To provide continuity in smooth functioning of business , Soneri Bank Limited has put in place a Succession Planning Policy, which identifies successors for senior roles within the organisation, thus encouraging movement of internal resources to fill in high-level management positions that become vacant due to retirement, resignation, or new business opportunities. Frequency/Applicability The succession plan will be reviewed annually and shall be put in place for positions of Mancom level and their one downs. Approving Authority The Succession Plan Document shall be approved as under: Nomination Co - Nomination Recommendation Approval Group Head Head of HR President Human Resource and Remuneration Committee Annual Succession Plan Document The Annual Succession Plan Document shall comprise of the following details for each job role: 64 Position/Incumbent Successor Details • Name of Current Incumbent • Job Title • Grade • SNBL Experience • Overall Experience • Education • Date of Joining • Date of Birth • Name of Successor • Name of Current Incumbent • Grade • Overall Experience • Education • Readiness of Successor
  34. GOVERNANCE TRAININGS Having good governance practices in place is a key focus area for the Bank . Apart from the policies and control procedures in place, the Bank also invests in employee development and ensures that the importance of good governance is understood by Senior Management and staff alike. During 2021, senior officials from I.T. and Security Departments attended the trainings on Enterprise Technology Governance and Fraud Examination, Risk Management, and Governance Trainings. Head of Risk and Head of Operational Risk also attended Enterprise Risk Management Training that was offered by NIBAF. The Bank also scheduled an in-house training on Environmental Risk Rating (ERR) that was attended by more than 50 participants. 65
  35. 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 the highest standards of professionalism, honesty, integrity, and ethical behaviour. 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 and forgeries, harassment, improper conduct, or wrongdoing 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 wrongdoing/improper conduct. Independence of Whistle-Blowing (WB) Unit To ensure independence, WB Unit has been established at the Internal Audit and 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 mechanisms 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 incidents 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 the Bank’s website. Dedicated email ID whistleblowing.unit@soneribank.com accessible to WB Unit Head. Number of Whistle-Blowing Incidences Reported to BAC Two (2) whistle-blowing incidences were reported to BAC in the year 2021. 66
  36. 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 investor grievances. Moreover, it also promotes equitable treatment of every shareholder, whether they are major 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 to the investors. 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/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 / complaints relating to shares / dividend. • Various documents, such as Notice of AGM, Proxy Form, Dividend Mandate Form, List of unclaimed dividends/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. 67
  37. MANAGEMENT COMMITTEES 1 . Management Committee 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 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. Muhammad Merajuddin Ahmed Mr. Ali Hassan Shah Mr. Mubarik Ali Mr. Muhammad Salman Ali Mr. Muhammad Amin Tejani Syed Adeel Ehtesham, 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, Secretary 3. Compliance 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. Ali Hassan Shah Mr. Mubarik Ali Mr. Muhammad Merajuddin Ahmed Mr. Muhammad Qaisar Riaz Mr. Muhammad Salman Ali Mr. Mohammad Amin Tejani Mr. Rizwan Zafar Mr. Tariq Yar Khan, Secretary 4. Assets and liability Committee 1. 2. 3. 4. 5. 6. 7. 8. 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. Shahid Abdullah, Secretary 5. Investment Committee 1. 2. 3. 4. 5. 6. Mr. Muhtashim Ahmad Ashai, Chairman Mr. Amin A. Feerasta Mr. Shahid Abdullah Mr. Mirza Zafar Baig Mr. Mubarik Ali Mr. Muhammad Rehan Khan, Secretary 68
  38. 6 . I.T. Steering Committee 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. Mr. Muhtashim Ahmad Ashai, Chairman Mr. Amin A. Feerasta Mr. Mirza Zafar Baig Mr. Ali Hassan Shah Mr. Muhammad Salman Ali Mr. Abdul Aleem Qureshi Mr. Tariq Yar Khan Mr. Mubarik Ali Mr. Muhammad Qaisar Riaz Mr. Mohammad Amin Tejani Mr. Akber Sultan Mr. Qurban R. Punjwani Mr. Muhammad Imran, Secretary 7. Credit Risk Management Committee 1. 2. 3. Mr. Muhtashim Ahmad Ashai, Chairman Mr. Amin A. Feerasta Mr. Muhammad Qaisar Riaz 4. 5. 6. 7. 8. Mr. Abdul Aleem Qureshi Mr. Mirza Zafar Baig Mr. Shahid Abdulllah Mr. Mohammad Amin Tejani Mr. Mubarik Ali, Secretary 8. Operational Risk Management 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 Qaiser Riaz Mr. Mirza Zafar Baig Mr. Tariq Yar Khan Mr. Ali Hassan Shah Mr. Muhammad Salman Ali Mr. Mubarik Ali, 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. 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. Zain-ul-Abydeen Khandwani Mr. Mian Asif Iqbal Mr. Sajjad Butt Mr. Muhammad Azizullah Abid Mr. Azhar Sajjad Siddiqui Mr. Mohammad Amin Tejani Mr. Ali Karimjee Mr. Rizwan Zafar Mr. Mubarik Ali, Secretary 69
  39. CHAIRMAN 'S REVIEW Dear Stakeholders, revenues and profits. Our upgraded mobile banking and internet banking platforms are now state of the art, and put On behalf of the Board of Directors, it is my privilege to the customers’ ease of doing business at the forefront. With present the Annual Report of Soneri Bank Limited for the more developments and refinements in the pipeline, I am financial year ended 31 December 2021. optimistic that the digitization of the processes at the Bank will continue to benefit our customers in the days to come. The challenges posed by the COVID-19 pandemic persisted over the course of the year 2021, as the lives of many people At the same time, our branch outreach now extends to 367 around the world, including members of the SNBL family, were branches across the country. Deposits at the year-end crossed affected. My heartfelt condolences go out to all those who the Rs. 400 Billion land mark, as we closed the year with have lost their dear ones during this difficult time. Timely overall deposits at Rs. 403.037 Billion, indicating a year on initiation of vaccination drives, travel restrictions, imposition year growth of 17 percent. Our current accounts registering an of smart lockdowns and packages in support of businesses impressive growth of 19 percent, and the Bank’s CASA mix has were key factors that helped in managing the health and improved to 70 percent. Our balance sheet size crossed the economic challenges. half a trillion mark, with total assets reported at Rs. 579.489 Billion at 31 December 2021. In terms of Profitability, our Profit I am pleased to share that our staff achieved 100 percent before tax grew by 28%, crossing the Rs. 5 Billion mark for vaccination status over the course of the year. The Bank joined 2021. hands and took part in conducting vaccination drives across key locations to facilitate the Bank’s staff and public at large. During the course of the year, the Bank actively participated in the Government led schemes and initiatives for low cost Bank’s housing as well as youth entrepreneurship programs. The performance remained strong, and we continued to deliver on Bank successfully met the overall regulatory housing and our key performance indicators. While we were forced to construction targets set by the State Bank of Pakistan for the change the way we work, our staff maintained the highest year. We also revisited our strategy for Consumer Banking this levels of service quality for customers, whilst supporting the year, which led to a year on year growth of 71 percent for the well-being of their families and colleagues. Considering the segment. Despite these unprecedented challenges, our well-being of all our staff members, as well as our Board members and other stakeholders, we encouraged and Our Bank’s Board of Directors possess rich and diversified preferred virtual meetings over the course of the year. With experience, and have performed their duties effectively and strictly enforced SOPs, we ensured the safety of our diligently all throughout the course of the year. The Board employees as well as our customers. Amidst these challenging remained compliant with the provision with regard to their times, we are continually re-assessing and re-aligning our training program. Also, as required under the regulations, the operational strategies for serving our customers. Board’s Performance Evaluation for the year 2021 was conducted independently by the Pakistan Institute of I am extremely proud of the fact that the Bank celebrated its Corporate Governance (“PICG”), a premier body in the field of 30th year of operations in 2021. A number of key milestones promoting good corporate governance practices in Pakistan. were achieved this year, as we continued to deliver on our The challenges identified by them were deliberated by the strategic objectives, and were able to achieve record levels of Board and have been duly noted to be addressed. 70
  40. I would like to thank the Bank ’s shareholders and our valued customers for their continued trust in the Bank. I am also grateful to the State Bank of Pakistan, and the Securities and Exchange Commission of Pakistan and other regulatory authorities for their support and guidance. Also, I would like to express my appreciation to the members of the Bank’s Board of Directors, and the Shariah Board, the Management team and employees of the Bank, especially our front line staff for their hard work and contributions towards achieving the objectives of the Bank. Alauddin Feerasta Chairman Lahore: 17 February 2022 71
  41. 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 2021. Economic Review: Over the course of FY 2020-21, Pakistan’s economy indicated visible signs of recovery as the GDP growth rate approached close to 4 percent, following a negative growth period of 0.5 percent in 2020. Recovery was reflected in most high-frequency indicators of domestic demand – including automobile sales, POL (petroleum, oil and lubricants) sales, and electricity generation – as well as the strength of imports and tax revenues. Initially aided by lifting of Covid19 restrictions, the low base effect, supported by relaxed fiscal and monetary policy, the growth in 2021 was as per expectations. However, with the robust recovery in domestic demand amidst the backdrop of rising international commodity prices post opening up of global economies, the country’s external account remained under pressure. Over the course of the last few months, the government has taken certain necessary policy measures to address key concerns, and as a result, the economy now appears to be on the path of stabilization. Analysts anticipate further accelerated growth in FY2021-22, driven by falling Covid-19 cases, un-interrupted service sector activity, and moderate demand in some sectors of the economy. Although exports have also rebounded, concerns still remain on the country’s Balance of Payment (BoP) position. The current account deficit (CAD) has risen sharply to USD 9 billion during the 1HFY22, compared to a surplus of USD 1.247 billion at end of 1HFY21. Recently enacted policy actions such as large currency devaluation, broadening of the scope of 100% cash margin requirement on imports, temporarily banning / levying of regulatory duties on non-essential imported items, and tapering of monetary stimulus by the SBP are expected to contain the import bill going forward. The SBP is also geared to contain the domestic demand, as the Cash Reserve Requirement (CRR) of the banking industry has been raised from 5% to 6% to curtail the money supply. Analysts expect the CAD to increase to USD 13.5 billion for FY2022 due to pick-up in economy and increased commodity prices in international markets. Exports grew by nearly 25 percent year on year, to reach USD 15.1 billion, buoyed by record-high shipments of textiles as well as strong rice exports. Meanwhile, remittances rose by 11.3 percent year on year, to an all-time high of USD 15.8 billion during the first half of the fiscal year. The Foreign exchange reserves of SBP improved from USD 13.4 billion at CY20 end to around USD 17.9 billion at CY21 end on the back of flows from multilateral agencies such as ADB & World Bank and Kingdom of Saudi Arabia. FX reserves are expected to remain stable due to expected resumption of IMF Program which will make available 750 million in Special Drawing Rights (equivalent to USD 1,059 million), and the planned issuance of International Bonds in the first half of CY22. Inflation numbers have overshot the market consensus where the CPI has jumped to double digits, clocking in at 12.3% for the month of Dec-2021. Inflation is expected to remain elevated in the first half of CY22, driven by removal of subsidies in mini budget, upward adjustments in utility prices, and increase in commodity prices in international markets. During the first half of FY22, FBR tax collections grew strongly by 32.5 percent year on year. As a result, the fiscal deficit shrank to 1.1 percent of GDP during July-October FY22, compared to 1.7 percent of GDP during the same period last year. The primary surplus also improved by 0.1 percentage points to 0.4 percent of GDP. Private sector credit cumulatively grew by 13.4 percent during the first half of FY22, largely driven by increased demand for working capital loans especially by rice, textile, petroleum and steel industries. At the start of CY22, both short and long-term secondary market yields, benchmark rates and cut-off rates in the government’s auctions declined significantly, in line with the forward guidance provided by the SBP’s Monetary Policy Committee (MPC) and the conduct of 2-month open market operations by the SBP. In the last MPC meeting held in January 2022, the SBP’s MPC decided to maintain the policy rate at 9.75 percent, in line with the forward guidance provided in the last monetary policy statement. At that time, the MPC had considered the measures taken, as cited above, to lower inflation and keep the ongoing economic recovery sustainable. In the last four months of CY2021, we saw a cumulative 275 basis point increase in the policy rate. The MPC in its latest policy statement, shared its view that recent developments suggest that the demand moderating measures are gaining traction and have improved the outlook for inflation. The current account deficit appears to have stopped growing since November and the non-oil current account balance is expected to achieve a small surplus for FY22. Finally, and importantly, the enactment of the recent Finance (Supplementary) Act, 2022 represents significant additional fiscal consolidation compared to the budget and has lowered the outlook for inflation in FY23.Looking ahead, and against the backdrop of these developments that have improved the inflation outlook, the MPC remains of the view that current real interest rates on a forward-looking basis are appropriate to guide inflation to the medium-term range of 5-7 percent, support growth, and maintain external stability. 72
  42. The Bank ’s Performance and Operating Results: The summarized financial position and operating results of the Bank for year ended 31 December 2021 are as follows: FINANCIAL POSITON Advances – net Investments – net Total Assets Deposits and other accounts Shareholders’ Equity FINANCIAL PERFORMANCE Net Markup Income Non Markup Income Total Revenue Non-Markup Expenses Profit before provisions and taxation (Reversals) / provisions and impairment Profit before taxation Profit after taxation Earnings per share (Rupees) 2021 2020 ---(Rupees in millions)--165,495 327,425 579,489 403,037 21,636 164,545 249,956 485,345 345,499 23,157 2021 2020 ---(Rupees in millions)--10,938 4,290 15,228 10,191 5,037 (112) 5,149 2,854 2.5889 10,655 3,808 14,463 9,026 5,437 1,402 4,035 2,400 2.1772 Overview of the Business: The Bank posted Profit before tax (PBT) of Rs. 5,149.219 million and Profit after tax (PAT) of Rs. 2,854.147 million for the year ended 31 December 2021, as compared to Rs. 4,034.755 million and Rs. 2,400.272 million respectively for the prior year, indicating an improvement of 27.62 percent and 18.91 percent respectively. As a result, earnings per share (EPS) was recorded at Rs. 2.5889 per share for the year 2021, as compared to Rs. 2.1772 per share for the year 2020. The Bank’s net markup income for the year ended 31 December 2021 improved to Rs. 10,937.534 million from Rs. 10,655.256 million reported for the year ended 31 December 2020, improving by 2.65 percent as spreads continued to remain under pressure. Average net investments improved notably to Rs. 276,334.220 million for the current year as against Rs. 223,132.229 million for the prior year. While yields on investments reduced to 8.19 percent in 2021 from 10.35 percent in 2020, this volumetric increase kept the Bank’s income from investments intact at Rs. 22,619.325 million for the year, ending only slightly lower than Rs. 23,086.990 million reported in the year 2020. On a year on year comparison, yields on advances also remained noticeably lower, at 7.63 percent for the year ended 31 December 2021 as against 9.74 percent for the prior year, as the gradual reduction in policy rates by the State Bank of Pakistan over the course of the last year took full effect this year. The Bank’s average net advances also reduced to Rs. 175,221.482 million for the year ended 31 December 2021, as against Rs. 193,261.875 million for the prior year. Due to decline in volumes, but primarily driven by reduction in yields, income from advances ended lower at Rs. 13,373.990 million for the current year as against Rs. 18,826.212 million for the prior year. The Bank’s period end deposits, after witnessing a decline at June 2021 end, picked up at September 2021, and were reported at Rs. 403,036.554 million at 31 December 2021, improving by Rs. 57,537.786 million or 16.65 percent against the year-end 2020 position. In terms of averages, the overall portfolio grew by Rs. 30,887.591 million, or 9.87 percent year on year. More importantly, CA averages grew by Rs. 18,427.399 million or 23.84 percent year on year, as the Bank continued to maintain its focus on CASA mix improvement and retention of current accounts, rationalizing of funding costs and improvement of overall margins. As a result of this strategy, the Bank’s End of Period CASA growth was recorded at an impressive Rs. 44,113.100 million, or 18.60 percent year on year, with mix improving to 69.80 percent at 31 December 2021 (31 December 2020: 68.65 percent). With improved CA averages, the Bank’s overall cost of deposits reduced by 188 bps, ending at 4.86 percent for the current year, as against 6.74 percent for last year, and overall deposit expense reduced to Rs. 16,719.062 million for the current year as against Rs. 21,103.983 million for the prior year. 73
  43. On the borrowings side , the Bank’s average borrowings increased by Rs. 19,417.682 million from December 2020 levels, while cost decreased to 6.22 percent for the current year as against 7.99 percent for the prior year. The Bank’s overall Cost of funds decreased to 5.08 percent for the year ended 31 December 2021 as against 6.89 percent for the prior year. Non markup income for the year 2021 was reported at Rs. 4,290.235 million, improving by 12.68 percent from Rs. 3,807.495 million reported for the year 2020. Core fee and commission income registered an increase of Rs. 298.762 million or 16.83 percent year on year, while Dividend income also indicated a healthy increase of Rs. 216.207 million year on year. The Bank’s foreign exchange income witnessed an increase of Rs. 123.981 million year on year, and the overall income was further augmented by a capital gain booked on disposal of property amounting to Rs. 281.800 million in the current year. In terms of overall revenue, the Bank reported a growth of Rs. 765.018 million, or 5.29 percent year on year. Non-Markup expenses were reported at Rs. 10,190.506 million for the year ended 31 December 2021 as against Rs. 9,026.293 million in the year 2020, indicating a growth of 12.90 percent. Out of this growth, which includes expenses on account of branch expansion as well as development expenditure on systems and new initiatives, growth attributable as business as usual was 6.6 percent. The management remains committed on pursuing stringent cost discipline measures to keep overall costs in check. Under the head of provisions, with the absence of one off additional equity investment impairment charge of Rs. 717.214 million booked in the prior year, coupled with decent recoveries against classified advances in the current year, a positive year on year variance was observed. The Bank booked a net provision reversal of Rs. 129.974 million for the current year against classified advances, while a net charge of Rs. 673.486 million had been considered last year. The Bank continues to carefully and prudently monitor its portfolio. With the recent changes to the SBP policy rate, the Bank’s Money Market Desk continues to assess the portfolio yields and durations so that timely decisions are taken at the right time. Furthermore, as per SBP and GOP directives, all Banks have been assigned with targets for housing and construction finance as well as other programs and initiatives which continue to be tracked and monitored. 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 2021 was reported at 43.03 percent as against 49.98 percent in 2020. The Non-performing loans to total Advances ratio stood at 5.95 percent at 31 December 2021 (31 December 2020: 6.25 percent), with specific coverage maintained at 76.51 percent (December 2020: 75.16 percent). Capital Structure of the Bank: The Bank remains adequately capitalized, with a capital base above the regulatory limits and Basel capital requirements. As part of its regulatory relief measures post the COVID-19 outbreak, the State Bank of Pakistan had relaxed the regulatory requirements for Capital Adequacy for Banks in general. These relaxations continued throughout the course of the year 2021. As at 31 December 2021, the Bank’s total Capital Adequacy Ratio was at 13.82 percent against the revised requirement of 11.50 percent (including Capital Conservation Buffer). Prior to the relaxation in this regard, the regulatory requirement was set at 12.50 percent with a CCB of 2.50 percent. Also, the Bank’s Common Equity Tier 1 (CET-1) to total Risk Weighted Assets ratio at 31 December 2021 was at 10.22 percent, well above the requirement of 6.00 percent. 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 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 behaviors to create that enabling climate. 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 organization, thus allowing upward career mobility to the right talent, and help them in fulfilling their career growth aspirations. Organizational 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. Our focus is on maintaining constructive employee relations, and fostering a culture of transparency and good behavior. 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. 74
  44. 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. The Coronavirus outbreak gave birth to a new set of challenges and the role of HR increased significantly. Focusing on staffs’ well-being, we enacted Coronavirus protocols, which helped ensure the safety of our staff and customers, and minimized the disruption to business. To avoid close interaction, 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. The Bank however, ensured that no position was made redundant and no salary deductions were made. Moreover, we have supported staff in avoiding and detecting covid-19 infection by investing in all advisable protocols. Our Whistleblowers 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, reprisal or adverse consequences. 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 organization 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 fully complied with all the mandatory regulations of the Code of Corporate Governance, and the Bank’s Statement of Compliance with the Code to this effect forms part of this Annual Report. Composition of the Bank’s Board of Directors: 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. The Bank is also 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 most recent 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. There were no changes to the composition of the Board during the current year, and no casual vacancies occurred during the period. 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* *President & CEO is a deemed director as per clause 3 of Section 188 of Companies Act, 2017. 75
  45. 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 organization. Board Meeting Outside Pakistan: During the year, no Board Meeting was held outside Pakistan. 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, The Pakistan Institute of Corporate Governance (“PICG”), a premier and independent body in the field of promoting good corporate governance practices in Pakistan, was engaged to independently conduct the Board’s Performance Evaluation for the year 2021, and submit their analysis report for review by the Board, in line with the requirements of the Listed Companies (Code of Corporate Governance) Regulations, 2019 and BPRD Circular No. 11 dated 22 August 2016 that requires for external evaluations once every three years. Accordingly, The PICG conducted an independent evaluation of the Board, and finalized their assessment report. This report was reviewed by the Board in its 190th meeting convened on 17 February 2022 and the challenges identified by them have been duly noted to be addressed. 76
  46. Board and Committees ’ Meetings: Details of the meetings of the Board of Directors and its Committees held during 2021 and the attendance by each director/committee member are given as under: Held during the year Attended** Held during the year Attended** Held during the year Attended** Held during the year Attended** Held during the year Attended** Names of Directors 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 Attended** Board of Directors Meetings Held during the year 1 Mr. Alauddin Feerasta 7 7 * * 4 4 * * * * * * * * 2 Mr. Muhtashim Ahmad Ashai 7 7 * * 4 4 * * 4 4 * * 2 1 3 Mr. Nooruddin Feerasta 7 6 4 3 4 4 * * * * * * * * 4 Mr. Ahmed A. Feerasta 7 6 * * * * * * 4 4 * * 2 2 5 Mr. Muhammad Rashid Zahir 7 7 4 4 4 4 * * * * * * * * 6 Mr. Manzoor Ahmed (NIT Nominee) 7 7 * * 4 4 4 4 4 4 * * 2 2 7 Mr. Jamil Hassan Hamdani 7 7 4 4 * * 4 4 4 4 1 1 2 2 8 Ms. Navin Salim Merchant 7 6 4 4 * * 4 4 * * 1 1 * * Total number of meetings held during the year Held during the year 7 4 4 4 4 1 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. Also, the CEO was onboarded as a member of the Board’s IT Committee effective 15th July 2021 and his attendance is reflected in the above table accordingly. (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. 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. 77
  47. 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 2021 has been disclosed in note 41 to the financial statements under the “fees” category, and the remuneration details of the Chief Executive Officer of the Bank have also been disclosed as part of the said note. 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) Investments of Provident Fund 384,312 Investments of Gratuity Fund 157,505 Statement on Risk Management Framework: Risk Management is an integral component of Soneri Bank’s strategy. The Risk Management Framework aims at optimizing the value for all stakeholders via identifying, measuring, monitoring and reporting the multitudes of risky exposures. The risk management policies and 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 later 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 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 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 organization 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 Board 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. 78
  48. 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, IT security risk and reputational risk, are managed via risk management processes. Modeling and measurement approaches for quantifying risk and capital demand are implemented across the material risk types. 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 behavior that supports a strong risk culture in line with our Code of Business Conduct and Ethics. Our policies require that risk-related behavior 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 cognizant 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 prioritized 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: 79
  49. • • • • • • • • • • • • 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; 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. 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 for which has been set by the SBP at 01 January 2022. As per SBP instructions, all banks were required to report results of impact assessment over an extended parallel run reporting period. As at 31 December 2021, Banks await final 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. The Bank’s Risk Management Division also performs stress testing against various pre-determined scenarios to analyse the Bank’s ability to withstand potential shocks from adverse developments. Based on the Board’s current assessment, there are no significant doubts about the Bank’s ability to continue as a going concern. External Auditors: The financial statements of the Bank for the year ended 31 December 2021 have been audited without qualification by the auditors of the Bank, M/s. KPMG Taseer Hadi & Co., Chartered Accountants. M/s. KPMG Taseer Hadi and Co, Chartered Accountants, the existing auditors, have given their consent to continue to act as auditors of the Bank for the year 2022, if so appointed. The Board Audit Committee has recommended the re-appointment of the existing auditors as statutory external auditors of Bank for the next year. 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. Subsequent Events: 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. Corporate Social Responsibility: Soneri Bank remains firm in its commitment to actively contribute to socio-economic development. During the year, the Bank actively and regularly participated in several CSR activities and philanthropic efforts in the field of healthcare, education and women empowerment along with other areas of community development, sports and rehabilitation. Keeping the ‘Roshan Har Qadam’ spirit intact, the Bank ensured that it fulfilled its social responsibility towards the country and its people. A summary of the Bank’s key CSR activities during the year forms part of the Annual Report. 80
