United Bank Limited: Annual Report 2017

Transcription

3. CONTENTS Company Information 05 Annexure ‘B’ as referred to in note 10.6 of the Bank’s Unconsolidated and Consolidated Financial Statements Chairman’s Profile 06 145 Board of Directors 08 Directors’ Report to the Members 16 Annexure ‘C’ as referred to in note 11.7 of the Bank’s Unconsolidated Financial Statements Sustainability at UBL in 2017 32 154 President & CEO Review 2017 33 Auditors' Report to the Members 155 Management Team 40 Consolidated Statement of Financial Position 156 Growth at a Glance 42 Consolidated Profit and Loss Account 157 UBL International Network 46 Report of Shariah Board for the Financial Year-2017 Consolidated Statement of Comprehensive Income 158 48 Consolidated Cash Flow Statement 159 Statement of Compliance with the Code of Corporate Governance 52 Consolidated Statement of Changes in Equity 160 Notes to and forming part of the Consolidated Financial Statements 161 Annexure ‘A’ as referred to in note 9.7 of the Group’s Consolidated Financial Statements 243 Annexure ‘C’ as referred to in note 11.7 of Group’s Consolidated Financial Statements 252 Consolidated Statement of Financial Position 253 Consolidated Profit and Loss Account 254 Category of Shareholders 255 Details of Mutual Funds & Modarabas 256 Auditors’ Reivew Report to the Members on the Statement of Compliance with the Code of Corporate Governance 54 Annual Statement on Internal Controls 2017 55 Disclosure in Annual Accounts 56 Financial Statement 2017 58 Auditors' Report to the Members 59 Unconsolidated Statement of Financial Position 60 Unconsolidated Profit and Loss Account 61 Unconsolidated Statement of Comprehensive Income 62 Pattern of Shareholding 257 Unconsolidated Cash Flow Statement 63 Unconsolidated Statement of Changes in Equity Shares Trading (Sale / Purchase) during the year 2017 264 64 Notice of 59th Annual General Meeting 265 Notes to and forming part of the Unconsolidated Financial Statements Statement of Material Facts 271 65 Annexure ‘A’ as referred to in note 9.8 of the Bank’s Unconsolidated Financial Statements Form of Proxy 138 Annual Report 2017 01
4. HEAR THE QUAID SPEAK ! 1. 3rd June 1947: Response to Lord Mountbatten’s Partition Plan announcement 2. 15th August 1947: Address on Radio Pakistan on the birth of Pakistan 3. 30th October 1947: Address to a mammoth public gathering in Lahore 4. 12th April 1948: Address to the students of Islamia College Peshawar Scan the QR code to listen to the four historic speeches
5. VISION TO LEAD MISSION THAT EMPOWERS VALUES THAT FORM OUR CORE VISION To be a world class bank dedicated to excellence , and to surpass the highest expectations of our customers and all other stakeholders. MISSION • Be the undisputed leader in financial services for our customers • Most innovative and fastest growing bank in targeted businesses • Continue to diversify across chosen geographies • Achieve operational excellence with the highest level of compliance • Consistently create leaders through inspired human capital • Contribute positively to the communities we operate in VALUES • Customer first • Honesty of purpose • Teamwork • Excellence • Meritocracy Annual Report 2017 03
6. ALLAMA IQBAL The most dominant poet of South Asia in the 20th century whose Urdu and Persian work foresaw a Muslim Renaissance . A philosopher who envisioned a separate homeland for the Muslims of the Sub-Continent. He is our Shair-e-Mashriq, Mufakkir-e-Pakistan and Hakeem-ul-Ummat.
7. COMPANY INFORMATION Board of Directors Sir Mohammed Anwar Pervez , OBE, HPk Chairman/Non-Executive Director Mr. Khalid A. Sherwani Independent Director Mr. Zameer Mohammed Choudrey, CBE Non-Executive Director Mr. Amar Zafar Khan Independent Director Mr. Haider Zameer Choudrey Non-Executive Director Mr. Tariq Rashid Independent Director Mr. Rizwan Pervez Non-Executive Director Ms. Sima Kamil President & CEO Mr. Arshad Ahmad Mir Non-Executive Director Committees of the Board Board Audit Committee Mr. Amar Zafar Khan Chairman Mr. Haider Zameer Choudrey Member Mr. Khalid A. Sherwani Member Mr. Aqeel Ahmed Nasir Secretary Board Risk & Compliance Committee Mr. Arshad Ahmad Mir Chairman Mr. Zameer Mohammed Choudrey, CBE Member Ms. Sima Kamil Member Mr. Imran Sarwar Secretary Chief Financial Officer Mr. Aameer Karachiwalla Company Secretary & Chief Legal Counsel Mr. Aqeel Ahmed Nasir Registered Office: 13th Floor, UBL Building, Jinnah Avenue, Blue Area, Islamabad. UBL Head Office I.I. Chundrigar Road, Karachi – 74000, Pakistan. Share Registrar THK Associates (Pvt.) Limited 1st Floor, 40-C, P.E.C.H.S Block-6, Karachi. Phone No.: 021-34168270 UAN: 021-111-000-322 Fax No.: 021-34168271 Board Human Resource & Compensation Committee Mr. Khalid A. Sherwani Chairman Mr. Rizwan Pervez Member Mr. Arshad Ahmad Mir Member Syed Zulfiqar Hussain Secretary Board IT Committee Mr. Tariq Rashid Chairman Mr. Haider Zameer Choudrey Member Ms. Sima Kamil Member Mr. Baqar Muzaffar Secretary Auditors M/s. KPMG Taseer Hadi & Co., Chartered Accountants M/s. A.F. Ferguson & Co., Chartered Accountants Legal Advisors M/s. Mehmood Abdul Ghani & Co., Advocates Contacts UAN: 111-825-111 Contact Centre: 111-825-888 Website: www.ubldirect.com Email: company.secretary@ubl.com.pk Annual Report 2017 05
8. 06 United Bank Limited
9. CHAIRMAN ’S PROFILE Sir Mohammed Anwar Pervez, OBE HPk is the Chairman of the Board of Directors of United Bank Limited since December 2013. He is also the Chairman of Bestway Group & its subsidiaries, which include Batleys Limited, Well Pharmacy and Bestway Cement Limited. He is also Chairman of Bestway Northern Limited in UK. Sir Anwar began his career in the food business in 1963 when he opened a convenience store in London. He ventured into the wholesale business in 1976 and has been responsible for growing Bestway Group into the seventh largest family business in the UK. Today, it is the 2nd largest wholesaler in the UK, the 3 rd largest retail pharmacy in the UK, the largest cement producer in Pakistan and the 2nd largest private bank in Pakistan. The Group provides employment to over 33,600 globally. Sir Anwar was awarded the Order of the British Empire (OBE) in 1992 and was conferred the title of Knight’s Bachelor in 1999 by Her Majesty the Queen for his services to the food industry and various charitable causes in the UK. In 2000, he was awarded “Hilal-e-Pakistan”. In 2005, Sir Anwar Pervez was voted winner of the prestigious “Grocer Cup for Outstanding Business Achievement” by the Institute of Grocery Distribution, UK. In 2006, he received “Sitara-e-Essar” by the President of Pakistan. The same year he was chosen as the “Master Entrepreneur – UK” at the Ernst & Young Entrepreneur of the Year 2006 Awards. In 2011, Sir Anwar was awarded with an honorary Doctor of Laws degree by FC College Lahore. In 2012, in recognition of his philanthropic services to the Community, the University of Bradford conferred on Sir Anwar Pervez an honorary Doctor of Laws degree. He is the Chairman of Bestway Foundation UK and Patron-in-Chief of Bestway Foundation Pakistan and a charter member of the Duke of Edinburgh Awards Scheme. Annual Report 2017 07
10. BOARD OF DIRECTORS Zameer Mohammed Choudrey CBE , FCA Director Mr. Zameer Mohammed Choudrey has been a Member of the Board of Directors of United Bank Limited since October 2002. He is a Member of the Board Risk and Compliance Committee (BRCC). He is also a Director of UBL Insurers Limited. He is the Chief Executive of Bestway Group, which is the seventh largest family business in UK with an annual turnover of £3.28 billion. The Group is the 2nd largest wholesaler in the UK, the 3 rd largest retail pharmacy in the UK, the largest cement producer in Pakistan and the 2nd largest private bank in Pakistan. The Group provides employment to over 33,600 globally. Zameer is a Chartered Accountant by profession. He joined Bestway Group as a Financial Controller in 1984. In 1990, he was promoted as the Group Finance Director. In 1995, he was given additional responsibilities of business diversification both in UK and Pakistan and was promoted as Chief Executive of Bestway Cement Limited. He was appointed as the Group CEO in 2004. He is a fellow of the Institute of Chartered Accountants of England & Wales and a member of the Institute of Directors. He is the Chairman of Conservative Friends of Pakistan. Zameer is a trustee of Bestway Foundation UK and Chairman of Bestway Foundation Pakistan. He is also a trustee of GroceryAid and Crimestoppers. Zameer is a member of British Asian Trust’s UK Advisory Council and a member of HRH Prince of Wales Pakistan Recovery Fund International Leadership Team. In 2014, Zameer was awarded an honorary degree by University of Kent in recognition of his philanthropic services to the community. In December 2015, Zameer was appointed Commander of the Order of the British Empire (CBE) by Her Majesty the Queen for his services to the UK wholesale industry and various charitable causes in the UK and abroad. 08 United Bank Limited
11. Haider Zameer Choudrey Director Mr . Haider Zameer Choudrey became a Director of United Bank Limited in March 2014. He is a Member of the Board Audit Committee (BAC) and Board IT Committee (BITC) and has the distinction of being the youngest Director of any listed bank in Pakistan. He is a Chartered Accountant by profession. After having distinguished himself at the world renowned Eton College, Haider read Economics at Gonville & Caius College, University of Cambridge. He also received his Masters in Economics from University of Cambridge. Between October 2009 – 2012, Haider undertook his accountancy training at KPMG UK LLP. At KPMG he was an integral part of the Consumer Markets Audit; Corporate Tax & Corporate Finance Teams. He gained rich experience of audit; finance; advisory; business strategy and corporate taxation through his exposure to the multinational clients in the FMCG; Financial Services & Telecommunication Sectors. In November 2012, Haider joined the Bestway Group and is responsible for spearheading the Group’s UK tax; international diversification and operational efficiency strategies and for providing financial / strategic oversight of all Group subsidiaries. In October 2014, Haider was an integral part of the team that worked on Bestway Group’s £620 million acquisition of The Co-operative Pharmacy, UK’s 3 rd largest retail pharmacy. In 2016, Haider was appointed as Head of Group Finance at Bestway Group. Haider has been a Director of Bestway Cement Limited since 2016. Haider is actively involved with the charitable work of the Bestway Foundation in the UK and Pakistan; and is part of the management team that is supervising the construction of two state of the art schools in Chakwal, Punjab. Haider is a certified Director from the Pakistan Institute of Corporate Governance (PICG). Annual Report 2017 09
12. BOARD OF DIRECTORS Rizwan Pervez Director Mr . Rizwan Pervez has been a Member of the Board of Directors of United Bank Limited since March 2014. He is a Member of the Board Human Resource & Compensation Committee (HRCC). He is also a Director of UBL Insurers Ltd. Rizwan graduated from the University of Pittsburgh, USA in 1990 with a BSc in Business Management. He trained with a leading UK firm of Chartered Accountants and qualified in August 1995. Rizwan is a member of the Institute of Chartered Accountants in England & Wales. He joined Bestway as a Financial Accountant in 1995 and was elected to the Board of Directors in January 2000 as Group Business Development Director. He was responsible for developing the Group’s fascia and delivered business. Rizwan was instrumental in creating the “Best-One” symbol group and Bestway Direct, the Group’s delivered wholesale operation. In 2006, Rizwan was appointed Operations Director where he led and managed the integration of Bestway and Batleys wholesale operations which created the UK’s largest independent wholesale group. In 2012, Rizwan was appointed the Group Marketing & PR Director. In 2014, he was appointed as Wholesale Operations Director. In 2016, he was appointed as Customer Liaison Director. Rizwan has served as Governor of John Kelly Schools in North West London playing a leading role in the school’s attainment of ‘academy’ status and establishing the school as a centre of excellence under its new name of The Crest Academy. Rizwan is a Trustee of Bestway Foundation UK. Rizwan is a certified Director from the Pakistan Institute of Corporate Governance (PICG). 10 United Bank Limited
13. Arshad Ahmad Mir Director Mr . Arshad Ahmad Mir, appointed as member of the Board of Directors with effect from 26 October 2009, has over four decades of extensive corporate experience in financial services, oil industry, management consultancy, manufacturing and wholesale distribution businesses. He has served with major corporate entities in areas of general management, corporate planning, project management, compliance and consultancy. Geographical coverage of his corporate roles and responsibilities encompass Pakistan, Middle East, Africa, UK & Europe. Arshad Mir is a member of Institute of Chartered Accountants and Institute of Bankers UK. He has attended various management courses and conferences including Advanced Management Programme of London Business School. He is a certified Director from Pakistan Institute of Corporate Governance (PICG). He is also Chairman of the Board Risk & Compliance Committee (BRCC) and Member of Human Resources & Compensation Committee (HRCC). Annual Report 2017 11
14. BOARD OF DIRECTORS Khalid Ahmed Sherwani Director Mr . Khalid Ahmed Sherwani was appointed Member, Board of Directors as an Independent Director in October 2014. He is a seasoned professional with vast experience of corporate governance of over 70 years, gained in over two decades, serving as director on various Boards of Directors primarily in the financial services industry of Pakistan, including chairmanship of 5 BODs of public & private sector entities. He also has top management experience of 30 years in diverse areas in major commercial banks as SEVP, CIO, CFO and CEO. He had originally joined United Bank Limited in 1968 as a Trainee in its IT Division, became its IT Head in 1974 and rose to the position of Senior Executive Vice President in 1984. Thereafter, he oversaw the working of numerous banking functions of the Bank and played a pivotal role in its restructuring during 1996-2000. He was appointed President/CEO of Allied Bank Limited, the 5th largest bank of Pakistan, in 2000 where he spear-headed restructuring and recapitalisation of the Bank and led its subsequent turnaround after being taken over by the new sponsors. He retired from Allied Bank in 2007 but was re-inducted by the sponsors as President/CEO in 2010 for a period of three years for a fast pace growth in business & profitability of the Bank and to further fine tune its systems & controls. He holds a Master’s degree from the University of Karachi and is a Certified Director from the Pakistan Institute of Corporate Governance (PICG). He is a Chairman, Board Human Resources & Compensation Committee (HRCC) and member Board Audit Committee (BAC). 12 United Bank Limited
15. Amar Zafar Khan Director Mr . Amar Zafar Khan is a Chartered Accountant, with over 30 years’ multi-functional experience at premium international financial institutions, including Price Water House, UK and Citibank NA, covering general management, directing turnarounds and developing new ventures/businesses in commercial banking, investment banking, domestic and cross-border corporate finance and securities trading. As an international staff member of Citibank, he has exposure to markets in Europe, the Middle East and Africa and has knowledge and experience of a wide spectrum of financing solutions. In 1992, he set up First Capital Securities Discount House, an IFC investment in Nigeria as the pioneering Managing Director. This institution specialised in market making of Fixed Income securities aimed at liquefying the balance sheets of Nigerian banks. In 1999 he returned to Nigeria as an Executive Director overseeing retail banking, investment banking and international operations of United Bank for Africa, one of Nigeria’s largest banks. Mr. Khan did his M.B.A. (Major in Marketing) from Cranfield School of Management, Bedford, UK. He is a Fellow, Institute of Chartered Accountants, England & Wales, UK. Mr. Khan was Chairman and CEO of United Bank Limited (UBL) from the year 2000 to 2004. At the Government’s invitation, he took the charge of this nationalised institution in order to accelerate the pace of commercialisation and achieve the objective of privatisation of the Bank. The entire Bank was turned around along contemporary banking lines. Within the first year, the organisation had turned the corner in terms of profitability. Midway the Bank was successfully privatised to multinational owners, for a price which substantially recouped equity injections by the Government. Mr. Zafar was invited by the new owners to continue as CEO in order to build the momentum achieved and assist the new Board to settle in. Further upgrading of management, staff and network occurred and the Bank built capacity for the launch of its consumer assets activity, and reported record profits for the first full year after privatisation. Previously, Mr. Amar was also appointed as Advisor and Director of UBL in 1996 by State Bank of Pakistan where he played a pivotal role in the multi-dimensional restructuring of the bank. Mr. Khan is the Chairman of Board Audit Committee (BAC) of UBL. He is a Certified Director from the Pakistan Institute of Corporate Governance (PICG). Annual Report 2017 13