  50. Six Years ’ Operating and Financial Data: Six years’ financial performance of the bank is presented on page no. 109 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 2021 [2020: 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 15 December 2021. 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 2021. The rating reflects the Bank’s sustained and stable positions in the market with strong risk profiling and lending capacity. These ratings denote a low expectation of credit risk, and adequate capacity for timely payment of financial commitments. 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. 216 of the 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: At Soneri Bank, we remain optimistic about the future. Effective risk Management continues to remain a top priority at our Bank. 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. With a renewed business strategy and operational plan, the Bank is well-positioned for sustainable growth and building long-term shareholder value. We remain committed to expanding our footprint further as we continue to invest in our branch network, our technology infrastructure, our human capital, whilst strengthening our overall control environment. Going forward, our focus remains on building a stable deposit base, improving customer experience, and optimizing returns through growth strategies and by enforcing a strong cost discipline across the Bank. We celebrated our 30th Anniversary of operations this year, and embarked on a journey of digitalizing our processes. Our focus is on facilitating and enhancing our customer experience through the use of technology. The year 2021 has been a year of strategy refresh for the Bank, and we look forward to building on our core strengths as we move forward. We remain cognizant of the threat that COVID-19 has and continues to pose to businesses and the economy in general, and shall continue to work with our customers and partner with them amidst these challenging times. Dividend: The Board of Directors of the Bank, in their meeting held on 17 February 2022, has recommended a final cash dividend (D-13) of Rs. 1.50/- per share (i.e. 15% percent) for the year ended 31 December 2021 to be approved in the 30th Annual General Meeting of the Shareholders. 81
  51. Acknowledgment : On behalf of the Board, we thank the State Bank of Pakistan, the Ministry of Finance, the Securities and Exchange Commission of Pakistan, and other regulatory authorities for their continued guidance. We remain indebted to our valued customers for their patronage, and express our gratitude to our shareholders for their unwavering trust and support. As we celebrate our 30th Anniversary this year, we take this opportunity to appreciate the commitment and hard work of our dedicated employees. It is this exemplary dedication and passion that has enabled us to serve and satisfy our customers over the course of our Banking journey. We expect the same level of commitment towards excellence, and look forward to achieving many more milestones together. While there are challenging times ahead, we remain optimistic and confident about the future, and assure our stakeholders that the Bank shall continue with its efforts aimed at ceaselessly serving the growing needs of our society. For and on behalf of the Board of Directors, MUHTASHIM AHMAD ASHAI President & Chief Executive Officer Lahore: 17 February 2022 82 ALAUDDIN FEERASTA Chairman
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  53. 109 216 84
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  61. 2020 2021 2020 2021 92
  62. 2021 93
  63. REPORT OF SHARIAH BOARD TO THE BOARD OF DIRECTORS FOR THE YEAR ENDED 31ST DECEMBER 2021 By the grace of Almighty Allah , the year under review was the 16th year of Islamic commercial banking for Soneri Bank Limited. The Board of Directors and Executive Management are solely responsible to ensure that the operations of Soneri Bank Limited – Mustaqeem Islamic Banking which are conducted in a manner that comply with Shariah principles at all times. We are required to submit a report on the overall Shariah Compliance environment of Soneri Bank Limited – Mustaqeem Islamic Banking. To form an opinion on the overall Shariah Compliance environment as required by the regulatory framework, the Shariah Compliance Department (SCD) of the bank needs to carry out reviews, on test check basis, of each class of transactions, the relevant documentation and process flows. Further, the reports of the Internal Shariah Audit and External Shariah Audit also form the basis of this report. The year 2021 had been a challenging year for the world specially emerging countries including Pakistan as the smaller economies takes desperate measures to recover from the effect of the global supply chain. The govt. has taken various measures to control the food inflation; document the economy with limited resources, the reliance on the banking services became all more important. The Islamic Banking overall showed the resilience, stability and in return contributed to the society. Soneri Islamic Banking was no different, the Board of Directors, the Management and overall staff ensure that we remain focus on shariah compliance, growth and overall Islamic Banking structure. During the year, the management strengthens the Shariah Board effective from July 01, 2021 by adding two new unique members to the existing Shariah Board with the vision to enhance the effective decision making with respect to Shariah and to comply with the Shariah Governance Framework issued by State Bank of Pakistan. The Shariah Board hereby presents the Annual Shariah Board report regarding affairs of the Soneri Bank Mustaqeem Islamic Banking: During the year ended December 31, 2021, Shariah Board of Soneri Bank Mustaqeem Islamic Banking held four meetings to review various matters which included, among others, new products and services, product modifications, concepts, transactions, structures, processes, and Shariah issues referred to us. To ensure that, apart from the quarterly meetings, SCD remained in close coordination with Shariah Board. Deposit Composite: It is very encouraging-g to report that the Islamic Banking deposit has increased by 45%, the composition of the deposit is dominated by savings accounts which stood at 65% of the total deposits. The same can be viewed as follows: Deposit Composition Current Savings 31,925,206 Meadi 22,113,481 8,414,817 4,469,808 20,380,118 (Rupees in '000) 14,574,640 3,130,271 2020 3,069,033 2021 Total The Board of Directors are focused on enhancing the foot print of the Soneri Mustaqeem Islamic Banking. In this regard, 15 Islamic Banking Windows are launched in the main conventional branches across Pakistan in order to better serve the Islamic Banking customers and helps the Islamic Banking Group to mobilize the core deposits which plays a pivotal role for the growth of the Islamic business. In addition to the Islamic banking windows, the Islamic Banking Group also added 5 new dedicated branches to make a total of 35 dedicated Islamic branches and 15 Islamic Windows. Asset Review: The asset portfolio has also shown 28% at PKR 11.57 Bn as compare to 2020. The main modes of financing used for the bank’s Islamic financing consist of Diminishing Musharakah (37%), Murabaha (8%), Salam (28%), Running Musharakah (15%), Istisna (7%) and Ijarah (5%). We hope to see the trend continue to remain in the upward direction as shown in the trend line. Asset Composition Ijarah Murabaha Musharakah Diminishing Musharakah Salam 960,874 838,948 3,193,319 1,044,843 4,245,096 4,253,719 1,797,708 1,127,082 1,270,096 889,024 598,963 (Rupees in '000) 2020 390,903 2021 Istisna To strengthen and broaden the functions of Shariah control, the Shariah Compliance Department under the supervision of Resident Shariah Board Member supported the asset team to understand and assess the customers’ business needs and give their due feedback on the process flows. Additionally, to maintain the high level of compliance, the SCD performed random physical inspections of Islamic financing transactions. Shariah Compliance: The commitment of the Board of Directors and Management in building the overall Shariah compliance environment of the Bank is commendable. The Bank’s Shariah Compliance Department (SCD) experienced the management’s utmost support in discharging its functions. The SCD strives to bring about continuous improvement in the Shariah compliance environment of the Bank. In this regard, SCD, in compliance of the SBP and Shariah Board directives in coordination with IBD and Risk Management Department devised a mechanism for identifying and reporting Shariah non-compliance risk to Board of Directors and its sub-committee. During the year, RSBM supported the SCD in issuing different Shariah guidelines which include, among others, guidelines regarding obtaining Shariah Approval in various Cases, operational policies, and various day to day activities. The function of Shariah Review of transactions is carried out by SCD in two different levels i.e. Pre-Execution review through process flows, visits to the customers and monitoring the disbursement if necessary and post execution review on a sample check basis through its annual review. It is necessary to mention that Resident Shariah Board Member also visited branches to assess the overall shariah compliant environment. 94
  64. SCD carried out Shariah Review of different departments /functions of Head office and Branches across the country during the year. The SCD presented Shariah Review reports, Internal and External Shariah Audit reports, and SBP Inspection report to Shariah Board for determining corrective actions. Shariah Board also reviewed various operational manuals to ensure IBD operations are continued to remain Shariah Compliant. In addition to this, Shariah board also approved revised manuals including but not limited to revised Shariah Compliance manual. Product Developments: During the year, following products were reviewed by SCD and approved by Shariah Board: 1. 2. 3. 4. 5. Mustaqeem Ghar Finance based on Diminishing Musharakah Mera Pakistan Mera Ghar (A Subsidized Scheme based on Diminishing Musharakah) (All variants) Mustaqeem Low Cost Housing Scheme Staff Vehicle Finance Staff House Finance It is necessary to state that the management vision and commitment toward Islamic Banking resulted in strengthen the product department with qualified resources enabling them to develop products based on the market requirement and to provide better services. Trainings of Islamic Staff: It is encouraging to note that the Bank’s learning and development Department on our advice conducted various Islamic Banking training for almost all the employees posted in Islamic Banking Group. It is imperative to report that Shariah compliance department facilitated the HR-Learning & development in developing Learning Management System (LMS) having Voice Overs which will help the Islamic Banking staff to enhance their learning experience at the desks. Board of Directors, Shariah Board and Executives Trainings: Learning & Development Department organized learning session for Board of Directors and Management Committee members in line with the regulatory requirement to keep them abreast with the best practices. 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. Last but not least, we appreciate State Bank of Pakistan – Islamic Banking Department for their continuous support and efforts for the expansion of Islamic Banking. Open Market Operations (OMO) discount window for Islamic Banks and Islamic Banking Windows is a long step in the right direction enabling the Islamic operations to have an opportunity to better manage their liquidity. Conclusion: Based on the reports of Internal Shariah Audit, External Shariah Audit and different Shariah compliance checks carried out from time to time and according to best of our knowledge, we are of the view that: i. ii. iii. iv. v. 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. 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 Board. 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. During the year, an amount of Rupees three hundred fourteen thousand seventeen and sixty-four paisa only (PKR 314,017.64) were collected as charity from various customers on account of delay in payments. Further, an income of Rupees four hundred and six thousand one hundred fifteen and forty-three paisa only (PKR 406,115.43) 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 twenty thousand one hundred thirty-three and seven paisa only (PKR 720,133.07) was disbursed for charitable purposes as per the Charity Policy approved by Shariah Board and Board of Directors. Based on the Shariah Compliance review and Shariah Audit report, we are of the opinion that profit distribution was generally 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 more efficient. Recommendation Pool Management System (PMS): We appreciate the Bank’s Management that it acquired the comprehensive Pool Management System (PMS) on Shariah Board recommendation to safeguard the interest of Investment account holders and the automated pool management system bring more transparency and increase trust of the account holders on the profit distribution. However, the implementation process has consumed a considerable time and efforts and the delays due to COVID related issues. It is also imperative to report that the management constantly updated the Shariah Board regarding the implementation progress and we expect the implementation process shall be completed on the most urgent basis. Capacity Building: While we recognize the efforts of 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 staffs should receive Islamic Banking training enabling them to effectively serve the customers in line with the regulatory 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 Muhammad Zahid Resident Shari’ah Board Member Mufti Abid Shah Shariah Board Member Mufti Samiullah Arif Shari’ah Board Member Mufti Bilal Ahmed Qazi Shariah Board Member Mufti Ehsan Waquar Ahmad Chairman Shari’ah Board Dated: 02 February 2022 95
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  66. 598 ,963 Ijarah Murabaha Musharakah Diminishing Musharakah 3,193,319 Salam 960,874 838,948 Meadi 1,044,843 Savings 4,245,096 2020 4,253,719 3,130,271 31,925,206 22,113,481 4,469,808 8,414,817 14,574,640 20,380,118 3,069,033 2020 1,127,082 Current 1,797,708 1,270,096 889,024 2021 390,903 2021 (Rupees in '000) Total (Rupees in '000) Istisna 97
  67. STATEMENT OF COMPLIANCE WITH LISTED COMPANIES (CODE OF CORPORATE GOVERNANCE) REGULATIONS 2019 YEAR ENDED 31 DECEMBER 2021 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 98 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”)
  68. 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. 99
  69. 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 Mr. Mr. Mr. Mr. Names of Directors Position Ahmed A. Feerasta Manzoor Ahmed Jamil Hassan Hamdani Muhtashim Ahmad Ashai Chairman Member 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 Lahore: 17 February 2022 100 _______________________________ ALAUDDIN FEERASTA Chairman
  70. 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 2021 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 rs’ , 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. 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 2021. 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 2022 UDIN: CR202110106SubVJKd4i 101
  71. STATEMENT OF INTERNAL CONTROLS YEAR ENDED 31 DECEMBER 2021 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, 2021. 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 had 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. For the Year 2021, the Bank has also successfully completed the cycle of SBP’s Internal Control over Financial Reporting roadmap. As per latest SBP directives of July 06, 2021, the banks which have completed all the stages of ICFR roadmap will continue to prepare Annual Assessment Report but they are allowed to discontinue its yearly submission to SBP. However, as part of SBP supervisory assessments, these reports may be required by SBP for evaluation purposes. Accordingly, the bank will prepare aforementioned Report for the Year 2021 and the same will presented to Board Audit Committee during the year 2022. MUHTASHIM AHMAD ASHAI President & Chief Executive Officer Lahore: 17 February 2022 102
  72. 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 the 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 skillsets, 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 the 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 the independence and objectivity of the external auditors. The Audit Committee recommends to the Board of Directors re-appointment of M/s KPMG Taseer Hadi & Co. Chartered Accountants, as statutory auditors of the Bank for the year ending 31 December 2022 for the 4th term, subject to the approval of the Bank’s shareholders in the forthcoming Annual General Meeting. The Committee’s Performance for the year 2021 was also evaluated externally by the Pakistan Institute of Corporate Governance and assigned a “Satisfactory Rating” to the Committee. 103
  73. KEY PERFORMANCE INDICATORS 2021 2020 Variance Compared to 2020 Amount Financial Investments-Gross Advances-Gross Total Assets Deposits Shareholders ' Equity / Net Assets Net Interest Income Non Interest Income Gross Income Profit Before Provisions (Reversals) / Provisions and write-offs - net Profit Before Taxation Profit After Taxation Trade Volumes % Rs. In Millions " " " " " " " " " " " " 327,518 173,442 579,489 403,037 21,636 10,938 4,290 15,228 5,037 (112) 5,149 2,854 544,403 250,164 172,693 485,345 345,499 23,157 10,655 3,808 14,463 5,437 1,402 4,035 2,400 418,242 77,353 749 94,144 57,538 (1,521) 283 482 765 (400) (1,514) 1,114 454 126,161 31% 0% 19% 17% -7% 3% 13% 5% -7% -108% 28% 19% 30% Absolute " " " " " " 573,256 28 1 74,350 196,510 3,290 19,841 533,083 32 64,150 51,776 3,097 35,090 40,173 (4) 1 10,200 144,734 193 (15,249) 8% -13% 100% 16% 280% 6% -43% 2.59 19.62 9.71 10,705 3.75 12.74% 0.54% 43.03% 13.82% 2.18 21.00 9.95 10,970 4.57 11.07% 0.52% 49.98% 16.97% 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 108 Rs. " " Rs. In Millions Times % % % %
  74. SIX YEARS ' FINANCIAL SUMMARY 2016-2021 (Rs. In Millions) 2021 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 (Reversals) / Provisions and write-offs - net Profit before tax Profit after tax Cash Dividend paid 37,133 26,196 10,938 3,235 714 341 4,290 15,228 10,191 5,037 (112) 5,149 2,854 - 2016 42,228 31,573 10,655 2,812 953 43 3,808 14,463 9,026 5,437 1,402 4,035 2,400 1,378 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 2021 PROFIT BEFORE TAX 2016 2019 2019 2020 2021 2016 2017 2018 2019 2020 2,854 2,400 1,906 1,784 1,660 1,879 4,035 5,149 2,904 2018 2021 (Rs. in Millions) 3,247 2,848 3,077 2017 2020 PROFIT AFTER TAX (Rs. in Millions) 2016 4,290 2018 3,808 2017 2,861 3,260 2,871 2020 3,456 2019 2017 10,938 10,655 7,926 6,472 6,953 6,709 2018 2018 (Rs. in Millions) (Rs. in Millions) 2017 2019 NON-MARKUP INCOME FUND BASED INCOME 2016 2020 2021 109
  75. SIX YEARS ' FINANCIAL SUMMARY 2016-2021 (Rs. In Millions) 2019 2018 2017 2016 11,025 3,541 (12) 7,082 21,636 579,489 515,033 173,442 165,495 10,314 327,425 557,853 403,037 281,311 124,585 425,121 228,145 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 SHAREHOLDERS' EQUITY TOTAL ASSETS 2018 2019 2018 2020 579,489 485,345 442,541 2019 2021 2016 2017 2018 2019 2021 2020 327,425 249,956 403,037 345,499 2020 117,429 2017 2017 (Rs. in Millions) 302,083 2016 2016 INVESTMENTS 262,379 2021 227,304 2020 209,894 173,442 2019 172,693 2018 2021 (Rs. in Millions) 212,516 194,831 172,772 133,753 110 2017 2020 DEPOSITS (Rs. in Millions) 2016 2019 117,884 GROSS ADVANCES 2018 177,056 2017 382,498 2016 281,805 2021 21,636 2020 (Rs. in Millions) 23,157 11,025 2019 20,214 11,025 2018 17,989 11,025 2017 18,505 11,025 2016 18,289 11,025 (Rs. in Millions) 11,025 (Rs. in Millions) 146,646 PAID UP CAPITAL 2020 325,219 Statement of Financial Position Paid up Capital Reserves Surplus / (deficit) 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 Contingent and Commitments 2021 2021
  76. SIX YEARS ' FINANCIAL SUMMARY 2016-2021 2021 2020 2019 33.81% 29.45% 28.17% 1.49 12.74% 0.54% 4.67 2.59 43.03% 41.06% 19.62 88.88% 1.21 6.15% 69.80% 5.95% 76.51% 26.78 525.61 18.63 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% 75.17% 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 Rs.in Millions 22,434 " 183,399 % 12.23% " 13.82% " 1.65% 22,845 161,785 14.12% 16.97% 1.50% 15%* - 2018 2017 2016 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 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% 12.50% - 10% - 10% - 7.50% - 12.50% - 9.71 11.00 8.40 10,705 0.49 3.75 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 17.90 12.76 19,458 1.06 10.36 % " 1.92% 1.71% 1.93% 1.94% 2.06% 2.51% 1.86% 2.36% 1.84% 2.65% 1.78% 2.40% Absolute " " 367 3,290 351 340 3,097 338 308 3,026 323 295 2,823 316 290 2,847 313 288 2,715 306 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 % " " Times % " Rs. Rs. % " Rs. % Times % " " " Times Times Times 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 Bonus Shares Issued % 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 Rs. " " Rs.in Millions Rs. Times Industry Share Deposits Advances Non Financial Information No of branches No of permanent employees ATMs * Subject to shareholders' approval in the forthcoming AGM 111
  77. PER BRANCH PERFORMANCE GROSS ADVANCES DEPOSITS 2019 2020 2021 2016 2018 2019 2020 1 ,098.19 1,016.17 980.79 889.42 783.96 2017 2021 PROFIT BEFORE TAX CASA 2020 2021 2017 2018 2019 2020 14.03 2016 11.87 10.54 2019 766.51 540.35 2018 697.64 546.00 2017 620.49 493.89 2016 9.84 (Rs. in Millions) (Rs. in Millions) 112 728.91 472.59 507.92 689.99 660.44 2018 9.76 2017 (Rs. in Millions) 10.69 2016 595.77 464.42 (Rs. in Millions) 2021
  78. MATURITIES OF ASSETS AND LIABILITIES 31 DECEMBER 2021 (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 Deferred tax assets Other assets - net Liabilities Bills payable Borrowings Deposits and other accounts Sub-ordinated loans Deferred tax liabilities - net Other liabilities 35,197 2,427 22,113 327,425 165,495 11,145 433 178 15,076 579,489 35,197 2,427 22,113 101,483 80,704 294 58 12,607 254,883 70,711 28,363 1,179 172 178 1,321 101,924 119,309 15,365 2,099 187 8 136,968 25,415 13,002 1,513 16 14 39,960 10,507 28,061 6,060 1,126 45,754 6,901 124,585 403,037 6,993 16,337 557,853 6,901 110,298 372,711 1 12,241 502,152 9,078 28,806 1 1,218 39,103 1,110 1,109 2,991 1,069 6,279 782 411 824 2,017 3,317 4,000 985 8,302 ASSETS LIABILITIES (Rs. in Millions) (Rs. in Millions) 502,152 254,883 136,968 101,924 39,960 45,754 39,103 6,279 Up to 3M 3M to 1Y 1Y to 3Y 3Y to 5Y 5Y & above Up to 3M 3M to 1Y 1Y to 3Y 2,017 3Y to 5Y 8,302 5Y & above 113
  79. KEY INTEREST BEARING ASSETS AND LIABILITIES 2021 2020 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 Balances with other banks Lendings and other placements Advances (excluding NPLs) Investments (excluding equity investments) 2,247 14,893 172,663 273,126 0.01 7.65 7.75 8.28 0 1,140 13,374 22,619 1,613 3,727 193,261 219,598 0.56 8.21 9.74 10.51 9 306 18,826 23,087 Interest Bearing Liabilities Deposits and other accounts Sub-ordinated loan Borrowings* 343,931 6,993 125,967 4.86 9.44 6.68 16,719 660 8,415 313,044 6,994 106,752 6.74 12.01 8.67 21,104 840 9,256 * Includes FCY swap cost Balance with other Banks 12.01 9.44 8.67 10.51 4.86 6.68 6.74 8.28 9.74 7.75 8.21 0.56 0.01 7.65 EFFECTIVE INTEREST RATE ON ASSETS AND LIABILITIES Return on lendings to F.ls Return on Loans Returns on Investments 2021 Cost of Deposits Cost of Borrowings Cost of Sub-ordinated loans 2020 KIBOR-6 MONTHS 15% 10% 5% 0% Jan Feb Mar Apr May Jun 2021 114 Jul Aug 2020 Sep Oct Nov Dec
  80. STATEMENT OF VALUE ADDITION 2021 (Rs. in Millions) Value added Net Interest Income Non interest income Non-markup expenses excluding staff costs, depreciation, amortization,donation and WWF Reversal / (Provision) 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 2020 % (Rs. in Millions) 10,938 4,290 10,655 3,808 (5,058) (4,459) 112 10,282 (1,402) 8,602 % 4,065 40% 3,697 43% 2,294 120 22% 1% 1,635 86 19% 1% 1,654* 16% 1,378 16% 46 0% 44 0% 693 208 1,202 10,282 7% 2% 12% 100% 574 166 1,022 8,602 7% 2% 12% 100% * Subject to shareholders' approval in the fifthcoming AGM 2021 2020 To Providers of Capital 16% To Providers of Capital 16% Employees 40% Expansion and Growth 21% Government 23% Employees 43% Expansion and Growth 21% Government 20% 115
  81. QUARTERLY PERFORMANCE 2021 & 2020 (Rupees in Million) 2021 Profit & Loss Account 2020 4th 3rd 2nd 1st 4th 3rd 2nd 1st Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter 8,932 (6,431) 2,500 1,251 (2,672) (129) 951 (454) 497 9,633 (6,901) 2,732 988 (2,519) (29) 1,172 (636) 536 9,729 (6,744) 2,985 1,090 (2,472) 147 1,750 (710) 1,040 8,839 (6,119) 2,720 961 (2,528) 123 1,276 (494) 782 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 35,197 2,427 22,113 327,425 165,495 11,145 433 178 15,076 579,489 39,048 2,092 21,892 239,788 179,208 11,157 434 16,288 509,907 29,481 1,937 10,108 291,521 175,127 11,926 447 15,660 536,207 21,244 1,177 20,038 275,773 199,787 11,942 386 14,131 544,478 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 6,901 124,585 403,037 6,993 16,337 557,853 6,970 95,603 359,925 6,993 738 16,909 487,138 7,462 146,011 336,819 6,993 1,101 14,901 513,287 5,671 157,127 337,569 6,993 1,079 14,216 522,655 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 11,025 3,541 7,082 (12) 21,636 11,025 3,442 6,670 1,632 22,769 11,025 3,335 5,818 2,742 22,920 11,025 3,127 4,962 2,709 21,823 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 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 Reversals / (Provision) 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 Deferred tax assets Other assets Total Assets Liabilities Bills payable Borrowings Deposits and other accounts Sub-ordinated loans Deferred tax liabilities -net Other liabilities Total Liabilities Equity Share Capital Reserves Un-appropriated profit Surplus on revaluation of assets Total Equity 116
  82. MARKET STATISTICS OF SNBL SHARES Year Market Share Price Trend Quarter end High (Rs.) Low (Rs.) Closing (Rs.) 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 2021 March June September December 11.00 10.00 9.80 10.30 8.40 8.40 8.75 9.00 8.75 9.80 9.29 9.71 Market Share Price Trend 16 14 12 10 8 6 4 2 0 Mar Jun Sep Dec Mar Jun Sep 2020 Dec 2021 High (Rs.) Low (Rs.) Closing (Rs.) Historical Trend vs KSE Index (2016-2021) 2016 2017 2018 KSE-100 Index 2019 9.95 43,755 9.85 40,735 12.67 37،067 40،471 47،807 13.40 2020 9.71 44,596 17.65 2021 Soneri Bank Ltd. Price Year ended 2016 2017 2018 2019 2020 2021 Share Price (Rs.) 17.65 13.40 12.67 9.85 9.95 9.71 KSE-100TM Index 47,807 40,471 37,067 40,735 43,755 44,596 117
  83. SIX YEARS ' VERTICAL ANALYSIS STATEMENT OF FINANCIAL POSITION / PROFIT & LOSS 2021 2020 % Rs. in Mln % Rs. in Mln 2017 % Rs. in Mln 2016 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 35,197 6% 29,964 6% 33,961 8% 2,427 0% 4,268 1% 2,075 0% 22,113 4% 8,956 2% 1,202 0% 327,425 57% 249,956 52% 177,056 41% 165,495 29% 164,545 34% 204,901 46% 11,145 2% 11,911 2% 8,329 2% 433 0% 408 0% 467 0% 178 0% 15,076 3% 15,337 3% 14,550 3% 579,489 100% 485,345 100% 442,541 100% Liabilities and Equity Bills payable Borrowings Deposits and other accounts Subordinated debt Deferred tax liabilities-net Other liabilities 6,901 124,585 403,037 6,993 16,337 1% 6,708 21% 87,020 70% 345,499 1% 6,994 0% 1,533 3% 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% 15% 75% 1% 0% 2% Total Liabilities 557,853 96% 462,188 95% 422,327 95% 364,509 95% 306,714 94% 263,516 94% Represented by Share Capital - net of discount Reserves Surplus / (deficit) on revaluation of assets Un-appropriated profit Rs. in Mln 2018 Rs. in Mln Net Assets % 2019 Statement of Financial Position % 26,020 7% 19,431 6% 1,180 0% 1,151 0% 3,921 1% 6,503 2% 146,646 38% 117,429 36% 186,475 49% 164,293 51% 6,239 2% 6,464 2% 454 0% 117 0% 11,563 3% 9,831 3% 382,498 100% 325,219 100% Rs. in Mln % 18,279 6% 823 0% 5,522 2% 117,884 43% 125,306 44% 4,936 2% 202 0% 8,853 3% 281,805 100% 21,636 4% 23,157 5% 20,214 5% 17,989 5% 18,505 6% 18,289 6% 11,025 3,541 (12) 7,082 21,636 2% 1% 0% 1% 4% 11,025 2,970 3,471 5,691 23,157 2% 11,025 1% 2,490 1% 1,894 1% 4,805 5% 20,214 2% 11,025 1% 2,109 0% 543 2% 4,312 5% 17,989 3% 1% 0% 1% 5% 11,025 1,753 2,095 3,632 18,505 3% 11,025 1% 1,424 1% 2,393 1% 3,447 6% 18,289 4% 0% 1% 1% 6% Profit & loss account Interest / Return / Non Interest Income Mark-up / Return / Interest Earned 37,133 90% Fee, Commission and Exchange income 3,235 8% Capital Gain and Dividend Income 714 2% Other income 341 1% Total Income 41,423 100% 42,228 92% 38,790 93% 21,600 87% 2,812 6% 3,016 7% 2,694 11% 953 2% (192) 0% 519 2% 43 0% 37 0% 47 0% 46,036 100% 41,651 100% 24,860 100% 18,504 84% 17,524 86% 2,016 10% 1,711 8% 1,399 6% 1,131 6% 41 0% 29 0% 21,960 100% 20,395 100% Mark-up / Return / Non Interest Expense Mark-up / Return / Non Interest Expensed 26,196 Non mark-up / interest expenses 10,191 (Reversal) / Provisions and write-offs - net (112) Taxation 2,294 Total Expenses 38,569 Profit after taxation 2,854 31,573 9,026 1,402 1,635 43,636 2,400 12,032 7,003 78 1,187 20,300 1,660 118 63% 25% 0% 6% 93% 7% 69% 30,864 20% 8,129 3% (589) 4% 1,341 95% 39,745 5% 1,906 74% 14,647 59% 20% 7,380 29% -1% (71) 0% 3% 1,120 5% 95% 23,076 93% 5% 1,784 7% 55% 10,815 32% 6,454 0% 49 5% 1,198 92% 18,516 8% 1,879 53% 32% 0% 6% 91% 9%
  84. SIX YEARS ' HORIZONTAL ANALYSIS STATEMENT OF FINANCIAL POSITION / PROFIT & LOSS 2021 Statement of Financial Position Rs. in Mn 2021 vs 2020 % 2020 2020 vs 2019 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 35,197 2,427 22,113 327,425 165,495 11,145 433 178 15,076 579,489 Liabilities and Equity Bills payable Borrowings Deposits and other accounts Subordinated debt Deferred tax liabilities-net Other liabilities Total Liabilities 6,901 3% 6,708 124,585 43% 87,020 403,037 17% 345,499 6,993 0% 6,994 - -100% 1,533 16,337 13% 14,434 557,853 21% 462,188 Share Capital Reserves Surplus / (deficit) on revaluation of assets Un-appropriated profit Total Equity % 2019 Rs. in Mn 17% 29,964 -12% 33,961 -43% 4,268 106% 2,075 147% 8,956 645% 1,202 31% 249,956 41% 177,056 1% 164,545 -20% 204,901 -6% 11,911 43% 8,329 6% 408 -13% 467 -2% 15,337 5% 14,550 19% 485,345 10% 442,541 2019 vs 2018 % 31% 76% -69% 21% 10% 33% 3% 26% 16% 2018 2018 vs 2017 2017 2017 vs 2016 2016 2016 vs 2015 Rs. in Mn % Rs. in Mn % Rs. in Mn % 26,020 34% 19,431 1,180 3% 1,151 3,921 -40% 6,503 146,646 25% 117,429 186,475 14% 164,293 6,239 -3% 6,464 454 288% 117 11,563 18% 9,831 382,498 18% 325,219 6% 40% 18% 0% 31% 31% -42% 11% 15% 18,279 9% 823 -50% 5,522 78% 117,884 8% 125,306 12% 4,936 0% 202 177% 8,853 5% 281,805 10% 69% 3,961 -1% 3,994 -18% 4,895 -9% 95,705 17% 81,963 27% 64,584 14% 302,083 15% 262,379 15% 227,304 0% 6,995 0% 6,996 133% 2,998 61% 951 693% 120 -87% 936 14% 12,632 39% 9,057 51% 5,997 9% 422,327 16% 364,509 19% 306,714 18% 4,164 66% 38,905 8% 209,894 0% 2,999 -18% 1,138 -7% 6,416 16% 263,516 35% -2% 14% 0% -20% 22% 11% 11,025 0% 3,541 19% (12) -100% 7,082 24% 21,636 -7% 11,025 2,970 3,471 5,691 23,157 0% 11,025 0% 11,025 0% 19% 2,490 18% 2,109 20% 83% 1,894 249% 543 -74% 18% 4,805 11% 4,312 19% 15% 20,214 12% 17,989 -3% 11,025 1,753 2,095 3,632 18,505 0% 11,025 23% 1,424 -12% 2,393 5% 3,447 1% 18,289 10% 36% -16% -19% 1% Mark-up / Return / Interest Earned Fee, Commission and Exchange income Capital Gain and Dividend Income Other income Total Income 37,133 3,235 714 341 41,423 -12% 15% -25% 693% -10% 42,228 9% 38,790 80% 21,600 17% 2,812 -7% 3,016 12% 2,694 34% 953 -596% (192) -137% 519 -63% 43 16% 37 -21% 47 15% 46,036 11% 41,651 68% 24,860 13% 18,504 2,016 1,399 41 21,960 6% 17,524 18% 1,711 24% 1,131 41% 29 8% 20,395 -4% -11% -12% -49% -6% Mark-up / Return / Non Interest Expense Mark-up / Return / Non Interest Expensed Non mark-up / interest expenses (Reversal) / Provisions and write-offs - net Taxation Total Expenses Profit after taxation 26,196 -17% 10,191 13% (112) -108% 2,294 40% 38,569 -12% 2,854 19% 31,573 2% 30,864 111% 14,647 22% 9,026 11% 8,129 10% 7,380 5% 1,402 -338% (589) 730% (71) -191% 1,635 22% 1,341 20% 1,120 -6% 43,636 10% 39,745 72% 23,076 14% 2,400 26% 1,906 7% 1,784 7% 12,032 11% 10,815 0% 7,003 9% 6,454 6% 78 59% 49 -95% 1,187 -1% 1,198 -13% 20,300 10% 18,516 -4% 1,660 -12% 1,879 -15% Profit & loss account 119
  85. CASH FLOW STATEMENT DIRECT METHOD CASH FLOW FROM OPERATING ACTIVITIES 2021 2020 ---------- (Rupees in ‘000)---------- Markup / return / interest and commission receipts 42,358,327 47,413,644 Markup / return / interest payments (24,744,276) (32,987,280) (9,293,477) (8,219,176) 8,320,574 6,207,188 Lendings to financial institutions (13,157,035) (7,753,843) Held-for-trading securities (17,684,076) 3,834,066 Advances - net (949,775) 39,563,246 Others assets - (excluding advance taxation) (154,228) (1,813,766) (31,945,114) 33,829,703 193,316 2,746,624 Cash payments to employees, suppliers and others (Increase) / decrease in operating assets Increase / (decrease) in operating liabilities Bills payable Borrowings 36,929,962 (8,644,271) Deposits and other accounts 57,537,786 43,415,783 Other liabilities Income tax paid Net cash flow generated from operating activities (57,784) 2,704,133 94,603,280 40,222,269 70,978,740 80,259,160 (2,264,263) (1,673,729) 68,714,477 78,585,431 (64,287,864) (76,003,892) CASH FLOW FROM INVESTING ACTIVITIES Net investments in securities Dividend received Investment in fixed assets (including intangible assets) Proceeds from disposal of fixed assets Net cash flow used in investing activities 249,550 127,910 (1,699,431) (3,390,910) 1,160,539 21,599 (64,577,206) (79,245,293) CASH FLOW FROM FINANCING ACTIVITIES Receipts / payments of subordinated debt (1,200) (1,200) Dividend paid (1,378,079) (1,102,463) Net cash flow used in financing activities (1,379,279) (1,103,663) Increase / (decrease) in cash and cash equivalents 2,757,992 (1,763,525) Cash and cash equivalents at the beginning of the period 34,183,169 35,946,694 Cash and cash equivalents at the end of the period 36,941,161 34,183,169 35,196,898 29,963,954 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD Cash and balances with treasury banks Balances with other banks 120 1,744,263 4,219,215 36,941,161 34,183,169
  86. CASH FLOW STATEMENT INDIRECT METHOD INDIRECT METHOD - SUMMARY 2021 2020 2019 2018 (Rupees in Million) 2017 2016 Cash flow from financing activities (1,379) (1,104) (1,104) 3,172 (1,379) (1,379) Cash flow from investing activities (64,577) (79,245) (30,287) (35,239) 8,650 (10,288) Cash flow from operating activities 68,714 78,586 40,426 38,673 (5,930) 12,284 Cash and cash equivalent at the beginning of the year 34,183 35,946 26,911 20,305 18,964 18,347 Cash and cash equivalent at the end of the year 36,941 34,183 35,946 26,911 20,305 18,964 Financing Activities Investing Activities (Rs. in Millions) 3,172 (Rs. in Millions) 2017 2020 2021 (64,577) (79,245) 2021 2019 (30,287) 2020 (35,239) 2019 2018 8,650 (10,288) (1,379) Operating Activities 2017 2018 68,714 40,426 (5,930) 2016 38,673 78,586 (Rs. in Millions) 33,745 12,284 2018 (1,104) 2017 (1,104) (1,379) (1,379) 2016 2016 2019 2020 2021 121
  87. 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 2021, 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 2021 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 Auditor’s 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 reversal against advances amounting to Rs. 129.97 million in the profit and loss account in the current year. As at 31 December 2021, the Bank holds a provision of Rs. 7,891.69 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. 124 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:
  88. 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. • Analyzed 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. 327,425 million, which constitutes 56.5% of the Bank’s total assets as at 31 December 2021. 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 2021 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. 125
  89. Information other than the Financial Statements and Auditor ’s 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 auditor’s 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. Auditor’s 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 auditor’s 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 auditor’s 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 auditor’s 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. 126
  90. 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 auditor’s 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 comprehensive income, statement of changes in equity and statement of cash flows 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 / branches and the transactions of the Bank / branches which have come to our notice have been within the powers of the Bank / branches; 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 2022 UDIN: AR202110106BTwSzf7hy 127
  91. STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2021 Note 2021 2020 ---------- (Rupees in ‘000)---------ASSETS Cash and balances with treasury banks 5 35,196,898 29,963,954 Balances with other banks 6 2,427,478 4,268,063 Lendings to financial institutions 7 22,113,121 8,956,086 Investments 8 327,425,187 249,955,671 Advances 9 165,494,796 164,544,519 Fixed assets 10 11,145,057 11,910,925 Intangible assets 11 432,894 408,274 Deferred tax assets - net 12 178,221 Other assets 13 15,074,897 15,337,731 579,488,549 485,345,223 - LIABILITIES Bills payable 15 6,900,897 6,707,581 Borrowings 16 124,584,868 87,020,539 Deposits and other accounts 17 403,036,554 345,498,768 Liabilities against assets subject to finance lease - Subordinated debt 18 Deferred tax liabilities - net 12 Other liabilities 19 6,992,800 - 6,994,000 1,533,265 16,337,889 14,434,032 557,853,008 462,188,185 21,635,541 23,157,038 11,024,636 11,024,636 NET ASSETS REPRESENTED BY Share capital 20 Reserves Surplus / (deficit) on revaluation of assets - net 21 Unappropriated profit CONTINGENCIES AND COMMITMENTS 3,541,315 2,970,486 (12,164) 3,471,003 7,081,754 5,690,913 21,635,541 23,157,038 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 Ahmed A. Feerasta Navin Salim Merchant Chairman President & Chief Executive Officer Chief Financial Officer Director Director 128
  92. PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2021 Note 2021 2020 ---------- (Rupees in ‘000)---------Mark-up / return / interest earned 23 37,133,146 42,228,185 Mark-up / return / interest expensed 24 26,195,612 31,572,929 10,937,534 10,655,256 2,073,603 1,774,841 Net mark-up / interest income Non mark-up / interest income Fee and commission income 25 Dividend income Foreign exchange income Income / (loss) from derivatives 350,340 134,133 1,161,427 1,037,446 - Gain / (loss) on securities - net 26 Other income 27 364,109 Total non-markup / interest Income Total income 818,393 340,756 42,682 4,290,235 3,807,495 15,227,769 14,462,751 Non mark-up / interest expenses Operating expenses 28 10,038,717 8,857,542 Workers' Welfare Fund - net 29 120,333 85,718 Other charges 30 31,456 83,033 10,190,506 9,026,293 Total non mark-up / interest expenses Profit before provisions (Reversals) / provision and write offs - net 31 Extraordinary / unusual items 5,037,263 5,436,458 (111,956) 1,401,703 - Profit before taxation Taxation 32 Profit after taxation - 5,149,219 4,034,755 2,295,072 1,634,483 2,854,147 2,400,272 --------------(Rupees)-------------Basic earnings per share 33 2.5889 2.1772 Diluted earnings per share 34 2.5889 2.1772 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 Ahmed A. Feerasta Navin Salim Merchant Chairman President & Chief Executive Officer Chief Financial Officer Director Director 129
  93. STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2021 Note 2021 2020 ---------- (Rupees in ‘000)---------Profit after taxation for the year 2,854,147 2,400,272 (2,855,364) 526,759 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 (loss) / gain on defined benefit obligations - net of tax 39.8.2 (2,828) 4,734 Movement in surplus on revaluation of fixed assets - net of tax 21.1 (106,492) 1,090,493 Movement in surplus on revaluation of non banking assets - net of tax 21.2 Total comprehensive income / (loss) 5,909 23,648 (103,411) 1,118,875 (104,628) 4,045,906 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 Ahmed A. Feerasta Navin Salim Merchant Chairman President & Chief Executive Officer Chief Financial Officer Director Director 130
  94. CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2021 Note 2021 2020 ---------- (Rupees in ‘000)---------CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation Less: dividend income 5,149,219 350,340 4,798,879 4,034,755 134,133 3,900,622 693,408 129,472 672,032 208,338 401,580 (111,956) (112,298) (303,671) 120,333 (6,643) 1,690,595 6,489,474 574,288 120,038 550,180 165,890 373,470 1,401,703 (628,420) (17,193) 85,718 (8,350) 2,617,324 6,517,946 (13,157,035) (17,684,076) (949,775) 244,012 (31,546,874) (7,753,843) 3,834,066 39,563,246 (743,566) 34,899,903 Income tax paid Net cash flow generated from operating activities 193,316 36,929,962 57,537,786 1,375,076 96,036,140 (2,264,263) 68,714,477 2,746,624 (8,644,271) 43,415,783 1,323,175 38,841,311 (1,673,729) 78,585,431 CASH FLOWS FROM INVESTING ACTIVITIES Net investments in available-for-sale securities Net investments in held-to-maturity securities Dividends received Investments in fixed assets Proceeds from sale of fixed assets Net cash flow used in investing activities (64,382,848) 94,984 249,550 (1,699,431) 1,160,539 (64,577,206) (71,964,167) (4,039,725) 127,910 (3,390,910) 21,599 (79,245,293) CASH FLOWS FROM FINANCING ACTIVITIES Payments of subordinated debt Dividend paid Net cash flow used in financing activities (1,200) (1,378,079) (1,379,279) (1,200) (1,102,463) (1,103,663) 2,757,992 34,183,169 36,941,161 (1,763,525) 35,946,694 34,183,169 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 (Reversals) / provision and write offs - net Reversal of provision for diminution in the value of investments Gain on sale of fixed assets - net Provision for 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 Deposits Other liabilities Increase / (Decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year 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 Ahmed A. Feerasta Navin Salim Merchant Chairman President & Chief Executive Officer Chief Financial Officer Director Director 131
  95. STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2021 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 2019 11,024,636 Comprehensive income for the year Profit after taxation for the year ended 31 December 2020 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 fixed assets - 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 2019 at Re 1.00 per share Balance as at 31 December 2020 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 fixed assets - net of tax - Movement in surplus on revaluation of non banking assets - net of tax 21.2 480,054 (632) 526,759 526,759 - - - - - - - 570,829 526,127 (2,855,364) (2,855,364) - Transfer from surplus on revaluation of assets to unappropriated profit on disposal - - - 21.1 - - - Transactions with owners recorded directly in equity Final cash dividend for the year ended 31 December 2020 at Rs. 1.25 per share 49.1 - - - (a) 3,541,315 (63,352) 2,944,876 - (106,492) (32,881) (139,373) - Transfer from surplus on revaluation of assets to unappropriated profit - net of tax 11,024,636 1,090,493 23,648 1,114,141 - Transfer to statutory reserve Balance as at 31 December 2021 - - - 2,970,486 1,894,087 - - 11,024,636 Comprehensive income for the year Profit after taxation for the year ended 31 December 2021 2,490,432 (2,329,237) - 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 2,854,147 2,854,147 (2,828) 2,851,319 (2,855,364) (2,828) (106,492) (32,881) (143,418) (570,829) - (398,500) 398,500 - (89,930) 89,930 - 2,317,073 (1,378,079) (1,378,079) 7,081,754 21,635,541 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. 1,101.221 million - net of tax as at 31 December 2021 (31 December 2020: Rs. 1,275.492 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 Ahmed A. Feerasta Navin Salim Merchant Chairman President & Chief Executive Officer Chief Financial Officer Director Director 132
  96. NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021 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 2nd Floor, 307- Upper Mall Scheme, 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 367 branches including 35 Islamic banking branches, 15 Islamic banking windows. and 01 sub branch (2020: 340 branches including 30 Islamic banking branches and 01 sub branch) 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 and windows of the Bank have been consolidated in these financial statements for reporting purposes, after eliminating material intra branch transactions / balances. The same 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 2022 vide BPRD Circular Letter No. 24 of 2021 dated 25 July 2021. 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 final implementation instructions from the SBP on applicability of IFRS 9 as also detailed in note 2.3.1 of these financial statements. 2.2 Standards, interpretations of and amendments to published accounting and reporting standards that are effective in the current year: 2.2.1 There are certain new standards, amendments and interpretations of and to existing accounting standards that are mandatory for the Bank's accounting periods beginning on or after 1 January 2021. These are considered not to be relevant or do not have any significant impact on the Bank's operations and are therefore, not disclosed in these financial statements. 133
  97. 2 .3 Standards, interpretations of and amendments to published accounting and reporting standards that are not yet effective: 2.3.1 IFRS 9 ‘Financial Instruments’ and amendment – Prepayment Features with Negative Compensation – As per State Bank of Pakistan (SBP)’ BPRD Circular Letter No. 24 of 2021, IFRS 9 ‘Financial Instruments’ is applicable to banks/DFIs/MFBs effective 1 January 2022. The standard 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. 2.3.1.1 The aforementioned SBP circular letter contained instructions for quarterly parallel reporting purposes to the SBP only and it was stated that final instructions will be issued based on the results of parallel reporting. However, banks have submitted their reservations on instructions issued for parallel reporting through the Pakistan Banks Association (PBA) and requested that they are addressed in the final instructions to be issued. The reservations are pervasive and points of contention inter alia include, retaining some relaxations given presently in the Prudential Regulations, prescription of macro-economic variables, retaining local regulatory requirements related to IFRS 9 related areas on overseas branches, impact on capital adequacy ratio, adequacy of significant increase in credit risk criteria, future tax impact of any reversals, recording of expected credit loss on local currency denominated Government securities, together with further clarifications required in certain areas. Due to the fact that final instructions have not yet been issued and the reservations shared by the industry over the draft instructions are still to be addressed, the impact of application of IFRS 9 on Bank's financial statements is presently being assessed. Banks are collectively of the opinion that impact on initial application of IFRS 9 will only be reasonably estimated subsequent to issuance of final application guidelines by SBP. 2.3.2 Furthermore, following standards, amendments and interpretations of approved accounting standards will be effective for the accounting periods as stated below: Standard, Interpretation or Amendment Effective date (annual periods beginning on or after) Annual improvement process IFRS 9 Financial Instruments – Fees in the   ’10 percent’ test for de-recognition of financial liabilities Classification of Liabilities as Current or Non-current - Amendments to IAS 1 Definition of Accounting Estimates - Amendments to IAS 8 Deferred Tax related to Assets and Liabilities arising from a Single Transaction - Amendments to IAS 12 Reference to the Conceptual Framework – Amendments to IFRS 3 Property, Plant and Equipment: Proceeds before Intended Use   – Amendments to IAS 16 Onerous Contracts – Costs of Fulfilling a Contract – Amendments to IAS 37 Annual improvement process IFRS 1 First-time Adoption of International   Financial Reporting Standards – Subsidiary as a first-time adopter Annual improvement process IAS 41 Agriculture – Taxation in fair value measurements Sale or Contribution of Assets between an Investor and its Associate or Joint   Venture - Amendments to IFRS 10 and IAS 28 January 01, 2022 January 01, 2023 January 01, 2023 January 01, 2022 January 01, 2022 January 01, 2022 January 01, 2022 January 01, 2022 January 01, 2022 Not yet finalized Further, following new standards have been issued by IASB which are yet to be notified by the SECP for the purpose of applicability in Pakistan. Standard IFRS 1 – First time adoption of International Financial Reporting Standards IFRS 17 – Insurance Contracts IASB Effective date (annual periods beginning on or after) January 01, 2014 January 01, 2023 2.3.2.1 Amendment to IFRS 9 - The amendment clarifies that an entity includes only fees paid or received between the entity (the borrower) and the lender, including fees paid or received by either the entity or the lender on the other’s behalf, when it applies the ‘10 percent’ test in paragraph B3.3.6 of IFRS 9 in assessing whether to derecognize a financial liability. 2.3.2.2 Amendments to IAS 1 - Classification of liabilities as current or non-current - The amendments apply retrospectively for the annual periods beginning on or after 1 January 2023. These amendments in the standards have been added to further clarify when a liability is classified as current. The standard also amends the aspect of classification of liability as non-current by requiring the assessment of the entity’s right at the end of the reporting period to defer the settlement of liability for at least twelve months after the reporting period. An entity shall apply those amendments retrospectively in accordance with IAS 8. 134
  98. Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of Accounting Policies - the Board has issued amendments on the application of materiality to disclosure of accounting policies and to help companies provide useful accounting policy disclosures . The key amendments to IAS 1 include: - requiring companies to disclose their material accounting policies rather than their significant accounting policies; - clarifying that accounting policies related to immaterial transactions, other events or conditions are themselves immaterial and as such need not be disclosed; and - clarifying that not all accounting policies that relate to material transactions, other events or conditions are themselves material to a company’s financial statements. The Board also amended IFRS Practice Statement 2 to include guidance and two additional examples on the application of materiality to accounting policy disclosures. The amendments are effective for annual reporting periods beginning on or after 1 January 2023 with earlier application permitted. 2.3.2.3 Amendments to IAS 8 - Definition of Accounting Estimates - The amendments introduce a new definition for accounting estimates clarifying that they are monetary amounts in the financial statements that are subject to measurement uncertainty. The amendments also clarify the relationship between accounting policies and accounting estimates by specifying that a company develops an accounting estimate to achieve the objective set out by an accounting policy. The amendments are effective for periods beginning on or after 1 January 2023 and will apply prospectively to changes in accounting estimates and changes in accounting policies occurring on or after the beginning of the first annual reporting period in which the company applies the amendments. 2.3.2.4 Amendments to IAS 12 - Deferred Tax related to Assets and Liabilities arising from a Single Transaction - The amendments narrow the scope of the initial recognition exemption (IRE) so that it does not apply to transactions that give rise to equal and offsetting temporary differences. As a result, companies will need to recognize a deferred tax asset and a deferred tax liability for temporary differences arising on initial recognition of a lease and a decommissioning provision. For leases and decommissioning liabilities, the associated deferred tax asset and liabilities will need to be recognized from the beginning of the earliest comparative period presented, with any cumulative effect recognized as an adjustment to retained earnings or other components of equity at that date. The amendments are effective for annual reporting periods beginning on or after 1 January 2023 with earlier application permitted. 2.3.2.5 Amendments to IFRS 3 - Reference to the Conceptual Framework, issued in May 2020, amended paragraphs 11, 14, 21, 22 and 23 of and added paragraphs 21A, 21B, 21C and 23A to IFRS 3 . An entity shall apply those amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2022. Earlier application is permitted if at the same time or earlier an entity also applies all the amendments made by Amendments to References to the Conceptual Framework in IFRS Standards, issued in March 2018. 2.3.2.6 Amendments to IAS 16 - Property, Plant and Equipment: Proceeds before Intended Use  - effective for annual periods beginning on or after 1 January 2022 clarifies that sales proceeds and costs 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. Furthermore, an additional amendment has been made to Illustrative Example 13 accompanying IFRS 16 by excluding the illustration of reimbursement of leasehold improvements by the lessor. The objective of the amendment is to resolve any potential confusion that might arise in lease incentives. 2.3.2.7 Amendments to IAS 37 - Onerous Contracts – Cost of Fulfilling a Contract, effective for the annual periods beginning on or after 1 January 2022 amend IAS 1 by mainly adding paragraphs which clarifies what comprises the cost of fulfilling a contract, Cost of fulfilling a contract is relevant when determining whether a contract is onerous. An entity is required to apply the amendments to contracts for which it has not yet fulfilled all its obligations at the beginning of the annual reporting period in which it first applies the amendments (the date of initial application). Restatement of comparative information is not required, instead the amendments require an entity to recognize the cumulative effect of initially applying the amendments as an adjustment to the opening balance of retained earnings or other component of equity, as appropriate, at the date of initial application. 2.3.2.8 Amendment to IAS 41 – The amendment removes the requirement in paragraph 22 of IAS 41 for entities to exclude taxation cash flows when measuring the fair value of a biological asset using a present value technique. 135
  99. 2 .3.2.9 Amendments to IFRS 10 and IAS 28 - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture - The amendment amends accounting treatment on loss of control of business or assets. The amendments also introduce new accounting for less frequent transaction that involves neither cost nor full step-up of certain retained interests in assets that are not businesses. The effective date for these changes has been deferred indefinitely until the completion of a broader review. 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. Besides considering periodic revisions to policy rates, the SBP introduced certain regulatory measures to maintain banking system soundness & 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. The SBP had initially relaxed the classification and provisioning requirements for such borrowers. The bank continues to monitor the portfolio of clients that availed the deferment / restructuring & rescheduling relief for repayments for the purpose of deterring their classification and measurements. 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 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. 136
  100. 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, 12, 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 (notes 4.4.1 and Annexure II - note 3); right of use assets and related lease liabilities (notes 4.7 and 19.2); provisions and contingent assets and liabilities (notes 4.17 ,14 and 22); impairment of assets (notes 4.16 and 8.4); workers welfare fund (note 29); Valuation of non-banking assets acquired in satisfaction of claims (notes 4.9 and 13.1.2); and Remuneration framework and related disclosures (note 4.12.3 , 28.1 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. 137
  101. (c) Lending under margin trading system Securities purchased under margin financing are recorded as "lendings to financial 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. 138
  102. 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. 139
  103. 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 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. 140
  104. 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 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. 141
  105. 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 is subjected 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. 142
  106. The payouts for variable compensation for the performance years 2019 and 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 associated with a transaction will flow to the Bank and the revenue can be reliably measured. - 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 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. 4.15 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 criterias are met. 143
  107. 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 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. 144
  108. 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. 145
  109. (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 2021 2020 ---------(Rupees in ‘000)--------6,767,308 618,813 7,386,121 6,393,784 1,788,180 8,181,964 5.1 5.2 22,894,073 924,051 17,083,273 871,899 5.3 1,717,847 25,535,971 1,585,852 19,541,024 2,150,059 1,669,585 124,747 35,196,898 571,381 29,963,954 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. 5.1.1 In addition to the standard regulatory cash reserve requirements, the SBP required all Banks to maintain additional reserves against quarterly shortfalls (if any) against SBP assigned quarterly disbursement targets for Housing and Construction Finance. Additional reserve requirements were also introduced during the year by the SBP, after taking into consideration the efforts put in by the Banks for achievement of targets in terms of disbursement amounts as well as number of units for the Government’s Mark up Subidy Scheme (GMSS) for Housing. Although the Bank has met its overall target for Housing and Construction as at 31 December 2021, an amount of Rs. 908.893 million (December 2020 : Rs. NIL) is being maintained over and above the standard requirement, based on previous quarterly shortfalls during the year, and shortfall against GMSS targets. The said amount will be made available for use of the Bank in the year 2022. 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. (2020: NIL return). 5.3 This represents special cash reserve maintained with SBP at an amount equivalent to at least 10% (2020 : 10%) of the Bank's foreign currency deposits mobilised under FE-25 scheme, which currently carries mark-up at NIL rates (2020 :NIL 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 146 6.1 2021 2020 ---------(Rupees in ‘000)--------11,846 32 11,878 12,041 450 12,491 2,415,600 2,427,478 4,255,572 4,268,063
  110. 6 .1 This includes Rs. 1,065.070 million (2020: Rs. 2,076.008 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. 7 LENDINGS TO FINANCIAL INSTITUTIONS Note Call / clean money lendings Repurchase agreement lendings (reverse repo) Bai Muajjal receivable - with other financial institutions Letters of placements 7.4 7.2 6,000,000 11,020,612 6,974,800 7.3. & 7.5 7.6 1,892,509 3,200,000 22,113,121 1,981,286 8,956,086 22,113,121 22,113,121 8,956,086 8,956,086 7.1 Particulars of lendings In local currency In foreign currency 7.2 2021 2020 ---------(Rupees in ‘000)--------- Securities held as collateral against lendings to financial institutions 2021 Held by Bank 2020 Further given as collateral Total Held by Bank Further given as collateral Total ----------------------------------- (Rupees in ‘000) ----------------------------------Market Treasury Bills Pakistan Investment Bonds Total 670,998 10,349,614 11,020,612 - 670,998 10,349,614 11,020,612 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. 11,048.64 million (2020: Rs. 6,968.57 million). 7.3 Bai Muajjal receivable 2021 2020 ---------(Rupees in ‘000)--------- Bai Muajjal receivable - with other financial institutions 1,944,541 2,020,185 less: deferred income - with other financial institutions (52,032) (38,899) 1,892,509 1,981,286 Bai Muajjal receivable - net 7.4 This represents lendings to a financial institution carrying mark-up at 10.60% per annum (2020: NIL) due to mature on 04 January 2022. 7.5 This represents Bai Muajjal placements entered into with financial institutions whereby the Bank has sold sukuks having carrying value of Rs. 1,839.432 million (2020: Rs. 1,952.524 million) on deferred payment basis. The average return on these transactions is ranging from 7.10% to 7.25% per annum (2020: 7% per annum). 7.6 This represents lending through letters of placement to financial institutions carrying mark-up at rates ranging from 10% to 11% (2020: NIL) and are due to mature on 28 January 2022. 147
  111. 8 INVESTMENTS 8 .1 Investments by type: 2021 Cost / amortised cost Provision for diminution 2020 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 19,617,943 19,617,943 - 291,090,171 3,239,896 3,317,480 239,298 149,574 298,036,419 (33,537) (33,537) 13,613,173 59,075 13,672,248 (59,075) (59,075) 331,326,610 (92,612) 9,611 9,611 19,627,554 19,627,554 1,925,742 1,925,742 (3,467,242) (426,972) 65,865 9,927 (3,818,422) 287,622,929 2,779,387 3,383,345 249,225 149,574 294,184,460 226,129,343 3,189,295 3,910,455 390,284 34,194 233,653,571 (122,331) (122,331) 13,613,173 13,613,173 13,666,853 100,379 13,767,232 (86,094) (86,094) 327,425,187 249,346,545 (208,425) Carrying value Cost / amortised cost (3,808,811) - 2021 Investments by segments: Cost / amortised cost Provision for diminution 8,125 8,125 1,933,867 1,933,867 701,977 37,866 43,851 25,732 809,426 226,831,320 3,104,830 3,954,306 416,016 34,194 234,340,666 - 13,666,853 14,285 13,681,138 817,551 249,955,671 Surplus / (deficit) Carrying value 2020 Surplus / (deficit) 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 148 133,978,413 175,342,874 - 22,895 (3,423,326) 134,001,308 171,919,548 103,316,207 130,301,875 - 27,005 682,297 103,343,212 130,984,172 15,000,000 324,321,287 - (57,200) (3,457,631) 14,942,800 320,863,656 2,603,856 5,500,000 241,721,938 - 800 710,102 2,603,856 5,500,800 242,432,040 239,298 - 9,927 249,225 390,284 - 25,732 416,016 3,173,096 66,800 3,239,896 (27,837) (5,700) (33,537) (426,972) (426,972) 2,718,287 61,100 2,779,387 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 1,440,230 2,085,899 3,526,129 (59,075) (59,075) 40,056 25,809 65,865 1,480,286 2,052,633 3,532,919 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 4,002,785 331,326,610 (92,612) (3,808,811) 327,425,187 249,346,545 (208,425) 817,551 249,955,671