16. BOARD OF DIRECTORS Tariq Rashid Director Mr . Tariq Rashid has more than 25 years’ experience in Management & Information Technology at senior levels. He spearheaded the setup of the IT infrastructure of mobile operator (Mobilink now Jazz) since inception. He led the IT organisation of Mobilink through different phases of the telecom industry’s life cycle i.e. infancy, growth and consolidation and served as VP & Chief Strategy Officer for more than 5 years. He also served as a Director of Information Technology at HQ of Telecommunication company in Egypt. He successfully led few large business/technology transformation initiatives during his career. He served as a Director on the Board of Mobilink Microfinance Bank and headed the Risk Committee. He served as Director on the Board of Mobile Number Portability Database (Guarantee) Limited. He also served as President on the Board of International School of Islamabad (ISOI) for more than 4 years. He is a Chairman of the Board IT Committee (BITC) of the UBL. He holds an engineering degree from University of Engineering & Technology, Lahore and post graduate certificate in Computers from National Academy of Higher Education. He attended different management programs abroad and locally from institutes like IMD, INSEAD, MIT and LUMS. 14 United Bank Limited
17. Sima Kamil President and CEO Ms . Sima Kamil, the President and CEO of UBL, has over 35 years of experience in the diversified fields of banking, including branch banking, corporate banking and investment banking. She started her banking career from American Express Bank. She also worked with ANZ Grindlays and Standard Chartered Bank in corporate banking and risk management. Before joining UBL, Ms. Kamil was with Habib Bank Limited where she worked for 16 years. At Habib Bank, she worked in diversified fields at senior levels, including as Head of Corporate & Investment Banking and then as Head of Branch Banking. Ms. Kamil had been associated with microfinance as Director of the First MicroFinance Bank for a number of years. She is the Chairperson of UBL (Switzerland) AG and UBL Bank (Tanzania) Limited. She is also the director on the Board of United Bank UK. In addition to her professional commitments and assignments, Ms. Kamil has interest in the social sector, primarily in education and health. She is the Chairperson of the Board of Governors of Karachi Grammar School. She has a degree in business from Kingston University, UK and an MBA from City University, London. She is a member of the Board Risk & Compliance Committee (BRCC) & Board IT Committee (BITC). She is a certified director from Institute of Business Administration (IBA), Karachi. Annual Report 2017 15
18. DIRECTORS ’ REPORT TO THE MEMBERS 2017 On behalf of the Board of Directors, I am pleased to present the 59th Annual Report of United Bank Limited for the year ended December 31, 2017. Financial Highlights UBL continued to actively build its balance sheet in 2017. Our asset base crossed Rs. 2 trillion at Dec’17, a growth of 27% over the previous year. A key milestone achieved this year was that the domestic franchise surpassed Rs. 1.0 trillion in total deposits. Building on the strong current deposits momentum, we grew the average domestic portfolio by 18% year on year. Branch network maintained its strong performance with the acquisition of 450K new current account holders (2016: 400K) to take the overall customer base of the Bank to 4.9 million (2016: 4.4 million). 2017 was also a strong year for credit expansion with the overall loan book up by 19% over Dec’16. This included aggressive build up across all three core lending segments; Corporate, Consumer and SMEs. Treasury and Capital Markets maintained their strong contribution to revenue with active bond trading while maintaining a stable stream of accrual income at high yields. Special Asset Management Unit continues to proactively pursue non-performing loans posting significant reversals resulting in domestic asset quality levels falling to below 6.2% in Dec’17 (Dec 2016: 8.8%). Overall Return on Equity (RoE) remained strong in 2017 at 20.8% (2016: 24.9%) with growth in earnings and revenue drivers across all core businesses. Rs. in billion 46.02 40.16 27.73 PBT 2016 2017 25.42 PAT UBL posted profit after tax (PAT) amounting to Rs. 25.4 billion during the year ended December 31, 2017 compared to Rs. 27.7 billion in 2016. Earnings per share were reported at Rs. 20.77 in 2017 against Rs. 22.65 per share last year. Profit before tax (PBT) closed at Rs. 40.2 billion in 2017 compared to Rs. 46.0 billion in 2016. The consolidated PAT stood at Rs. 26.2 billion in 2017 (2016: Rs. 28.0 billion) with earnings per share recorded at Rs. 21.39 (2016: Rs. 22.70). Gross revenues stood at Rs. 78.6 billion (Dec’16: Rs. 80.7 billion). Despite the low interest rate regime, growth in the balance sheet maintained net markup income in line with the 2016 level to close at Rs. 56.4 billion. Non-markup Income decreased by 6% year on year to reach Rs. 22.2 billion in 2017 but mainly due to lower capital gains and dividends. The cost to income ratio increased from 39.6% in 2016 to 45.0% 24 16 United Bank Limited United Bank Limited in 2017 owing to a 11% growth in administrative expenses and lower revenues in line with restricted margins. Overall asset quality was reported at 7.9% as at Dec’17, an improvement of 19 bps over 2016. Net provisioning expense amounted to Rs. 2.2 billion in 2017 (2016: Rs. 1.7 billion). The break-up value per share increased to Rs. 130.1 as at Dec’17 (Dec’16: Rs. 124.0). The Board is pleased to recommend a final cash dividend of Rs. 4 per share i.e. 40% for the year ended December 31, 2017, bringing the total cash dividend for the year 2017 to 130%. Net Markup Income Rs. in billions 60.00 57.04 50.00 56.42 20.00 5.0% 4.7% 10.00 - 7.0% 6.0% 40.00 30.00 8.0% 2016 Net Markup Income 3.9% 2017 4.0% 3.0% 2.0% 1.0% Net Interest Margin The current interest rate regime maintained its pressure on banking sector margins in 2017. Despite these challenges, the Bank has sustained its net markup income base in 2017 at Rs. 56.4 billion. This being only marginally lower than the previous year. Net interest margin was recorded at 3.9% in 2017 as compared to 4.7% in 2016. UBL’s average earning assets grew from Rs. 1,245 billion at Dec’16 to Rs. 1,490 billion at Dec’17. The Bank’s overall deposits portfolio grew by 9% to reach Rs. 1.3 trillion at Dec’17, with domestic deposits having crossed the milestone of Rs. 1.0 trillion. The key focus within Domestic Bank was to improve the deposits mix with aggressive growth in average current deposits (at 18% year on year) and shedding of high cost deposits. As a result, domestic cost of deposits reduced from 2.87% in 2016 to 2.73% in 2017. Credit expansion was witnessed across all business segments with 12% growth in average advances. High yielding bonds maintained a strong contribution to interest earnings in 2017, albeit at lower yields in line with maturities during the year. Non-Markup Income UBL reported non-markup income of Rs. 22.2 billion in 2017, a 6% reduction over 2016. Non-Markup Income remains a major contributor to overall revenues with a share of around 28.2% (2016: 29.3%). Revenue streams are driven by a diversified suite of fee based services as well as strong contribution by our Treasury and Capital Markets Division.
19. Rs . in billions Rs. in billions 2.00 2.21 1.74 1.50 23.61 22.16 1.00 0.50 0.12% - 2016 Dividend income stood at Rs. 2.4 billion in 2017, lower than previous year’s level of Rs. 3.3 billion owing to lower payouts on energy and fertilizer sector investments. Capital gains maintained their significant contribution to non-funded income and stood at Rs. 4.4 billion in 2017 (2016: Rs. 5.4 billion). These were realized mainly on sale of longer dated bonds. We maintained a cautious stance on profit taking within equities due to the bearish run that prevailed in the stock market for most of the year. Foreign exchange earnings closed at Rs. 1.9 billion, a growth of 10% over 2016. The growth was driven by the Domestic Bank that posted a 54% increase over 2016. Higher earnings were backed by the currency volatility seen towards the end of the year. Provisions and Loan Losses 2016 2017 Fee, commission and brokerage income accounted for 57% of total non-markup income in 2017, closing at Rs. 12.6 billion (2016: Rs. 12.3 billion). 2017 proved to be particularly successful for bancassurance, with a significant turnaround in business scale and earnings. The structural re-alignments made in 2017 strengthened sales momentum, resulting in an almost 100% increase in revenues over 2016. ATM / Debit card commissions registered an 18% growth year on year as 756K new cards were issued during the year (2016: 567K). Cash management commissions were up 17% compared to 2016, contributed by new mandates as well as higher through put volumes from existing relationships. Renewed focus on capturing market share from competition helped grow home remittances market share to 26.6% in 2017 from 25.4% in 2016. Overall, Investment Banking revenues grew by 6%, led by corporate mandates for debt arrangement and advisory. Omni revenues remained under pressure due to increased price competition that affected domestic remittance volumes. However, in spite of these headwinds, we maintained our leadership within G2P payments services. The net provisioning expense was recorded at Rs. 2.2 billion (2016: Rs. 1.7 billion). Led by strong focus on maximising recoveries from remedial assets, the Domestic Bank reduced NPLs by Rs. 4.3 billion to Rs. 28.2 billion in 2017, resulting in a net provision reversal of Rs. 2.6 billion (2016: Rs. 72.4 million). However, amid sustained economic slowdown in the GCC region, prudent classification of loans led to International NPLs increasing by Rs. 10.8 billion to reach Rs. 22.9 billion at Dec’17. Provisions amounting to Rs. 4.8 billion were booked against the International portfolio during 2017 (2016: Rs. 1.8 billion). At Bank level, the overall asset quality, improved marginally from 8.1% at Dec’16 to 7.9% at Dec’17. The specific provision coverage against NPLs stood at 75.8% at Dec’17 (Dec’16: 83.9%). 0.23% 2017 Total Provisions 0.80% 0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% NCL Ratio Cost Management UBL’s administrative expenses were up by 11% over 2016 to close at Rs. 35.3 billion in 2017. Personnel cost grew by 10% year on year mainly as a result of capacity building across the retail network. Premises costs increased by 10%, on account of rent escalations across the estate and an increase in utility expenses. Variable costs were higher this year as we continued to invest in our brand with enhanced marketing across both electronic and print channels. In line with strong current account mobilization, turnaround in bancassurance and growth in consumer assets, higher sales commission were awarded in 2017. Maximizing operational efficiencies remains a key priority as we continue to rationalize operational structures and build synergies across functions. While seeking to better manage costs, we remain committed to constantly raising the bar on service quality standards. Balance Sheet Management UBL’s balance sheet size reached Rs. 2 trillion as at Dec’17, a 27% growth over Dec’16. The Bank level deposit base increased by 9.3% over Dec’16 to reach Rs. 1.3 trillion at Dec’17 (2016: Rs. 1.2 trillion). Our domestic deposit base stood at Rs. 1.0 trillion (2016: Rs. 946 billion) with a 9% growth in the portfolio. Domestic deposits market share stood at 8.4% at Dec’17, at par with the Dec’16 level. Rs. in billions 121 1,059 2016 Core Deposits 134 9.3% 1,155 2017 Non-Core Deposits Average domestic deposits witnessed a 12% growth compared to 2016. This year, we shifted our focus from aggressive market share buildup to optimizing the deposit base aiming at reduction in cost of deposits. As part of this strategy, efforts were directed towards aggressive mobilization of core deposits, mainly new to bank current accounts, and shedding expensive deposits. Resultantly, the average domestic core deposits grew by 14% year on year, led by 18% growth in average current Annual Report 2017 25 Annual Report 2017 17
20. DIRECTORS ’ REPORT TO THE MEMBERS 2017 deposits. The domestic CASA ratio improved by 92 bps from 83.8% at Dec’16 to 84.7% at Dec’17. The Bank’s average loan portfolio grew by 12% over Dec’16, with closing net advances at Rs. 604.6 billion. The domestic average loan book was up by a strong 15% with aggressive credit uptake across all three core segments, Corporate, SME and Consumer. Our loan acquisition strategy continues to be driven by considerations of asset quality, maximizing overall relationship yields and capital efficiency. The Bank’s investment portfolio stood at Rs. 1,091.8 billion at Dec’17, from Rs. 806.5 billion at the end of the previous year. Our investment portfolio is primarily concentrated within high yielding PIBs that stood at Rs. 541.9 billion as at Dec’17 (Dec’16: Rs. 570.6 billion). However, the investment mix shifted towards shorter tenor instruments during the year as an additional Rs. 310.9 billion were deployed in treasury bills, taking the portfolio size to Rs. 407.0 billion as at Dec’17. The Bank’s equity book closed at Rs. 18.4 billion at Dec’17 end (2016: Rs. 16.0 billion). This consists of positions taken with a long-term investment horizon and a view to generate stable dividend streams. The overall mark to market surplus on available for sale investments closed at Rs. 9.6 billion as at Dec’17 (Dec 2016: Rs. 23.3 billion). In view of the balance of payments position, the USD-PKR parity, after two years of a stable rate regime, shed around 5% in 2017 to settle at around PKR 110.4 / USD by year end. For the sixth year in a row, the average CPI inflation remained in single digits at 4.1% during 2017, a result of relatively weak commodity prices. In view of an expected buildup of inflationary pressures due to the rupee depreciation and recovery in global oil prices, the State Bank of Pakistan, in its monetary policy statement announced on January 26, 2018, increased the policy rate by 25 bps to 6.0%, after having maintained status quo since May 2016. The Pakistan Stock Exchange (PSX) touched a record high of 52.8K points during H1’17 in anticipation of Pakistan’s upgrade to the MSCI Emerging Market Index. However, the country’s political scenario impacted the overall market sentiment, triggering heavy foreign selling, thereby breaking market momentum during the second half of the year. Eventually, the market closed 2017 at a level of 40K points, losing 15% in the year. Our capital footing remains sound with strong internal capital generation and focus on maintaining an optimal Risk Weighted Assets (RWA) base. The unconsolidated Tier-1 CAR stood at 11.3% with the overall capital adequacy improving to 15.4% in Dec’17 compared to 10.9% and 15.1% in Dec’16 respectively. Deposits for the banking sector grew by 10.3% year on year in 2017. In view of low interest rates, private sector credit expansion remained healthy for most part of the year with overall industry advances recording a growth of 17.2% in 2017. Non-performing loans for the banking industry declined slightly to Rs. 612 billion at the end of Sep’17 with the gross infection ratio improving further to 9.2% from 10.1% in Dec’16. Economy Review International The country’s trade deficit deteriorated during H1 FY’18 to around USD 18.0 billion, up 24.5% on a year on year basis. During H1 FY’18, exports picked up by 11.2% year on year while imports were up by 19.1%. Thus, the current account deficit for H1 FY’18 increased substantially to USD 7.4 billion as compared to USD 4.7 billion for the same period last year. Home remittances growth also remained muted in H1 FY’18, with the year closing at USD 9.7 billion, up only slightly from USD 9.5 billion in H1 FY’17. Despite weaker current account performance, the financial account supported the country’s reserves position during H1 FY’ 18. For UBL International, our focus remains to consolidate and re-risk the business by growing selectively in territories offering an acceptable risk profile. The Bank remains focused on its strategy of growing low cost deposits to maintain an organic balance sheet. The bank has increased focus on maximizing recovery from non-performing accounts and prudently providing for potential loss accounts. Given the economic and geopolitical risks, we have enhanced our scale of due diligence and strengthened risk surveillance of our existing portfolio. Capital Ratios Despite some headwinds on the external and political front, the economy maintained its momentum with GDP growth reaching a decade high level of 5.3% in FY’17. New energy and infrastructure projects, structural reforms and continued progress under the China Pakistan Economic Corridor (CPEC), all provided an impetus to economic growth. FX reserves, after having peaked at USD 24 billion in Oct’16, closed the year at a level of USD 20 billion. In Nov 2017, Pakistan received a strong response from international investors with the successful issuance of a 5-year Sukuk and 10-year Euro Bond 24 18 aggregating to USD 2.5 billion. United Bank Limited United Bank Limited Against the backdrop of range-bound oil prices, moderate growth and continued fiscal austerity, the GCC economic environment remained challenging in 2017 with real GDP growth for the period estimated at 0.5%. Looking ahead into 2018, there are a few positives - oil prices have recovered slightly, austerity is easing down with public finances on a more stable path and preparations for events such as the World Expo 2020 in Dubai are underway. Despite some headwinds, liquidity was well managed in all regions throughout the year. UBL International maintained the 2017 asset base in line with 2016 and managed to grow overall deposits by 4% to USD 2.3 billion.