  112. 8 .2.1 Investments given as collateral 2021 2020 ---------(Rupees in ‘000)--------- Market Treasury Bills Pakistan Investment Bonds 8.3 42,574,802 45,908,049 88,482,851 Bai Muajjal with Government of Pakistan Bai Muajjal investment Less: deferred income Bai Muajjal investment - net 8.4 - 208,425 (88,794) (3,515) (23,504) 92,612 119,631 717,214 (628,420) 208,425 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 Reversal during the year Amounts written off Closing balance 8.5 25,533,895 39,434,851 64,968,746 2021 2020 NonNonProvision Provision Performing Performing Investments Investments --------------------------- (Rupees in ‘000) --------------------------59,075 59,075 59,075 59,075 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: 2021 2020 Cost/Amortized Cost ---------(Rupees in ‘000)--------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 - Oil & Gas Exploration Companies - Oil & Gas Marketing Companies - Pharmaceuticals - Power Generation & Distribution - Real Estate Investment Trusts - Technology & Communication - Textile Composite 114,360,470 161,729,701 15,000,000 291,090,171 103,316,207 114,709,280 2,603,856 5,500,000 226,129,343 202,350 29,805 697,067 201,935 500,601 101,399 94,224 464,649 396,946 91,588 392,532 3,173,096 260,461 137,781 724,609 241,779 21,932 55,551 565,664 109,734 221,896 488,003 122,051 173,034 3,122,495 149
  113. 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 2021 2020 Break-up Cost Break-up value value ---------------------------(Rupees in ‘000)---------------------------Cost 11,100 5,700 50,000 66,800 Non-Government debt securities 50,902 267,895 318,797 Note Listed - AAA - AA+, AA, AA- A+, A, A- Unrated 11,100 5,700 50,000 66,800 47,496 202,032 249,528 2021 2020 Cost/Amortized Cost ---------(Rupees in ‘000)--------555,230 14,583 850,000 1,419,813 240,000 415,230 22,916 850,000 1,528,146 843,750 599,860 454,057 1,897,667 3,317,480 1,031,251 874,900 476,158 2,382,309 3,910,455 29,805 166,076 396,946 201,935 94,224 285,577 298,573 297,601 144,031 248,501 254,749 245,852 91,588 202,350 101,399 113,889 3,173,096 113,100 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 Unlisted - AAA - AA+, AA, AA- A+, A, A- Equity securities Listed AGP Limited [Nil (2020: 1,057,500) shares] Agritech Limited [851,560 (2020: 851,560) shares] Altern Energy Limited [5,784,500 (2020: 5,934,500) shares] Cherat Cement Company Limited [Nil (2020: 400,000) shares] D. G. Khan Cement Company Limited [Nil (2020:1,750,000) shares] Dolmen City REIT [33,000,000 (2020: Nil) shares] Fauji Fertilizer Company Limited [1,900,000 (2020: 200,000) shares] Glaxosmithkline Pakistan Limited [557,500 (2020: 575,000) shares] Habib Bank Limited [2,095,000 (2020: 2,170,000) shares] Hub Power Company Limited [3,500,000 (2020: 3,500,000) shares] I.C.I. Pakistan Limited [Nil (2020: 150,000) shares] International Industries Limited [Nil (2020: 1,825,000) shares] Lucky Cement Limited [Nil (2020: 30,000) shares] MCB Bank Limited [1,500,000 (2020: 1,500,000) shares] Nishat Chunian Limited [3,103,000 (2020: 2,325,000) shares] Nishat Mills Limited [2,415,000 (2020: 930,000) shares] Oil and Gas Development Company Limited [2,597,451 (2020: 2,597,451) shares] Pakistan Petroleum Limited [2,690,000 (2020: 2,690,000) shares] Pakistan State Oil Company Limited [Nil (2020: 120,000) shares] Pakistan Telecommunication Company Limited [9,230,000 (2020: 12,300,000) shares] Pioneer Cement Limited [1,850,000 (2020: Nil) shares] Sui Northern Gas Company Limited [2,500,000 (2020: 1,700,000) shares] Tariq Glass Industries Limited [Nil (2020: 625,000) shares] The Bank Of Punjab [11,750,000 (2020: 11,750,000) shares] 150 8.10
  114. Note Unlisted DHA Cogen Limited [5,853,822 (2020: 5,853,822) shares] ISE Towers REIT Management Company Limited [3,034,603 (2020: 3,034,603) shares ] Pakistan Export Finance Guarantee Agency Limited [569,958 (2020: 569,958) shares] 1-Link Private Limited [4,999,999 (2020: 4,999,999) shares] 8.11 8.12 11,100 11,100 8.13 5,700 50,000 5,700 50,000 66,800 66,800 Note 8.7 2021 2020 Cost/Amortized Cost ---------(Rupees in ‘000)--------- Particulars relating to held-to-maturity securities are as follows: Federal Government Securities - Government guaranteed Pakistan Investment Bonds 2021 2020 Cost ---------(Rupees in ‘000)--------13,613,173 13,666,853 Non Government debt Securities Listed - Unrated Unlisted - A+, A, A- Unrated Non Government debt Securities - Total - 8.14 16,269 59,075 59,075 14,285 69,825 84,110 59,075 100,379 8.7.1 The market value of securities classified as held-to-maturity as at 31 December 2021 amounted to Rs. 12,628.519 million (31 December 2020 : Rs. 13,901.468 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 (2020: 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 2021, 1,500,000 shares (31 December 2020: 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 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. SNBL had filed a civil suit before civil court Lahore along with other FIs/banks claiming to be the lawful owners of the disputed sukuk bonds and right to receive ijara rentals alongwith profit/mark-up thereon. The said suit was dismissed vide judgement dated 14 April 2017 against which an appeal/ RFA No.50966/2017 was filed by SNBL before Lahore High court. The said appeal/RFA has been accepted vide judgement dated 1 December 2021 with the result that judgement passed by the civil court has been reversed/set aside. WAPDA First Sukuk Company Limited has approached the Supreme Court of Pakistan against the judgement of Lahore High Court, however, the notice of appeal has not been received as yet. Accordingly, the Bank continues to retain full provision against the same. 151
  115. 9 ADVANCES Performing 2021 Non-performing 2020 2021 Total 2020 2021 2020 --------------------------------------- (Rupees in ‘000) --------------------------------------Loans, cash credits, running finances, etc. Islamic financing and related assets Bills discounted and purchased Advances - gross 146,318,507 148,810,537 8,867,739 9,342,768 155,186,246 158,153,305 10,178,861 7,602,553 1,446,285 1,442,638 11,625,146 9,045,191 6,631,050 5,494,147 163,128,418 161,907,237 - - 6,631,050 5,494,147 10,314,024 10,785,406 173,442,442 172,692,643 (7,891,691) (8,106,586) (7,891,691) (8,106,586) Provision against advances - Specific - - General Advances - net of provision 9.1 - (55,955) (41,538) - - (55,955) (41,538) (7,891,691) 163,072,463 161,865,699 2,422,333 (55,955) (41,538) (8,106,586) (7,947,646) (8,148,124) 2,678,820 165,494,796 2021 2020 ---------(Rupees in ‘000)--------- Particulars of advances (Gross) In local currency In foreign currencies 9.2 164,544,519 165,517,244 7,925,198 173,442,442 165,360,354 7,332,289 172,692,643 Advances include Rs. 10,314.024 million (31 December 2020 Rs. 10,785.406 million) which have been placed under non-performing status as detailed below: 2021 Note Nonperforming loans Category of Classification 2020 Provision Nonperforming loans Provision ----------------------- (Rupees in ‘000) ----------------------Other Assets Especially Mentioned Substandard Doubtful Loss 9.2.1 51,810 188,029 759,452 9,314,733 10,314,024 591 19,741 234,797 7,636,562 7,891,691 28,219 763,631 141,849 9,851,707 10,785,406 99,243 28,580 7,978,763 8,106,586 9.2.1 The 'Other Assets Especially Mentioned' category pertains to agriculture finance, small enterprise finance and consumer finance amounting to Rs.15.887 million (31 December 2020: Rs. 4.513 million), Rs. 7.632 million (31 December 2020: Rs. 5.706 million) and Rs. 28.291 million (31 December 2020: Rs. 18.000 million) respectively. 9.3 Particulars of provision against advances Note Opening balance Charge for the year Reversals Amounts written off Transfers Closing balance 9.4 2021 2020 Specific General Total Specific General Total ---------------------------------------- (Rupees in ‘000) ---------------------------------------8,106,586 716,019 (860,410) (144,391) (70,504) 7,891,691 41,538 14,417 14,417 55,955 8,148,124 730,436 (860,410) (129,974) (70,504) 7,947,646 7,573,063 1,352,331 (678,845) 673,486 (139,963) 8,106,586 41,538 41,538 7,614,601 1,352,331 (678,845) 673,486 (139,963) 8,148,124 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 are 1% for secured and 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. 152
  116. 9 .3.3 Particulars of provision against advances 2021 2020 Specific General Total Specific General Total ---------------------------------------- (Rupees in ‘000) ---------------------------------------- In local currency In foreign currency Total 7,891,691 7,891,691 55,955 55,955 7,947,646 7,947,646 8,106,586 8,106,586 41,538 41,538 8,148,124 8,148,124 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. 1,805.281 million (31 December 2020: Rs. 1,962.296 million. The additional profit arising from availing this benefit - net of the tax amounts to Rs.1,101.221 million (31 December 2020: Rs. 1,275.492 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 (31 December 2020: 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 70,504 70,504 139,963 24 139,987 9.4.2 Write offs of Rs. 500,000/- and above Write offs of below Rs. 500,000/- 9.5 70,504 70,504 139,938 49 139,987 9.5 Details of loan write off of Rs. 500,000/- and above Note 2021 2020 ---------(Rupees in ‘000)--------- 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 2021 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. 10 FIXED ASSETS Capital work-in-progress Right-of-use assets Property and equipment 10.1 Note 10.1 10.2 10.3 314,133 2,957,843 7,873,081 11,145,057 253,914 3,094,617 8,562,394 11,910,925 93,416 200,664 20,053 314,133 122,408 118,411 13,095 253,914 3,094,617 535,258 (672,032) 2,957,843 1,943,868 1,700,929 (550,180) 3,094,617 Capital work-in-progress Civil works Advances to suppliers and contractors Consultant's fee and other charges 10.2 2021 2020 ---------(Rupees in ‘000)--------- Right-of-use assets Opening balance Additions during the year Depreciation for the year Closing balance 28 153
  117. 10 .3 Property and equipment 2021 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 2021 Cost / revalued amount Accumulated depreciation Net book value 2,332,292 2,332,292 Year ended 31 December 2021 Opening net book value 2,332,292 Additions Movement in surplus on assets revalued during the year (398,500) Disposals / write-offs - cost (451,500) Disposals / write-offs - Accumulated Depreciation Disposals / write-offs - net (451,500) Depreciation charge Other transfer Closing net book value 1,482,292 At 31 December 2021 Cost / revalued amount Accumulated depreciation Net book value Rate of depreciation (years / percentage) 1,482,292 1,482,292 - 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) 929,293 471,558 - 302,080 24,139 3,040,377 14,378 1,163,487 280,660 204,737 67,719 929,293 424,858 118,570 59,242 8,562,394 870,996 471,558 (12,477) 313,742 (164,369) 2,890,386 (21,722) 8,264 (13,458) (88,232) 1,342,457 (8,671) 7,908 (763) (42,543) 229,150 (101,434) 98,754 (2,680) (346,279) 1,005,192 (19,934) 19,934 (39,508) 138,304 (398,500) (603,261) 134,860 (468,401) (693,408) 7,873,081 471,558 471,558 396,677 (82,935) 313,742 4,990,471 (2,100,085) 2,890,386 1,912,312 (569,855) 1,342,457 585,883 (356,733) 229,150 3,476,710 (2,471,518) 1,005,192 363,778 13,679,681 (225,474) (5,806,600) 138,304 7,873,081 40 years 40 years 20 years 10 % 20% - 33% - 324,470 13,810,446 (205,900) (5,248,052) 118,570 8,562,394 20% 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 40 years 40 years 20 years 10 % 20% - 33% Rate of depreciation (years / percentage) 2,332,292 2,332,292 - - 324,470 13,810,446 (205,900) (5,248,052) 118,570 8,562,394 20% 10.3.1 The cost of fully depreciated property and equipment still in use amounts to Rs.1,989.284 million (2020: Rs.1,783.640 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 2021 would have been Rs.1,237.865 million and Rs. 684.060 million respectively (2020: Rs.1,689.365 million and Rs. 675.204 million respectively). 154
  118. 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 2021 Cost Accumulated amortisation Net book value Year ended 31 December 2021 Opening net book value Additions: - directly purchased Amortisation charge Closing net book value At 31 December 2021 Cost Accumulated amortisation Net book value Rate of amortisation (percentage) Useful life 2021 Computer Trademark Total software --------------------(Rupees in ‘000)------------------1,429,234 (1,021,044) 408,190 6,315 (6,231) 84 1,435,549 (1,027,275) 408,274 408,190 84 408,274 232,958 (208,254) 432,894 (84) - 232,958 (208,338) 432,894 1,662,192 (1,229,298) 432,894 6,315 (6,315) - 1,668,507 (1,235,613) 432,894 20 to 33.33 33.33 3 to 5 3 2020 Computer Trademark Total software --------------------(Rupees in ‘000)------------------At 01 January 2020 Cost Accumulated amortisation Net book value 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 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 11.1 20 to 33.33 33.33 3 to 5 3 The cost of fully amortised intangible assets still in use amounts to Rs.780.139 million (2020: Rs. 712.309 million). 155
  119. 12 DEFERRED TAX ASSETS - NET 2021 At 1 January 2021 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 non banking assets - Surplus on revaluation of investments - Accelerated tax depreciation Recognised in the profit and loss account Recognised in other comprehensive income At 31 December 2021 --------------------------- (Rupees in ‘000) --------------------------11,922 75,939 87,861 (931,805) (283,299) (406,022) (1,621,126) (1,533,265) 58,329 58,329 4,040 1,489,185 1,493,225 15,962 1,489,185 134,268 1,639,415 57,402 (31,709) 25,693 84,022 (106,492) (42,568) 283,299 134,239 1,627,464 (980,895) (42,568) (437,731) (1,461,194) 178,221 Recognised in other comprehensive income At 31 December 2020 2020 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 --------------------------- (Rupees in ‘000) --------------------------14,471 340 55,307 70,118 (645,401) (376,176) (1,021,577) (951,459) 20,632 20,632 34,069 (29,846) 4,223 24,855 Note 13 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 term finance certificates 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 13.1 156 Market value of non-banking assets acquired in satisfaction of claims 13.1 13.2 13.3 13.1.1 (2,549) (340) (2,889) 11,922 75,939 87,861 (320,473) (283,299) (603,772) (606,661) (931,805) (283,299) (406,022) (1,621,126) (1,533,265) 2021 2020 ---------(Rupees in ‘000)--------6,084,195 10,703 107,013 381,608 1,168,850 1,036,162 333 44,320 142,382 5,605,872 143,443 479,679 15,204,560 (238,811) 14,965,749 109,148 15,074,897 6,571,289 12,390 6,223 291,067 1,283,681 1,039,769 5,870 41,810 8,678 250,000 5,471,061 143,443 340,153 15,465,434 (227,311) 15,238,123 99,608 15,337,731 1,145,310 1,139,377
  120. 13 .1.1 The non-banking assets acquired in satisfaction of claims by the Bank were revalued by independent and professional valuers in October 2021 and December 2021. 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 and M/s Al Hadi Financial and Legal Consultants on the basis of professional assessment of present market values and the revalued amount is disclosed in note 13.1.2 to these financial statements. 13.1.2 Non-banking assets acquired in satisfaction of claims Note Opening balance Acquired Revaluation Depreciation Closing balance 13.1.3 13.1.1 2021 2020 -------(Rupees in ‘000)--------1,139,377 9,687 (3,754) 1,145,310 919,880 198,220 23,648 (2,371) 1,139,377 13.1.3 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 in previous year resulted in provision reversals against non-performing loans amounting to Rs. NIL (2020: Rs. 57.457 million), and a reduction in non-performing loans amounting to Rs. NIL (2020: Rs. 198.220 million). 13.2 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. 13.3 Provision held against other assets Provision held against receivable against fraud and forgeries Others 13.3.1 143,443 95,368 238,811 143,443 83,868 227,311 227,311 11,500 238,811 227,311 227,311 6,900,897 6,900,897 6,707,581 6,707,581 Movement in provision held against other assets Opening balance Charge for the year Amount written-off Closing balance 14 2021 2020 -------(Rupees in ‘000)--------- CONTINGENT ASSETS There were no contingent assets as at the balance sheet date. 15 BILLS PAYABLE In Pakistan Outside Pakistan 157
  121. 16 BORROWINGS Note 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 Temporary economic refinance scheme Modernisation of SME-Rice Husking Financing facility for storage of agriculture produce Financing facitlity for Renewable Energy Repurchase agreement borrowings 16 .2.1 16.2.2 16.2.3 16.2.4 16.2.5 16.2.6 16.2.7 16.2.8 17,994,560 1,908,405 1,604,953 1,375,723 3,924 161,472 808,519 47,980,825 71,838,381 17,307,129 1,807,212 2,711,913 5,886 150,281 79,562 22,061,983 16.2.9 16.2.10 16.2.11 15,418,248 24,910,909 980,560 113,148,098 22,521,876 41,379,320 85,963,179 16.2.12 16.2.13 2,993,580 7,759,975 683,215 11,436,770 124,584,868 1,008,512 48,848 1,057,360 87,020,539 116,141,678 8,443,190 124,584,868 86,971,691 48,848 87,020,539 Repurchase agreement borrowings - other banks Borrowings from other financial institutions - local Refinance from Pakistan Mortgage Refinance Company Limited Total secured Unsecured Call borrowings Borrowings from other financial institutions - foreign Overdrawn nostro accounts Total unsecured 16.1 2021 2020 ---------(Rupees in ‘000)--------- Particulars of borrowings with respect to currencies In local currency In foreign currencies 16.2.1 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 (2020: 1% to 2% per annum). These are secured against demand promissory notes and are due to mature latest by 27 June 2022 (2020: latest by 29 June 2021). 16.2.2 These represent borrowings from SBP under scheme for long-term financing facility at rates ranging from 2.0% to 4.5% per annum (2020: 2.0% to 4.5% per annum) and have varying long term maturities due by 30 June 2032 (2020: due by 30 June 2032). 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. 16.2.3 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. 16.2.4 These represent borrowings from SBP under the scheme for Temporary Economic Refinance (TERF) at the rates of 1% (2020: NIL) and are due to mature latest by 08 December 2031 (2020: NIL). 16.2.5 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 (2020: 4.25% to 6.25% per annum) and are due to mature latest by 29 September 2023 (2020: latest by 29 September 2023). 16.2.6 These represent borrowings from SBP under the scheme for Finance Facility for Storage of Agricultural Produce at the rates of 2% (2020: 2%) and are due to mature latest by 28 March 2026 (2020: 28 March 2026). 16.2.7 These represent borrowings from SBP under the scheme for renewable energy at rates ranging from 2% to 3% per annum (2020: 2% to 3% per annum) and are due to mature latest by 30 June 2032 (2020: 30 June 2032). 16.2.8 These represent repurchase agreements borrowing with SBP at the rate ranging from 9.85% to 10.26% per annum (2020: NIL) and are due to mature latest by 04 March 2022 (2020: NIL). The market value of securities given as collateral against these borrowings as given in note 8.2.1. 158
  122. 16 .2.9 These represent repurchase agreements borrowings executed with local financial institutions at the rate ranging from 9.75%% to 10.70% per annum (2020: 7.00% to 7.02% per annum) and are due to mature latest by 04 January 2022 (2020: latest by 08 January 2021). The market value of securities given as collateral against these borrowings as given in note 8.2.1. 16.2.10 These represent borrowings executed with the local financial institutions secured against government securities which carry mark up at rates ranging between 7.20% to 7.65% per annum (2020: ranging from 6.70% to 6.95% per annum) and are due to mature latest by 05 August 2022 (2020: latest by 10 May 2021). The market value of securities given as collateral against these borrowings as given in note 8.2.1. 16.2.11 This is secured against mortgage finance portfolio of the Bank and carrying mark-up at the rate of 8.89% per annum (2020: NIL) with maturity due on 01 April 2024 (2020: NIL). 16.2.12 This represent borrowings from a commercial bank in the inter bank money market, carrying mark-up at the rate of at rates ranging from 7.50% to 10.70% per annum (2020: 6.85% per annum) with maturity due on 13 January 2022 (2020: latest by 11 January 2021). 16.2.13 These represent borrowings against foreign bills from various foreign banks at rates ranging from 1.40% to 2.10% per annum (2020: NIL) and are due to mature latest by 09 March 2022 (2020: NIL). 17 DEPOSITS AND OTHER ACCOUNTS 2021 In local currency Customers Current deposits Savings deposits Term deposits Others Financial Institutions Current deposits Savings deposits Term deposits 17.1 2020 Total In local currency In foreign currencies Total ----------------------------------------(Rupees in ‘000)---------------------------------------92,089,254 111,279,683 106,879,226 7,095,761 317,343,924 8,465,917 6,287,664 1,361,179 16,114,760 100,555,171 117,567,347 108,240,405 7,095,761 333,458,684 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 4,921,675 295,173,553 965,374 54,250,091 13,485,038 68,700,503 386,044,427 877,367 877,367 16,992,127 1,842,741 54,250,091 13,485,038 69,577,870 403,036,554 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 Composition of deposits - Individuals - Government (Federal and Provincial) - Public Sector Entities - Banking Companies - Non-Banking Financial Institutions - Private Sector 17.2 In foreign currencies 2021 2020 ---------(Rupees in ‘000)-------145,856,032 38,456,089 36,054,751 8,262,407 60,722,382 113,684,893 403,036,554 134,957,518 33,360,028 41,829,379 5,499,496 44,945,645 84,906,702 345,498,768 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 2021, the deposits eligible to be covered under insurance arrangements amount to Rs.167,114 million. (2020 : Rs. 142,792 million). 159
  123. 18 18 .1 SUBORDINATED DEBT Note Listed Term Finance Certificates - Additional Tier I Listed Term Finance Certificates - Tier II 18.1 18.2 2021 2020 ---------(Rupees in ‘000)-------4,000,000 2,992,800 6,992,800 4,000,000 2,994,000 6,994,000 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 2021 Security Unsecured Profit payment frequency Semi-annually 18.2 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: 160 Issue amount Rs. 3,000 million Issue date 07 July 2015
  124. Maturity date 07 July 2023 Rating (Note 37) "A+" by PACRA on 15 December 2021 Security Unsecured Profit payment frequency Semi-annually 19 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. OTHER LIABILITIES 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 - net 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 Note 2021 2020 ---------(Rupees in ‘000)--------- 19.1 19.2 4,738,903 42,906 129,423 458,167 5,605,872 93,903 8,422 27,475 466,096 3,419,465 583,335 763,922 16,337,889 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 27,475 27,475 27,475 27,475 3,350,017 539,568 401,580 (871,700) 3,419,465 2,023,516 1,674,538 373,470 (721,507) 3,350,017 Movement in provision held against off-balance sheet obligations Opening balance 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 24.2 161
  125. 20 SHARE CAPITAL 20 .1 Authorized Capital 2021 2020 ----- (Number of shares) ----1,800,000,000 20.2 1,800,000,000 Ordinary shares of Rs. 10 /- each 387,397,655 715,065,828 1,102,463,483 21.1 387,397,655 715,065,828 1,102,463,483 Ordinary shares Fully paid in cash Issued as bonus shares 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 - Non-banking assets acquired in satisfaction of claims 21.1 21.2 18,000,000 3,873,977 7,150,659 11,024,636 3,873,977 7,150,659 11,024,636 (3,818,422) 3,231,388 109,148 (477,886) 809,426 3,777,073 99,608 4,686,107 1,489,185 (980,895) (42,568) 465,722 (12,164) (283,299) (931,805) (1,215,104) 3,471,003 3,777,073 (398,500) 2,463,447 1,410,966 - (89,783) (63,271) (57,402) 3,231,388 (34,069) 3,777,073 (931,805) (106,492) 57,402 (980,895) 2,250,493 (645,401) (320,473) 34,069 (931,805) 2,845,268 99,608 9,687 76,041 23,648 (147) (42,568) 66,580 (81) 99,608 Surplus on revaluation of fixed assets Less: related deferred tax liability: - revaluation as at 01 January - revaluation recognised during the year - effect of rate change - incremental depreciation charged during the year 10.3 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 Related deferred tax liability Surplus on revaluation as at 31 December 162 18,000,000 SURPLUS / (DEFICIT) ON REVALUATION OF ASSETS Surplus on revaluation of fixed assets as at 01 January Recognised during the year Realised on disposal of land 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 21.2 2021 2020 ---------(Rupees in ‘000)--------- Issued, subscribed and paid-up capital 2021 2020 ----- (Number of shares) ----- 21 Note
  126. 22 CONTINGENCIES AND COMMITMENTS - Guarantees - Commitments - Other contingent liabilities 22 .1 Note 22.1 22.2 22.3 17,677,531 154,084,937 3,041,804 174,804,272 5,664,947 15,410,184 1,079,686 22,154,817 4,671,493 12,121,177 884,861 17,677,531 Commitments Documentary credits and short-term trade-related transactions - letters of credit Commitments in respect of - forward foreign exchange contracts - forward lending - forward government securities transactions - future equity securities Commitments for acquisition of - fixed assets - intangible assets Other commitments 22.2.1 22,154,817 203,599,487 2,390,628 228,144,932 Guarantees - Financial guarantees - Performance guarantees - Other guarantees 22.2 2021 2020 ---------(Rupees in ‘000)--------- 22.2.1 22.2.2 22.2.3 22.2.4 22.2.5 38,680,125 31,755,753 161,787,971 2,675,230 249,104 1,903 114,269,483 2,549,990 4,996,920 - 117,194 15,960 72,000 203,599,487 399,466 17,325 96,000 154,084,937 86,975,369 74,812,602 57,715,311 56,554,172 2,675,230 2,549,990 Commitments in respect of forward foreign exchange contracts Purchase Sale The maturities of the above contracts are spread over a period of one year. 22.2.2 Commitments in respect of forward lending Undrawn formal standby facilities, credit lines and other commitments to lend 22.2.2.1 22.2.3 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. Commitment in respect of government securities transactions Purchase 22.2.4 249,104 4,996,920 1,903 - Other commitments Donation 22.3 2021 2020 ---------(Rupees in ‘000)--------- Commitments in respect of equity future contracts Sale 22.2.5 22.2.2.1 Other contingent liabilities 72,000 96,000 2,390,628 3,041,804 163
  127. 22 .3.1 (a) The income tax returns of the Bank have been filed up to tax year 2021 (accounting year ended 31 December 2020). The income tax authorities have issued amended assessment orders against different tax years, thereby creating additional tax demands 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 2013 to 2020 have been decided at the level of Commissioner Inland Revenue (Appeals).The department has filed appeal for tax year 2013 with Appellate Tribunal Inland Revenue which is currently pending and in case of any adverse decision, an additional tax liability of Rs. 470.11 million (which include impact of certain timing differences as well) may arise. The Bank has decided to file appeal for tax years 2014, 2015, 2016, 2018 and 2019 with Appellate Tribunal Inland Revenue, which in case of any adverse decision may create an additional tax liability of Rs. 131.11 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. (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. The department has filed tax reference with Honourable High Court Lahore against the order issued by Appellate Tribunal Inland Revenue, which is still pending. 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. Management is also confident that Honourable High Court Lahore will decide the case in favor of the Bank and the Bank may not be exposed to any additional tax liability in these matters. (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 Appellate Tribunal Inland Revenue, 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) The department has filed appeals against orders passed under section 161/205 of the Income Tax Ordinance, 2001 for tax years 2014 and 2017 with Appellate Tribunal Inland Revenue. These are currently pending and in case of any adverse decision an additional tax liability of Rs. 109.38 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 these matters. (e) Punjab Revenue Authority has passed orders for years 2015, 2016 and 2017 under section 14 and 19 of the Punjab Sales Tax on Services Act, 2012, creating demands of Rs. 144.688 million, Rs. 46.900 million and Rs. 24.790 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. (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. 164
  128. 22 .3.2 Claims against the Bank which are not acknowledged as debts amounted to Rs. 3.665 million (31 December 2020: Rs. 10.832 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 and Rs. 0.06 million. Currently, these matter are 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 these accounts. 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. 245.290 million (upto 31 December 2020: Rs. 213.857 million) will become payable by the Bank to the EOBI. The said amount of Rs. 245.290 million has not been provided in these financial statements as the Bank is confident that the case will be decided in the Bank's favour. 23 MARK-UP / RETURN / INTEREST EARNED Note Loans and advances Investments Lendings to financial institutions Balances with banks Placement and call lendings Income on bai muajjal placements 24 2021 2020 ---------(Rupees in ‘000)--------13,373,990 22,619,325 499,869 232 338,188 301,542 37,133,146 18,826,212 23,086,990 125,559 8,686 73,071 107,667 42,228,185 16,719,062 7,866,011 660,117 21,103,983 8,562,657 839,616 548,842 401,580 26,195,612 693,203 373,470 31,572,929 MARK-UP / RETURN / INTEREST EXPENSED Deposits Borrowings Subordinated debt Cost of foreign currency swaps against foreign currency deposits / borrowings Finance cost of lease liability 24.1 A corresponding income of the same amount is recognised in foreign exchange income. 24.2 This represents finance cost of lease liability against right-of-use assets. 24.1 24.2 165
  129. Note 25 FEE & COMMISSION INCOME 2021 2020 ---------(Rupees in ‘000)--------- 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 26.1 8.1 166 810,043 8,125 225 818,393 144,885 210,410 1,171 1,000 357,466 458,191 363,285 (11,433) 810,043 303,671 4,893 18,597 13,595 340,756 17,193 10,800 12,539 2,150 42,682 OTHER INCOME Gain on sale of fixed assets-net Insurance claim recovered Staff notice period and other recoveries Rental income on properties 27.1 357,466 9,611 (3,013) 45 364,109 Realised gain / (loss) on Federal Government securities Shares Mutual funds Non-Government debt securities 27 390,667 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 GAIN / (LOSS) ON SECURITIES - NET Realised Unrealised - held for trading Unrealised - forward purchase of government securities Unrealised - forward of equity securities 26.1 440,776 54,200 89,967 28,902 108,421 783,320 130,604 10,629 31,159 99,367 275,096 21,162 2,073,603 27.1 This represents rent earned through certain spaces / floors of Bank's properties let out on rental basis.