21. During 2017 , International business arranged approx. USD 900 million in syndicated facilities for the Government of Pakistan, acting as Mandated Lead Arranger and Agent Bank. In addition, to syndications arranged for the Governments of Kenya and Tanzania. While wholesale banking remains our strength, we are increasingly focused on a more dynamic retail strategy to provide our customers efficient, end-to-end banking solutions across all international branches. In line with this strategy, we expanded our suite of retail offerings, opened UAE’s second priority lounge in Abu Dhabi, launched the Mukammal Account product in Bahrain, enhanced credit card offerings and further expanded our Non-Resident Pakistani (NRP) proposition. The Bank continued to play a leading role in processing home remittances to Pakistan and retained its position as the market leader in 2017. New tie ups with exchange houses were entered which are expected to boost transaction volumes further in 2018. In view of the situation in Yemen since 2015, the Bank has been able to de-risk almost its entire clean funded exposure and continues to operate with a risk reduction strategy going forward. Subsidiaries & Associates Highlights of our subsidiaries and associates performance are as follows: United National Bank Limited (UBL UK) is a 55% owned subsidiary of UBL. This year UBL UK’s results closed near to break-even. Due to adoption of balance sheet de-risking strategy during the year, Net Interest Income (NII) reported a 4% reduction year on year. Non-Funded Income (NFI) depicted a decline of 10% over last year because of reduction in trade finance business. UBL UK’s investments reduced by 13% during the year while advances grew by 24%. The deposit base was however maintained close to 2016 levels. We remain prudent in terms of our asset acquisition strategy within each business segment. UBL Switzerland AG (USAG) is a wholly owned subsidiary of UBL. Its revenues being derived principally from the trade business. USAG’s profit before tax increased by 13% over the previous year, mainly driven by a rise in trade related fees. NII remained largely flat on a year on year basis. The balance sheet continued to expand, led by growth in deposits and borrowings. UBL Fund Managers Limited, Pakistan (UBLFM) is a 98.9% owned subsidiary of UBL and has witnessed a growth in PBT of 49% over the last year. The funds under management of UBLFM stood at Rs. 84.14 billion, a growth of 10% over 2016. UBL Bank (Tanzania) Limited (UBTL) was established in 2012 and is a wholly owned subsidiary of UBL. During this year UBTL incurred a loss, mainly as a result of significant provisioning against non-performing loans and lower fee revenues. Foreign exchange earnings remained subdued, declining by 6% year on year, a result of a stable local currency and slowdown in FX volumes. The business model for the location remains challenging and we are in the process of developing a more sustainable scale of business. Technology We continue to invest in technology and innovation to re-define the customer experience and enhance security around financial transactions and customer data. In order to build on our technological leadership, in 2016, we embarked upon a ‘Digital Strategy’ that seeks to transform the way we do banking. In 2017, UBL opened Pakistan’s first digital lab in collaboration with IBM. This lab will provide a futuristic design thinking methodology to redefine core business models to develop ground-breaking and unique customer experiences. These would be created in direct collaboration with leading technology players including start-ups, Fin-techs and ecosystem partners. During the year, we also inaugurated our first “Branch of the Future” that provides customers state of the art technology driven financial solutions within a hi-tech branch setting. After the successful pilot launch of this branch, we intend to roll out such branches nationwide. UBL’s branchless banking proposition Omni maintains its dominance and market position as a leader in financial inclusion in Pakistan. We aim to build on this lead and inclination to serve the mass population beyond the brick and mortar structure, with ease, efficiency and at a lower cost. Our banking application “UBL Digital” has been developed with unique features and enhanced security, with a road map to release new versions of the product in the future developed based on customer feedback and payment requirements. Credit Ratings JCR-VIS Credit Rating Company Limited (JCR-VIS) re-affirmed the entity ratings of United Bank Limited (UBL) at ‘AAA/A-1+’ (Triple A/A-One Plus) on June 30, 2017. Outlook on the assigned ratings is ‘Stable’. Capital Intelligence (CI), an international credit rating agency, has re-affirmed UBL’s long-term and short-term Foreign Currency ratings at B- and B respectively in line with CI’s sovereign ratings for Pakistan. In addition, the Bank’s Financial Strength rating has been re-affirmed at BB+, with the Outlook reaffirmed at ‘Stable’ based on the Bank’s strong performance. Awards and Recognition UBL won the “Best Bank for Corporate Finance & Capital Market Development” award at the second Pakistan Banking Awards 2017. The award is in recognition of UBL’s significant contribution in promoting capital market development, deepening secondary markets and providing advisory services to optimize efficient use of industrial and commercial assets. Future Outlook 2017 remained a challenging year for Pakistan in view of developments within internal and regional politics, thus slowing down the much needed momentum in economic reforms. However, transition towards an emerging economy maintained its trajectory with strong credit expansion and GDP growth of 5.3%, the highest in the last decade. Continued progress on the Annual Report 2017 25 Annual Report 2017 19
22. DIRECTORS ’ REPORT TO THE MEMBERS 2017 China Pakistan Economic Corridor (CPEC) and political stability remain crucial to sustaining the economic momentum over the long term. With our vast scale, diversified business presence and strong risk appetite, we are poised to actively contribute to Pakistan’s economic transformation. We are committed to taking a leading role in intermediation by supporting development projects in addition to partnering with large corporates. We shall play our part to enhance access to finance and increase financial inclusion to serve the needs of the unbanked population. Lending decisions shall continue to be directed by considerations of enhancing asset quality, maximizing yields and efficient capital allocation. We seek to further improve the deposits mix through focus on core deposits buildup driven by new to bank client acquisitions and relationship deepening. We are striving towards our vision to make UBL a leading digital bank with the best in class service offerings and innovative payment systems. Customers being at the core of our values, we are striving to constantly raise service quality standards while building more agile structures, maximizing synergies and operational efficiencies. Statement under Clause XVI of the Code of Corporate Governance 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 Bank has adopted good corporate governance practices and the Directors are pleased to report that: • The financial statements prepared by the management of the Bank present fairly the state of affairs of the Bank, the results of its operations, cash flows and changes in equity. • Proper books of accounts of the Bank have been maintained. • Appropriate accounting policies have been consistently applied in the preparation of the financial statements. Accounting estimates are based on reasonable and prudent judgment. • International Financial Reporting Standards, as applicable to banks in Pakistan, have been followed in the preparation of the financial statements without any departure therefrom. • The system of internal control in the Bank is sound in design, and is effectively implemented and monitored. • There are no significant doubts regarding the Bank’s ability to continue as a going concern. • There has been no material departure from the best practices of corporate governance. 24 20 United Bank Limited United Bank Limited • Performance highlights for the last six years are attached to these unconsolidated financial statements. • Details of Directors’ training programs are given in the Statement of Compliance with the Code of Corporate Governance. Subsequent to the elections of Board of Directors held on March 25, 2017, the Board has constituted the following four Committees with defined Terms of Reference (TORs):- Board Audit Committee (BAC): 1. 2. 3. 4. Mr. Amar Zafar Khan Mr. Haider Zameer Choudrey Mr. Khalid A. Sherwani Mr. Aqeel Ahmed Nasir Chairman Member Member Secretary Board Risk and Compliance Committee (BRCC): 1. 2. 3. 4. Mr. Arshad Ahmad Mir Mr. Zameer Mohammed Choudrey, CBE Ms. Sima Kamil Mr. Imran Sarwar Chairman Member Member Secretary Board Human Resource & Compensation Committee (HRCC): 1. 2. 3. 4. Mr. Khalid A. Sherwani Mr. Rizwan Pervez Mr. Arshad Ahmad Mir Mr. Syed Zulfiqar Hussain Chairman Member Member Secretary Board IT Committee (BITC): 1. 2. 3. 4. Mr. Tariq Rashid Mr. Haider Zameer Choudrey Ms. Sima Kamil Mr. Baqar Muzaffar Chairman Member Member Secretary The number of Board Committees’ meetings held during the year and the number of meetings attended by the Directors is shown below: Number of meetings held Number of meetings attended: Mr. Zameer Mohammed Choudrey, CBE Mr. Haider Zameer Choudrey Mr. Rizwan Pervez Mr. Amin Uddin** Mr. Arshad Ahmad Mir Mr. Zaheer Sajjad ** Mr. Khalid A. Sherwani Mr. Amar Zafar Khan *** Mr. Tariq Rashid*** Mr. Wajahat Husain** Ms. Sima Kamil*** BAC BRCC HRCC BITC 4 4 4 2* *Constituted on June 2, 2017. **Retired upon completion of their term. ***Elected/appointed during 2017. 4 1 2 2 2 - 4 2 1 2 2 4 2 4 2 - 2 2 2
23. The Bank operates five funded retirement schemes which are the Provident Fund , Gratuity Fund, Pension Fund, Benevolent Fund and General Provident Fund. The values of the investments of these funds, based on their latest audited financial statements as at December 31, 2016 are as follows: Employees’ Provident Fund Employees’ Gratuity Fund Staff Pension Fund Staff General Provident Fund Officers / Non-Officers’ Benevolent Fund Rupees in ‘000 3,583,236 709,048 3,063,981 1,148,854 499,980 Meetings of the Board Shareholders Bestway Group (BG) General Public & Others Banks, DFIs & NBFIs Insurance Companies Modarabas & Mutual Funds International GDRs (non-voting shares) Privatization Commission of Pakistan TOTAL OUTSTANDING SHARES Designation Meetings Attended Sir Mohammed Anwar Pervez, OBE, HPk Chairman 6 Mr. Zameer Mohammed Choudrey, CBE Director 6 Mr. Rizwan Pervez Director 6 Mr. Haider Zameer Choudrey Director 6 Mr. Arshad Ahmad Mir Director 6 Mr. Khalid A. Sherwani Director 6 Mr. Amar Zafar Khan 1 Director 4 Mr. Tariq Rashid 2 Director 3 Mr. Amin Uddin 3 Director 2 Mr. Zaheer Sajjad 3 Director 2 Ms. Sima Kamil 4 President & CEO 3 Mr. Wajahat Husain 5 President & CEO 3 Note: 1- Elected in 58th AGM held on March 25, 2017 2- Appointed on May 25, 2017 after SBP approval 3- Retired in 58th AGM held on March 25, 2017 4- Appointed on June 1, 2017 5- Retired on May 31, 2017 Change in Directors Mr. Amar Zafar Khan and Mr. Tariq Rashid have been appointed as members of the Board of Directors on March 25, 2017 and May 25, 2017 respectively. The Board wishes to place on record the sincere appreciation for the valuable contribution of the outgoing directors, Mr. Amin Uddin and Mr. Zaheer Sajjad. Change in CEO On May 31, 2017, Mr. Wajahat Husain resigned from the position of President & CEO. Ms. Sima Kamil was appointed as the new President & CEO effective June 1, 2017. No. of Shares % of Ordinary Shares 752,514,602 61.47 389,012,382 31.78 25,459,340 2.08 29,349,033 2.40 22,567,306 1.84 5,275,310 0.43 1,714 0.00 1,224,179,687 100.00 The aggregate shares held by the following are: a) During the year under review, the Board of Directors met six times. The number of meetings attended by each Director during the year is shown below: Name of the Director Pattern of Shareholding The pattern of shareholding as at December 31, 2017 is given below: b) c) d) e) f) No. of Shares Associated Companies, undertakings & related parties - Bestway (Holdings) Limited* - Bestway Cement Limited Modarabas & Mutual Funds** Directors & CEO*** -Sir Mohammed Anwar Pervez, OBE, HPk -Mr. Zameer Mohammed Choudrey, CBE -Mr. Haider Zameer Choudrey -Mr. Rizwan Pervez -Mr. Arshad Ahmad Mir -Mr. Khalid A. Sherwani -Mr. Amar Zafar Khan -Mr. Tariq Rashid -Ms. Sima Kamil Executives Public sector companies and corporations Banks, DFIs, NBFIs, Insurance Companies 631,728,895 93,649,744 22,567,306 12,765,368 2,348,870 2,000,000 129,500 2,500 2,500 471 746,202 1,846,782 54,808,373 *The Bank is a subsidiary of Bestway (Holdings) Limited which is incorporated in the United Kingdom. **Name wise detail of Modarabas & Mutual Funds is annexed with Categories of Shareholders. ***There were no shares held by the spouses or minor children of the Directors and CEO of the Bank. Shareholders holding 5% or more voting rights No. of shares % Bestway (Holdings) Limited 631,728,895 51.60 93,649,744 7.65 Bestway Cement Limited Trades in the shares of UBL carried out by Directors, Executives and their spouses and minor children, as defined in Clause xvi (l) of the Code of Corporate Governance are annexed along with the Pattern of Shareholding. Risk Management Framework The Risk and Credit Policy Group has the following divisions, headed by senior executives, reporting to the Group Executive Risk and Credit Policy: • Credit Policy, Research and Operational Risk • Credit Risk Management and FI Risk Management • Consumer Credit • International Risk • Market and Treasury Risk • Basel - Analytics and Reporting • IT Security A Risk Management Committee comprising of heads of all areas of Risk, Business and Credit Administration are responsible for reviewing and undertaking strategic business Annual Report 2017 25 Annual Report 2017 21
24. DIRECTORS ’ REPORT TO THE MEMBERS 2017 decisions with a collective view on Credit Risk, Market Risk, Operational Risk and Capital. In line with changing risk, regulatory and the Bank’s controls environment, the Bank has revised its SME Credit Policy in 2017 and implemented it during the year. Credit processes for Corporate, Commercial, SME and Agriculture have also been streamlined via revised Credit Manual with an aim to improve efficiencies and reduce turnaround time in asset booking. The revised mechanism also reflects the amendments in the Credit Approval Structure especially for SMEs and agri to aid growth and maintain clear focus on these segments. With respect to consumer assets, the portfolio has picked up pace with enhanced focus towards low risk, quality acquisitions. Policies and processes have been amended being made more stringent which would lead to further improvement in asset quality. Additionally, portfolio management techniques such as use of bureau reviews are still being used for identifying high potential customers to assist in recoveries from vintage NPLs and monitoring of portfolio behavior. The risk associated with Interest rate, Equity, Foreign Exchange and Liquidity are being continuously measured and monitored by the Market and Treasury Risk function. Stress testing and sensitivity measures are used as risk management tools to monitor and manage the market risk. In addition, Notional, Factor Sensitivity and MAT limits are being monitored for investments. ALCO is responsible for overseeing the Bank’s Liquidity. Tools such as balance sheet ratios and liquidity stress tests are used to monitor the Bank’s Liquidity risk. All Market and Treasury Risk activities are being undertaken in line with the Board approved policies. The Bank has maintained its CAR well above the regulatory thresholds throughout the year under the prescribed Basel-III regulations. The Internal Capital Adequacy Assessment Process (ICAAP) Framework is reviewed annually and updated in case of any material change in the underlying long term strategy of the bank. UBL has established an extensive Information Security (IS) Program and governance structure to manage the security of the information assets. The sensitive information managed by Board of Directors 24 22 United Bank Limited United Bank Limited
25. UBL including the data entrusted to UBL by its customers , partners and staff are among the organization’s most valuable assets. Given the competitive nature of UBL’s business and significant value of the data it manages, the Risk group in conjunction with business and technology, have taken measures to: • Reduce information security risks and potential business impacts to an acceptable level through the introduction of a detailed Information Security Risk Assessment / Management (ISRA) program and Vulnerability Assessment (VA) process. • Generate business value through the optimization of security investments by self-developing secure SDLC tools and processes, Internal Penetration test process, Online IS awareness and trainings for all staff. • Preserve and increase market share with a reputation of safeguarding information assets by introducing multiple IS initiatives such as advanced malware protection, VA, ISRA, End point protection and Next generation firewall etc. A strong operational risk management framework and exhaustive policies, guidelines and manuals are in place to strengthen the overall control environment of the Bank. Operational risk assessment tools are effectively used to assess, mitigate and monitor potential risks that may arise in the Bank’s business and support functions. Auditors The present auditors, M/S. KPMG Taseer Hadi & Co., Chartered Accountants and M/S. A. F. Ferguson & Co., Chartered Accountants, retire and being eligible, offer themselves for re-appointment in the forthcoming Annual General Meeting. KPMG is eligible for reappointment in accordance with the special approval as received from the State Bank of Pakistan, being the Group Auditor. The Board of Directors, on the recommendation of the Board Audit Committee, recommends M/S. KPMG Taseer Hadi & Co., Chartered Accountants and M/S. A. F. Ferguson & Co., Chartered Accountants, for re-appointment as auditors of the Bank. Conclusion In conclusion, I would like to express my gratitude to our customers for placing their trust in us. Your confidence and unwavering support is what drives us to scale greater heights. We appreciate the efforts of our colleagues who work tirelessly to exceed customer expectations. On behalf of the Board, I would like to thank them for their commitment and dedication. I would also like to extend my thanks to my fellow Board members, State Bank of Pakistan, Securities and Exchange Commission of Pakistan and other regulatory bodies for their continued direction and support. For and on behalf of the Board, Continued efforts are being made to enhance the scope of a robust ‘Operational Risk Management Framework’. The Bank has an internal operational risk awareness program which is aimed at building capacity and inculcating a risk free culture in the staff through trainings and on-job awareness for promoting greater risk awareness. Corporate Social Responsibility (CSR) In 2017, UBL’s sustainability initiatives were steered towards projects that supported the Bank’s vision of a developed and prosperous Pakistan. Supporting education through infrastructural development of educational institutes and granting scholarships to deserving students for higher education remained the Bank’s core priority. Other areas the Bank contributed towards included healthcare and community welfare. By serving worthy causes across Pakistan, UBL intends to strengthen and diversify its sustainability efforts in the coming years. Sir Mohammed Anwar Pervez, OBE, HPk Chairman Dubai February 19th, 2018 Statement of Internal Controls The Board is pleased to endorse the statement made by the management relating to Internal Controls over Financial Reporting (ICFR) and also the overall internal controls. The Statement on Internal Controls is included in the Annual Report. Annual Report 2017 25 Annual Report 2017 23
26. (Auditors) (Conclusion) (Corporate Social Responsibility) (CSR) (Statement of Internal Controls) 24 24 United Bank Limited United Bank Limited
27. (Risk Management Framework) Board of Directors Annual Report 2017 25 Annual Report 2017 25
28. (Change in CEO) (Pattern of Shareholding) (Meetings of the Board) (Change in Directors) 24 26 United Bank Limited United Bank Limited