  130. Note 28 OPERATING EXPENSES Total compensation expense Property expense Rent & taxes Insurance Utilities cost Security (including guards) Repair & maintenance (including janitorial charges) Depreciation on non-banking assets Depreciation on right-of-use assets Depreciation on 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 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 2021 2020 ---------(Rupees in ‘000)--------4,064,883 3,696,675 153,570 35,347 399,933 406,739 280,311 3,755 672,032 265,078 2,216,765 215,409 25,332 313,010 353,080 248,381 2,370 550,180 199,516 1,907,278 432,630 190,188 212,175 208,338 234,444 108,790 1,386,565 326,308 163,723 181,490 165,890 230,123 89,502 1,157,036 17,250 6,610 50,506 138,352 11,299 41,746 216,155 12,789 54,082 64,854 242,916 94,306 45,550 11,841 46,229 214,413 61,088 263,924 135,880 60,378 185,891 228,467 165,978 2,370,504 10,038,717 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 74,037 165,732 196,777 176,685 2,096,553 8,857,542 167
  131. Note 28 .1 Total compensation expense 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 Severance Allowance Grand Total 28.1.1 28.1.2 2021 2020 ---------(Rupees in ‘000)--------- 2,126,228 1,913,913 296,763 117,432 154,318 812,712 218,188 2,247 200,875 355 19,692 111,903 3,174 996 4,064,883 4,064,883 230,629 109,956 140,550 734,968 174,635 1,616 182,573 16 14,409 89,372 3,119 919 3,596,675 100,000 3,696,675 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 No severance allowance was paid / accrued during the current year. Prior year amount represents charge in respect of Ex-gratia, for the Bank's outgoing CEO in the year 2020, as approved by the Board of Directors. 28.2 Total cost for the year relating to outsourcing activities included in operating activities is Rs. 639.604 million (2020: Rs 661.744 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: 28.3 Name of company Nature of Service Prime Human Resource services Business Development Services 28.4 119,415 10,000 24,000 10,000 1,350 200 45,550 5,000 5,000 24,000 10,000 44,000 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. 2021 2020 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 168 138,352 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 Aga Khan Foundation Pakistan Family Education Services Foundation Pakistan Eye Bank Society Hospital 28.3.1 2021 2020 ---------(Rupees in ‘000)--------- 2,589 4,871 168 2,413 1,800 11,841 2,420 4,553 157 1,455 1,565 10,150
  132. 28 .5 This represents the insurance premium paid to the State Bank of Pakistan’s Depositors Protection Corporation (DPC) during the year. 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 2021. The premium amount payable for the financial year ending 2022 is determined in accordance with the eligible deposits (note 17.2) as at 31 December 2021 and amounts to Rs. 267.38 million (2020: Rs. 228.47 million). 29 WORKERS' WELFARE FUND - NET Note Workers' Welfare Fund - net 29.1 2021 2020 ---------(Rupees in ‘000)--------120,333 85,718 29.1 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. 30 OTHER CHARGES Note Penalties imposed by State Bank of Pakistan (SBP) 31 31,456 83,033 (3,515) (129,974) 10,033 11,500 (111,956) 717,214 673,486 27,475 7,783 (24,279) 24 1,401,703 2,379,094 (84,022) 2,295,072 1,659,338 (24,855) 1,634,483 (REVERSALS) / PROVISIONS & WRITE OFFS - NET (Reversals) / provisions for diminution in the value of investments - net (Reversals) / provisions 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 2021 2020 ---------(Rupees in ‘000)--------- 8.4 9.3 13.3.1 10.3 9.4 TAXATION Current Prior years Deferred 32.1 32.1 The Finance Act, 2021 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 2022 (accounting year ended 31 December 2021) and onwards. Accordingly, an amount of Rs. 235.852 million (2020: Rs. 168.008 million) has been recognised in these financial statements as super tax. Moreover, as the same has been imposed for future years, the Bank has decided to book the Deferred tax asset/liabilities at 39% considering the same as the enacted rate for foreseeable future, the impact of the same has been considered from the beginning of the current year 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 2021 2020 ---------(Rupees in ‘000)--------- Profit before taxation 5,149,219 4,034,755 Tax at the applicable tax rate of 39% (2020: 35%) Super Tax Tax effect on permanent differences Effect of rate change from 35% to 39% Additional charge due to investment in government securities - Rule 6c Others 2,008,195 167,683 37,724 79,536 1,934 2,295,072 1,412,164 168,008 29,062 21,263 3,986 1,634,483 169
  133. 33 2021 2020 --------- (Rupees in ‘000)--------- BASIC EARNINGS PER SHARE Profit for the year 2,854,147 2,400,272 ------- (Number of Shares) ------Weighted average number of ordinary shares 1,102,463,483 1,102,463,483 ------------- (Rupees) ------------Basic earnings per share 34 2.5889 2.1772 --------- (Rupees in ‘000) --------- DILUTED EARNINGS PER SHARE Profit for the year 2,854,147 2,400,272 ------- (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 2.5889 2.1772 SubOrdinated Loans 35 Other Liabilities Mark-up Payable* ------- (Rupees in ‘000) ------- NET DEBT RECONCILIATION Net debt as at 01 January 2021 6,994,000 Other non-cash movements Mark-up accrued - Cash Flows Principal paid Issuance of new debt Mark-up paid (1,200) (1,200) 6,992,800 Net debt as at 31 December 2021 144,780 660,117 (634,334) (634,334) 170,563 * 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 16 2021 2020 -------- (Rupees in ‘000) -------35,196,898 2,427,478 (683,215) 36,941,161 29,963,954 4,268,063 (48,848) 34,183,169 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 2021 [2020: 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 15 December 2021. 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 2021 170
  134. 38 STAFF STRENGTH 2021 2020 -- (Number of employees) -- Permanent On Bank contract Bank's own staff strength at the end of the year 3,290 187 3,477 3,097 175 3,272 38.1 In addition to the above, 425 (2020: 372) 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, 687 (2020: 737) employees of outside contractor / agency were posted in the Bank as at the end of the year to perform janitorial services. 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 defined benefit scheme are: 39.3 2021 2020 -- (Number of employees) -- Gratuity fund 3,242 3,213 Principal actuarial assumptions The actuarial valuation was carried out as at 31 December 2021 using the following significant assumptions: 2021 2020 ---------- (Per annum) ---------Discount rate Expected rate of return on plan assets Expected rate of salary increase Mortality rates (for death in service) Rate of employee turnover 39.4 Reconciliation of payable to defined benefit plan Present value of obligation Fair value of plan assets 39.5 11.75% 7.0% 7.0% SLIC (2001-05)-1 Special 8.5% 8.5% 6.5% SLIC (2001-05)-1 Special 2021 2020 -------- (Rupees in ‘000) -------927,320 (927,320) - 879,604 (879,604) - 879,604 117,432 73,909 (105,619) (38,006) 927,320 819,805 109,956 97,610 (106,577) (41,190) 879,604 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 171
  135. Note 39 .6 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 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 819,805 97,610 (3,904) (44,874) 927,320 (33,907) 879,604 117,432 (124,300) 109,956 (102,673) 39.8.2 6,868 - (7,283) - 117,432 73,909 (73,909) 117,432 109,956 97,610 (97,610) 109,956 (46,426) 8,420 44,874 6,868 (10,028) (31,162) 33,907 (7,283) 186,139 24,367 473,751 199,693 43,370 927,320 472,738 193,042 130,236 40,218 43,370 879,604 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 39.9 879,604 73,909 18,681 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 39.8.2 39.8.2 2021 2020 ---------(Rupees in ‘000)--------- Components of plan assets Cash and cash equivalents - net Mutual funds Government securities Shares Term Finance Certificates 39.9.1 The fund primarily invests in government securities (Market Treasury Bills, Pakistan Investment Bonds and Special Savings Certificates) and accordingly does 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. 39.10 Sensitivity analysis on significant assumptions: Actuarial Liability 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 39.11 172 2021 2020 ---------(Rupees in ‘000)--------- (43,146) 47,498 29,565 (27,408) (42,747) 47,233 49,865 (45,871) The expected gratuity expense / contribution to the fund for the next year commencing 01 January 2022 works out to be Rs. 122.767 million (2021: Rs 117.432 million).
  136. 39 .12 Gratuity expense for the year ended 31 December 2022 -- (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) 39.14 122,767 107,671 (107,671) 122,767 2021 4.87 2020 5.10 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. 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 (2020: 8.33 percent) of basic salaries of the employees. The contribution made by the Bank during the year amounted to Rs. 154.318 million (2020: Rs. 140.550 million). The total number of employees as at 31 December 2021 eligible under the scheme were 2,700 employees (2020: 2,778 employees). 173
  137. 41 COMPENSATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL 41 .1 Total Compensation Expense Directors Item s 2021 Executives NonChairman (other than Executives CEO) Members Shariah Board Other Key President / Material Risk Management CEO Takers/ Personnel Controllers ------------------------------------------------- (Rupees in ‘000) ------------------------------------------------Fees and Allowances etc. Managerial Remuneration 1,980 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 - 15,270 6,610 - - - - - - 2,562 31,198 126,786 153,119 - - - 132 132 7,801 7,801 34,149 34,149 34,984 34,984 1,980 - 15,270 257 213 1,024 966 256 179 45 12,245 3,856 2,570 13,882 368 2,247 428 2,645 64,995 11,248 10,561 52,814 53,004 2,410 13,263 8,875 1,839 314,949 14,281 12,739 61,948 95,633 15,312 10,718 3,225 401,959 1 - 6 5 1 22 79 Number of Persons * This represents cash bonus for performance year 2020, paid out in the year 2021. In addition to this payout, an amount of Rs. 25.559 million 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. 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) ------------------------------------------------- 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 2020 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 67,572 94,243 16,893 11,825 3,037 423,784 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 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. 174
  138. ***Mr. Aftab Manzoor served as President and CEO till 31 March 2020. Mr. Muhtashim Ahmad Ashai succeeded him as the new President and CEO. 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. 1.201 million (2020: Rs. 1.621 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. 1,531.915 million (2020: Rs. 1,363.930 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 2021 Meeting Fees and Allow ances Paid For Board Com m ittee Meetings Board Human Board Board Board Risk Com m ittee of Resource and Inform ation For Board Board Audit Credit Managem ent Independent Remuneration Technology Meetings Com m ittee Com m ittee Com m ittee Directors Com m ittee Com m ittee Total Amount Paid ------------------------------------------------------- (Rupees in ‘000) ------------------------------------------------------1 2 3 4 5 6 7 Sr. No. Mr. Alauddin Feerasta Mr. Nooruddin Feerasta Mr. Ahmed Feerasta Mr. Muhammad Rashid Zahir Mr. Manzoor Ahmed Mr. Jamil Hassan Hamdani Ms. Navin Salim Merchant Total Amount Paid Nam e of Director 1,260 900 900 1,050 1,050 1,050 900 7,110 450 600 720 600 2,370 720 720 600 600 2,640 720 600 600 1,920 600 720 600 1,920 180 150 330 360 300 300 960 2020 Meeting Fees and Allow ances Paid For Board Com m ittee Meetings Board Human Board Board Board Risk Com m ittee of Resource and Inform ation For Board Board Audit Credit Managem ent Independent Remuneration Technology Meetings Com m ittee Com m ittee Com m ittee Directors Com m ittee Com m ittee 1,980 2,070 1,860 2,250 3,390 3,450 2,250 17,250 Total Amount Paid ------------------------------------------------------- (Rupees in ‘000) ------------------------------------------------------1 2 3 4 5 6 7 8 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 18,461 175
  139. 41 .3 Remuneration paid to Shariah Board Members 2021 Item s Chairm an Resident Member 2020 NonResident Mem ber(s) NonResident Mem ber(s) Resident Member Chairman ------------------------------------------- (Rupees in ‘000) ------------------------------------------a. Meeting Fees and Allowances b. Remuneration (note 41.1) 2,810 - 5,635 3,800 - 2,700 - 3,661 2,400 - Total Amount Total Number of Persons 2,810 1 5,635 2 3,800 2 2,700 1 3,661 1 2,400 1 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: 2021 On balance sheet financial instruments Financial assets - measured at fair value Investments Federal Government securities Shares Non-Government debt securities Units of mutual fund 2,718,287 249,225 307,250,483 3,383,345 - 61,100 - 307,250,483 2,779,387 3,383,345 249,225 Financial assets - disclosed but not measured at fair value Investments Federal Government securities Non-Government debt securities - 12,628,519 - - 12,628,519 - Off-balance sheet financial instruments - measured at fair value Forward purchase of foreign exchange Forward sale of foreign exchange Forward purchase of government securities Forward sale of equity securities - 86,975,369 74,812,602 246,091 1,858 - 86,975,369 74,812,602 246,091 1,858 Non - Financial Assets Land and Building (operating fixed assets & non-banking assets)* 176 Level 1 Level 2 Level 3 Total ------------------------ (Rupees in ‘000) ---------------------- 2,967,512 485,298,267 6,303,288 6,364,388 6,303,288 494,630,167
  140. 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 * 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. (c) Financial instruments in level 3 Financial instruments included in level 3 comprise of fixed assets (land and building) and unlisted securities. 177
  141. 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 2021 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 2020 Acquisitions Amounts recognised in the profit or loss for depreciation and impairment Other adjustments / transfers Closing balance 31 December 2020 Acquisitions Amounts recognised in the profit or loss as depreciation and impairment Other adjustments / transfers Closing balance 31 December 2021 178 1,333,280 601,915 349,047 - 170,008 96,394 2,221,992 61,793 919,880 198,220 4,994,207 958,322 397,097 2,332,292 122,511 471,558 (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 24,139 14,378 (12,477) 313,742 (164,369) 2,890,386 (850,000) 1,482,292 471,558 (3,754) 9,687 1,145,310 38,517 (180,600) (840,313) 6,303,288
  142. 43 SEGMENT INFORMATION 43 .1 Segment details with respect to business activities 2021 Retail Banking Profit and loss Net mark-up / return / profit Inter segment revenue - net Non mark-up / return / interest income Total income Corporate Trading and Sales Islamic Others Total ------------------------------------- (Rupees in ‘000) ------------------------------------(10,272,827) 17,698,994 2,251,907 9,678,074 6,956,528 (5,985,236) 451,605 1,422,897 659,236 109,225 768,461 14,385,012 (12,989,385) 2,170,452 3,566,079 (790,415) 1,275,627 (692,954) (207,742) 10,937,534 4,290,235 15,227,769 6,701,416 103,816 6,805,232 (136,827) 3,009,669 238,847 1,764 240,611 (234,302) 1,416,588 581,274 7,016 588,290 252,448 (72,277) 183,260 420 183,680 (3,515) 3,385,914 2,485,709 (113,016) 2,372,693 10,240 (2,590,675) 10,190,506 10,190,506 (111,956) 5,149,219 Balance sheet Cash & bank balances Investments Net inter segment lending Lendings to financial institutions Advances - performing - non-performing Others Total assets 31,265,061 265,598,191 58,890,757 1,235,085 5,092,646 362,081,740 1,962,300 396,000 89,352,989 119,577 2,107,327 93,938,193 2,207,198 17,220,848 4,592,509 10,162,675 1,013,659 1,659,357 36,856,246 2,189,817 309,808,339 (280,374,441) 17,520,612 3,359,002 52,503,329 Borrowings Subordinated debt Deposits & other accounts Net inter segment borrowing Others Total liabilities Equity Total equity & liabilities 11,585,729 337,761,115 12,734,896 362,081,740 362,081,740 11,566,486 33,350,233 46,060,906 2,960,568 93,938,193 93,938,193 705,360 31,925,206 2,804,319 1,421,361 36,856,246 36,856,246 99,746,733 (48,865,225) 1,621,821 52,503,329 52,503,329 980,560 6,992,800 4,500,140 12,473,500 21,635,541 34,109,041 124,584,868 6,992,800 403,036,554 23,238,786 557,853,008 21,635,541 579,488,549 35,882,154 35,882,154 23,174,145 2,675,230 25,849,375 1,778,643 1,778,643 161,787,971 249,104 1,903 162,038,978 133,154 72,000 2,390,628 2,595,782 60,834,942 161,787,971 2,675,230 133,154 249,104 1,903 72,000 2,390,628 228,144,932 Segment direct expenses Inter segment expense allocation Total expenses (Reversal)/ provision Profit before tax 37,624,376 327,425,187 14,776,250 22,113,121 4,666,042 163,072,463 54,012 2,422,333 14,612,737 26,831,069 34,109,041 579,488,549 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 equity securities In respect of other commitments In respect of other contingencies Total 2020 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 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 Corporate Islamic Trading and Sales Others Total ------------------------------------- (Rupees in ‘000) ------------------------------------(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 27,656,930 485,345,223 179
  143. 2020 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 commitments In respect of other contingencies Total 13,289,403 293,849,764 16,009,847 323,149,014 323,149,014 8,228,957 29,535,523 67,328,379 1,584,156 106,677,015 106,677,015 543,623 22,113,481 1,261,824 842,035 24,760,963 24,760,963 64,958,556 (68,590,203) 926,602 (2,705,045) (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 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 2021 2020 Face Value 2021 2020 ----- (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 45 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 2 8 6 6 1 - 1 1 1 2 1 1 1 3 1 1 1 2 2 17 24 250,000 22,000 2,113,500 3,241,000 57,350 200,000 60,000 53,000 20,500 5,400 10,000 250,000 1,500,000 10,000 7,792,750 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 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. 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 180
  144. 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: 2021 2020 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 Directors (a) Key* management Other related personnel parties (a) Directors (a) Key* management Other related personnel parties (a) --------------------------------------- (Rupees in ‘000) --------------------------------------- - - 440,284 100,000 (250,986) 289,298 - - 215,213 573,185 (348,114) 440,284 149,000 150,175 (165,175) 134,000 141,353 313,174 (285,697) 38,053 206,883 - 65,000 244,570 (160,570) 149,000 176,995 59,543 (65,968) (29,217) 141,353 - 3,981 192 - 4,464 56 - 3,981 192 4,464 56 Statement of financial position 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 533,284 1,484,976 (1,455,560) 562,700 136,346 136,346 88,656 5,229,818 1,656,304 112,144,205 (1,647,653) (113,027,565) 2,323 99,630 4,346,458 602,994 1,804,933 (1,831,907) (42,736) 533,284 656,418 656,418 10,013 5,425,540 696,483 87,591,751 (547,530) (87,787,473) (70,310) 88,656 5,229,818 4,322 1,925 28,711 1,981 752 29,424 Income Mark-up / return / interest earned Fee and commission income Dividend income Rent Income Net gain on sale of securities 11,022 31 - 18,788 139 - 536 24,933 10,120 1,171 9,726 42 - 11,484 68 - 467 12,155 (11,433) Expense Mark-up / return / interest paid Rent expense ** Computer expense Charge for staff retirement funds 20,098 - 5,916 - 322,088 17,027 17,638 271,750 36,406 - 4,470 - 469,004 15,225 8,352 250,506 Profit and loss account * 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. 181
  145. 2021 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) 18,749,210 3,684,770 22,433,980 2,905,008 25,338,988 19,260,436 3,584,770 22,845,206 4,610,533 27,455,739 154,826,990 6,607,437 21,964,183 183,398,610 134,385,533 8,610,225 18,789,518 161,785,276 Common Equity Tier 1 Capital Adequacy ratio Tier 1 Capital Adequacy Ratio Total Capital Adequacy Ratio 10.22% 12.23% 13.82% 11.90% 14.12% 16.97% 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% 11.50% Leverage Ratio (LR): Eligible Tier-1 Capital Total Exposures Leverage Ratio - percentage 22,433,980 713,553,593 3.14% 22,845,206 566,685,566 4.03% Liquidity Coverage Ratio (LCR): Total High Quality Liquid Assets Total Net Cash Outflow Liquidity Coverage Ratio - percentage 198,521,926 118,370,009 167.71% 155,353,599 125,268,638 124.02% Net Stable Funding Ratio (NSFR): Total Available Stable Funding Total Required Stable Funding Net Stable Funding Ratio - percentage 261,913,644 150,992,810 173.46% 235,312,708 161,201,255 145.97% 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 2020 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 2021 stood at Rs 11.025 billion (2020: 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 2021: 182
  146. - 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/2022/04/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. 183
  147. 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 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) Assessment & Monitoring 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; • To conduct risk and control assessment exercise for processes / products / systems. BCP Steering Committee Investment Committee • Establishes business continuity plan and ensures its effective implementation; • To manage Capital Market risk • Ensures the protection and availability of critical business processes and supporting technology in case of crises; I.T. Security Steering Committee • To manage I.T. Security risk • Sponsors the execution and maintenance of risk assessment business impact analysis, crises recovery plans and training programs; Chief Risk Officer • Ensures the adequacy of plans; • Ensures that alternate sites and/or spaces are available for critical process; Risk Management Group • Develops risk framework / policies & procedures for management of Credit Market, Liquidity, Operational I.T. security and other inherent risks; • Ensures that proper training sessions are conducted. • 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 184 Market & Liquidity Risk Management Department Risk Analytics & Economic Capital Department Basil II / III Implementation & Policy Review Operational Risk / BCP Management Department
  148. 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. The automated loan originating system coupled with credit risk ratings developed on Avra by AFS 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 have 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 mechanism also accounts for Internal Rating 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. 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 completed validation of scorecards and probability of default (P.D) modelling through a Bahrain based vendor having international repute. 185
  149. 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.ablish 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. 47.1.1 Lendings to financial institutions Credit risk by public / private sector Public / Government Private 186 Gross lendings Non-performing lendings Provision held 2021 2020 2021 2020 2021 2020 ------------------------------------------ (Rupees in ‘000) -----------------------------------------22,113,121 22,113,121 3,000,000 5,956,086 8,956,086 - - - -
  150. 47 .1.2 Investment in debt securities Credit risk by industry sector Textile Chemical and Pharmaceuticals Services Construction Power (electricity), Gas, Water, Sanitary Financial Credit risk by public / private sector Public / Government Private 47.1.3 Gross investments Non-performing investments Provision held 2021 2020 2021 2020 2021 2020 ------------------------------------------ (Rupees in ‘000) -----------------------------------------25,215 52,234 7,440 7,440 578,629 440,444 6,560 6,560 1,843,853 2,088,662 321,993,953 243,925,579 324,455,650 246,520,919 25,215 7,440 6,560 19,860 59,075 52,234 7,440 6,560 19,860 86,094 25,215 7,440 6,560 19,860 59,075 52,234 7,440 6,560 19,860 86,094 Gross investments Non-performing investments Provision held 2021 2020 2021 2010 2021 2020 ------------------------------------------ (Rupees in ‘000) -----------------------------------------322,637,198 243,494,228 1,818,452 3,026,691 324,455,650 246,520,919 59,075 59,075 86,094 86,094 59,075 59,075 86,094 86,094 Advances Credit risk by industry sector Gross advances 2021 2020 Non-performing advances 2021 2020 Provision held 2021 2020 ------------------------------------------ (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 Credit risk by public / private sector 3,209,024 2,622,705 18,409,467 30,709,114 36,244,688 26,940,779 8,287,524 6,942,734 1,643,924 1,891,846 10,206,622 6,768,573 2,372,867 1,673,182 2,213,936 1,585,306 4,753,615 3,709,311 7,684,309 4,750,985 23,097,233 25,599,370 7,952,075 19,605,766 11,680,653 9,598,205 1,185,802 869,791 7,022,135 7,148,405 11,219,069 7,928,632 2,111,837 1,888,895 7,347,801 5,439,354 1,550,698 1,469,973 1,528,160 817,460 1,182,786 1,884,276 2,538,217 2,847,981 173,442,442 172,692,643 Gross advances 2021 2020 158,647 1,448,696 4,202,405 545,109 56,321 53,312 102,192 833,216 423,715 216,089 132,167 198,587 196,734 226,256 48,669 350,277 1,057,246 64,386 10,314,024 181,502 136,104 1,452,257 653,802 4,428,419 3,777,084 573,804 537,869 85,704 61,321 56,321 54,312 53,312 33,581 29,804 839,183 362,946 254,445 224,674 228,864 97,317 132,167 132,167 305,466 150,696 182,263 134,380 340,447 154,213 48,920 48,669 364,297 312,170 1,087,246 974,056 131,208 56,107 10,785,406 7,891,691 Non-performing advances 2021 2020 151,185 473,791 4,006,948 552,417 85,704 61,321 54,312 32,582 224,960 145,442 87,148 132,167 245,681 133,808 246,802 48,920 326,190 1,004,056 93,152 8,106,586 Provision held 2021 2020 ------------------------------------------ (Rupees in ‘000) -----------------------------------------Public/ Government Private 13,206,447 43,813,940 160,235,995 128,878,703 173,442,442 172,692,643 10,314,024 10,314,024 10,785,406 7,891,691 10,785,406 7,891,691 8,106,586 8,106,586 187
  151. 47 .1.4 Contingencies and Commitments 2021 2020 ------ (Rupees in ‘000) -------- 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 217,391 9,231,506 8,766,096 2,245,330 3,173,418 446,450 223,518 2,169,904 3,367,053 3,879,980 5,615,426 8,675,826 1,908,089 166,853,435 5,100,641 54,571 1,909,577 756,160 1,482,207 834,485 1,233,869 228,144,932 233,007 9,201,400 6,335,128 3,560,440 317,014 221,542 325,808 756,562 2,226,289 2,618,876 6,100,543 7,475,828 1,866,685 117,332,855 10,812,612 104,571 1,808,043 810,454 1,588,724 116,707 991,184 174,804,272 262,569 227,882,363 228,144,932 1,232,133 173,572,139 174,804,272 Credit risk by public / private sector Public / Government Private 47.1.5 Concentration of advances The Bank's top 10 exposures on the basis of total (funded and non-funded exposures) aggregated to Rs. 31,149 million (2020: Rs. 56,101 million) and are as following: 2021 2020 ------ (Rupees in ‘000) -------Funded Non-funded Total exposure 24,028,154 7,120,843 31,148,997 54,219,037 1,881,771 56,100,808 The sanctioned limits against these top 10 exposures aggregated to Rs. 36,996 million (2020: Rs. 105,476 million). As at 31 December 2021, none of the top 10 exposures are classified and no provision is required / held thereagainst. 47.1.6 Advances - province / region-wise disbursement & utilization 2021 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 188 272,713,032 332,778,161 4,591,022 321,689 5,557,543 51,727,288 667,688,735 253,892,573 13,750,658 106,063 13,765,553 281,514,847 1,807,140 315,153,054 12 5,352,326 322,312,532 8,148,277 1,661,792 4,484,959 13,656,055 27,951,083 2,174,687 321,689 2,496,376 4,333,801 5,557,531 9,891,332 4,531,241 37,970 18,953,354 23,522,565