29. (Statement under Clause XVI of the Code of Corporate Governance) Annual Report 2017 25 Annual Report 2017 27
30. (Technology) (Subsidiaries & Associates) (Credit Ratings) (Awards and Recognition) (Future Outlook) 24 28 United Bank Limited United Bank Limited
31. (Capital Ratios) (International) (Economy Review) Annual Report 2017 25 Annual Report 2017 29
32. Rs . in billions 2.00 2.21 1.74 1.50 1.00 0.50 - 0.12% 0.23% 2016 2017 Total Provisions NCL Ratio Rs. in billions 0.80% 0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% 23.61 2016 (Cost Management) (Balance Sheet Management) Rs. in billions 121 1,059 2016 Core Deposits 24 30 United Bank Limited United Bank Limited 134 (Provisions and Loan Losses) 9.3% 1,155 2017 Non-Core Deposits 22.16 2017
33. (Financial Highlights) (Net Markup Income) Rs. in billions 60.00 57.04 50.00 56.42 20.00 5.0% 4.7% 10.00 - 7.0% 6.0% 40.00 30.00 8.0% 2016 Net Markup Income 3.9% 2017 4.0% 3.0% 2.0% 1.0% Rs. in billion Net Interest Margin 46.02 40.16 27.73 PBT 2016 2017 25.42 PAT (Non-Markup Income) Annual Report 2017 25 Annual Report 2017 31
34. SUSTAINABILITY AT UBL IN 2017 At the heart of UBL ’s Sustainability philosophy is the desire to help those less fortunate than others by supporting causes and empowering communities. The emphasis on giving back to the community it operates in, is part of the bank’s well-articulated corporate strategy. By focusing on the key sectors of higher education and health both independently as well as in partnership with specialist organizations, UBL believes that it can empower disadvantaged sections of the society through economic regeneration and employment creation. UBL aims to help those in need by providing for accessible higher education, affordable and high-quality healthcare and improvements in infrastructure and communal well-being, through a detailed and all-encompassing sustainability programme. In 2017, these were the key areas the Bank focused its sustainability efforts on. The second and final tranche of PKR 50 million was presented to Namal Education Foundation for the construction of an Auditorium and a Faculty and Staff Accommodation Unit for the Namal Agri-Business programme. This was part of a PKR 100 donation to the educational institution. Moreover, education of over 260 students, in various programmes across the country, was financed through scholarships by the Bank in 2017. LUMS, Forman Christian College, Bahauddin Zakariya University and the Nasra Schools were amongst the recipients of UBL scholarship funds. UBL also supported many healthcare causes across Pakistan during 2017. Donations for purchase of medical equipment were given to institutions like the Memon Medical Institute Hospital, Murshid Hospital & Healthcare Center and Shalamar Hospital. Ambulances were also donated to healthcare institutions in Balochistan and the Federal Capital. UBL also worked in collaboration with Hisaar Foundation towards water conservation and sustainability, an issue of much importance in Pakistan. 2017 saw UBL consolidate its sustainability agenda towards its core focus areas of education and healthcare. It is the Bank’s sheer commitment to its values that continues to inspire and motivate it to be sensitive to the society. It is this very commitment that will play an important role in UBL’s efforts as the Bank looks ahead and focuses on improving lives and building brighter futures for a wider and more diverse recipient base. 24 32 United Bank Limited United Bank Limited
35. PRESIDENT AND CEO REVIEW 2017 Introduction The economy sustained positive momentum built upon economic reforms implemented over the last 4 years . Led by improvement in the energy situation, pickup in industrial activity and higher infrastructure spending, GDP growth reached a decade high of 5.3% in FY’17. In 2017, the private sector credit extended its strong upward trajectory with 15% year on year growth. Inflation, although gradually building up, remains well-controlled at around 4%. However, the widening current account deficit is a concern and continues to maintain pressure on the FX reserves position and the PKR exchange rate. These short-term challenges notwithstanding, the long-term economic outlook for Pakistan remains promising. Improvement in the investment climate will be essential going forward as political clarity emerges following the 2018 elections and some of the early harvest CPEC projects come online. We believe Pakistan has significant growth potential in the retail and mid-market segments and a young and growing population in need of sophisticated banking solutions. UBL’s technology driven, innovative business model is a step up from its competitors; our strategic focus is organic growth with product development across key businesses. With its extended outreach, diversified business profile and sound capital footing, UBL is well-placed to play a leading role in Pakistan’s growth story. UBL maintained our dominance in Pakistan’s financial sector with market leading positions in all core segments. We are currently the second largest private bank in Pakistan with assets of over Rs. 2 trillion (USD 18.2 billion) in Dec’17. A leading Retail Banking operation, our network spans across 1,379 branches globally, with presence in Asia, Europe, Africa and USA. Our bank serves over 4 million customers, with a deposits base of Rs. 1.3 trillion and advances portfolio of Rs. 605 billion as at December 31st 2017. We have a leading Corporate and Investment Banking franchise that services top tier corporates and public sector entities. We maintain our active participation in financing new infrastructure projects along with advisory and arrangement mandates. Driving our China Business Initiative, the Corporate Banking and Financial Institutions Group continues to expand our outreach and build new strategic partnerships. The Payment Services Group remains committed to building on the bank’s lead in financial innovation and re-defining customer experiences. Our Treasury and Capital Markets division has yielded strong returns through proactive positioning and market making activities. Over the past two years, we have re-aligned our SME structure in order to leverage our widespread footprint and re-gain market share. We have also revived the Consumer Bank, scaling up acquisition particularly within the secured loan portfolio. We continue to build a niche in the Islamic Banking segment through continuous product innovation, network expansion and market deepening. UBL International’s bottom line remained under pressure in 2017 given the subdued economic activity in our target markets. Our focus remains on cautious asset buildup with improved risk vigilance and reviving the Retail Bank. Proactive management of non-performing loans is a key priority as we strengthen the Special Assets Management Unit to maximize our recovery potential. We aim to build on our existing compliance culture and seek to further strengthen controls and governance. Business strategies would centre around consolidation, derisking and more efficient utilization of capital. Building cost efficiencies across all network countries remains a key priority going forward. We have demonstrated the diversification and depth of the UBL group over the last many years with profitability growth CAGR of 8.4% over the 2012 to 2017. We have delivered strong ROEs in the range of 20-26% over this period, while maintaining optimal capital levels with consistent dividend pay outs. Earnings per share have increased from Rs 14.61 per share in 2012 to Rs 20.77 in 2017, as a result of consistent growth in core markets. Our share price has almost doubled over the last 5 years with compounded annual return of 24% per annum comprising of share price appreciation and cash dividends. Financial Highlights for 2017 UBL reported Profit Before Tax (PBT) amounting to Rs. 40.2 billion in 2017 compared to Rs. 46.0 billion in 2016. Profit After Tax (PAT) stood at Rs. 25.4 billion (2016: Rs. 27.7 billion). Return on equity remained strong at 20.8% (2016: 24.9%). The Bank remains adequately capitalized as a result of a strong earnings profile and effective management of risk weighted assets (RWAs). The Capital Adequacy Ratio (CAR) closed at 15.45% as at Dec’17 compared to 15.13% at Dec’16. Tier I Capital to total RWAs stood at 11.28% (Dec’16: 10.87%). Aggressive build up within advances and deposits expands core earnings 2017 proved to be a strong year in terms of balance sheet buildup. Supported by proactive leveraging, our asset base increased by 27% compared to the previous year to cross the Rs. 2.0 trillion mark at the end of 2017. Overall deposits closed at Rs. 1,289 billion, an increase of 9% over 2016. The growth was primarily contributed by the Domestic Bank where deposits grew by 9% from Rs. 946 billion in 2016 to over Rs. 1 trillion at Dec’17. Optimizing the deposits mix was a key priority this year that was achieved through aggressive focus on current account acquisition (18% YoY growth in average domestic current account portfolio) and shedding of non-core, expensive deposits. As a result, our domestic CASA ratio improved from 83.8% in 2016 to 84.7% in 2017. We maintained our core deposits within International business, growing our deposits portfolio by 4% over 2016 to reach USD 2.3 billion in 2017, notwithstanding liquidity pressures. Cost of deposits remained well-managed at around 2.2% (2016: 2.0%) despite an increase in LIBOR of 125 bps in 2017. Net advances witnessed 19% growth compared to 2016 to reach Rs. 604.6 billion at Dec’17. This was driven by the Corporate and Investment Banking Group that reported a 22% growth year on year. The focus being on actively tapping financing opportunities arising in the power and infrastructure sectors. We continued to Annual Report 2017 25 Annual Report 2017 33
36. PRESIDENT AND CEO REVIEW 2017 enhance our penetration in the SME and Consumer financing sectors with year on year portfolio growth of around 27 % each. Asset writing within International remained minimal with a cautious approach to finance only existing, well-established names. The investments portfolio remains well-diversified. Net investments stood at Rs. 1.1 trillion at Dec’17 (2016: Rs. 806.5 billion). The fixed income portfolio comprises PIBs amounting to Rs. 542 billion and foreign bonds amounting to USD 695 million. During 2017, we expanded our equity portfolio to Rs. 18.4 billion (2016: Rs. 16.0 billion) by capitalizing on the stock market volatility to build positions in high yielding stocks. Overall, mark to market surplus on investments was recorded at Rs. 9.6 billion as at Dec’17 (2016: Rs. 23.3 billion). Revenue levels largely sustained despite pressure on margins Net interest income (NII) amounted to Rs. 56.4 billion in 2017, a marginal reduction over the previous year. Given the prevailing low interest rate scenario, pressure on margins persisted as net interest margin (NIM) saw a 79 bps compression year on year to 3.9% in 2017. Interest earnings were supported mainly by a 12% growth in average domestic deposits along with a reduction in domestic cost of deposits from 2.87% in 2016 to 2.73% in 2017. In addition, the Bank actively participated in the repo borrowing market to improve its funding profile. Average domestic performing advances saw a robust 15% growth over 2016, with loan yields lower by 28 bps to close at 7%. However, re-pricing of the treasury portfolio resulting from PIB maturities and profit-taking on high yielding bonds lowered investment yields. Fee based businesses in full focus, Banca leads 11% growth in Domestic Fees in 2017 Constituting around 28% of overall revenues, non-fund income was reported at Rs. 22.2 billion in 2017, lower by 6% over the previous year. Overall fee revenues stood at Rs. 12.6 billion in 2017 compared to Rs. 12.3 billion in 2016. 2017 was particularly successful in terms of bancassurance as volumes witnessed significant growth. Improvements to the distribution structure and rigorous cross sell to liability relationships resulted in around 100% increase in revenues compared to 2016, surpassing the milestone of Rs. 1 billion. Our branchless banking proposition, UBL Omni, maintained its strong contribution to the fee of the Bank. However, the domestic remittances business came under pressure because of stiff competition and more stringent regulatory requirements. Within the home remittances area, we were able to sustain revenues at the 2016 level despite depressed country volumes. We built strong momentum in the cash management business by increasing penetration in the existing Corporate, Retail and FI clientele. As a result, cash management commissions grew by 17%. Trade income stood at 8% lower against 2016 mainly due to lower trade turnover within UBL International. Overall Investment Banking revenues increased by 6% year on year, with 13% growth in Domestic revenues led by active participation in new project financing and advisory transactions. Dividend income stood at Rs. 2.4 billion in 2017 as compared to Rs. 3.3 billion during 2016. Lower revenues are attributable to 24 34 United Bank Limited United Bank Limited reduced payouts, particularly within the power and fertilizer sectors. However, our equity portfolio continued to generate a healthy dividend yield of around 10% during 2017 (2016: 12%). Exchange income reported 10% year on year growth in 2017 to close at Rs. 1.9 billion. Domestic revenues saw significant growth in line with strong buildup in FX flows along with greater trading opportunities amid devaluation of the PKR during the latter part of the year. Capital gains amounting to Rs. 4.4 billion were realized in 2017 (2016: Rs. 5.4 billion). This mainly consisted of gains on long-term bonds. The bearish sentiment that prevailed in the stock market, limited trading opportunities on equities. Expense growth in line with reinvestment in branch network and sales commissions Administrative expenses amounted to Rs. 35.3 billion, depicting a growth of 11% on a year on year basis. Personnel cost, the largest component of the cost base, recorded 10% growth. In addition to salary increments and performance awards, the cost increase resulted from higher allowances, particularly within Retail Bank to incentivize staff to build strong business volumes in current accounts and bancassurance. Premises Cost registered an increase of 10% against 2016 in line with rent escalation across the expanding branch network and higher utility expenses. Variable costs also increased as a result of an aggressive advertising strategy and increase in sales force commissions. Higher costs accompanied with reduced revenues resulted in the cost to income ratio increasing from 39.6% in 2016 to 45.0% in 2017. The Bank continues to be focused on improving cost management through robust monitoring and maximizing cost synergies where possible. Strong Domestic recoveries offset portfolio classification within International Asset quality levels remained stable during the year at around 8%. Non-performing loans (NPLs) increased by Rs. 6.5 billion to Rs. 51.1 billion at Dec’17. Effective NPLs management helped curtail domestic NPLs by Rs. 4.3 billion; however, this was more than offset by higher infection in the International portfolio. Resultantly, net provisioning expense closed at Rs. 2.2 billion (2016: Rs. 1.7 billion). Specific coverage stood at 75.8% at Dec’17, relative to 83.9% at Dec’16. Retail Bank Strong Network penetration across Pakistan maintains growth trajectory in 2017 Retail Bank remains the cornerstone of our domestic franchise. We are a leading player in Pakistan’s banking space with a deposits market share of 8.4%, which was maintained throughout 2017. We remain deeply woven into Pakistan’s financial fabric, with strong penetration within the major cities as well as reaching the underbanked areas of the country. With around half of our network present in rural areas, we have played a pivotal role in
37. improving financial inclusion in Pakistan . We remain committed to provide easy access to banking channels to the unbanked population of the country, which we believe is a huge asset for the economy. 2017 was a landmark year for Retail Bank as it crossed the milestone of Rs. 1 trillion in domestic deposits, making UBL one of the few banks in the country to achieve this level. This year, we shifted our focus from aggressive market share acquisition to improving the deposits mix with greater emphasis on core deposits. We continue to invest in our branch network in order to better serve clients and seize growth opportunities in areas with more business potential. In line with our network expansion strategy, we opened 20 new branches in 2017, concentrating on enhancing presence in major urban centers. A key aspect of our network strategy has been maximizing branch performance through more rigorous monitoring of performance benchmarks and enhanced and more direct variable compensation. We aim to evolve a leaner business model with more empowerment at the branch manager level. This is to ensure that all regions grow above predefined benchmarks while raising the bar every year. 42 branches were re-located during the year in order to improve visibility at prime locations. Furthermore, we renovated 77 branches as part of our endeavor to ensure that our customers are provided with more professional, efficient and modern service standards across all geographies. Aggressive growth in current accounts supporting core earnings and interest margins Active buildup of current deposits remained the key priority for our distribution teams with a two-pronged focus on mobilizing new to bank client deposits as well as deepening existing relationships. We further strengthened the deposits momentum achieved through the ‘Mukammal Current Account’ launched two years ago, growing this product portfolio by Rs. 47 billion during the year to close at Rs. 114 billion. The overall domestic current account base for UBL at the end of Dec 2017 stood at Rs. 458 billion (Dec 2016: Rs. 393 billion), reflecting a strong 17% growth. Acquisition of new to bank customer relationships remained the core strategy with an addition of around 450,000 new current accounts in 2017 (2016: 400,000). As a result, current deposits depicted an impressive 18% year on year growth with incremental average deposits mobilization of Rs. 60 billion in 2017. This consistent buildup in current accounts since last 2 to 3 years is supporting overall interest margins and will have a significant impact on earnings with improving asset yields for both risk free investments and corporate lending. The current to total deposits ratio for the Bank remains one of the highest within the financial sector at 44.3% as at Dec’17 (Dec’16: 41.5%). The domestic cost of deposits reduced to 2.73% in 2017 (2016: 2.87%, 2015: 3.43%) bringing forth its consistently improving trend. Technological Innovations in product offering – targeting the future At the heart of our corporate philosophy of ‘customer first’ lies driving constant innovation in financial services in order to transform the customer experience and keep pace with ever changing market dynamics. A major foray in 2017 and very much a part of our ‘digital strategy’ was the inauguration of the first ever digital lab in Pakistan, in collaboration with IBM. The lab will use the more cutting edge ‘design thinking’ concept to develop personalized digital and engaging customer experiences that would be unique for the Pakistan market. We also introduced a state of the art “Digital Mobile App” with enhanced security features and diverse service menu. The evolving versions of this product seek to shift our existing branch led ‘brick and mortar’ banking experience to a 24/7 digital banking product suite with embedded payment solutions. In 2017, we further enhanced the footprint of our Islamic Banking business. Our network size now stands at 93 branches as we opened 3 new branches in 2017 and converted 43 conventional branches into Islamic. In addition, we also established 15 Islamic Banking Windows, taking our window operations to 156. As a result, the asset base of the Islamic Bank has grown from Rs. 48.0 billion at Dec’16 to Rs. 63.9 billion at Dec’17. Our strategy within this segment is to build scale through deeper market penetration and new product development. We seek to continuously raise service quality levels to achieve excellence in customer care. A comprehensive service quality programme is in place that comprises initiatives such as the Service Pledge System (SPS), Customer Experience Management (CEM) and Internal Service Measures (ISM). We are constantly striving to set new benchmarks to ensure efficient service delivery across all channels. Further as part of our drive to grow new to bank customers in greater volumes while providing ease to our customers, in 2017 we have now initiated digital onboarding of customers via electronic tablets. These include a unique ‘fingerprint authentication’ account opening feature. This aims to enhance outreach of our sales teams while also providing our customers with services closer to their homes. Strong build up in advances across SME and consumer Growing our lending capabilities is a key element of UBL’s Retail Bank strategy. In 2017 we have geared up our Consumer Banking business, with our portfolio growing by 27% to reach nearly Rs. 12.0 billion at Dec’17. A significant turnaround was witnessed within the secured asset class with a 38% growth in our autos portfolio which stood at Rs. 8.2 billion in Dec’17 (Dec’16: Rs. 5.9 billion). The credit card portfolio has grown by 10% in 2017 to reach Rs. 2.1 billion as we continue to enhance our value proposition for each client segment. We maintain our strong focus on recoveries against delinquent accounts and this has resulted in consistent Annual Report 2017 25 Annual Report 2017 35