  152. 2020 Utilization Disbursements Province / region 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 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 Board Risk Management Committee (BRMC), 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). MARKET RISK MANAGEMENT STRUCTURE Board of Directors Board Risk Management Committee President & CEO ALCO Chief Risk Officer Head of Risk Management Market Risk Management Department 189
  153. 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: 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 2021 Banking book Trading book 2020 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 Deferred tax assets Other assets 190 35,196,898 2,427,478 22,113,121 304,830,121 165,494,796 11,145,057 432,894 178,221 15,074,897 556,893,483 35,196,898 29,963,954 2,427,478 4,268,063 22,113,121 8,956,086 22,595,066 327,425,187 244,562,058 5,393,613 - 165,494,796 164,544,519 11,145,057 11,910,925 432,894 408,274 178,221 15,074,897 15,337,731 22,595,066 579,488,549 479,951,610 5,393,613 29,963,954 4,268,063 8,956,086 249,955,671 164,544,519 11,910,925 408,274 15,337,731 485,345,223
  154. 47 .2.3 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. 2021 Foreign Currency Assets Foreign Currency Liabilities Off-balance sheet items 2020 Net foreign currency exposure Foreign Currency Liabilities Foreign Currency Assets Off-balance sheet items Net foreign currency exposure --------------------------------------------- (Rupees in ‘000)----------------------------------------------United States dollar Great Britain pound Japanese Yen Euro Chinese Yuan Other currencies 12,559,483 398,057 19,971 489,974 93,355 51,373 13,612,213 21,927,051 2,737,474 73 836,432 6,912 25,507,942 9,542,112 2,341,144 (18,396) 357,648 (92,617) (2) 12,129,889 174,544 1,727 1,502 11,190 738 44,459 234,160 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 2021 Banking book 796,521 (4,533) 3,288 (9,666) 7,047 17,405 810,062 2020 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 - 2,342 - - 8,101 - 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/IC and other authorities on a periodical basis. 2021 Banking book Impact of 5% change in equity prices on - Profit and loss account - Other comprehensive income 47.2.5 2020 Trading book Banking book Trading book ------------------ (Rupees in ‘000) ------------------ 148,376 - 172,987 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. 2021 2020 Banking book Impact of 1% change in interest rates on - Profit and loss account - Other comprehensive income Trading book Banking book Trading book ------------------ (Rupees in ‘000) -----------------2,383,724 - 62,224 - 2,777,543 - 24,932 - 191
  155. 47 .2.6 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. 2021 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% 35,196,898 - - - - - - - - - 35,196,898 Balances with other banks 0.00% 2,427,478 32 - - - - - - - - 2,427,446 Lending to financial institutions 8.99% 22,113,121 20,729,439 1,383,682 - - - - - - - Investments 8.99% 327,425,187 69,714,124 74,730,851 75,741,632 46,774,306 Advances 8.84% 165,494,796 107,983,810 21,199,920 12,264,399 9,776,188 Other assets 0.00% 14,888,517 - 567,545,997 198,427,405 97,314,453 88,006,031 56,550,494 19,057,589 19,490,671 384,082 19,441,671 611,741 20,102,412 10,000,473 8,886,929 2,726,746 4,046,634 12,727,219 12,933,563 4,134,898 4,134,898 3,028,612 2,366,378 14,888,517 57,907,851 Liabilities Bills payable 0.00% 6,900,897 Borrowings 6.34% 124,584,868 87,972,460 4,965,406 4,112,727 77,943 1,031,866 781,610 Deposits and other accounts 8.44% 403,036,554 134,118,496 129,098,347 10,349,408 18,456,727 460,973 648,408 410,520 Liabilities against assets subject to finance lease Subordinated debt Other liabilities 0.00% - 11.29% 6,992,800 0.00% 16,172,923 21,642,449 2,992,800 - - - 557,688,042 158,753,745 217,070,807 On-balance sheet gap 9,857,955 Non financial net assets 11,777,586 Total net assets 21,635,541 - 4,000,000 - - - - - 2,747,351 569,841 - - - - - - - - - - - - - - - - - - - - 6,900,897 683,215 109,493,675 16,172,923 19,314,814 22,569,454 538,916 1,680,274 1,192,130 2,747,351 569,841 133,250,710 39,673,660 (119,756,354) 68,691,217 33,981,040 18,902,755 18,422,138 11,535,089 10,186,212 3,565,057 (75,342,859) 5,535,836 1,140,143 358,249 Off-balance sheet financial instruments Documentary credits and short-term trade-related transactions 60,834,942 22,189,498 14,140,126 9,599,640 6,847,140 - forward foreign exchange contracts purchase 86,975,369 32,575,649 34,424,581 19,184,159 790,980 - forward foreign exchange contracts sale (74,812,602) (23,126,728) (29,873,108) (21,812,766) 737,216 287,094 - Commitments in respect of: - forward government securities transactions - forward equities securities transactions 249,104 - - 1,903 1,903 - - - - - - - - - - - - - - - - - - - - - - - - - - 2,675,230 - - - 2,675,230 - - - - - - - acquisition of fixed assets 117,194 - - - 117,194 - - - - - - - acquisition of intangibles 15,960 - - - 15,960 - - - - - - forward lending Off-balance sheet gap 192 249,104 - - 76,057,100 31,889,426 18,691,599 6,971,033 10,446,504 Total yield/ interest risk sensitivity gap 71,563,086 (101,064,755) 75,662,250 44,427,544 Cumulative yield / interest risk sensitivity gap 71,563,086 90,588,125 115,026,716 134,588,997 (29,501,669) 46,160,581 5,535,836 1,140,143 24,438,591 19,562,281 358,249 737,216 287,094 11,893,338 10,923,428 3,852,151 146,482,335 157,405,763 161,257,914 (75,342,859)
  156. 2020 Effective Yield / Interest rate Exposed to Yield/ Interest risk Total Upton 1 Month Over 3 to 6 Months Over 1 to 3 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 11,973,661 230,895 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 0.00% - - - - - 10,277,794 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 2,994,000 - - 459,291,121 143,725,607 150,688,557 On-balance sheet gap 13,630,737 Non financial net assets 9,526,301 Total net assets - 38,322,665 12.00% Other liabilities 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 3,181,541 5,631,352 4,328,358 1,105,549 978,302 1,108,474 587,926 6,707,581 48,848 91,770,394 13,070,233 40,258 111,597,056 (58,673,108) 23,157,038 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 - - 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) - - - - - - Commitments in respect of: - forward government securities transactions 4,996,920 - - - 4,996,920 - - - - - - - forward lending 2,549,990 - - - 2,549,990 - - - - - - - acquisition of fixed assets 399,466 - - - 399,466 - - - - - - - acquisition of intangibles 17,325 - - - 17,325 - - - - - Off-balance sheet gap 58,558,124 17,674,038 18,947,860 132,379 13,695,238 4,328,358 1,105,549 978,302 1,108,474 587,926 9,616,774 3,769,467 Total yield/ interest risk sensitivity gap 4,644,661 (53,055,496) 17,522,616 81,554,423 12,422,737 41,493,248 12,893,539 Cumulative yield / interest risk sensitivity gap 4,644,661 (48,410,835) (30,888,219) 50,666,204 63,088,941 104,582,189 117,475,728 (58,673,108) 127,092,502 130,861,969 (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. 193
  157. 47 .2.7 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 (BRMC), to ensure the compliance of BoD approved operational risk management framework, supported by the Risk Management Division (RMD). 194
  158. 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. 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. 47.2.8 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. 195
  159. 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’s ALCO is responsible for the formulation of overall strategy and oversight of asset and liability management. Liquidity Risk measures are chosen using a range of metrics, including Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR), liquidity gaps and various liquidity ratios. 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: 196 1. Significant withdrawals from corporate clients deposits. 2. Withdrawal of top ten, top fifteen, and top twenty deposits. 3. Loss in the funding value of unencumbered assets. 4. Shock to Liquidity Coverage Ratio and Net Stable Funding Ratio
  160. 47 .2.9 Maturities of Assets and Liabilities - based on contractual maturity of the assets and liabilities of the Bank 2021 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 Deferred tax 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 35,196,898 2,427,478 22,113,121 327,425,187 165,494,796 11,145,057 432,894 178,221 15,074,897 579,488,549 35,196,898 2,427,478 - 17,831,908 508,827 - 27,459,263 45,055,403 1,615,904 3,482,662 3,189 19,140 22,330 622 3,718 4,338 7,876,350 471,720 280,072 90,559,940 19,942,390 31,757,492 2,388,704 1,383,682 - 11,820,984 62,202,717 23,812,386 37,798,580 9,099,773 99,279,431 5,393,502 14,795,269 10,361,474 19,006,780 2,852,234 6,504,238 8,249,361 54,231 97,612 97,369 290,712 602,740 285,748 1,097,075 10,534 19,203 19,203 57,530 57,496 57,087 137,925 178,221 1,058,552 1,498,520 1,420,661 143,108 8,376 1,169,799 3,797 8,905,523 29,615,270 74,101,424 43,310,516 41,319,426 17,294,866 108,767,589 20,029,807 7,115,536 1,001,802 48,983 3,797 28,199,925 25,414,965 13,001,587 1,512,823 16,255 13,823 39,959,453 10,507,281 28,060,846 6,060,286 1,126,322 45,754,735 6,900,897 6,900,897 124,584,868 683,215 17,830,352 2,886,149 925,948 52,974,853 34,997,607 4,965,406 2,528,008 1,584,719 77,943 1,031,867 781,610 403,036,554 281,812,851 7,853,942 8,990,384 30,863,713 13,250,396 29,939,232 10,349,408 6,995,505 11,461,222 460,973 648,408 410,520 6,992,800 600 600 - 2,991,600 16,337,889 7,379,500 480,390 290,187 1,083,115 1,543,312 1,465,453 277,484 142,752 797,532 541,302 527,852 824,078 557,853,008 296,776,463 26,165,284 12,166,720 32,872,776 67,768,561 66,402,292 15,592,298 9,666,865 13,843,473 4,071,818 2,208,127 2,016,208 21,635,541 (206,216,523) (6,222,894) 19,590,772 (23,967,253) (38,153,291) 7,699,132 27,718,218 31,652,561 3,451,393 104,695,771 25,991,798 37,943,245 3,317,191 4,000,000 984,932 8,302,123 37,452,612 11,024,636 3,541,315 (12,164) 7,081,754 21,635,541 2020 Total 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) ------------------------------------------------------------------------------------------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 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 11,024,636 2,970,486 3,471,003 5,690,913 23,157,038 197
  161. 47 .2.10 Maturities of assets and liabilities - based on expected maturities of the assets and liabilities of the Bank 2021 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 Deferred tax 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 35,196,898 2,427,478 22,113,121 327,425,187 165,494,796 11,145,057 432,894 178,221 15,074,897 579,488,549 16,866,631 7,928,043 4,121,675 6,280,549 2,427,478 20,729,439 1,383,682 27,459,263 74,023,701 23,812,386 46,898,353 99,279,431 23,693,186 35,256,883 25,610,717 19,068,144 13,687,897 98,891 194,980 290,712 888,488 1,097,075 19,212 38,406 57,530 114,583 137,925 178,221 9,686,694 2,919,181 143,108 1,178,175 3,797 100,980,794 121,744,876 54,036,128 74,606,513 114,206,125 20,029,807 25,414,965 10,507,281 7,115,536 13,001,587 18,008,180 10,052,666 1,001,802 1,512,823 2,244,115 3,816,171 48,983 16,255 3,797 13,823 18,987 1,107,335 28,199,925 39,959,453 30,778,563 14,976,172 6,900,897 124,584,868 403,036,554 6,992,800 16,337,889 557,853,008 21,635,541 6,900,897 22,325,664 93,388,178 600 9,233,193 131,848,532 (30,867,738) 1,031,866 781,610 2,747,351 22,984,675 36,492,182 5,154,523 527,852 824,078 984,931 24,544,393 38,097,870 8,886,805 3,655,532 1,861,583 21,891,758 87,972,460 4,965,406 4,112,727 77,943 79,136,834 41,142,092 62,691,729 62,046,341 600 2,991,600 3,008,765 277,484 940,284 541,302 170,118,059 46,384,982 67,745,340 65,657,186 (48,373,183) 7,651,146 6,861,173 48,548,939 569,841 4,000,000 4,569,841 10,406,331 11,024,636 3,541,315 (12,164) 7,081,754 21,635,541 2020 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 198 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) -----------------------------------------------------------------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 12,950,593 164,544,519 24,000,421 32,268,495 22,309,582 20,559,809 17,281,675 11,910,925 96,191 191,694 283,977 808,476 1,064,701 408,274 15,170 30,293 45,377 87,365 158,104 15,337,731 9,209,772 3,316,846 226,216 1,442,354 2,979 485,345,223 59,826,576 98,846,275 64,302,724 102,940,865 31,458,052 6,707,581 87,020,539 345,498,768 6,994,000 1,533,265 14,434,032 462,188,185 23,157,038 11,024,636 2,970,486 3,471,003 5,690,913 23,157,038 6,707,581 40,943,796 72,689,314 600 6,909,895 127,251,186 (67,424,610) 40,853,188 18,048,661 10,266,930 14,759,890 12,779,303 13,542,405 7,042,939 989,886 1,512,976 2,213,927 4,749,097 67,871 4,094 2,979 12,185 14,894 1,109,506 56,673,814 32,357,219 26,038,156 12,901,542 14,881,615 13,421,689 13,020,807 2,761,403 18,635 100,130 1,832,206 69,992,169 45,017,405 50,956,654 53,195,145 18,837,937 30,508,691 4,301,453 600 1,200 2,991,600 1,533,265 3,404,734 358,048 941,645 530,308 517,132 807,342 964,928 88,278,518 58,797,142 66,452,971 56,488,056 22,365,304 31,416,163 7,098,587 10,567,757 5,505,582 36,487,894 (25,030,004) 34,308,510 941,056 18,939,569 40,258 4,000,000 4,040,258 8,861,284
  162. 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 2022 has proposed a cash dividend in respect of the year ended 31 December 2021 of Rs. 1.50 per share (2020: Rs. 1.25 per share). This appropriation will be approved in the forthcoming Annual General Meeting. The financial statements for the year ended 31 December 2021 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 2022. 50 DATE OF AUTHORISATION FOR ISSUE These financial statements were authorised for issue on 17 February 2022 by the Board of Directors of the Bank. Alauddin Feerasta Muhtashim Ahmad Ashai Mirza Zafar Baig Ahmed A. Feerasta Navin Salim Merchant Chairman President & Chief Executive Officer Chief Financial Officer Director Director 199
  163. Annexure - I STATEMENT SHOWING WRITTEN-OFF LOANS OR ANY OTHER FINANCIAL RELIEF OF FIVE HUNDRED THOUSAND RUPEES AND ABOVE PROVIDED DURING THE YEAR ENDED 31 DECEMBER 2021 (Rs. in million) Outstanding liabilites at beginning of the year S. No. Name and address of borrower Name of Individuals/ partners/ directors (with CNIC No.) Father/ Husband’s Name 1 2 3 4 1 Global Touch 75-A, D/1, Main Boulevard Gulberg III, Lahore 2 Khurram Shehzad Mr. Khurram Shehzad House # 08, Sharif Pura Colony M.A. Jinnah Road, CNIC No. 35302-1866239-1 Okara Mr. Zafar Iqbal 3 Muhammad Ibrahim Chak 202-G B Goband Ghar Sumandri, Faisalabad Mr. Muhammad Ibrahim CNIC No. 33105-0758468-7 Mr. Manzoor Ahmed 4 Trans Asia Travel (Pvt) Ltd 114 Shahrah-e-Faisal Anum Estate Building, Karachi Syed Shahid Hussain CNIC No. 42501-7297177-5 Syed Rashid Hussain CNIC No. 42201-5443389-3 Syed Fida Hussain Dairy One (Pvt) Ltd 8 KM, Salam Bhera Road, Chak no. 7,M-L, Tehsil Bhalwal, District Okara Malik Muhammad Azam CNIC No. 61101-6491339-1 Mrs. Maleeha Azam CNIC No. 37405-0264264-0 Malik Muhammad Akbar Chaudhary Cotton Industries Mouza Saldera, Luddon Road, Burewala Mr. Salman Javed CNIC No. 36601-9212639-7 Mr. Nadeem Akhtar CNIC No. 36601-7937300-9 Mr. Muhammad Yamin CNIC No. 36601-9182586-5 Mr. Muhamamd Javed Mr. Zafar Mehmood CNIC No. 35202-3629295-7 Mr. Muhammad Shah Anjum CNIC No. 35201-5451203-7 Mr. Muhammad Aslam CNIC No. 35201-0838245-5 Mr. Abdul Ghani Mr. Qaiser Javed CNIC No. 35202-9920249-3 Mr. Muhammad Waseem CNIC No. 35201-9904356-7 Ch. Muhammad Shareef 5 6 7 8 Exporient Knitters (Pvt) Ltd T-65 3rd Floor, Hafiz Centre, 75 E1, Main Boulevard Gulberg III, Lahore Spirit Furnishing Industries (Pvt) Ltd 113/11, Quaid e Azam Industrial Estate, Lahore Chaudhary Muhammad Nawaz CNIC No. 35202-6447149-1 Chaudhary Wali Muhammad Principal Mark-up Others Total 5 6 7 8 - 9 10 11 Total 12=9+10+11 8.116 0.450 8.566 - 8.116 0.450 8.566 5.609 2.009 0.156 7.774 - 2.009 0.156 2.165 2.328 0.669 0.625 3.622 - 0.669 0.503 1.172 4.997 0.395 5.392 - 3.203 0.395 3.598 1.674 0.364 3.935 - 1.674 0.162 1.836 - Syed Fida Hussain 1.897 W/o. Malik Muhammad Azam - 1.683 - 1.683 - 1.683 - 1.683 - 8.686 - 8.686 - 2.149 - 2.149 - 3.543 - 3.543 - 0.757 - 0.757 - 7.414 0.118 7.532 - 7.414 - 16.188 Mr. Muhammad Yaqoob Mr. Muhammad Javed Mr. Allah Jawayah Shah Mr. Abdul Sattar Mr. Qaiser Javed 9 Rustam Enterprises Mr. Rustam Ali Shop No. 566 Sheet No. M-A.C-3 Liaquat Ashraf CNIC No. 42301-0812040-5 Colony No.1 Near Ali Clinic Mehmoodabad, Karachi Mr. Din Muhammad 10 Aman Cold Storage Ratta Khanna Road, Tehsil Depalpur, District Okara Mr. Asad Ullah Khan CNIC No. 35301-2004675-7 Mr. Aman Ullah Khan 13.119 16.188 0.262 29.569 11 N.P. Spinning Mills Ltd 703, UNI Towers, I.I.chundrigar Road, Karachi Mr. Khalid Inam CNIC No. 42201-7725927-7 Mrs. Asma Khalid CNIC No. 42201-3459907-8 Mr. Noor Muhammad CNIC No. 42401-2084918-3 Mr. Fahker Mohiuddin CNIC No. 42101-0670936-1 Mrs.Summayya Rehman CNIC No. 42201-6673184-0 Mr. Shaikh Inam Ur Rehman CNIC No. 42201-9016249-1 Mr. Ziauddin Zubairi CNIC No. 42201-5157044-7 Mr. Shaikh Inam UR Rehman 70.504 101.167 0.874 172.545 0.160 4.880 70.504 0.103 - 7.517 16.188 103.056 0.874 174.434 - 1.239 0.141 1.380 2.382 - 1.012 - 1.012 1.752 - 0.653 - 0.653 W/O. Khalid Inam Mr. Shaban Ali Late M. Ubaidullah W/O. Shaikh Inam Ur Rehman S.M.Yahya (Late) Mr. Barkat Zubairi 12 Choudhary Motor Bikes Centre Church Road, Okara Mr. Muhammad Akram Asim CNIC No. 35302-1869510-9 Chaudhary Wali Muhammad 3.481 1.239 13 Tahir Rajput Caterers Hsoue No.37, Street No.1, Block 11, Khanewal Mr. Tahir Saeed CNIC No. 33203-1395135-3 Mr. Kanwar Saeed Akhtar 1.370 1.012 14 Muhammad Ilyas Moza Murad Ali, Post Office Sahooka, Burewala Mr. Muhammad Ilyas CNIC No. 36601-1476042-5 Mr. Ali Ahmed Shah Naqvi 0.900 0.789 200 Other Mark-up Principal Financial Written off/ Written off Relief Waived Provided - 0.063
  164. Annexure - I (Rs. in million) Outstanding liabilites at beginning of the year S. No. Name and address of borrower Name of Individuals/ partners/ directors (with CNIC No.) Father/ Husband’s Name 1 2 3 4 15 16 Top Star Seafood International Plot # A-33 Lane 1 , West Wharf Industrial Area, Behind Glaxo Smith, Karachi Mr. Muhammad Rasheed Khan CNIC No. 82303-3289573-1 Mr. Nizakat Hussain CNIC No. 42301-8332138-9 Mr. Alam Khan F. Rabbi Steel (Pvt) Ltd 19-Sir Jehangir Kothari Building, M.A. Jinnah Road, Karachi Shaikh Khalid Tawab CNIC No. 42301-1123116-9 Mr. Ahmed Sadiq Tawab CNIC No. 42301-0158244-9 Mr. Mehmood Tawab CNIC No. 42201-4104306-1 Shaikh Abdul Tawab Principal Mark-up Others Total 5 6 7 8 2.500 2.809 - Other Mark-up Principal Financial Written off/ Written off Relief Waived Provided 9 10 5.309 - 2.809 11 Total 12=9+10+11 - 2.809 Mr. Sardar Pehlwan Khan - 3.342 0.020 3.362 - 3.342 0.020 3.362 Shaikh Abdul Tawab Shaikh Abdul Tawab 17 Ubaid Ur Rehman H # 6, ST # 1, Mohalla Touheed Park, Gulshan Ravi, Lahore Mr. Ubaid Ur Rehman CNIC No. 35202-2826053-5 Mr. Muhammad Aslam 1.703 0.326 0.232 2.261 - 0.326 0.204 0.530 18 Waseem Ahmed R/O Kot Mahender Singh, PO Nanak Pur, Tehsil PakPattan Mr. Waseem Ahmed CNIC No. 36402-4306366-1 Mr. Ali Sher 3.880 0.920 0.150 4.950 - 0.920 0.150 1.070 19 New Auto Scan Mouza Ama Kot Din Nath, 1.5KM, Thokar Niaz Baig, Lahore Mr. Sohail Ahmed CNIC No. 35202-1704886-7 Mr. Awais Shamshair Ali Baig CNIC No. 35202-1704981-7 Mr. Shamshair Ali 2.056 0.439 2.495 - 2.056 0.439 2.495 20 Faizan e Madina Marble Factory Nasir Market, House No. E-369, Main Bedian Road, Lahore Mr. Muhammad Nadeem CNIC No. 35201-4666738-7 Mr. Muhammad Arshad 0.370 0.838 21 Gujjar Dairy Farm Saddar Hameed Ullah Colony, Sahiwal Mr. Muhammad Anwar CNIC No. 36502-8121854-9 22 Muhammad Nawaz Chak Ahmed Khan Khokhar, District Okara 23 A One Rice Mills Dhonkal More, Wazirabad 24 Touseef Meo House # L1194, Street # 08, Sector 32 A, Zia Colony, Korangi # 1, Karachi 25 Odero Lal Cotton Ginning Pressing Factory & Oil Mills Plot No. 219, 223 , 239 & 240 Deh Khadi Tapo A Naubat Mari District Matyari TOTAL - Mr. Shamshair Ali - 0.495 0.370 0.865 - 0.468 Mr. Muhammad Ghulam Muhammad 1.500 0.690 0.076 2.266 - 0.645 - 0.645 Mr. Muhammad Nawaz CNIC No. 35301-4928198-5 Mr. Malik Noor Hassan 1.200 0.647 0.050 1.897 - 0.647 - 0.647 Mr. Muhamad Siddique CNIC No. 34101-2315610-9 Mr. Muhammad Rehman CNIC No. 34104-7530498-1 Mr. Nazir Ahmed 1.946 0.825 0.027 2.798 - 0.629 - 0.629 Mr. Touseef Meo CNIC No. 42201-8371913-1 Mr. Muhammad Ishaq Meo 1.916 0.413 0.531 2.860 - 0.393 0.184 0.577 Mr. Ghulam Muhammad Dahiri CNIC No. 45401-6278935-1 Mr. Bhojo Mal CNIC No. 44204-1927286-7 Mr. Muhammad Urs Dahiri 3.495 1.537 0.213 5.245 - 1.537 - 1.537 119.404 171.629 5.136 296.169 163.594 4.151 238.249 Mr. Muhamamd Siddique Mr. Moolo Mal 70.504 201
  165. Annexure - II ISLAMIC BANKING BUSINESS The Bank is operating with 35 Islamic Banking Branches (31 December 2020: 30) and 15 Islamic Banking Windows (31 December 2020: Nil). The statement of financial position and profit and loss account of these branches and windows (including Islamic Banking Division) are as follows: Note 2021 2020 --------(Rupees in ‘000)-------- 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 1,969,622 237,576 4,592,509 17,220,848 11,184,427 624,710 1,034,647 36,864,339 1,420,207 401,869 1,981,286 11,098,217 8,858,713 577,849 439,592 416,525 25,194,258 399,583 705,360 31,925,206 815,280 1,029,871 34,875,300 318,544 543,623 22,113,481 529,789 23,505,437 1,989,039 1,688,821 2,000,000 (72,277) 61,316 1,989,039 1,750,000 (147,121) 85,942 1,688,821 2,141,090 1,481,854 659,236 1,804,347 1,411,178 393,169 72,438 36,956 (1,135) 966 109,225 768,461 62,370 20,563 (2,008) 1,006 81,931 475,100 Other expenses Operating expenses Other charges Total other expenses 588,210 80 588,290 445,253 2,372 447,625 Profit before provisions Provision and write offs - net Loss before tax 180,171 (252,448) (72,277) 27,475 (174,596) (147,121) 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 loss * Surplus on revaluation of assets - net of tax CONTINGENCIES AND COMMITMENTS 7 Profit / return earned Profit / return expensed Net profit / return 8 9 Other income Fee and commission Income Foreign exchange income Loss on securities Other income Total other income 202 6
  166. Annexure - II 1 Due from Financial Institutions 2021 In local Currency 2020 In foreign currencies In local currency Total In foreign currencies Total ---------------------------------------------- (Rupees in ‘000) --------------------------------------------Bai Muajjal receivable from other financial institutions Musharaka placement 2 1,892,509 2,700,000 4,592,509 - 1,892,509 2,700,000 4,592,509 1,981,286 1,981,286 - 1,981,286 1,981,286 Investments by segments: 2021 2020 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 Total Investments 3 15,000,000 - (57,200) 14,942,800 5,500,000 - 800 5,500,800 15,000,000 - (57,200) 14,942,800 2,603,856 8,103,856 - 800 2,603,856 8,104,656 925,000 1,292,666 2,217,666 (19,860) (19,860) 57,825 22,417 80,242 982,825 1,295,223 2,278,048 1,025,000 1,941,553 2,966,553 (19,860) (19,860) 6,615 40,253 46,868 1,031,615 1,961,946 2,993,561 17,217,666 (19,860) 23,042 17,220,848 11,070,409 (19,860) 47,668 11,098,217 Islamic financing and related assets 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 Less: Provision against Islamic financing - Specific - General Islamic financing and related assets - net of provision Note 3.1 3.2 2021 2020 ---------(Rupees in ‘000)--------- 519,339 565,514 1,797,708 4,103,748 568,838 124,515 45,374 309,196 1,120,620 1,127,082 4,245,096 469,622 162,522 - 323,510 79,624 149,971 3,068,804 270,110 11,617,055 149,476 81,707 882,321 491,251 9,038,893 432,628 432,628 11,184,427 180,180 180,180 8,858,713 203
  167. Annexure - II 3 .1 Ijarah 2021 Cost As at 01 January 2021 Additions/ (deletions)/ adjustment Depreciation As at 31 December 2021 As at 01 January 2021 Charge for the year As at 31 December 2021 Book Value as at 31 December 2021 ------------------------------------------- (Rupees in ‘000) ------------------------------------------Plant & Machinery - Vehicles 534,580 Total 534,580 - 377,396 (164,276) 377,396 (164,276) - - - - 747,700 225,384 747,700 - 225,384 - 129,472 (126,495) 129,472 (126,495) 228,361 519,339 228,361 - 519,339 - 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 3.1.1 - 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 - Future ijarah payments receivable ----------------------- 2021 ----------------------Later than Not later 1 year and than 1 less than 5 year years Over five years Total ----------------------- 2020 ----------------------Later than Not later 1 year and than 1 year less than 5 years Over five years Total ------------------------------------------------- (Rupees in 000) -------------------------------------------------Ijarah rental receivables 71,908 434,444 12,987 519,339 72,772 222,287 Note 3.2 3.2.1 204 Murabaha 14,137 309,196 2021 2020 --------(Rupees in ‘000)-------- Murabaha financing Advances for Murabaha 3.2.1 565,514 323,510 889,024 1,120,620 149,476 1,270,096 Murabaha receivable - gross Less: Deferred murabaha income Murabaha financings 3.2.2 3.2.4 573,606 8,092 565,514 1,126,919 6,299 1,120,620
  168. Annexure - II 3 .2.2 The movement in Murabaha financing during the year is as follows: 2021 2020 ---------(Rupees in ‘000)--------- Opening balance Sales during the year Adjusted during the year Closing balance 1,126,919 1,998,982 (2,552,295) 573,606 1,109,376 1,989,754 (1,972,211) 1,126,919 3.2.3 Murabaha sale price Murabaha purchase price 1,998,982 (1,934,902) 64,080 1,989,754 (1,928,553) 61,201 3.2.4 Deferred murabaha income 6,299 64,080 (62,287) 8,092 17,077 61,201 (71,979) 6,299 Opening balance Arising during the year Less: Recognised during the year Closing balance 4 2021 Deposits and other accounts In local currency In foreign currencies 2020 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 2,123,492 10,199,614 462,789 4,761,117 17,547,012 438,219 438,219 2,561,711 2,299,835 10,199,614 5,225,076 462,789 356,889 4,761,117 2,947,308 17,985,231 10,829,108 348,347 348,347 2,648,182 5,225,076 356,889 2,947,308 11,177,455 63,509 10,180,504 3,653,700 13,897,713 31,444,725 42,262 42,262 480,481 105,771 30,520 10,180,504 9,349,564 3,653,700 1,522,500 13,939,975 10,902,584 31,925,206 21,731,692 33,442 33,442 381,789 63,962 9,349,564 1,522,500 10,936,026 22,113,481 2021 2020 ---------(Rupees in ‘000)--------4.1 Composition of deposits - Individuals - Government / Public Sector Entities - Public Sector Entities - Banking Companies - Non-Banking Financial Institutions - Private Sector 6,738,976 1,747,711 3,782 2,350,036 11,570,140 9,514,561 31,925,206 5,279,207 1,736,487 698,246 35 10,945,991 3,453,515 22,113,481 4.2 This includes deposits eligible to be covered under insurance arrangements amounting to Rs 8,013 million (2020: 5,736 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 2021 2020 ---------(Rupees in ‘000)--------- 13 720 720 695 708 720 720 - 708 708 - 205