38. PRESIDENT AND CEO REVIEW 2017 provision reversals of Rs . 383 million in 2017 (2016: Rs. 395 million). This year we consolidated the structure of our Small and Medium Enterprises (SME) business in view to synergize with the wider retail network. However, we maintain our dedicated commercial centers across the network at 11 locations (2016: 14). We maintained our efforts directed towards building the business model developed in 2016 through our strategic partnership with the International Finance Corporation (IFC). This strategy infused renewed momentum in the business as depicted by a 28% year on year growth in the loan portfolio. Diversification from fee based businesses providing impetus to earnings growth 2017 saw record revenues in Bancassurance as commissions closed at Rs. 1.2 billion, a robust growth of 97% over 2016. We reorganized and strengthened our sales and distribution with greater presence at branches as well as close liaison between the network and Banca teams. These measures resulted in significant improvements in turnaround times, speedy processing of applications and improvement in our persistency levels to over 80%. We also realigned our sales incentives structure with aggressive focus on new acquisitions and enhanced cross sell to branch banking customers. Within the home remittances space, the business environment remained increasingly challenging in 2017. Slowdown in growth levels within the GCC region impacted volumes that stood relatively stagnant year on year at country level. However, through dedicated focus on capturing market share from the competition, we were able to grow remittance volumes by over 4%. Consequently, our market share improved from 25.4% in 2016 to 26.6% in 2017, thus further cementing our leadership position in the industry. UBL maintained its strategic role with remittance volumes of over USD 5 billion in 2017, maintaining the scale of business from 2016. We are increasing the distribution of the “Pardes” card, which serves as an ATM card for beneficiaries allowing home remittances to be available with immense ease and convenience all across Pakistan. Alternate Distribution Channels – creating new boundaries each year Our channel strategy has evolved with a multi-pronged focus to diversify the product suite and deepen relationships. Consistent with our innovation agenda, we have widened our Alternate Distribution Channels (ADCs) to provide customers a holistic product suite as well as diversify revenue profile. We pride ourselves in being Pakistan’s largest network of over 45,000 customer touchpoints that include 1,378 ATMs, 4,300 POS terminals, over 480 phone banking agents and 42,000 Omni agents. We have one of the largest biometric enabled ATM networks in Pakistan that covers around half of the network size. We have one of the largest debit card portfolios in the industry and are the largest issuer of MasterCard in Pakistan. Building on our technological leadership, in 2017 we launched UBL Wiz Virtual Prepaid Card. It is the most versatile financial solution available in the market that offers customers an efficient, convenient and secure means for conducting e-commerce transactions. 24 36 United Bank Limited United Bank Limited Corporate and Investment Banking Group (CIBG) Highest Credit expansion in the last 5 years – with robust pipeline CIBG was at the forefront in driving the strong loan growth momentum achieved in 2017. The Corporate Banking Group has established itself as a key strategic partner to large blue chip corporate names. We continue to diversify our portfolio, expanding within the fertilizers, chemicals, engineering, telecom and pharmaceutical sectors. The focus remains on capturing large-ticket public sector financing mandates particularly those related to new projects in the energy and infrastructure sectors. During 2017, major disbursements were made to clients such as Sui Southern Gas Company Limited, National Power Parks and Quaid-e-Azam Thermal. While growth in asset and trade volumes was witnessed within our predefined sector limits, more efficient utilization of capital remains a priority. Coverage teams are targeting enhancement in overall relationship yields with a focus on growing fee based services. We shall continue with our efforts to pursue external credit rating of large corporates as this is essential to improve risk adjusted returns across the wholesale banking space. Within the cash management business, the strategy has been to expand coverage by scaling up cross selling efforts and building technology driven payment solutions catered to client needs. The business captured 40 new mandates in 2017, with transaction volumes increasing two folds to close at around Rs. 1.5 trillion. Strong Market recognition for our leading investment banking performance in 2017 2017 was a successful year for the Investment Banking unit in terms of both, revenue growth as well as market recognition. The Debt Capital Markets and Syndications segment concluded 14 transactions with a cumulative value of Rs. 346 billion. These included facility arrangements for WAPDA, Power Holding Private Limited and Qasim International Container Terminal. Project Finance and Advisory closed 4 project financing transactions with a total value of over Rs. 180 billion. In addition, in 2017, we collaborated with Netherlands Development Finance Company
39. (FMO, a leading Dutch Development Bank). With this partnership, UBL is well positioned to secure a steady pipeline of mandates in wind and solar power in 2018. During 2017, International Investment Banking closed two Syndicated Financing Facilities amounting to USD 650 million and USD 255 million for the Government of Pakistan, acting as Mandated Lead Arranger and Agent Bank. The highlight of the year was the Bank being awarded the coveted “Best Bank in Corporate Finance and Capital Market Development” Award at the Pakistan Banking Awards 2017. This award recognizes UBL’s significant role in developing the local capital market, deepening secondary markets and providing advisory services for the optimization of industrial, commercial and infrastructural assets. Treasury and Capital Markets (TCM) Given the relative size of the balance sheet and its market position, UBL is a market maker in local financial markets. UBL is a primary dealer with a development role in the domestic market and is one of the first authorized derivatives dealers appointed by the SBP in Pakistan. Treasury and Capital Markets continued its growth trajectory in 2017, primarily due to aggressive book building strategies and proactive positioning. We have strategically built our long term bond portfolio since the last few years, thus offsetting margin compression. We hold one of the larger equity books in the industry and continue to enhance yields through proactive trading in capital markets. This year there was enhanced focus on client coverage and cross selling with other units. Despite gradual maturities in PIBs and a low rate regime, a proactive ALM strategy resulted in core interest earnings being sustained year on year. Sizeable capital gains of Rs. 3.6 billion were also realized on a timely basis on government securities. Moreover, due to active market-making and participation, the Primary Dealer ranking of the Bank improved from the 7th position to the 3 rd position in 2017. Our equity portfolio continued to yield a stable dividend stream. Capitalizing on the bearish spell that prevailed in the stock market for the better part of 2017, the Capital Markets desk built the equity portfolio further with a view to maximize dividend yields. Financial Institutions Group (FIG) We remain a leading player in local and international financial markets, as our FI division continued to expand its coverage in 2017. Within Domestic FIG, focus was on arranging syndicated financing and active participation in debt capital market instruments that resulted in over 40% growth in the credit portfolio compared to 2016. The group also enhanced its transactional banking coverage, targeting microfinance institutions, insurance companies and brokerage houses. We remain a preferred bank for transactional escrow arrangements and back to back guarantees in Pakistan. A landmark achievement in 2017 has been UBL’s strategic alliance with Sinosure to support CPEC projects and promote bilateral trade and investment activities in the two countries. Internationally, the strategy remains to increase penetration in core and connected markets. Global FIs continued to demonstrate their confidence in UBL in the form of larger exposures against bilateral funding, swaps, FX and other Treasury and FI related products. In 2017, FIG closed 6 international syndications with various regional and foreign banks. The Bank participates actively in the FX market with sizable business volumes generated from corporates, SMEs and individuals across the wide branch network. The Corporate and Institutional Solutions Team pursued aggressive cross-sell across its product suite, catering to a diverse client base and deepening its market footprint. Taking advantage of market volatility, the FX Trading and Sales Desk increased domestic FX revenues by 54% this year. Payment Services Group (PSG) We continue to build on a strategic advantage with wider penetration across Pakistan UBL’s branchless banking proposition, ‘UBL Omni’, is a leader in providing basic banking services to the unbanked. Omni is a telco agnostic technology platform that has introduced every customer to mobile banking irrespective of SIM ownership. Customers across Pakistan can open a UBL Omni bank account at any UBL Omni Dukaan by using their CNIC number and mobile phone number. The outreach of our Omni ‘Dukaan’ network now extends to 42,000 agents covering more than 1,600 cities and towns. Active ‘new to bank’ focus driven by digital client onboarding has resulted in over 450,000 new accounts being opened in 2017, with the value of account based transactions growing 1.7 times from the previous year. Enhanced Product and transaction suite gaining acceptance and outreach UBL Omni has taken service parameters to a new level this year by introducing cash deposit and withdrawal facility through the Omni network for existing branch banking customers. In 2017 biometric verification systems were deployed across the network in order to enable secure authentication and processing of transactions. Furthermore, we also tapped branch banking customers through targeted promotional campaigns. As a result, cash deposits increased by 85%, cash withdrawals for UBL account holders 10 folds whereas interbank funds transfer transaction volumes grew by 145%. UBL continues to grow its Annual Report 2017 25 Annual Report 2017 37
40. PRESIDENT AND CEO REVIEW 2017 very strong alliance with Pakistan Railways , reflected in e ticket volumes growing to Rs 1 billion in 2017. business to Pakistan, our flagship product ‘Tezraftaar’ closed 2017 with 15% higher remittance volumes compared to 2016. Multi-currency remittance service from all UAE branches to Sri Lanka was also initiated in 2017. The International Treasury maintained its contribution to profitability in 2017 despite maturity of high yielding assets. The Investment portfolio yield was maintained at above 7% whereas a proactive trading strategy resulted in capital gains of USD 2.2 million in 2017. UBL Omni has also maintained its market leadership in Government-to-Person (G2P) payments and cash management services. Our cash management proposition offers customized solutions for loan disbursements, collections, payroll processing and retail payments for mid-tier clients and micro finance institutions. In 2017, we also entered into a business facilitation agreement with the Pakistan State Oil (PSO), thereby onboarding their owned and dealer operated petrol pumps as Omni agents. UBL Netbanking continued to serve the country’s growing tech savvy segment with 35% growth in customer base and 13% market share. We are industry leaders in terms of transaction throughout with a share of 45% in total transactions processed during the year. International Market challenges surround business performance in 2017 Our business model is built around trade finance, medium sized lending and a service oriented retail franchise. Structured around the Wholesale Banking model, our strategy centers on cautious credit expansion with well-established corporate names and deepening of existing relationships. Most of the foot print of UBL international is present in countries with a significant Pakistani diaspora creating a captive channel for home remittances. 2017 was a challenging year for UBL International, as despite slight recovery in global oil prices towards the end of year, the austere fiscal stance led to a second year of tight liquidity in the GCC banking sector. As a result, UBL International’s profitability was also negatively impacted. Despite testing market conditions, the asset base was maintained during the year and stood at USD 2.96 billion as at Dec’17 (Dec’16: USD 2.97 billion). In line with its strategy to contain risk in the asset portfolio international advances reduced to USD 1.51 billion as at Dec’17 (Dec’16: USD 1.59 billion). UBL International maintained its focus on broadening the deposit base. Liquidity was proactively and efficiently managed within the organically funded balance sheets in each country. The International deposits portfolio grew by 4% to close 2017 at USD 2.3 billion. During 2017, the bank focused on re-energizing the International Retail business. The Mukammal Current Account was launched in Bahrain and more Priority Banking lounges were opened in the UAE. As the market leader in home remittances 24 38 United Bank Limited United Bank Limited The Bank has a clear strategy to de-risk its exposure in Yemen. The clean funded exposure has been almost settled in 2017. However, the Bank remains exposed to the risk of currency devaluation that started in Aug’17 for which appropriate measures are being taken. Going forward, the Bank would be closely monitoring the developing situation on ground in order to take immediate action to safeguard its assets and capital investment. Human Resource (HR) We continue to invest in human capital as we consider a skilled and competent workforce as the single most competitive advantage. Key emphasis in 2017 was on improving the corporate culture through dissemination of our refreshed values of Customer First, Honesty of purpose, Teamwork, Excellence and Meritocracy across the organization. HR continues to be an effective business partner to all functions thereby ensuring adequate capacity building and implementing best practices for performance measurement across the organization. A key priority has been to build our bench strength by identifying high potential employees from various ranks and providing them well-defined career paths as well as learning and development opportunities for leadership roles. Sustainability In 2017, UBL’s sustainability initiatives were steered towards projects that supported the Bank’s vision of a developed and prosperous Pakistan. Supporting education through infrastructural development of educational institutes and granting scholarships to deserving students for higher education remained the Bank’s core priority. Other areas the Bank contributed towards included healthcare and community welfare. By serving worthy causes across Pakistan, UBL intends to strengthen and diversify its sustainability efforts in the coming years. Conclusion UBL maintains its position as one of the leading financial institutions in Pakistan. Looking ahead, our strategy is to maximize our franchise value by leveraging our core strengths, building on our technological leadership, investing in people and further strengthening the compliance and risk culture of the Bank. Active acquisition of new to bank customers shall remain a key priority to build a critical mass well beyond the existing client base. While acquiring market share is important, we shall balance it with the need to maintain CASA and cost of deposits at optimal levels. Maximizing network performance shall be imperative with aggressive targets across all regions. We are keen to make an
41. active contribution towards financial inclusion in Pakistan through UBL Omni , by targeting previously untapped segments with tailored service propositions. We seek to play a larger intermediation role in the economy by actively pursuing project finance opportunities arising within the power and infrastructure sectors apart from diversifying our core corporate lending book. Credit expansion is to be directed by considerations of maintaining superior asset quality, enhancing yields and efficient capital utilization. Having turned around our Consumer and SME lending businesses in 2017, we remain poised to further grow this new-found momentum going ahead. Within International, asset acquisition shall remain conservative with focus on maintaining adequate liquidity buffers. We stay committed to investing in new technologies in order to revolutionize customer experiences and outpace the industry as a leader in innovation. We shall strive to further elevate service quality standards in order to better serve our customers and raise industry benchmarks. Focus shall be enhanced on maximizing cost efficiencies by optimizing the organizational structure with creation of inter business synergies. We value our people as our biggest asset and will continue to invest as much as required towards their development in order to help them to realize their true potential. In the end, I would like to express my sincere gratitude to our customers without whose patronage UBL would not stand where it is today. I also extend my sincere appreciation to our colleagues whose dedication and relentless efforts have built our success story. I would also like to thank our shareholders for their confidence in us and the Board of Directors, the State Bank of Pakistan and other regulatory bodies for their continued guidance and support. Sima Kamil President and CEO 19 February 2018 Annual Report 2017 25 Annual Report 2017 39
42. MANAGEMENT TEAM Ms . Sima Kamil President & CEO 40 Mr. Zia Ijaz Group Executive, Branch Banking Mr. Mansoor Masood Khan Group Executive, Corporate, Institutional & Investment Banking Mr. Furrukh Zaeem Group Head, Treasury & Capital Markets Mr. Naeem Bashir Ahmad Head of International Mr. Muhammad Merajuddin Ahmed Group Executive, Human Resources Mr. Rashid Maqsood Hamidi Head of Financial Institutions Mr. Aameer M. Karachiwalla Chief Financial Officer Mr. Aqeel Ahmed Nasir Chief Legal Counsel & Company Secretary Mr. Imran Sarwar Group Executive, Risk and Credit Policy Mr. Aslam Sadruddin Group Executive, Operations Mr. Baqar Muzaffar Group Executive, Information Technology Mr. Sharjeel Shahid Group Head, Digital Banking Mr. Sajid Hussain Group Head, Compliance Mr. Shahid Mahmood Khan Group Head, Special Assets Management Mr. Tanveer Farhan Mahmood Head of Islamic Banking Mr. Suleman Pervez Acting Head, Audit & Risk Review United Bank Limited
43. ABDUL SATTAR EDHI A great philanthropist , his foundation operates one of the world’s largest fleet of ambulances. A man whose heart beat for humanity all his life.
44. GROWTH AT A GLANCE Six Years Financial Summary December 31 Standalone Rs . in million 2013 2012 2017 2016 2015 2014 Assets Cash and balances with treasury and other banks Lendings to financial institutions Investments - gross Advances - gross Operating fixed assets Other assets Total assets - gross Provisions against non-performing advances Provisions against diminution in value of investments Total assets - net of provisions 177,099 33,664 1,095,555 646,552 46,205 54,065 2,053,140 (41,990) (3,769) 2,007,381 146,428 34,168 808,959 550,636 35,582 44,731 1,620,504 (40,525) (2,428) 1,577,551 128,870 24,095 721,651 497,032 31,630 41,124 1,444,402 (41,618) (2,133) 1,400,651 87,573 21,872 499,060 479,998 30,303 40,067 1,158,874 (45,734) (1,726) 1,111,414 114,388 28,835 425,253 436,749 24,608 27,317 1,057,150 (45,936) (1,476) 1,009,739 109,396 21,953 351,002 409,090 24,431 26,800 942,673 (44,727) (1,412) 896,535 Liabilities & Equity Deposits & other accounts Borrowings from financial institutions Subordinated loans Bills payable Other liabilities Total liabilities Net assets Share capital Reserves Unappropriated profit Equity - Tier I Surplus on revaluation of assets - net of deferred tax Total equity Total liabilities & equity 1,289,247 512,650 13,388 32,789 1,848,074 159,307 12,242 43,847 71,154 127,243 32,064 159,307 2,007,381 1,179,887 201,550 11,756 32,571 1,425,764 151,787 12,242 40,455 64,246 116,943 34,844 151,787 1,577,551 1,051,235 163,132 13,392 30,757 1,258,516 142,135 12,242 38,402 55,223 105,867 36,268 142,135 1,400,651 895,083 53,065 9,554 28,196 985,898 125,516 12,242 34,130 48,217 94,589 30,927 125,516 1,111,414 827,848 40,574 665 16,591 23,147 908,825 100,914 12,242 33,681 42,635 88,558 12,356 100,914 1,009,739 698,430 68,720 9,319 7,601 20,226 804,296 92,238 12,242 29,044 37,416 78,702 13,537 92,238 896,535 107,206 (50,781) 56,425 14,496 6,762 904 22,162 78,587 (36,109) 42,478 (110) (2,208) 40,160 (14,739) 25,421 98,219 (41,177) 57,042 14,020 8,629 960 23,609 80,651 (32,809) 47,842 (87) (1,740) 46,015 (18,285) 27,730 94,353 (38,511) 55,842 14,474 6,442 1,070 21,986 77,828 (31,776) 46,052 (167) (3,710) 42,175 (16,448) 25,727 82,735 (37,769) 44,967 14,418 3,806 1,071 19,296 64,263 (29,597) 34,666 (112) (1,156) 33,398 (11,469) 21,930 72,846 (34,910) 37,936 12,205 4,845 1,064 18,114 56,050 (26,718) 29,332 (77) (1,448) 27,807 (9,193) 18,614 73,507 (34,948) 38,560 10,025 3,131 3,975 17,131 55,691 (24,306) 31,385 (35) (4,499) 26,851 (8,960) 17,891 253,459 (208,158) (15,480) 146,428 850 177,099 130,777 (96,241) (16,257) 128,870 (721) 146,428 266,960 (211,420) (15,942) 87,573 1,699 128,870 49,134 (59,936) (14,266) 114,388 (1,747) 87,573 95,737 (73,236) (20,267) 109,396 2,758 114,388 64,812 (42,910) (15,464) 100,602 2,356 109,396 Balance Sheet Profitability Markup / return / interest earned Markup / return / interest expensed Net markup / return / interest income Fee, commission, brokerage and exchange income Capital gains & dividend income Other income Total non interest income Gross income Administrative expenses and other charges Profit before donations and provisions Donations Provisions Profit before taxation Taxation Profit after taxation Cash Flow Statement - Summary Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Cash and cash equivalents at the beginning of the year Effect of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the year 24 42 United Bank Limited United Bank Limited
45. December 31 Financial Ratios Return on equity (RoE) Return on assets (RoA) Profit before tax ratio Gross spread ratio Return on capital employed (RoCE) Advances to deposits ratio (ADR) - gross Advances to deposits ratio (ADR) - net Income to expense ratio Cost to revenue ratio Growth in gross income Growth in net profit after tax Total assets to shareholders’ funds Intermediation cost ratio Asset quality (NPL ratio) Net infection ratio Weighted average cost of debt Capital adequacy ratio (CAR) Share Information Cash dividend per share Proposed bonus issue per share Dividend yield (based on cash dividend) Dividend payout ratio (total payout) Earning per share (EPS) Price earnings ratio Market value per share - at the end of the year Market value per share - highest during the year Market value per share - lowest during the year Breakup value per share - without surplus on revaluation of assets Breakup value per share - with surplus on revaluation of assets Other Information Non-performing advances (NPLs) - Rs. in million Import business - Rs. in million Export business - Rs. in million Number of employees Number of branches - Domestic Number of branches - International Number of branches - Total 2017 2016 2015 2014 2013 2012 20.8% 1.4% 51.1% 52.6% 20.8% 47.3% 44.0% 2.18 45.0% -2.6% -8.3% 12.6 2.9% 7.9% 1.5% 4.2% 15.4% 24.9% 1.9% 57.1% 58.1% 24.9% 44.4% 41.0% 2.46 39.6% 3.6% 7.8% 10.4 2.9% 8.1% 0.8% 4.4% 15.1% 25.7% 2.0% 54.2% 59.2% 25.7% 45.2% 41.3% 2.45 39.7% 21.1% 17.3% 9.9 3.3% 9.4% 1.1% 5.0% 14.6% 23.9% 2.1% 52.0% 54.4% 23.9% 51.3% 46.2% 2.17 45.2% 14.7% 17.8% 8.9 3.4% 11.2% 1.9% 5.6% 13.9% 22.3% 2.0% 49.6% 52.1% 21.0% 50.7% 45.1% 2.10 46.5% 0.6% 4.0% 10.0 3.5% 12.1% 1.7% 5.6% 13.3% 23.8% 2.1% 48.2% 52.5% 20.9% 56.2% 49.8% 2.29 42.6% 6.8% 15.4% 9.7 3.7% 14.0% 3.5% 6.1% 15.0% 13.00 5.4% 62.6% 20.77 9.05 187.97 283.00 162.01 103.94 130.13 13.00 8.4% 57.4% 22.65 10.55 238.90 243.72 137.31 95.53 123.99 13.00 7.4% 61.9% 21.02 7.37 154.95 186.75 141.25 86.48 116.10 11.50 8.7% 64.2% 17.91 9.86 176.71 198.39 130.36 77.27 102.53 10.00 12.0% 65.8% 15.21 8.72 132.55 154.21 81.24 72.34 82.43 8.50 16.2% 58.2% 14.61 5.72 83.67 91.99 52.00 64.29 75.35 51,073 720,496 294,428 14,771 1,361 18 1,379 44,567 575,991 255,287 14,153 1,341 18 1,359 46,833 607,496 220,701 14,623 1,312 18 1,330 53,853 655,881 259,259 13,382 1,295 18 1,313 52,630 641,866 249,006 13,270 1,283 18 1,301 57,347 515,638 180,434 13,056 1,278 18 1,296 Annual Report 2017 25 Annual Report 2017 43
46. GROWTH AT A GLANCE Balance Sheet December 31 2017 2016 2015 2014 2013 2012 8 .8% 1.7% 54.4% 30.1% 2.3% 2.7% 100.0% 9.3% 2.2% 51.1% 32.3% 2.3% 2.8% 100.0% 9.2% 1.7% 51.4% 32.5% 2.3% 2.9% 100.0% 7.9% 2.0% 44.7% 39.1% 2.7% 3.6% 100.0% 11.3% 2.9% 42.0% 38.7% 2.4% 2.7% 100.0% 12.2% 2.4% 39.0% 40.6% 2.7% 3.0% 100.0% 64.2% 25.5% 0.0% 0.7% 1.6% 92.1% 0.6% 2.2% 3.5% 6.3% 1.6% 7.9% 74.8% 12.8% 0.0% 0.7% 2.1% 90.4% 0.8% 2.6% 4.1% 7.4% 2.2% 9.6% 75.1% 11.6% 0.0% 1.0% 2.2% 89.9% 0.9% 2.7% 3.9% 7.6% 2.6% 10.1% 80.5% 4.8% 0.0% 0.9% 2.5% 88.7% 1.1% 3.1% 4.3% 8.5% 2.8% 11.3% 82.0% 4.0% 0.1% 1.6% 2.3% 90.0% 1.2% 3.3% 4.2% 8.8% 1.2% 10.0% 77.9% 7.7% 1.0% 0.8% 2.3% 89.7% 1.4% 3.2% 4.2% 8.8% 1.5% 10.3% Assets Cash and balances with treasury and other banks Lendings to financial institutions Investments - net Advances - net Operating fixed assets Other assets Total assets 161.9% 153.3% 312.3% 165.9% 189.1% 201.7% 223.9% 133.9% 155.6% 230.7% 140.0% 145.6% 166.9% 176.0% 117.8% 109.8% 205.8% 125.0% 129.5% 153.4% 156.2% 80.1% 99.6% 142.3% 119.2% 124.0% 149.5% 124.0% 104.6% 131.3% 121.2% 107.3% 100.7% 101.9% 112.6% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Liabilities & Equity Deposits & other accounts Borrowings from financial institutions Subordinated loans Bills payable Other liabilities Total liabilities Share capital Reserves Unappropriated profit Equity - Tier I Surplus on revaluation of assets - net of deferred tax Total equity 184.6% 746.0% 0.0% 176.1% 162.1% 229.8% 100.0% 151.0% 190.2% 161.7% 236.9% 172.7% 168.9% 293.3% 0.0% 154.7% 161.0% 177.3% 100.0% 139.3% 171.7% 148.6% 257.4% 164.6% 150.5% 237.4% 0.0% 176.2% 152.1% 156.5% 100.0% 132.2% 147.6% 134.5% 267.9% 154.1% 128.2% 77.2% 0.0% 125.7% 139.4% 122.6% 100.0% 117.5% 128.9% 120.2% 228.5% 136.1% 118.5% 59.0% 7.1% 218.3% 114.4% 113.0% 100.0% 116.0% 113.9% 112.5% 91.3% 109.4% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Vertical Analysis Assets Cash and balances with treasury and other banks Lendings to financial institutions Investments - net Advances - net Operating fixed assets Other assets Total assets Liabilities & Equity Deposits & other accounts Borrowings from financial institutions Subordinated loans Bills payable Other liabilities Total liabilities Share capital Reserves Unappropriated profit Equity - Tier I Surplus on revaluation of assets - net of deferred tax Total equity Horizontal Analysis 24 44 United Bank Limited United Bank Limited
47. Profit and Loss Account December 31 2017 2016 2015 2014 2013 2012 82 .9% 11.2% 5.2% 0.7% 100.0% 80.6% 11.5% 7.1% 0.8% 100.0% 81.1% 12.4% 5.5% 0.9% 100.0% 81.1% 14.1% 3.7% 1.0% 100.0% 80.1% 13.4% 5.3% 1.2% 100.0% 81.1% 11.1% 3.5% 4.4% 100.0% 39.3% 28.0% 1.7% 11.4% 80.3% 33.8% 27.0% 1.4% 15.0% 77.2% 33.1% 27.5% 3.2% 14.1% 77.9% 37.0% 29.1% 1.1% 11.2% 78.5% 38.4% 29.5% 1.6% 10.1% 79.5% 38.6% 26.9% 5.0% 9.9% 80.3% 19.7% 100.0% 22.8% 100.0% 22.1% 100.0% 21.5% 100.0% 20.5% 100.0% 19.7% 100.0% Interest / Return / Non Interest Income Earned Markup / return / interest earned Fee, commission, brokerage and exchange income Capital gains & dividend income Other income Total 145.8% 144.6% 216.0% 22.7% 142.7% 133.6% 139.8% 275.6% 24.1% 134.4% 128.4% 144.4% 205.8% 26.9% 128.4% 112.6% 143.8% 121.6% 26.9% 112.6% 99.1% 121.7% 154.7% 26.8% 100.4% 100.0% 100.0% 100.0% 100.0% 100.0% Interest / Return / Non Interest Expense Markup / return / interest expensed Operating expenses Provisions Taxation Total 145.3% 148.8% 49.1% 164.5% 142.9% 117.8% 135.1% 38.7% 204.1% 129.3% 110.2% 131.2% 82.5% 183.6% 124.6% 108.1% 122.1% 25.7% 128.0% 110.1% 99.9% 110.1% 32.2% 102.6% 99.4% 100.0% 100.0% 100.0% 100.0% 100.0% Profit after taxation 142.1% 155.0% 143.8% 122.6% 104.0% 100.0% Vertical Analysis Interest / Return / Non Interest Income Earned Markup / return / interest earned Fee, commission, brokerage and exchange income Capital gains & dividend income Other income Total Interest / Return / Non Interest Expense Markup / return / interest expensed Operating expenses Provisions Taxation Total expense - percentage of total income Profit after taxation Total Horizontal Analysis Statement of Value Added 2017 Rs. in million Mark-up / return / interest earned - net of provisions Fee, commission, brokerage and exchange income Capital gains & dividend income Other income Administrative expenses Value added % 2016 Rs. in million % 104,998 14,496 6,762 904 127,160 100.0% 13.8% 6.4% 0.9% 121.1% 96,479 14,020 8,629 960 120,088 96.7% 14.1% 8.7% 1.0% 120.4% 22,144 21.1% 20,356 20.4% 105,016 100.0% 99,732 100.0% 13,965 14,739 31,676 19,105 110 15,914 9,507 105,016 13.3% 14.0% 30.2% 18.2% 0.1% 15.2% 9.1% 100% 12,453 18,285 29,136 12,041 87 15,914 11,816 99,732 12.5% 18.3% 29.2% 12.1% 0.1% 16.0% 11.8% 100% Distributed as follows: To employees - as remuneration To government - as income tax To depositors - as profit on investments To institutions & individuals - as profit on borrowings To society - as donations To shareholders - as dividends / bonus Retained in business - as reserves and retained profits Annual Report 2017 25 Annual Report 2017 45