  169. Annexure - II 6 2021 2020 -------- (Rupees in ‘000)-------- Islamic Banking Business - Unappropriated (Loss) / Profit Opening balance Add: Islamic Banking loss for the year Less: Transferred / remitted to Head Office Closing balance 7 802,184 976,459 1,778,643 306,772 706,152 1,012,924 744,867 1,039,317 356,906 2,141,090 873,988 786,193 144,166 1,804,347 1,334,836 7,009 140,009 1,481,854 1,352,350 5,944 52,884 1,411,178 Profit / Return Earned of Financing, Investments and Placement Financing Investments Placements 9 135,645 (147,121) (135,645) (147,121) CONTINGENCIES AND COMMITMENTS -Guarantees -Other contingent liabilities 8 (147,121) (72,277) 147,121 (72,277) 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. 28,794.935 million (31 December 2020: Rs.19,044.448 million) and deposits on Qard basis of Rs. 3,130.271 million (31 December 2020: Rs. 3,069.033 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 2021 2020 Normal Special Normal Special Total Total Pool Pool Pool Pool ----------------------------------- (Rupees in ‘000) ----------------------------------- 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 834,751 2,482,026 5,876,693 2,753 80,414 813,431 7,999 781,429 581,030 530,552 11,991,078 731,471 995,697 60,000 15,933,482 153,408 284,235 1,977,418 22,736 645,562 632,142 21,436,151 1,566,222 995,697 2,542,026 21,810,175 153,408 2,753 364,649 2,790,849 30,735 781,429 1,226,592 1,162,694 33,427,229 488,962 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 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. 206
  170. 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 Expenses Gains / (loss) on sale of securities Total ------------------- (Rupees in ‘000) ------------------Islamic financing and related assets Investments Due from financial institutions Others 10.2 737,886 1,039,317 55,364 301,542 2,134,109 (7,013) (7,013) (1,135) (1,135) 737,886 1,039,317 55,364 293,394 2,125,961 Incentive profits (Hiba) The Bank paid an aggregate amount of Rs. 117.618 million as incentive profits (Hiba), which includes Rs. 54.819 million for normal pool and Rs. 62.799 million for special pool during the year ended 31 December 2021. 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 2021 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 8,414,817 3,256,000 178,550 1,032,555 100,299 35,413 - Savings Deposits 17,127,779 17,127,779 3,812,000 - - - - - - 3,252,339 - - - - - - 3,256,000 178,550 1,032,555 100,299 35,413 - Current Account - Remunerative 3,252,339 28,794,935 24,192,118 207
  171. 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 57:43% 6.11% 62,799 20.34% 214,636 33.92% Monthly 4.04% Special Pool 77:23% 8.42% 54,819 24.07% 198,151 17.68% Monthly 6.96% 70:30% 7.42% 117,618 22.18% 412,787 23.54% Monthly 5.68% Total 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 1.63% 0.1636 1,716 - Quarterly 1.59% 0.1956 1,805 - Quarterly 1.67% 0.1551 1,864 - Quarterly 1.68% 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 period ended 31 December 2021, the Bank charged 30.25% (2020: 20.91%) 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 2021 2020 ------(Rupees in ‘000)--------Profit / return earned on financings, investments and placements Other income (including other charges) Directly related costs attributable to pool 1,834,449 - 1,681,923 - (54,432) (71,630) 1,780,017 1,610,293 The Bank shares all its revenue generated through banking operations with the deposit account (pertaining to Islamic Operation) holders. 208
  172. Annexure - II b ) Following weightages have been assigned to different products under the Mudaraba Pool during the year: Percentage of total Mudaraba based deposits Savings - Soneri Munafa Account Savings - Soneri Bachat Account Savings - Assan Account Current Account - Remunerative Time Deposits - Soneri Meadi 59% 1% 0% 11% 29% Minimum weightage 0.4843 0.4843 0.4843 0.0061 0.5448 Maximum weightage 1.4225 0.4843 0.4843 0.0061 1.4467 The Bank shares all its revenue generated through banking operations with the deposit account (pertaining to Islamic Operation) holders. 209
  173. 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 Cost Sale price/ Mode of Book value insurance settlement / proceeds disposal Particulars of buyers / insurance companies ---------- (Rupees in ‘000) ---------Freehold Land 451,500 850,000 1,131,801 Negotiated Habib Metropolitan Bank Limited Leasehold Improvements ------------- do ------------- 4,164 291 - Write off ------------- do ------------- 1,675 1,401 - Write off ------------- do ------------- 1,429 1,195 - Write off ------------- do ------------- 1,235 807 - Write off ------------- do ------------- 1,137 951 - ------------- do ------------- 1,009 773 844 ------------- do ------------- 874 731 - Write off ------------- do ------------- 818 684 - Write off ------------- do ------------- 622 520 - ------------- do ------------- 645 494 539 ------------- do ------------- 560 468 - ------------- do ------------- 597 457 499 Insurance Claim Jubilee General Insurance Company ------------- do ------------- 558 428 467 Insurance Claim Jubilee General Insurance Company ------------- do ------------- 557 427 466 Insurance Claim Jubilee General Insurance Company ------------- do ------------- 541 415 453 Insurance Claim Jubilee General Insurance Company ------------- do ------------- 492 412 - ------------- do ------------- 413 317 346 ------------- do ------------- 480 314 - ------------- do ------------- 477 312 - ------------- do ------------- 342 262 286 Write off Insurance Claim Jubilee General Insurance Company Write off Insurance Claim Jubilee General Insurance Company Write off Write off Insurance Claim Jubilee General Insurance Company Write off Write off Insurance Claim Jubilee General Insurance Company Various Various Various Various Tender Zahid Engineering Items with WDV of below Rs. 250,000/and cost of less than Rs. 1,000,000 3,097 1,799 61 21,722 13,458 3,961 8,671 763 1,256 8,671 763 1,256 ------------- do ------------- 2,872 - 125 ------------- do ------------- 1,259 - 8 ------------- do ------------- 1,250 - ------------- do ------------- 1,241 ------------- do ------------- 1,230 ------------- do ------------- Furniture and fixtures Items with WDV of below Rs. 250,000/and cost of less than Rs. 1,000,000 Electrical office and computer equipment Trade off Touchpoint 40 Tender Power Technology - 172 Tender Fayyaz And Company - 170 Tender Fayyaz And Company 1,207 - 117 Tender Rajab Ali And Company ------------- do ------------- 1,184 - 164 Tender Fayyaz And Company ------------- do ------------- 1,087 - 8 Trade off Touchpoint ------------- do ------------- 1,082 - 8 Trade off Touchpoint ------------- do ------------- 1,082 - 8 Trade off Touchpoint ------------- do ------------- 1,030 - 8 Trade off Touchpoint ------------- do ------------- 1,029 - 8 Trade off Touchpoint ------------- do ------------- 1,021 - 8 Trade off Touchpoint 210
  174. Annexure - III Particulars Cost Sale price / Mode of Book value insurance settlement / proceeds disposal Particulars of buyers / insurance companies ---------- (Rupees in ‘000) ---------Electrical office and computer equipment ------------- do ------------- 1,021 - 8 Trade off Touchpoint ------------- do ------------- 1,021 - 8 Trade off Touchpoint ------------- do ------------- 1,021 - 8 Trade off Touchpoint ------------- do ------------- 1,021 - 8 Trade off Touchpoint ------------- do ------------- 1,010 - 8 Trade off Touchpoint ------------- do ------------- 1,010 - 8 Trade off Touchpoint ------------- do ------------- 1,010 - 8 Trade off Touchpoint ------------- do ------------- 1,010 - 8 Trade off Touchpoint ------------- do ------------- 1,010 - 8 Trade off Touchpoint ------------- do ------------- 1,008 - 8 Trade off Touchpoint ------------- do ------------- 1,009 - 8 Trade off Touchpoint ------------- do ------------- 1,009 - 8 Trade off Touchpoint ------------- do ------------- 1,009 - 8 Trade off Touchpoint ------------- do ------------- 1,007 - 8 Trade off Touchpoint ------------- do ------------- 1,007 - 9 Trade off Touchpoint ------------- do ------------- 1,007 - 9 Trade off Touchpoint ------------- do ------------- 1,007 - 16 Trade off Touchpoint ------------- do ------------- 1,007 - 16 Trade off Touchpoint ------------- do ------------- 1,007 - 16 Trade off Touchpoint ------------- do ------------- 1,007 - 16 Trade off Touchpoint ------------- do ------------- 1,007 - 17 Trade off Touchpoint ------------- do ------------- 1,004 - 8 Trade off Touchpoint ------------- do ------------- 1,004 - 8 Trade off Touchpoint ------------- do ------------- 1,004 - 8 Trade off Touchpoint ------------- do ------------- 1,004 - 8 Trade off Touchpoint ------------- do ------------- 1,004 - 8 Trade off Touchpoint Various Various Items with WDV of below Rs. 250,000/and cost of less than Rs. 1,000,000 58,615 2,680 6,611 101,434 2,680 7,706 Motor vehicles ------------- do ------------- 1,497 - 1,557 Tender ------------- do ------------- 1,507 - 1,412 Tender Muhammad Umair Muhammad Umair ------------- do ------------- 1,034 - 825 Tender M. Aamir Khan ------------- do ------------- 1,034 - 1,080 Tender Wasim Mirza ------------- do ------------- 1,034 - 645 Tender Shahzad Abdul ------------- do ------------- 1,014 - 715 Tender M. Aamir Khan Various Various Items with WDV of below Rs. 250,000/and cost of less than Rs. 1,000,000 12,814 - 9,581 19,934 - 15,815 603,261 866,901 1,160,539 211
  175. NOTICE OF THE ANNUAL GENERAL MEETING Notice is hereby given that Thirtieth (30th) Annual General Meeting (AGM) of Soneri Bank Limited will be held on Friday, 25 March 2022 at 10:00 a.m. through video-link (Zoom). Additionally, arrangements have also been made to attend the meeting in-person at 2nd Floor, 307-Upper Mall Scheme, Lahore, to transact the following business: Ordinary Business 1) To confirm the minutes of 29th Annual General Meeting held on 26 March 2021. 2) To receive, consider and adopt Annual Audited Accounts together with the Directors' and Auditors' Reports thereon, for the year ended 31 December 2021. 3) To approve and declare the final cash dividend of Rs 1.5/- per share (i.e. 15%) for the financial year ended 31 December 2021, as recommended by the Board of Directors in its 190th meeting held on 17 February 2022. 4) To appoint Auditors of the Bank for the year ending 31 December 2022 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. Special Business 6) To consider and approve amendment made to existing Remuneration Policy for Non-Executive Directors in compliance of the Corporate Governance Regulatory Framework issued by the State Bank of Pakistan vide BPRD Circular No. 05 dated 22 November 2021 and if thought fit, to pass the following resolution as Ordinary Resolution: “RESOLVED THAT on recommendation of the Board of Directors made in its 187th meeting convened on 13 September 2021, amendment made to existing Remuneration Policy for Non-Executive Directors be and is hereby reviewed and approved in compliance of the Corporate Governance Regulatory Framework issued by the State Bank of Pakistan vide BPRD Circular No. 05 dated 22 November 2021.” Statement under Section 134(3) of the Companies Act, 2017 in respect of the special business contained in Item No.6, is annexed to the Notice of AGM. BY ORDER OF THE BOARD Muhammad Altaf Butt Company Secretary Lahore: 17 February 2022 NOTES: 1. Closure of Share Transfer Books Share Transfer Books of Soneri Bank Limited (“the Bank”) will remain closed from 18 March 2022 to 25 March 2022 (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 17 March 2022 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. Participation in the Meeting a) Via Video-link Facility (Zoom) In order to ensure safety and well-being of participants under rising COVID-19 cases, the AGM may be attended virtually via video-link (Zoom). For attending the meeting through Zoom, 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) by sending an e-mail with subject “Registration for AGM” at cs@soneribank.com maximum by 22 March 2022. 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 or WhatsApp/SMS on 0321-4001427. The Bank shall ensure that 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. b) Physical attendance While complying with instructions of the SECP Circular No.4 dated 15 February 2021 and Circular No.6 dated 03 March 2021 read with clarification issued by SECP vide their letter No.SMD/SE/2/(20)/2021/117 dated 15.12.2021, necessary arrangements have also been made to attend the meeting physically at 2nd Floor, 307-Upper Mall Scheme, Lahore. It is highlighted that complete COVID-19 related SOPs issued by the Government 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 2nd Floor, 307-Upper Mall Scheme, Lahore-54000 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. Further, proxy form may also be downloaded from the following link:https://www.soneribank.com/about-us/investor-relations/shareholders-information/ 212
  176. 4 . Change in Address 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 & Notice of Annual General Meeting Through E-Mail and CD/DVD SECP through its Notification No.S.R.O.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 by 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 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 followed by a reminder on 08 June 2021, 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 country wide circulations. This notice was also posted to the PSX for 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/ 213
  177. 10 . Deposit of Physical Shares into CDC Account The SECP, through its letter No.CSD/ED/Misc/2016-639-640 dated 26 March 2021, has advised the listed companies to adhere with the provisions of the Section 72 of the Act, which requires all the existing companies to replace shares issued by them in Physical Form with shares to be issued in Book-Entry Form in a manner as may be specified and from the date notified by the SECP but not exceeding four years from the date of promulgation of the Act. Shareholders were apprised about this requirement vide our letter dated 08 June 2021. Further, we are also continuously informing our shareholders, since this requirement was first inserted in the Act, along with benefits of maintaining their shares in scrip-less form vide AGM Notices, are hereby again 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 and avoidance of formalities required for issuance of duplicate shares. 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 and Financial Statements on the Bank’s website Notice of 30th AGM and Financial Statements and other reports of the Bank for the year ended 31 December 2021, have also been made available on the Bank’s website www.soneribank.com, in addition to its dispatch to the shareholders through CD/DVDs. AGM notice was also published in the newspapers and sent to the PSX through companies’ announcements. Statement under Section 134(3) of the Companies Act, 2017 This statement sets out the material facts concerning the special business to be transacted at Thirtieth (30th) Annual General Meeting of Soneri Bank Limited to be held on 25 March 2022. Agenda Item No. 6 Approval of amendment made in existing Remuneration Policy for Non-Executive Directors In compliance with the requirements of BPRD Circular No. 3 dated 17 August 2019 (now superseded by Corporate Governance Regulatory Framework) issued by State Bank of Pakistan, the Bank had formed the “Remuneration Policy for Non – Executive Directors” which was approved by the Shareholders in their 28th AGM convened on 26 March 2020 upon recommendations of the Board of Directors approved by them in their 175th meeting held on 13 February 2020. In that approved policy, an amendment is being proposed to be made by which a proviso to clause 3.2 that “authorizes the President to approve exceptions, if any, relating to certain expenses”, is being withdrawn. This amendment was reviewed and approved by the Board of Directors in their 187th meeting convened on 13 September 2021 subject to final approval by the Shareholders, in compliance of the Corporate Governance Regulatory Framework issued by the State Bank of Pakistan vide BPRD Circular No. 05 dated 22 November 2021. We confirm that there is no other change being proposed in this policy for approval of the Shareholders. Inspection of Documents The copies of the latest Annual Audited Financial Statements, Memorandum & Articles of Association, Remuneration Policy for Non-Executive Directors 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 30th AGM. Interest of Directors The Directors of the Bank have no direct or indirect interest with regard to above-mentioned special business that would require disclosure except to the extent of their remuneration fee as well as shareholding in the Bank. 214
  178. FINANCIAL CALENDAR Financial Calendar for the Year 2021 : 1st Quarter Results issued on 28 April 2021 2nd Quarter Results issued on 24 August 2021 3rd Quarter Results issued on 26 October 2021 Annual Results issued on 17 February 2022 30th Annual General Meeting scheduled to be held on 25 March 2022 Financial Calendar for the Year 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 held on 26 March 2021 215
  179. PATTERN OF HOLDING OF THE SHARES HELD BY THE SHAREHOLDERS AS ON 31 DECEMBER 2021 No . of Shareholders 917 1245 1047 2021 1398 561 143 72 40 40 23 15 21 23 11 10 6 6 8 5 1 4 15 3 4 4 2 4 2 3 1 2 5 3 4 2 1 1 6 2 1 1 1 1 1 2 1 1 1 2 1 216 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 125001 130001 135001 140001 145001 155001 160001 170001 175001 185001 195001 200001 210001 220001 225001 230001 235001 240001 245001 250001 260001 285001 290001 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 130000 135000 140000 145000 150000 160000 165000 175000 180000 190000 200000 205000 215000 225000 230000 235000 240000 245000 250000 255000 265000 290000 295000 31,905 344,344 829,521 4,643,618 11,474,331 6,597,924 2,489,310 1,652,415 1,105,855 1,323,131 875,112 646,453 1,021,039 1,211,173 630,884 627,812 397,965 436,634 624,493 412,134 85,470 371,402 1,488,334 306,229 431,108 448,563 235,791 488,026 259,000 398,224 137,875 283,664 745,002 475,949 652,170 345,940 177,000 189,835 1,200,000 403,502 214,864 222,500 226,000 232,268 235,962 488,142 248,000 254,493 264,000 577,342 291,035 0.0029 0.0312 0.0752 0.4212 1.0408 0.5985 0.2258 0.1499 0.1003 0.1200 0.0794 0.0586 0.0926 0.1099 0.0572 0.0569 0.0361 0.0396 0.0566 0.0374 0.0078 0.0337 0.1350 0.0278 0.0391 0.0407 0.0214 0.0443 0.0235 0.0361 0.0125 0.0257 0.0676 0.0432 0.0592 0.0314 0.0161 0.0172 0.1088 0.0366 0.0195 0.0202 0.0205 0.0211 0.0214 0.0443 0.0225 0.0231 0.0239 0.0524 0.0264
  180. No . of Shareholders 1 2 1 2 1 1 1 1 1 1 1 2 2 1 1 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Total 7751 From To Total Shares Held Percentage 295001 325001 350001 365001 390001 405001 445001 460001 500001 560001 570001 595001 600001 620001 635001 695001 1040001 1125001 1220001 1450001 1580001 1615001 1945001 2765001 2995001 3130001 3440001 3590001 4130001 4645001 4650001 4995001 5490001 5995001 6505001 8430001 9475001 12395001 13020001 13545001 22290001 24630001 37280001 37505001 43130001 48480001 51385001 53695001 86005001 101955001 109205001 307425001 300000 330000 355000 370000 395000 410000 450000 465000 505000 565000 575000 600000 605000 625000 640000 700000 1045000 1130000 1225000 1455000 1585000 1620000 1950000 2770000 3000000 3135000 3445000 3595000 4135000 4650000 4655000 5000000 5495000 6000000 6510000 8435000 9480000 12400000 13025000 13550000 22295000 24635000 37285000 37510000 43135000 48485000 51390000 53700000 86010000 101960000 109210000 307430000 295,838 658,571 353,709 732,300 393,500 405,585 449,000 461,500 504,134 560,500 571,046 1,200,000 1,208,661 620,500 636,427 1,399,000 1,040,500 1,129,647 1,225,000 1,454,000 1,584,500 1,618,500 1,948,500 2,766,216 3,000,000 3,134,650 3,441,416 3,591,580 4,134,500 4,649,000 4,650,500 5,000,000 5,494,500 5,996,522 6,506,500 8,430,965 9,477,018 12,400,000 13,020,500 13,546,734 22,291,500 24,631,642 37,280,242 37,508,988 43,133,684 48,483,000 51,386,588 53,700,000 86,008,806 101,959,549 109,208,514 307,425,706 0.0268 0.0597 0.0321 0.0664 0.0357 0.0368 0.0407 0.0419 0.0457 0.0508 0.0518 0.1088 0.1096 0.0563 0.0577 0.1269 0.0944 0.1025 0.1111 0.1319 0.1437 0.1468 0.1767 0.2509 0.2721 0.2843 0.3122 0.3258 0.3750 0.4217 0.4218 0.4535 0.4984 0.5439 0.5902 0.7647 0.8596 1.1248 1.1810 1.2288 2.0220 2.2342 3.3815 3.4023 3.9125 4.3977 4.6611 4.8709 7.8015 9.2483 9.9059 27.8853 1,102,463,481 100.000 217
  181. 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 2 160,595,102 14.5669 Trustees Alnu Trust 2 80,413,926 7.2940 Mr. Amir Feerasta 2 62,140,630 5.6365 2 625,901 0.0568 NIT 2 102,658,549 9.3117 ICP & IDBP (ICP unit) 2 807 0.0001 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 88,692,213 8.0449 Insurance Companies 3 13,562,912 1.2302 Modarabas 2 1,792 0.0002 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 43 62,860,652 5.7018 6 45,216 0.0041 13 9,435,884 0.8559 a) Local 6,481 110,044,559 9.9817 b) Foreign 1,164 7,819,028 0.7092 7,751 1,102,463,481 100.0000 Mutual Funds Joint Stock Companies Foreign Companies Others General Public: Total: 218
  182. 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 160,595,102 14.5557% National Investment Trust Limited (NIT) and ICP 102,659,356 9.4230% Trustees Alnu Trust 80,413,926 7.2884% Mr. Amir Feerasta* 62,140,630 5.6365% 799,243,526 72.5906% Total: * Voting rights on shares are restricted up to five percent only. -:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:-:Trading in shares during the year 2021: Directors CEO, CFO, HOA, Company Secretary and Executives-NIL. Notes: a) 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. b) 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. 219
  183. 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. 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. Soneri Bank Limited (Bank) expects all of its employees to act in full compliance with the policies and guidelines set forth in this Code of Conduct. It is employees’ responsibility to make themselves 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 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. 220 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 An Employee must not peruse such outside business activity(ies) and relationships using Banks resources 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. 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.
  184. 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. 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. the records in accordance with their importance and applicable statutory record retention requirements and Bank policies. 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 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. 221
  185. 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. 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. 222 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 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.
  186. LIST OF BRANCHES AS AT 31 DECEMBER 2021 REGISTERED OFFICE 2nd Floor , 307-Upper Mall Scheme, Lahore-54000 - Pakistan Tel. No.: (021) 32444401-05 & 111-567-890 CENTRAL REGION 1. Main Branch, Lahore Tel. No.: (042) 36368141-8 & 111-567-890 2. Defence Branch, Lahore Tel. No.: (042) 35730760-1, 3574616 & 35691037-9 3. Gulberg Branch, Lahore Tel. No.: (042) 35713445-8, 35759273 & 35772294-5 4. Circular Road Branch, Lahore Tel. No.: (042) 37670483, 86, 89 & 37379319 5. Model Town Branch, Lahore Tel. No.: (042) 35889311-2 & 35915666 6. PECO Road Branch, Lahore Tel. No.: (042) 35222306-7, 35203050-1, 35177804 & 35173392 CENTRAL OFFICE 10th Floor, PNSC Building, M.T. Khan Road Karachi Tel. No.: (021) 32444401-5 & 111-567-890 Swift: SONEPKKAXXX 25. Upper Mall (Corporate) Branch, Lahore Tel. No.: (042) 35789346, 49, 51 & 55 26. Islampura Branch, Lahore Tel. No.: (042) 37214394-7 27. Garhi Shahu Branch, Lahore Tel. No.: (042) 36294201-3 & 36376096 28. Zarrar Shaheed Road Branch, Lahore Tel. No.: (042) 36635167-8 29. Hamdard Chowk Kot Lakhpat Branch, Lahore Tel. No.: (042) 35140261-3 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. 50. Main Boulevard Branch, Gulberg, Lahore Tel. No.: (042) 35759924-5 & 0316-8226086-9 51. Islamic Banking Township Branch, Lahore Tel. No.: (042) 35113105 52. EME Housing Society Branch, Lahore Tel. No.: 0318-4178733-4 53. Lake City Branch, Lahore Tel. No.: 0318-4178739 54. Sundar Industrial Estate Branch, Lahore Tel. No.: 0315-4980731 & 0315-4980742 55. Islamic Banking Allama Iqbal Town Branch, Lahore Tel. No.: 0310-4031793 & 0310-4031781 56. Canal View Co-Operative Housing Society Branch, Lahore Tel. No.: 0315-4304582-5 Azam Cloth Market Branch, Lahore Tel. No.: (042) 37662203-7 57. 'K' Block Model Town Branch, Lahore Tel. No.: (042) 35880241-5 7. Cavalry Ground Branch, Lahore Tel. No.: (042) 36653728-30 & 36619702 8. Islamic Banking Temple Road Branch, Lahore Tel. No.: (042) 36376341, 2 & 6 34. Jail Road Branch, Lahore Tel. No.: (042) 35408936-8 58. Lalik Chowk Branch, Lahore Tel No.: (042) 35749534-5 & 35707640-1 9. Allama Iqbal Town Branch, Lahore Tel. No.: (042) 37812395-7 35. Badami Bagh Branch, Lahore Tel. No.: (042) 37731601, 2 & 4 59. Valencia Town Branch, Lahore Tel No.: (042) 35210593-5 10. Baghbanpura Branch, Lahore Tel. No.: (042) 36832811-3 36. Montgomery Road Branch, Lahore Tel. No.: (042) 36291013-4 60. Shadbagh Branch, Lahore Tel. No.: (042) 37608161-2 11. Thokar Niaz Baig Branch, Lahore Tel. No.: (042) 35313651, 3 & 4 0317-4484542-3 37. Islamic Banking DHA Phase: VI Branch, Lahore Tel. No.: (042) 37180535-7 61. DHA Phase-VIII Branch, Lahore Tel. No.: - 12. Ghazi Chowk Branch, Lahore Tel. No.: (042) 35188505-7 & 35185661-3 38. Bahria Town Branch, Lahore Tel. No.: (042) 35976354 & 0316-8226346-9 62. Park Avenue Branch, Lahore Tel. No.: - 13. Islamic Banking New Garden Town Branch, Lahore Tel. No.: (042) 35940611-616 39. Expo Centre Branch, Lahore Tel. No.: (042) 35314087, 88, 90 & 91 63. Islamic Banking Johar Town Branch, Lahore Tel. No.: - 14. DHA Phase-III Branch, Lahore Tel. No.: (042) 35734081, 2, 3 & 5 15. Chungi Amer Sadhu Branch, Lahore Tel. No.: (042) 35922182,184 & 186 16. 40. WAPDA Town Branch, Lahore Tel. No.: (042) 35187611-2 64. State Life Housing Society Branch, Lahore Tel. No.: - 41. Shah Alam Market Branch, Lahore Tel. No.: (042) 37376213-4 & 0316-8226277-8 65. Muridke Branch Tel. No.: (042) 37166511-4 & 37981100 Johar Town Branch, Lahore Tel. No.: (042) 35204191-3 42. DHA Phase-V Branch, Lahore Tel. No.: (042) 35695678 & 0316-8226322-3 66. Main Branch, Gujranwala Tel. No.: (055) 3843560-2 & 111-567-890 17. Wahdat Road Branch, Lahore Tel. No.: (042) 37424821-7 & 37420591 43. 67. Islamic Banking Gujranwala Cantt. Branch, Gujranwala Tel. No.: (055) 3861931-3 & 5 18. Gunpat Road Branch, Lahore Tel. No.: (042) 37361607-9 Block-L Gulberg-III Branch, Lahore Tel. No.: (042) 35861052-4 & 0316-8226326-7 68. WAPDA Town Branch, Gujranwala Tel. No.: (055) 4291136-7 19 Airport Road Branch, Lahore Tel. No.: (042) 35700115-8 69. Kamokee Branch, District Gujranwala Tel. No.: (055) 6813501-6 70. Sheikhupura Road Branch, Gujranwala Tel. No.: (055) 4219661-5 71. Wazirabad Branch Tel. No.: (055) 6603703-4 & 6608555 72. Ghakkar Mandi Branch Tel. No.: (055) 3832611-2 73. Main Branch, Faisalabad Tel. No.: (041) 2639873, 7-8 & 111-567-890 74. Peoples Colony Branch, Faisalabad Tel. No.: (041) 8555714 & 8555720 44. Walton Road Branch, Lahore Tel. No.: (042) 36672305 & 0316-8226339, 40 & 41 45. Faisal Town Branch, Lahore Tel. No.: (042) 35170540 & 0316-8226335, 7 & 8 20. Timber Market Branch, Lahore Tel. No.: (042) 37725353-8 21. Shahdara Branch, Lahore Tel. No.: (042) 37920085, 37941741-3 & 37921743-8 46. Karim Block Branch, Lahore Tel. No.: (042) 35417757 & 0316-8226412, 3 & 4 22. Manga Mandi Branch, Lahore Tel. No.: (042) 35383516-9 47. Defence Road Branch, Lahore Tel. No.: 0316-8226415-8 23. Badian Road Branch, Lahore Tel. No.: (042) 37165390-2 48. Safari Garden Branch, District Lahore Tel. No.: 0317-4484537-9 24. Mughalpura Branch, Lahore Tel. No.: (042) 36880892-4 49. Raiwind Branch, District Lahore Tel. No.: (042) 35398661-2 & 0317-4484562-4 223