48. UBL INTERNATIONAL NETWORK INTERNATIONAL BRANCHES UAE Al-Ain Branch Mohammad Salem Owaida Jaber Al Khaily Building , Ali Bin Ibi Talib Street, Oud Al Toba, P.O. Box: 1141, Al-Ain - UAE Tel: 00971-3-7083560 Fax: 00971-3-7666175 BAHRAIN Manama Branch Delmon Tower, Building No. 117, Block No. 304, Road No. 385, Government Avenue P.O. Box: 546, Kingdom of Bahrain Tel: 00973-17-503547 to 00973-17-503561 Fax: 00973-17-224099 Al-Barsha Branch Seef Branch Al Faraidooni Building, Shaikh Zayed Road, Al Barsha 1, P.O. Box: 3846, Dubai - UAE Tel: 00971-4-6085300 & 00971-4-6085301 Fax: 00971-4-3403645 Bur Dubai Branch Bank Street Building, Khalid Bin Waleed Road, P.O. Box: 1367, Dubai - UAE Tel: 00971-4-6085200 & 00971-4-6085201 Fax: 00971-4-3510607 Deira Branch Mohamed & Obaid Almulla Building, Shop No. 1, Plot No. 115-0108, Murshid Bazar, P.O. Box: 1000, Deira-Dubai - UAE Tel: 00971-4-6085350 & 00971-4-6085351 Fax: 00971-4-2269209 Khalifa Main Branch Hamad Suhail Al Khaily Building, Khalifa Street, P.O. Box: 3052, Abu Dhabi - UAE Tel: 00971-2-5996555 Fax: 00971-2-6719900 Musaffah Branch M-14, Street 17, Mussafah, P.O.Box:237 Abu Dhabi - U.A.E Tel: 00971-2-5996400 & 00971-2-5996401 Fax: 00971-2-5548779 Sharjah Branch Al-Majaz Building, King Faisal Street, P.O. Box: 669, Sharjah - UAE Tel: 00971-6-5979121 & 00971-6-5979122 Fax: 00971-6-5721200 Sheikh Hamdan Road Branch Ghamran Buti Al Qubaisi Building, Opp. Hamdan Centre, Sheikh Hamdan Bin Mohamed Street, P.O. Box: 2340, Abu Dhabi - UAE Tel: 00971-2-5996450 & 00971-2-5996451 Fax: 00971-2-6272134 24 46 United Bank Limited United Bank Limited BMMI Tower, Ground Floor, Road No. 2813, 2806 Block No. 428, Seef District, P.O. Box: 546, Kingdom of Bahrain Tel: 00973-17-503562/5035561 Fax: 00973-17-587552 Muharraq Branch Building No. 1127, Block No. 215, Road No. 10, Muharraq Town, P.O. Box: 546, Kingdom of Bahrain Tel: 00973-17-503581/503582 Fax: 00973-17-344793 QATAR Corniche Main Branch Sh. Jasim Bin Jaber Al-Thani Building, Abdullah Bin Jassim Street, P.O. Box: 242, Doha – Qatar Tel: 00974-44254444 & 00974-44254434 Fax: 00974-44418575 Salwa Road Branch Qatar General Insurance Building, P.O. Box: 242, Doha – Qatar Tel: 00974-44254444 & 00974-44254466 Fax: 00974-44506026 West Bay Branch Al Aamal Tower, (Ground Floor), Omer Al Mukthar Street, West Bay, P.O. Box: 242, Doha – Qatar Tel: 00974-44254444 & 00974-44254471 Fax: 00974-44110950 YEMEN Sana’a Branch Dr. Mohammad Ahmed Othman Al-Absi Building, Al-Zubairi Street, P.O. Box: 1295, Sana’a, Republic of Yemen Tel: 00967-1-409947 (Dir.) 00967-1-407540 (PABX) Fax: 00967-1-408211
49. Hodeidah Branch Essam Al-Shami Building , Shahrah-e-Meena, P.O. Box: 3927, Hodeidah, Republic of Yemen Tel: 00967-3-201494 (Dir.) 00967-3-201151 (Gen.) Fax: 00967-3-201153 Aden Branch Aden Mall, Crater, P.O. Box: 104, Aden, Republic of Yemen Tel: 00967-2-269191, 00967-2-269393 Fax: 00967-2-269065 USA New York Branch 80 Broad Street, 19th Floor, New York, NY 10004-2209, United States of America Tel: 001-212-943-1275 Fax: 001-212-9680557 OBU – EPZ EPZ Branch (Karachi) Export Processing Zone, Landhi Industrial Area, Mehran Highway, Landhi, Karachi, Pakistan Tel: 0092-21-35082301-3 Fax: 0092-21-35082305 EPZ Branch, Sambrial (Sialkot) Plot no: 261-A, EPZ Sialkot, Wazirabad Road, Sambrial, district, Sialkot Tel: 0092-52-6523388 REPRESENTATIVE OFFICES CHINA Beijing Rep. Office Office No. 2110, The Exchange Beijing, No. 118, Jianguo Road, Chaoyang District, Beijing,100022, Peoples Republic of China Tel: 0086-10- 65675579 Fax: 0086-10-65675560 IRAN Tehran Rep. Office Unit No. 26, 5th floor, Nahid Office Complex, No. 56, West Nahid St. Valiasr Ave., Tehran 1967756685, Iran. Tel: 009821- 22053977 Fax: 009821-26219963 SUBSIDIARIES UNITED KINGDOM United Bank UK 2 Brook Street, London, W1S 1BQ, United Kingdom Tel: 0044-20-72908000 Fax: 0044-20-76293054 SWITZERLAND Postfach I Feldeggstrasse 55, CH-8034, Zurich - Switzerland Tel: 0041-43-4991920 Fax: 0041-43-4991933 TANZANIA UBL Bank (Tanzania) Ltd. Main Branch Diplomat House, 26 Mkwepu / Kaluta Street, P.O. Box: 5887, Dar Es Salaam, Tanzania Tel: 00255-22-5510200 Fax: 00255-22-2136292 Kariakoo Branch 16 Uhuru Street, Kalist Tower, Dar-es-Salam, Tanzania. P. O. Box 5887 Tel: +255 22 2180962 & +255 22 5510300 Fax: +255 22 2181062 ASSOCIATED COMPANY OMAN Oman United Exchange Co. LLC, i) Ruwi Branch P.O. Box: 889, Near Ruwi Police Station, Postal Code 100, Ruwi, Muscat, Sultanate of Oman Tel: 00968-24794305, 00968-24782048 Fax: 00968-24794344 ii) Salalah Branch P.O. Box: 2052, Postal Code 211, Salalah, Sultanate of Oman Tel: 00968-23290323 Fax: 00968-23290323 iii) Sohar Branch P.O. Box: 62, Postal Code 327, Sohar, Sultanate of Oman Tel: 00968-26847021 Fax: 00968-26847022 iv) Ghoubra Branch P.O. Box: 889, Postal Code 100, Muscat, Sultanate of Oman Tel: 00968-24495645 Fax: 00968-24495642 v) Industrial Area Salalah Branch P.O. Box: 2052, Postal Code 211, Salalah, Sultanate of Oman Tel: 00968-23213264 Fax: 00968-23211260 vi) Barka Branch P.O. Box: 889, Postal Code 100 Muscat, Sultanate of Oman Tel: 00968-26884864 Fax: 00968-26884891 vii) Duqm Branch P.O. Box: 62, Postal Code 327, Duqm, Sultanate of Oman Tel: 00968-25215105 Fax: 00968-25215104 viii) Mabela Industrial Area P.O. Box: 889 Postal Code: 100 Muscat, Sultanate of Oman Tel: 00968-24460626 Fax: 00968-24460626 Annual Report 2017 25 Annual Report 2017 47
50. REPORT OF SHARIAH BOARD FOR THE FINANCIAL YEAR-2017 In the name of Allah , The Most Beneficent, The Most Merciful The year under review was the eleventh year of Islamic Banking Operations of UBL Ameen (Islamic Banking Division of United Bank Limited). During the year there was an exponential growth in business profitability and market penetration. Ameen business recorded a profit before tax of PKR 247 Million in comparison with loss of 76 million in the preceding year. Shariah Compliance remained the key focus in all activities in order to achieve the optimum level of satisfaction. Shariah Compliance Department worked under the supervision of Shariah Board and served as an effective conduit between management and the Shariah Board. Sole responsibility to ensure that the operations of UBL Ameen are conducted in a manner that comply with Shariah principles at all times lies with the Board of Directors and Executive Management while Shariah Board is responsible and accountable for all its Shariah related decisions. Shariah Board hereby submits its report on the overall Shariah compliance environment of UBL Ameen and major developments that took place during the year: Shariah Board Meetings: In line with Shariah Governance Framework of State Bank of Pakistan, Shariah Board shall meet at least on quarterly basis. Hence, Eleven (11) Shariah Board meetings have been held till date out of which 4 meetings were held in 2017. Minutes of meetings were subsequently submitted in Islamic Banking Department of State Bank of Pakistan. Full quorum of Shariah Board attended the meetings and meetings were chaired by Chairman Shariah Board. Apart from mandatory quarterly meeting, monthly meetings were also held to discuss and guide on matters related to product development, training, Shariah compliance and Shariah audit. Products & Services: On Assets side, to cater financing needs of corporate customers 2 new products namely Ameen Musharakah Running Finance and Ameen Islamic Export Refinance were successfully launched, during the year, after detailed review and approval of Shariah Board. While, Ameen Istisna was reviewed comprehensively and approved by Shariah Board and will be launched in 2018. On liabilities side, Ameen Wiz Card was launched after consent from Shariah Board. The prepaid card has been designed with the purpose to facilitate the unbanked sector. It enables purchases and withdrawals at POS or over the internet within a limited budget. It also acts as card for travelers and others for remittances and salary disbursements etc. Further, during the year 12 existing liability products were also modified and updated after review and approval from Shariah Board. Bancatakaful which was efficaciously launched pan-Pakistan in 2016 with EFU and JLI as Takaful operators has now grown up to Contribution of Rs. 590 million during 2017. UBL Ameen Network: The year 2017 was the best in UBL Ameen’s History where number of branches almost doubled. Tally of branches has now reached to 93. While Islamic banking window operations is being done from 156 UBL branches in comparison with 141 branches last year. New Branches include successful conversion of 43 conventional branches to UBL Ameen Islamic Banking Operations. Conversion process was effectively done with end to end review from Shariah Board and subsequent approval from State Bank of Pakistan. 24 48 United Bank Limited United Bank Limited Prior to approval staff from proposed conversion branches was given 5 days training on Islamic Banking Products and services while 3 days training was conducted for designated staff in Islamic Banking Windows. Shariah Compliance Department: The Shariah Compliance Department (SCD) of UBL Ameen constitutes of RSBM - Head of Shariah Compliance & four supporting staff. SCD carried its legacy of close surveillance of all matters of UBL Ameen Islamic Banking which are directly or indirectly related to Shariah. During the year, 131 visits were made by Shariah Compliance Department to Ameen Branches and Windows. Report of each visit was shared with Ameen District Managers, National Sales Manager and Head Islamic Banking for rectification and compliance. Shariah Compliance Department submitted its consolidated quarterly reports to Shariah Board for ratification. Reports consisted details of all Shariah reviews and opinions given and made during the year. For reviewing corporate transactions, Shariah Compliance Process is categorized into three stages: 1) Pre Disbursement Stage in which process flows and structures of the transactions are finalized in accordance with Shariah guidelines. Further, all related legal and financing agreements are reviewed before disbursement. 2) Disbursement Stage in which transactional documents like Purchase Requisitions etc. are reviewed till the issuance of Pay Order or credit of funds to suppliers accounts. In few cases, where funds are credited to customers account for onward payment to suppliers explicit reasons are being recorded in compliance with SBP - IBD Circular no. 01 of 2012. 3) Post Disbursement Stage in which transactional documents, offers and acceptances between UBL Ameen and customers, Invoices and other parameters are being checked to confirm Shariah compliance at each stage. Corporate Banking: During the year, total 475 corporate transactions were executed and each transaction was reviewed by Shariah Compliance Department and found to be in accordance with Shariah guidelines. Assets portfolio enhanced by 204% as assets at close of financial year stand at PKR 22.11 Bln in comparison to PKR 7.284 Bln only in the previous year. Ameen Treasury: UBL Ameen has a separate and independent treasury department. During the year, 214 deals were executed under Ameen treasury products namely, Musharakah, Wakalah, Mudarabah and GOP Ijarah Sukuk. Each deal was reviewed and approved by Shariah Compliance Department. All Product manuals were updated and consequently vetted by Shariah Board. Due to excess funds, 22 deals were executed under SBP’s approved product Bai Moajjal. Management restricted Bai Moajjal at 20% of total deposits in second half of the year in line with instructions of Shariah Board. Further, to manage excess liquidity or in case of shortage of funds a Qard arrangement with UBL was approved with a strategy that on best effort basis funds would be deployed in corporate, SME & Islamic financial institutions.