  187. 75 . Ghulam Muhammadabad Branch, Faisalabad Tel. No.: (041) 2680114, 110 & 117 103. WAPDA Town Branch, Multan Tel. No.: (061) 6213011 & 0316-8226441-2 131. Chichawatni Branch, District Sahiwal Tel. No.: (040) 5484852-3 76. Islamic Banking East Canal Road Branch, Faisalabad Tel. No.: (041) 2421381-2 104. Azmat Road Branch, Dera Ghazi Khan Tel. No.: (064) 2471630-6 132. Layyah Branch Tel. No.: (060) 6414205-7 77. Civil Lines Branch, Faisalabad Tel. No.: (041) 2648105, 8 & 11 105. Lodhran Branch Tel. No.: (0608) 364766-7 133. Jampur Branch, District Rajanpur Tel. No.: (060) 4567787 & 4567325 78. Madina Town Branch, Faisalabad Tel. No.: (041) 8735551-2 & 0316-8226451-3 106. Rahim Yar Khan Branch Tel. No.: (068) 5886042-4 134. Kharoor Pacca Branch Tel. No.: (0608) 341041-2 79. Jaranwala Branch, District Faisalabad Tel. No.: (041) 4312201-6 107. Factory Area Branch, Rahim Yar Khan Tel. No.: (068) 5906032, 4 & 5 135. Muzafargarh Branch Tel. No.: (066) 2422901, 3 & 5 80. Samundri Branch, District Faisalabad Tel. No.: (041) 3423983-4 108. Liaqatpur Branch, District Rahim Yar Khan Tel. No.: (068) 5792041-4 81. Painsera Branch, District Faisalabad Tel. No.: (041) 2557100-11 & 2574300 109. Sadiqabad Branch Tel. No.: (068) 5702162, 5800161, 5800661 & 5801161 136. Fazal Garh Sanawan Branch, District Muzafargarh Tel. No.: (066) 2250214-5 82. Killianwala Branch, District Faisalabad Tel. No.: (041) 3214151, 2 & 3 110. Bahawalpur Branch Tel. No.: (062) 2731703-1 83. Adda Zafar Chowk Branch, District Faisalabad Tel. No.: - 111. 84. Khurrianwala Branch Tel. No.: (041) 4360701-2 85. Chiniot Branch Tel. No.: (047) 6333840-4 86. Jhang Branch Tel. No.: (047) 7651601-2 87. Shorkot City Branch, District Jhang Tel. No.: 0316-8226093, 95, 97 & 98 88. Small Industrial Estate Branch, Sialkot Tel. No.: (052) 3242607-9 89. Pasrur Road Branch, Sialkot Tel. No.: (052) 3521655, 755 & 855 & 3611655 & 755 Islamic Banking 90. Sialkot Cantt Branch, Sialkot Tel. No.: (052) 4560023-7 Satellite Town Branch, Bahawalpur Tel. No.: (062) 2280602-3 112. Ahmedpur Sharqia Branch District Bahawalpur Tel. No.: (062) 2271345 & 0316-8226404, 6 & 8 142. Pattoki Branch Tel. No.: (049) 4422435-6 115. Pull-111 Branch, District Sargodha Tel. No.: (048) 3791403-4 & 0316-8226449 & 50 143. Ellahabad Branch Tel. No.: (049) 4751130 116. Sillanwali Branch, District Sargodha Tel. No.: 048-6532292-3 117. Jauharabad Branch, District Khushab Tel. No.: (0454) 723011-2 118. Khushab Branch, District Khushab Tel. No.: (0454) 710294, 5 & 6 92. Daska Branch, District Sialkot Tel. No.: (052) 6617847-8 120. Khanewal Branch Tel. No.: (065) 2551560-3 93. Daska Road Branch, Addah, District Sialkot Tel. No.: (052) 3525337 & 9 121. Kabirwala Branch, District Khanewal Tel. No.: (065) 2400910-3 94. Wazirabad Road Branch, Sialkot Tel. No.: (052) 3253752-4 122. Abdul Hakeem Branch, District Khanewal Tel. No.: (065) 2441888 & 0316-8226310-2 95. Sheikhupura Branch Tel. No.: (056) 3810933 & 3813133 123. Mian Channu Branch Tel. No.: (065) 2662201-2 96. Sharaqpur Sharif Branch, District Sheikhupura Tel. No.: - 124. Depalpur Branch Tel. No.: (044) 4541341-2 125. Okara Branch Tel. No.: (044) 2553012-4 & 2552200 97. Nankana Sahib Branch Tel. No.: (056) 2876342-3 98. Main Branch, Multan Tel. No.: (061) 4504018, 4504118, 4519927 & 4512884 126. Hujra Shah Muqeem Branch, District Okara Tel. No.: (044) 4860401-3 & 0316-8226419-21 Islamic Banking Shah Rukn-e-Alam Branch, Multan Tel. No.: (061) 6784051-4 & 6782081 127. Haveli Lakha Branch, District Okara Tel. No.: (044) 4775412-3 102. Gulgasht Colony Branch, Multan Tel. No.: (061)-6222701 & 0316-8226393-5 224 140. Jalalpur Bhattian Branch, District Hafizabad Tel. No.: (0547) 500848-50 114. Club Road Branch, Sargodha Tel. No.: (048) 3726021-3 119. Bhalwal Branch Tel. No.: (048) 6642224 & 0316-8226331-2 101. Mumtazabad Branch, Multan Tel. No.: (061) 6760212-4 139. Shahbaz Khan Road Branch, Kasur Tel. No.: (0492) 764890-3 141. Hafizabad Branch Tel. No.: (0547) 541641-4 Godhpur Branch, Sialkot Tel. No.: (052) 4563932-3 100. Bosan Road Branch, Multan Tel. No.: (061) 6210690-2 138. Kot Addu Branch Tel. No.: (066) 2239161-3 113. Hasilpur Branch Tel. No.: (062) 2441481-7 & 2441478 91. 99. 137. Sheikho Sugar Mills Branch District Muzafargarh Tel. No.: 0345-8530242-4 128. Renala Khurd Branch, District Okara Tel. No.: 044-2621501, 2 & 3 129. Sahiwal Branch Tel. No.: (040) 4467742-3 130. Farid Town Branch, Sahiwal Tel. No.: (040) 4272173, 4 & 5 144. Khudian Branch Tel. No.: (049) 2791595-6 145. Sambrial Branch Tel. No.: (052) 6523451-3 146. Gagoo Mandi Branch, District Vehari Tel. No.: (067) 3500311-2 147. Mailsi Branch, District Vehari Tel. No.: (067) 3750140-5 148. Burewala Branch, District Vehari Tel. No.: (067) 3773110 & 20 & 3355779 149. Vehari Branch Tel. No.: (067) 3361370-2 150. Tibba Sultanpur Branch, District Vehari Tel. No.: 151. Mandi Bahauddin Branch Tel. No.: (0546) 507602, 3 & 8 152. Bahawalnagar Branch Tel. No.: (063) 2274795-6 153. Haroonabad Branch, District Bahawalnagar Tel. No.: (063) 2251664-5 154. Toba Tek Singh Branch Tel. No.: (046) 2513203-4 155. Gojra Branch, District Toba Tek Singh Tel. No.: (046) 3516392 & 3515577 156. Kamalia Branch, District Toba Tek Singh Tel. No.: (046) 3411405-6 157. Pir Mahal Branch Tel. No.: (046) 3361690 & 5 158. Gujrat Branch Tel. No.: (053) 3520591, 2 & 4 159. Kotla Arab Ali Khan, District Gujrat Tel. No.: (053) 7575501 & 3
  188. 160 . Kharian Branch Tel. No.: (053) 7602904, 5 & 7 185. North Karachi Branch, Karachi Tel. No.: (021) 36920140-5 & 0316-8226171-2 213. Alyabad Branch, Karachi Tel. No.: (021) 36826727 & 36332517 161. Pak Pattan Branch, District Pak Pattan Tel. No.: (0457) 371781-5 186. Block-7 Gulshan-e-Iqbal Branch, Karachi Tel. No.: (021) 34815811-2, 34833728 & 777 214. Saudabad Branch, Malir, Karachi Tel. No.: (021) 34111901-5 162. Arif wala Branch, District Pak Pattan Tel. No.: (0457) 834013, 5 & 6 Islamic Banking 187. Cloth Market Branch, Karachi Tel. No.: (021) 32442961 & 32442977 215. Shireen Jinnah Colony Branch, Karachi Tel. No.: (021) 34166262-4 163. Chishtian Branch Tel. No.: (063) 2501141-2 & 0316-8226304-6 164. Khanpur Branch Tel. No.: (068) 5577719-20 & 0316-8226307-9 165. Narowal Branch Tel. No.: (0542) 411405 & 0316-8226328-30 166. Rajanpur Branch Tel. No.: (0604) 688108 & 0316-8226396 167. Mianwali Branch Tel. No.: (0459) 230825, 6 & 7 SOUTH REGION 188. Paria Street Kharadar Branch, Karachi Tel. No.: (021) 32201059, 60 & 61 Islamic Banking 216. Al-Tijarah Centre Branch, Karachi Tel. No.: (021) 34169251-3 189. SUPARCO Branch, Karachi Tel. No.: (021) 34970560, 34158325-6, 37080810 & 0316-8226457 217. Barkat-e-Haidery Branch, Karachi Tel. No.: (021) 36645688-9 190. Chandni Chowk Branch, Karachi Tel. No.: (021) 34937933 & 34141296 191. Allama Iqbal Road Branch, Karachi Tel. No.: (021) 34387673-4 192. Nishtar Road Branch, Karachi Tel. No.: (021) 32239711-3 & 32239678 168. Main Branch, Karachi Tel. No.: (021) 32436990 & 32444401-5 & 111-567-890 Islamic Banking 193. Waterpump Branch, Karachi Tel. No.: (021) 36312113 & 36312108, 36312349 & 36311908 169. Clifton Branch, Karachi Tel. No.: (021) 35877773-4, 35861286 & 35375448 & 0316-8226066-71 194. APWA Complex Branch, Karachi Tel. No.: (021) 32253143 & 32253216 170. Garden Branch, Karachi Tel. No.: (021) 32232877-8 0316-8226125-30 171. F. B. Area Branch, Karachi Tel. No.: (021) 36373782-3 & 36811646 172. Korangi Industrial Area Branch, Karachi Tel. No.: (021) 35113898-9, 35113900-1 & 0316-8226189-92 179. SITE Branch, Karachi Tel. No.: (021) 32568330, 32550997 & 32550903-4 180. Zamzama Branch, Karachi Tel. No.: (021) 35375835 & 35293435 181. Gole Market Branch, Karachi Tel. No.: (021) 36618932, 36618925 & 0316-8226154-62 182. Gulistan-e-Jauhar Branch, Karachi Tel. No.: (021) 34020943-5 183. M. A. Jinnah Road Branch, Karachi Tel. No.: (021) 32213972 & 32213498 184. Gulbahar Branch, Karachi Tel. No.: (021) 36607744 & 0316-8226434-5 222. Khayaban-e-Ittehad Branch, Karachi Tel. No.: (021) 35347413-6 224. New M. A. Jinnah Road Branch, Karachi Tel. No.: (021) 34894941-3 197. Bahadurabad Branch, Karachi Tel. No.: (021) 34135842-3 225. DHA Phase-IV Branch, Karachi Tel. No.: (021) 35311491-2 & 0316-8226285-7 198. New Challi Branch, Karachi Tel. No.: (021) 32625246 & 32625279 226. Gulberg Branch, Karachi Tel. No.: (021) 36340553, 549 & 0316-8226291-2 200. Zaibunissa Street Saddar Branch, Karachi Tel. No.: (021) 35220025-7 178. Gulshan-e-Iqbal Branch, Karachi Tel. No.: (021) 34811830-33 & 0316-8226239-45 221. Timber Market Branch, Karachi Tel. No.: (021) 32742491-2 196. Malir Branch, Karachi Tel. No.: (021) 34517982-3 174. Haidery Branch, Karachi Tel. No.: (021) 36638617, 36630409-410 & 0316-8226231-8 177. DHA Branch, Karachi Tel. No.: (021) 35852209, 35845211 & 35340825 Islamic Banking 220. Rashid Minhas Road Branch, Karachi Tel. No.: (021) 34983878 & 34837443-4 223. Bahria Complex-III (Corporate) Branch, Karachi Tel. No.: (021) 35640731-6 35640235-7 199. Shah Faisal Colony Branch, Karachi Tel. No.: (021) 34602446-7 176. Shahrah-e-Faisal Branch, Karachi Tel. No.: (021) 34316128, 34316395, 34322150, 34398430 & 34535545-46, 53-54 219. Enquiry Office Nazimabad No.: 2 Branch, Karachi Tel. No.: (021) 36601502-5 195. Clifton Block-2 Branch, Karachi Tel. No.: (021) 35361115-7 173. AKU Branch, Karachi Tel. No.: (021) 34852251-3 & 33102498-9 175. Jodia Bazar Branch, Karachi Tel. No.: (021) 32441786, 32442208, 32463894 & 0316-8226202-10 218. Shadman Town Branch, Karachi Tel. No.: (021) 36903038-9 227. New Sabzi Mandi Branch, Karachi Tel. No.: (021) 36870506-7 & 0316-8226409-11 201. Liaquatabad Branch, Karachi Tel. No.: (021) 34860723-25 228. Clifton Block-08 Branch, Karachi Tel. No.: (021) 35867435-6 & 0316-8226425-7 202. Lea Market Branch, Karachi Tel. No.: (021) 32526193-4 229. Block-02 Gulshan-e-Iqbal Branch, Karachi Tel. No.: (021) 34988781-2 203. Korangi Township No.: 2 Branch, Karachi Tel. No.: (021) 35058041 & 35071181 230. Garden Market Branch, Karachi Tel. No.: (021) 32244195-6 & 0316-8226431-3 204. North Karachi Ind. Area Branch, Karachi Tel. No.: (021) 36962851, 52 & 55 205. F. B. Industrial Area Branch, Karachi Tel. No.: (021) 36829961-4 206. Napier Road Branch, Karachi Tel. No.: (021) 32713539-40 207. Gulshan-e-Hadeed Branch, Karachi Tel. No.: (021) 34710252 & 256 208. Metroville Branch, Karachi Tel. No.: (021) 36752206-7 209. Defence Phase-II Extension Branch, Karachi Tel. No.: (021) 35386910-12 210. North Karachi Township Branch, Karachi Tel. No.: (021) 36968604-7 211. Stock Exchange Branch, Karachi Tel. No.: (021) 32414003-4 & 32415927-8 212. Gulshan-e-Jamal Branch, Karachi Tel. No.: (021) 34682682-4 231. Block-N North Nazimabad Branch, Karachi Tel. No.: (021) 36641623-4 & 0316-8226436-38 232. Marriot Road Branch, Karachi Tel. No.: (021) 32461840-42 & 0316-8226428-30 233. SITE-II Branch, Karachi Tel. No.: (021) 36881235-6 & 0316-8226445-47 234. Shersha Branch, Karachi Tel. No.: (021) 32583001-3 & 0317-4484534-6 235. DHA Phase-VIII Branch, Karachi Tel. No.: 0315-4979265, 328 & 445 236. Khalid Bin Waleed Road Branch, Karachi Tel. No.: (021) 34522044, 5 & 6 237. Bokhari Commercial Branch, Karachi Tel. No.: (021) 35170651, 2 & 3 238. 26th Commercial Street Branch, Karachi Tel. No.: (021) 35290094, 5 & 6 225
  189. 239 . Bahria Town Branch, Karachi Tel. No.: 0318-4304576-7 265. Deh. Sonhar Branch, District Badin Tel. No.: (0297) 870729 & 870781-3 Islamic Banking 240. Gulistan-e-Jauhar Branch, Karachi Tel. No.: 0318-4304615, 7 & 8 266. Matli Branch Tel. No.: (0297) 840171-2 Islamic Banking 241. North Karachi Township Branch, Karachi Tel. No.: 021-36948010, 1 & 2 Islamic Banking 242. Korangi Industrial Area Branch, Karachi Tel. No.: Islamic Banking 243. Dhoraji Colony Branch, Karachi Tel. No.: (021) 34120053-4 244. Main Branch, Hyderabad Tel. No.: (022) 2781528-9, 2782347 & 111-567-890, 0316-8226044-5 245. F. J. Road Branch, Hyderabad Tel. No.: (022) 2728131, 2785997 & 2780205 267. Tando Bago Branch, District Badin Tel. No.: (0297) 854554-6 268. Buhara Branch, District Thatta Tel. No.: 0316-8226439-40 269. Dhabeji Branch, District Thatta Tel. No.: (021) 34420030, 31 & 39 270. Makli Branch, District Thatta Tel. No.: (0298) 581807, 8 & 9 271. Hub Branch, District Lasbela Tel. No.: (0853) 310225-7 272. Umerkot Branch Tel. No.: (0238) 571350 & 356 293. Islamic Banking Shahrah-e-Iqbal Branch, Quetta Tel. No.: (081) 2820227-30 & 37 294. Chamman Branch Tel. No.: (0826) 613685 & 0316-8226342-4 295. Khuzdar Branch Tel. No.: (0848) 412861-3 & 0316-8226466-68 NORTH REGION 296. Main Branch, Peshawar Tel. No.: (091) 5277914-8 & 5277394 297. Chowk Yadgar Branch, Peshawar Tel. No.: (091) 2573335-7 & 2220006 Islamic Banking 298. Khyber Bazar Branch, Peshawar Tel. No.: (091) 2566811-3 273. Nawabshah Branch Tel. No.: (0244) 363918-9 Islamic Banking 299. G. T. Road Branch, Peshawar Tel. No.: (091) 2263347, 2263323 & 53 274. Sakrand Branch, District Nawabshah Tel. No.: 0318-4244919 & 0318-4244922 & 3 300. Main Branch, Rawalpindi Tel. No.: (051) 5123123, 4, 5 & 8 & 5123136-7 275. Nawab Wali Muhammad Branch District Shaheed Benazirabad Tel. No.: (0244) 311069, 70 & 71 301. Chandni Chowk Branch, Rawalpindi Tel. No.: (051) 4571160, 63, 86 & 87 & 4571301 276. Mirpurkhas Branch Tel. No.: (0233) 821221 & 821317-8 302. 22 Number Chungi Branch, Rawalpindi Tel. No.: (051) 5563576-7 277. Digri Branch, District Mirpurkhas Tel. No.: (0233) 869661, 2 & 3 303. Muslim Town Branch, Rawalpindi Tel. No.: (051) 5405506 & 4931112-3 278. Larkana Branch Tel. No.: (074) 4058211-13 304. Pindora Branch, Rawalpindi Tel. No.: (051) 4419020-22 279. Panjhatti Branch Tel. No.: (0243) 552183-6 305. Gulraiz Branch, Rawalpindi Tel. No.: (051) 5595148-9 & 5974073 252. Auto Bhan Road Branch, Hyderabad Tel. No.: (022) 2100062-3 & 0316-8226313-4 280. Ghotki Branch Tel. No.: (0723) 680305-6 253. Matyari Branch, District Matyari Tel. No.: (022) 2760125-6 281. Deharki Branch Tel. No.: (0723) 644156, 158 & 160 Islamic Banking 306. Peshawar Road Branch, Rawalpindi Tel. No.: (051) 5460113-7 254. Tando Allah Yar Branch Tel. No.: (022) 3890260-4 282. Thull Branch Tel. No.: (0722) 610153-4 255. Sultanabad Branch, District Tando Allah Yar Tel. No.: (022) 3404101-2 283. Kandkhot Branch Tel. No.: (0722) 572883-6 246. Latifabad Branch, Hyderabad Tel. No.: (022) 3816309 & 3816625 247. Qasimabad Branch, Hyderabad Tel. No.: (022) 2651968 & 70 248. Islamic Banking Isra University Branch, District Hyderabad Tel. No.: (022) 2032322 & 2030161-4 249. Prince Ali Road Branch, Hyderabad Tel. No.: (022) 2638514 & 2622122 250. S.I.T.E. Branch, Hyderabad Tel. No.: (022) 3886861-2 251. Faqir Jo Pir Branch, Hyderabad Tel. No.: (022) 2612685-6 & 0316-8226096 256. Tando Muhammad Khan Branch Tel. No.: (022) 3340371-2 & 0316-8226267-8 284. Jacobabad Branch Tel. No.: (0722) 654041-5 257. Pano Aqil Branch, District Sukkur Tel. No.: (071) 5690081, 2 & 3 285. Shahdadkot Branch, District Qamber Shahdadkot Tel. No.: (074) 4012401-2 258. Sukkur Branch Tel. No.: (071) 5622382, 5622925 & 0316-8226055-63 286. Dadu Branch Tel. No.: (025) 4711417-8 & 0316-8226294-6 259. Sanghar Branch, District Sanghar Tel. No.: (0235) 543376-7 & 0316-8226246-7 260. Tando Adam Branch, District Sanghar Tel. No.: (0235) 571640-44 261. Shahdadpur Branch, District Sanghar Tel. No.: (0235) 841982-4 287. Mehar Branch, District Dadu Tel. No.: (025) 4731113-4 288. Bhan Sayedabad Branch, District Jamshoro Tel. No.: 0316-8226296-7 289. Shikarpur Branch Tel. No.: (0726) 540381-3 & 0316-8226319-21 262. Shahpur Chakar Branch, District Sanghar Tel. No.: (0235) 846010-12 290. Moro Branch, District Naushero Feroze Tel. No.: (0242) 4102000, 4102001 & 4102002 263. Golarchi Branch, District Badin Tel. No.: (0297) 853192-4 291. Mith Branch, District Tharparkar Tel. No.: (0232) 261291, 2 & 3 264. Talhar Branch, District Badin Tel. No.: (0297) 830387-9 292. Main Branch, Quetta Tel. No.: (081) 2821610 & 2821641 226 307. Bahria Town Branch, Rawalpindi Tel. No.: (051) 5733772-3 & 5733768-9 Islamic Banking 308. Chaklala Scheme-III Branch, Rawalpindi Tel. No.: (051) 5766345-7 309. Adyala Road Branch, Rawalpindi Tel. No.: (051) 5569091, 96, 97 & 99 310. Bahria Town Phase-VII Branch, Rawalpindi Tel. No.: (051) 5400259-60 & 5400255 & 58 311. Bahria Town Phase-VIII Branch, Rawalpindi Tel. No.: (051) 5195232, 4, 5 & 6 Islamic Banking 312. Faisal Town Branch, Rawalpindi Tel. No.: (051) 2720670-5 313. Bewal Branch, District Rawalpindi Tel. No.: (051) 3360274-5 314. Wah Cantt. Branch, District Rawalpindi Tel. No.: (051) 4511140-1 & 0317-4484551-3 315. Kallar Syedan Branch, District Rawalpindi Tel. No.: (051) 3570903 Islamic Banking 316. Satellite Town Branch, Rawalpindi Tel. No.: 0310-8143237 & 0310-8153237 317. Main Branch, Islamabad Tel. No.: (051) 2348174 & 78 & 111-567-890 318. G-9 Markaz Branch, Islamabad Tel. No.: (051) 2850171-3
  190. 319 . Islamic Banking I-10 Markaz Branch, Islamabad Tel. No.: (051) 4101733-5 320. I-9 Markaz Branch, Islamabad Tel. No.: (051) 4858101-3 321. E-11 Branch, Islamabad Tel. No.: (051) 2228757-8 322. DHA Phase-II Branch, Islamabad Tel. No.: (051) 5161967-9 & 5161970-72 Islamic Banking 323. F-8 Markaz Branch, Islamabad Tel. No.: (051) 2818019-21 324. G-11 Markaz Branch, Islamabad Tel. No.: (051) 2363366-68 325. F-11 Markaz Branch, Islamabad Tel. No.: (051) 2101076-7 & 0316-8226282-4 326. DHA Phase-II (Corporate) Branch, Islamabad Tel. No.: (051) 2826573-4 & 0316-8226303 347. Aliabad Branch, Hunza Tel. No.: (05813) 455000, 455001 & 455022 348. Gahkuch Branch Tel. No.: (05814) 450409-10 349. Skardu Branch Tel. No.: (05815) 450327 & 450188-9 350. Abbottabad Branch Tel. No.: (0992) 385231-3 & 383073-75 351. Jhelum Branch Tel. No.: (0544) 625794-5 352. Dina Branch, District Jhelum Tel. No.: 0310-4755851, 2 & 6 353. Chitral Branch, District Chitral Tel. No.: (0943) 412078-9 354. Chakwal Branch Tel. No.: (0543) 543128-30 & 0316-8226045 355. Mardan Branch Tel. No.: (0937) 864753-7 327. PWD Branch, Islamabad Tel. No.: (051) 5708789, 90 & 91 356. Muzaffarabad Branch Tel. No.: (0582) 2920025-6 328. I-8 Markaz Branch, Islamabad Tel. No.: (051) 2719242-44 357. CMH Road Branch, Muzaffarabad (AJK) Tel. No.: (0582) 2443535-7 329. Gulberg Greens Branch, Islamabad Tel. No.: 0312-4015609, 0312-4019186 358. Islamic Banking Chillas Branch, District Diamer Tel. No.: (05812) 450631-2 330. Lehtrar Road Branch, Tarlai, District Islamabad Tel. No.: (051) 2241661-5 331. Soan Garden Branch, District Islamabad Tel. No.: (051) 5738940-2 332. Bahria Enclave Branch, Islamabad Tel. No.: 0310-4755851-2 & 6 & 0316-8226091 333. G-13 Markaz Branch, Islamabad Tel. No.: (051) 2301101-3 334. Bhara Kahu Branch, District Islamabad Tel. No.: 0316-8226092, 0311-4463237 & 0311-4883237 & 0311-4993237 335. Rawat Branch, District Islamabad Tel. No.: 0311-6203237 & 0311-6903237 336. Gujar Khan Branch Tel. No.: (051) 3516328, 29 & 30 337. Waisa Branch, District Attock Tel. No.: (057) 2651068-9 338. Attock Branch Tel. No.: 0316-8226540-2 Islamic Banking 339. Swabi Branch, District Swabi Tel. No.: (0938) 221741-45 340. Mirpur Branch, (AJK) Tel. No.: (05827) 444488 & 448044 359. Islamic Banking Mingora Branch, Swat Tel. No.: (0946) 714355, 714400 & 0316-8226273-75 360. Battagram Branch Tel. No.: (0997) 311044-6 361. Mansehra Branch Tel. No.: (0997) 301931-6 Islamic Banking 362. Dera Ismail Khan Branch Tel. No.: (0966) 718010-4 & 718091-4 363. Kohat Branch, District Kohat Tel. No.: (0922) 511011 & 511033 Islamic Banking 364. Nowshera Branch, District Nowshera Tel. No.: (0923) 611545-8 Islamic Banking 365. Shakas Branch, District Khyber Agency Tel. No.: 0316-8226101 & 0316-8226091, 2&9 366. Batkhela Branch Tel. No.: (0932) 411115, 6 & 7 Islamic Banking 367. Timergara Branch, District Lower Dir. Tel. No.: (0945) 822081, 2 & 3 341. Islamgarh Branch, (AJK) Tel. No.: (05827) 423981-2 342. Jattlan Branch, District Mirpur (AJK) Tel. No.: (05827) 403591-4 343. Gilgit Branch Tel. No.: (05811) 453749, 450504, 450498 & 451838 344. NLI Market (Sub Branch), Gilgit Tel. No.: (05811) 450802, 4 & 5 345. Denyore Branch, District Gilgit Tel. No.: (05811) 459986-7 346. Jutial Branch, District Gilgit Tel. No.: (05811) 457233-5 227
  191. FOREIGN CORRESPONDENTS 228 Country Name of Bank Argentina Banco Credicoop Cooperativo Limitado Banco De Galicia Y Buenos Aires Australia Citigroup Pty Limited , Sydney 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 Alfalah Limited Bahrain Askari Bank Limited, Bahrain Branch Bank Al Habib Limited Habib Bank Ltd. JS Bank Limited Bahrain MCB Bank Limited Bahrain United Bank Limited Bahrian Bangladesh Bank Alfalah Limited (Bangladesh - Dhaka Branch) Brac Bank Limited Eastern Bank Ltd. Habib Bank Ltd. Jamuna Bank Limited Southeast Bank Limited Standard Chartered Bank United Commercial Bank Ltd Belgium Byblos Bank Europe S.A. Commerzbank AG,The,Brussels Branch Deutsche Bank A.G. Belfius Bank SA/NV Habib Bank Ltd. 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 Citibank Canada 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 Ltd Bank Of Ningbo Bank Of Shanghai Changshu Rural Commercial Bank
  192. Country Name of Bank China Citic Bank China Construction Bank Corporation China Everbright Bank China Merchants Bank Citibank (China) Co., Ltd. Habib Bank Limited Urumqi Branch 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., Ltd. 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., Ltd 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 Ltd. Czechia Ceskoslovenska Obchodni Banka, A.S. Citibank Europe Plc, Organizacni Slozka Commerzbank AG 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 Habib Bank Limited, France National Bank Of Pakistan Societe Generale Germany Commerzbank AG Commerzbank AG (Formerly Dresdner Bank AG) Danske Bank Deutsche Bank AG DZ Bank AG (Formerly WBZ Bank AG) Hamburg Commercial Bank AG Hamburger Sparkasse AG JP Morgan AG Landesbank Baden-Wuerttemberg M.M.Warburg U. Co (Ag U. Co.) KGAA 229
  193. Country Name of Bank National Bank Of Pakistan , Frankfurt Sparkasse Dortmund Sparkasse Krefeld - Zweckverbandssparkasse Der Stadt Krefeld Und Des Kreises Viersen Sparkasse Westmuensterland Standard Chartered Bank AG 230 Greece Alpha Bank AE Citibank Europe Plc Greece Branch Piraeus Bank SA Hong kong Bank Of America, N.A. Hong Kong Citibank N.A. Deutsche Bank AG Habib Bank Zurich (Hong Kong) Limited 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 Unicredit Bank AG Hong Kong Branch Wells Fargo Bank, N.A., Hong Kong Branch (Organized Under The Laws Of U.S.A. With Limited Liability) Hungary Raiffeisen Bank Zrt. Unicredit Bank Hungary Zrt. India Citibank N.A. Deutsche Bank Ag 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, Ltd. Jakarta Branch Standard Chartered Bank Ireland Citibank Europe Plc Danske Bank A/S J.P. Morgan Bank Luxembourg S.A., Dublin Branch Italy Banca Carige Spa - Cassa Di Risparmio Di Genova E Imperia Banca Di Credito Popolare Banca Monte Dei Paschi Di Siena S.P.A. Banca Popolare Di Sondrio Banca Ubae Spa Banco Bpm Spa Bper Banca S.P.A. Cassa Di Risparmio Di Fermo Spa Commerzbank AG Deutsche Bank S.P.A. Iccrea Banca - Istituto Centrale Del Credito Cooperativo Unicredit S.P.A. Japan Citibank N.A., Tokyo Branch JP Morgan Chase Bank, N.A., Tokyo Branch
  194. Country Name of Bank Mizuho Bank , Ltd. MUFG Bank, Ltd. National Bank Of Pakistan Resona Bank, Ltd., Tokyo Saitama Resona Bank, Limited Standard Chartered Bank Sumitomo Mitsui Banking Corporation Jordan Citibank N.A. Kenya Habib Bank AG Zurich Kenya Habib Bank Limited KCB Bank Kenya Limited Republic of korea Busan Bank Citibank Korea Inc Daegu Bank, Ltd.,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 JSC Citadele Banka Lebanon Banque Libano Francaise Malaysia Citibank Berhad Hong Leong Bank Berhad JP Morgan Chase Bank Berhad MUFG Bank (Malaysia) Berhad Standard Chartered Bank Malaysia Berhad Mauritius Habib Bank Ltd Mauritius Standard Chartered Bank (Mauritius) Ltd Mexico Banco Nacional De Mexico S.A. Morocco Attijariwafa Bank (Formerly Banque Commerciale Du Maroc) Nepal Himalayan Bank Ltd. Netherlands ABN Amro Bank N.V. Citibank Europe Plc Netherlands Branch Commerzbank AG Kantoor Amsterdam Deutsche Bank AG New Zealand Bank Of New Zealand Norway Danske Bank A/S DNB Bank Asa 231
  195. 232 Country Name of Bank Oman Bank Dhofar (S.A.O.G.) Habib Bank Oman Sohar International Bank S.A.O.G Standard Chartered Bank Panama Banesco S.A. Philippines Asian Development Bank MUFG Bank, Ltd., Manila Branch Standard Chartered Bank Poland Bank Handlowy W Warszawie Sa Portugal Banco Bpi SA Caixa Central Credito Agricola Mutuo Qatar Dukhan Bank (Formerly 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 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 AG, Singapore Branch Credit Suisse Ag, Singapore Private Banking Deutsche Bank Ag Habib Bank Limited JP Morgan Chase Bank, N.A. KBC Bank N.V. Singapore Branch Mizuho Bank, Ltd. Singapore Branch Standard Chartered Bank (Singapore) Limited Sumitomo Mitsui Banking Corporation 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
  196. Country Spain Name of Bank HBZ Bank Limited Standard Chartered Bank Banco De Sabadell , S.A. Caixabank, S.A. Citibank Europe Plc Spain Branch Commerzbank AG Deutsche Bank Sociedad Anonima Espanola Kutxabank, S.A. Sri Lanka Bank Of Ceylon Commercial Bank Of Ceylon Plc Habib Bank Ltd. 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) Ltd Banque Cantonale Vaudoise Banque De Commerce Et De Placements S.A. Barclays Bank (Suisse) S.A. CA Indosuez (Switzerland) SA Habib Bank AG Zurich Luzerner Kantonalbank UBL (Switzerland) AG Zuercher Kantonalbank Banque Cantonale De Geneve Taiwan Citibank Taiwan Limited JP Morgan Chase Bank, N.A., Taipei Branch Mizuho Bank, Ltd.,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, Ltd., 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 Ltd. Kuveyt Turk Katilim Bankasi A.S. Odeabank A.S. Qnb Finansbank A.S. Turkiye Cumhuriyeti Ziraat Bankasi A.S. Turkiye Vakiflar Bankasi T.A.O. Turkland Bank AS 233
  197. Country United Arab Emirates 234 Name of Bank Turkiye Finans Katilim Bankasi A .S. Yapi Ve Kredi Bankasi A.S. Abu Dhabi Commercial Bank Bank Alfalah Limited (Dubai Branch) Citibank N.A. Deutsche Bank AG, Abu Dhabi 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 Ltd. 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 AG Habib Bank Zurich Plc HBL Bank Uk Limited 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, Na Citibank N.A. Citizens Bank, NA Comerica Bank Deutsche Bank Trust Company Americas Deutsche Bank AG East-West Bank First Horizon Bank Habib American Bank International Finance Corporation JP Morgan Chase Bank, N.A. Keybank National Association Mashreqbank PSC., New York Branch MUFG Bank Ltd. 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 Truist Bank U.S. Bank N.A. Wells Fargo Bank, N.A.
  198. Country Name of Bank Viet Nam Asia Commercial Bank Citibank N .A. Kookmin Bank JP Morgan Chase Bank, N.A., Ho Chi Minh City Branch Shinhan Bank Vietnam Limited Standard Chartered Bank (Vietnam) Limited Vietnam Export Import Commercial Joint-Stock Bank Vietnam Public Joint Stock Commercial Bank – Pvcombank Luxembourg J.P. Morgan Bank Luxembourg S.A. Luxembourg 235
  199. PROXY FORM 30th 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 30th Annual General Meeting of the Bank to be held on 25 March 2022 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 2022 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, 2nd Floor, 307-Upper Mall Scheme 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.
  200. Soneri Bank Limited AFFIX CORRECT POSTAGE The Company Secretary Soneri Bank Limited 2nd Floor , 307-Upper Mall Scheme Lahore 54000
  201. 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.