51. Consumer Banking : UBL Ameen’s Consumer Department experienced 127% growth as total 431 disbursements were made under Ameen Car Financing product in comparison with 190 cases in year 2016. All cases in 2017 were executed under Diminishing Musharakah model. While, Ameen Drive Product Manual based on Ijarah and Diminishing Musharakah was updated and reviewed by Shariah Board. As per Diminishing Musharakah guidelines, Insurance & Takaful costs should be proportionately divided between Bank and customers both in Corporate and Consumer Financing. Shariah Board has advised management to ensure meticulous compliance in this regard while management has assured to take up this matter on priority and develop a proper mechanism in 2018 towards improvement. Profit Distribution & Pool Management: ii. UBL Ameen has overall complied with directives, regulations, instructions and guidelines related to Shariah compliance issued by SBP in accordance with the rulings of SBP’s Shariah Board. iii. UBL Ameen has a satisfactory mechanism in place to ensure Shariah compliance in their overall operations. iv. UBL Ameen has a proper system in place to ensure that any earnings realized from sources or by means prohibited by Shariah have been credited to charity account and are being properly utilized. v. UBL Ameen has complied with the SBP instructions on profit and loss distribution and pool management. vi. The level of awareness, capacity and sensitization of the staff and the management in appreciating the importance of Shariah compliance in the products and processes of the bank is satisfactory. During the year, Profit was properly distributed to all saving account holders on Mudarabah guidelines. Pool calculations and Weightages were discussed with the Shariah Compliance Department on monthly basis and are subsequently vetted by RSBM. Internal Shariah Audit conducted its post disbursement audit on quarterly basis and presented its report to Shariah Board. Recommendations: The year 2017 proved to be momentous in the way that pool management system was automated after arduous joint efforts of the Ameen operations team and UBL IT. a) vii. The Shariah Board has been provided adequate resources enabling it to discharge its duties effectively. For further enhancement, Shariah Board recommends the following: Training: During the year 2017, 53 training sessions were conducted and more than 450 staff members from 30 cities were trained from UBL and UBL Ameen on basic concepts of Islamic Banking, Islamic Banking products and services and Islamic Branch Operations and segregation of funds. Trainings were conducted by Shariah Compliance Department, Shariah Board Members and Executives from Product & Operations Department. Further, to abreast the staff with expertise and skills selected staff were trained through Centre of Excellence for Islamic Finance (CEIF-IBA) and NIBAF-SBP. E-learning module had been soft launched in September 2017 and was made available on web portal for all staff members across the bank. Management has aimed to strengthen the module in 2018 and make it part of performance appraisals of the staff. b) c) Hiring of resources in Corporate, SME & consumer teams for increased deployment of funds in commercial sector which will not only increase the revenue generating assets but also improve the advances to deposit ratio. Provident & Gratuity Funds of Ameen Staff are still not Shariah Compliant after 11 years of Islamic Banking Operations. Treasury Foreign Currency dealing mechanism and Shariah structure to be elaborated in detail. Conclusion: The Shariah Board of UBL Ameen is satisfied with overall performance and operations of UBL Ameen – Islamic Banking Division of United Bank Limited and hope that the management will keep this momentum of profitability, Shariah compliance and market penetration and thus play pivotal role in sound and manifold growth of Islamic Banking countrywide. Shariah Audit Department (Isau): Internal Shariah Audit Unit performed all tasks in line with Shariah Governance Framework and took guidance and consultation from Shariah Board of UBL Ameen. Audit covered all business related functions like Treasury, consumer, corporate, profit and loss distribution very extensively. Reports were discussed with Shariah Board for opinion and subsequent submission to UBL Ameen Management for necessary actions wherever required. Dr. Mufti Muhammad Zubair Usmani Chairman Shariah Board Charity Disbursements: During the year, charity of PKR 1,320,000/= was distributed to charitable organizations after detailed screening and due diligence. No transaction was found to be null and void. Hence, amount credited in charity account was only due to late payments and not the non-compliant transactions. Dr. Mufti Ejaz Ahmed Samadani Member Shariah Board Shariah Opinion: To form our opinion as expressed in this report, the Shariah Compliance Department of the Bank carried out reviews of each class of transactions, the relevant documentation and process flows. Further, we have also reviewed reports from internal Shariah audit and SBP inspection teams. Based on above, we are of the view that: Mufti Abdul Rehman Resident Shariah Board Member & Head of Shariah Compliance i. Date of Report: January 29th, 2018 UBL Ameen has overall complied with Shariah rules and principles in the light of Fatawa, rulings and guidelines issued by Shariah Board. Annual Report 2017 25 Annual Report 2017 49
52. 24 50 United Bank Limited United Bank Limited
53. 2017 Annual Report 2017 25 Annual Report 2017 51
54. STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE for the year ended December 31 , 2017 This statement is being presented to comply with the Code of Corporate Governance 2012 and Rule Book of Pakistan Stock Exchange Limited together “The Code” for the purpose of establishing a framework of good governance, whereby a listed company is managed in compliance with the best practices of corporate governance. United Bank Limited (the Bank) has applied the principles contained in the Code in the following manner: 1. The Bank encourages representation of independent Directors, Non-Executive Directors and Directors representing minority interests on its Board of Directors. At present the Board includes: Category Independent Directors Executive Director Non-Executive Directors Names Mr. Khalid A. Sherwani* Mr. Amar Zafar Khan* Mr. Tariq Rashid** Ms. Sima Kamil, President & CEO Sir Mohammed Anwer Pervez, OBE, HPk* Mr. Zameer Mohammed Choudrey, CBE* Mr. Rizwan Pervez* Mr. Haider Zameer Choudrey* Mr. Arshad Ahmad Mir* *During the year, Election of Directors were held in the Annual General Meeting of shareholders on March 25, 2017. **Appointed on 25 th May 2017 after SBP approval. 8. The meetings of the Board were presided over by the Chairman. The Board met at least once in every quarter. Written notices of the Board meetings, along with the agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated. 9. The appointment of the President & CEO including the remuneration and terms of employment have been approved by the Board. Furthermore, no new appointment of Chief Financial Officer, the Company Secretary and the Head of Internal Audit was made during the year. 10. In compliance with Clause (5.19.7) of the Rule Book of Pakistan Stock Exchange Limited, five Directors and CEO have completed the Corporate Governance Leadership Skills programme conducted by the Pakistan Institute of Corporate Governance and Institute of Business Administration while two Directors are exempt from the training requirement. The independent directors meet the criteria of independence under clause I (b) of the Code. 11. The Directors' Report for the year has been prepared in compliance with the requirements of the Code and fully describes the salient matters required to be disclosed. 2. The Directors have confirmed that none of them is serving as a Director on more than seven listed companies, including the Bank. 12. The financial statements of the Bank were duly endorsed by the Chief Executive Officer and the Chief Financial Officer before approval of the Board. 3. All the resident Directors of the Bank are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company, a DFI or an NBFI or, being a member of a stock exchange, has been declared as a defaulter by that stock exchange. 13. The Directors, Chief Executive Officer and Executives do not hold any interest in the shares of the Bank other than as disclosed in the Pattern of Shareholding, which is part of Directors’ Report. 4. A casual vacancy occurred on the Board on April 19, 2017 which was filled up by the directors within 36 days. The approval of State Bank of Pakistan was received on 25th May 2017. Moreover, new President & CEO was appointed during the year 2017. 5. 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. 6. The Board has approved a Vision / Mission Statement, overall corporate strategy and significant policies of the Bank. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained. 24 52 7. All the powers of the Board have been duly exercised and decisions on material transactions, including the appointment and the determination of remuneration and terms and conditions of employment of the Chief Executive Officer and Non-Executive Directors have been taken by the Board. United Bank Limited United Bank Limited 14. The Bank has complied with all corporate and financial reporting requirements of the Code. The Bank has continued to present the details of all related party transactions before the Audit Committee and upon their recommendation to the Board for review and approval. The definition of related party used is in accordance with repealed Companies Ordinance, 1984 and applicable financial reporting frame work. 15. The Board has formed an Audit Committee. It comprises of three members, all of whom are Non-Executive Directors and the Chairman of the committee is an independent director. 16. The meetings of the Audit Committee are held at least once every quarter prior to the approval of interim and final results of the Bank as required by the Code. The terms of reference of the committee have been formulated and advised to the committee for compliance.
55. 17 . The Board has also constituted a Human Resource and Compensation Committee comprising of three Non-Executive Directors. The Chairman of the committee is an independent Director. 18. The Board has set up an effective internal audit function. Personnel of the Internal Audit department are suitably qualified and experienced for the purpose and are conversant with the policies and procedures of the Bank. 19. The statutory auditors of the Bank have confirmed that they have been given a satisfactory rating under the Quality Control Review Programme of the Institute of Chartered Accountants of Pakistan, that they or any of the partners of the firm, their spouses and minor children do not hold shares of the Bank and that the firm and all its 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. 20. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the listing regulations and the auditors have confirmed that they have observed IFAC guidelines in this regard. 21. The ”Closed Period”, prior to the announcement of interim/final results, and business decisions, which may materially affect the market price of the Bank’s securities, was determined and intimated to Directors, employees and the stock exchanges. 22. Material price sensitive information has been disseminated among all market participants at once through the stock exchanges. 23. The company has complied with the requirements relating to maintenance of register of persons having access to inside information by designated senior management officer in a timely manner and maintained proper record including basis for inclusion or exclusion of name of persons from the said list. 24. We confirm that all other material principles enshrined in the Code have been complied with. For and on behalf of the Board of Directors. Sima Kamil President & CEO Sir Mohammed Anwar Pervez, OBE, HPk Chairman Date: February 19, 2018 Annual Report 2017 25 Annual Report 2017 53
56. AUDITORS ’ REVIEW REPORT TO THE MEMBERS ON THE STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE We have reviewed the enclosed Statement of Compliance with the best practices contained in the Code of Corporate Governance (the Code) prepared by the Board of Directors of United Bank Limited (‘the Bank’) for the year ended December 31, 2017 to comply with the requirements of Rule 5.19 of the Pakistan Stock Exchange Limited Regulations issued by the Pakistan Stock Exchange where the Bank is listed. The responsibility of compliance with the Code is that of the Board of Directors of the Bank. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the Statement of Compliance reflects the status of the Bank’s compliance with the provisions of the Code and report if it does not and to highlight any non-compliance with the requirements of the Code. 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 Code. alternate pricing mechanism. 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 any procedures to determine 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 best practices contained in the Code as applicable to the Bank for the year ended December 31, 2017. As part of our audit of the financial statements, we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the Board of Directors' statement on internal control covers all risks and controls or to form an opinion on the effectiveness of such internal controls, the Bank's corporate governance procedures and risks. The Code requires 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 distinguishing between transactions carried out on terms equivalent to those that prevail in arm's length transactions and transactions which are not executed at arm's length price and recording proper justification for using such A.F. Ferguson & Co. Chartered Accountants Dated: February 28, 2018 Karachi 24 54 United Bank Limited United Bank Limited KPMG Taseer Hadi & Co. Chartered Accountants
57. ANNUAL STATEMENT ON INTERNAL CONTROLS 2017 The Internal Control System comprises of various inter-related components including the Control Environment , Risk Assessment, Control Activities, Information & Communication and Monitoring. It is the responsibility of the Bank’s management to establish an Internal Control System to maintain an adequate and effective Internal Control Environment. An Internal Control System is a set of processes designed to identify and mitigate the risk of failure and achieve the overall business objectives of the Bank. Internal controls and policies are designed to provide reasonable assurance regarding the effectiveness and efficiency of the Bank’s operations, reliability of financial information and compliance with applicable laws and regulations. Management ensures an efficient and effective Internal Control System by carrying out risk assessment, identifying controls, reviewing pertinent policies/procedures and establishing relevant control procedures and monitoring systems. Evaluation The Bank’s Internal Control System has been designed to provide reasonable assurance to the shareholders and Board of Directors; however, these systems may not entirely eliminate the risk of misreporting and failure of certain controls under a changing environment. implementation of controls and ensure the existence of a healthy control environment throughout the Bank. All significant and material findings of the internal & external auditors and regulators were addressed on a priority basis by the management and their status was reported periodically to the Board Audit Committee and Risk & Compliance Committee, who ensured that management has taken appropriate corrective actions and has put in place a system to minimize repetition to ensure strengthening of the control environment. The Bank endeavors to follow the State Bank of Pakistan’s guidelines on Internal Controls. The Bank is continuously making efforts to ensure that an effective and efficient Internal Control System remains active & implemented through consistent & continuous monitoring that would help in further improving the overall control environment. Based upon the results achieved from reviews and audits conducted during the year, management considers that the existing Internal Control System is adequate and has been effectively implemented and monitored, though room for improvement always exists. Evaluation of the Bank’s Internal Control System comprises of different levels of monitoring activities i.e. Line Management, Compliance Group and Audit & Risk Review Group. Keeping in view the changing risk environment and our enhanced focus on controls and compliance matters, Line Management’s role has been enhanced to include onsite reviews of processes in branches by Internal Control Division within Operations Group, to identify gaps with special emphasis on the implementation of regulatory instructions in addition to day to day monitoring of control breaches for prompt corrective actions. Compliance Group ensured regulatory compliance across the Bank on an on-going basis. Audit & Risk Review Group continued to perform audit and review activities to evaluate the Sajid Hussain Group Head – Audit & Risk Review Muhammad Ejazuddin Group Executive – Compliance Aameer KarachiwalIa Chief Financial Officer Sima Kamil President & CEO Annual Report 2017 25 Annual Report 2017 55
58. DISCLOSURE IN ANNUAL ACCOUNTS Complaint Management and BPR unit (under Service Quality) is responsible for Complaint Management at UBL. We ensure that; • • • • • Complaints are treated fairly. Complaints are resolved within shortest possible time. Complaint handling mechanism is visible and accessible. Complaints are handled with impartiality and transparency. Customers have access to channels for lodging complaints / grievances within the bank and their rights to alternative forum, in case they are not fully satisfied with the response of the Bank to their complaints. UBL has a robust mechanism in place for handling complaints. Customers have complete access to register their grievances through the following modes (but not limited to) - email, letter, fax, website, IP Hotlines, 24/7 helpline, State Bank of Pakistan, Banking Mohtasib & President Secretariat. All complaints received are logged into a centralized Complaint Management & Tracking System (CMTS). Complaint trends and closure analysis reports are shared with the Board, Senior Management & Business owners on quarterly basis. Based on these findings, remedial measures are taken. Status of open complaints and their aging is also shared with pertinent stakeholders on a weekly basis in the form of Complaint Tracker. UBL regards complaints as an important feedback for improvement. Our signature Service Pledge System (SPS) has monitoring of Complaint Management Calls as an important pillar. Middle and senior management members directly contact customers who have logged complaints to confirm whether their complaints have been resolved as per their satisfaction. Complaint lodgment procedure has been made public where placards have been displayed at the branches, as ATM screen messages and at UBL website we have also automated messages that are communicated to the customers on complaint lodgment & resolution via SMS/email through our CMTS. 24 56 United Bank Limited United Bank Limited Bank is continuously striving for improvement in processes to avoid recurrence of instances, also escalation mechanism helps to rectify issues on fast pace. Key highlights of year 2017 were as under. • • • • • Complaint volume of 147,050 managed successfully. 92% complaints were resolved within internally defined TATs. 92% resolutions were provided within 10 business days and 96% resolutions were provided in 15 days time. Less than 1% of customers approached regulators for redressal. Average complaint resolution time stood at 5.0 days. Furthermore, this resolution time remained 3.6 days excluding off-us transactions.
59. * *“...Leader of the way to progress and excellence...” Verse from the last stanza of Pakistan’s national anthem, penned by Mr. Hafeez Jullundhri
60. FINANCIAL STATEMENTS 2017 24 United Bank Limited
61. A .F. Ferguson & Co. KPMG Taseer Hadi & Co. Chartered Accountants State Life Building No. 1- C I.I. Chundrigar Road Karachi 74000 Chartered Accountants Sheikh Sultan Trust Building No. 2, Beaumont Road Karachi 75530 Auditors’ Report to the Members We have audited the annexed unconsolidated statement of financial position of United Bank Limited (the Bank) as at December 31, 2017 and the related unconsolidated profit and loss account, unconsolidated statement of comprehensive income, unconsolidated cash flow statement and unconsolidated statement of changes in equity together with the notes forming part thereof (here-in-after referred to as the ‘financial statements’) for the year then ended, in which are incorporated the un-audited certified returns from the branches except for seventy nine branches which have been audited by us and sixteen branches audited by the auditors’ abroad 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 our audit. It is the responsibility of the Bank’s management to establish and maintain a system of internal control, and prepare and present the financial statements in conformity with the approved accounting standards and the requirements of the Banking Companies Ordinance, 1962 (LVII of 1962), and the Companies Ordinance, 1984 (XLVII of 1984). Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the International Standards on Auditing as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, which in case of loans and advances covered more than sixty percent of the domestic loans and advances of the Bank, we report that: (a) in our opinion, proper books of account have been kept by the Bank as required by the Companies Ordinance, 1984 (XLVII of 1984), and the returns referred to above received from the branches have been found adequate for the purposes of our audit; (b) in our opinion: (i) the unconsolidated statement of financial position and unconsolidated profit and loss account together with the notes thereon have been drawn up in conformity with the Banking Companies Ordinance, 1962 (LVII of 1962), and the Companies Ordinance, 1984 (XLVII of 1984), and are in agreement with the books of account and are further in accordance with the accounting policies consistently applied; (ii) the expenditure incurred during the year was for the purpose of the Bank’s business; and (iii) the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the Bank and the transactions of the Bank which have come to our notice have been within the powers of the Bank; (c) in our opinion and to the best of our information and according to the explanations given to us, the unconsolidated statement of financial position, unconsolidated profit and loss account, unconsolidated statement of comprehensive income, unconsolidated cash flow statement and unconsolidated statement of changes in equity together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and give the information required by the Banking Companies Ordinance, 1962 (LVII of 1962), and the Companies Ordinance, 1984 (XLVII of 1984), in the manner so required and give a true and fair view of the state of the Bank’s affairs as at December 31, 2017, and its true balance of profit, its comprehensive income, its cash flows and its changes in equity for the year then ended; and (d) in our opinion 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. A.F. Ferguson & Co. KPMG Taseer Hadi & Co. Engagement Partner: Salman Hussain Engagement Partner: Mazhar Saleem Chartered Accountants Chartered Accountants Dated: February 28, 2018 Karachi Annual Report 2017 59
62. Unconsolidated Notes to and forming Statement part of of theFinancial Unconsolidated Position Financial Statements UNCONSOLIDATED STATEMENT OF FINANCIAL POSITION As For atthe December year ended 31 ,December 2017 31, 2017 AS AT DECEMBER 31, 2017 Note 2017 2016 --------------------- (Rupees in '000) --------------------ASSETS Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments 6 7 8 9 157,582,687 19,516,198 33,664,174 1,091,786,626 131,506,861 14,920,994 34,168,287 806,531,246 Advances Performing Non-performing - net of provision 10 10 592,224,354 12,337,839 604,562,193 502,940,552 7,170,372 510,110,924 11 46,204,564 54,065,004 2,007,381,446 35,581,758 44,730,953 1,577,551,023 13,388,316 512,650,465 1,289,247,251 2,611,941 30,176,426 1,848,074,399 11,756,422 201,549,619 1,179,887,048 4,691,544 27,879,529 1,425,764,162 159,307,047 151,786,861 19 12,241,798 43,846,877 71,153,991 127,242,666 12,241,798 40,454,505 64,246,270 116,942,573 Surplus on revaluation of assets - net of deferred tax 20 32,064,381 159,307,047 34,844,288 151,786,861 CONTINGENCIES AND COMMITMENTS 21 Operating fixed assets Deferred tax asset - net Other assets 12 LIABILITIES Bills payable Borrowings Deposits and other accounts Subordinated loans Liabilities against assets subject to finance lease Deferred tax liability - net Other liabilities 14 15 16 17 18 NET ASSETS REPRESENTED BY: Share capital Reserves Unappropriated profit The annexed notes from 1 to 48 and annexures form an integral part of these unconsolidated financial statements. Aameer AameerKarachiwalla Karachiwalla ChiefFinancial FinancialOfficer Officer Chief 60 United Bank Limited Sima Sima Kamil Kamil President & & President Chief Chief Executive Executive Officer Officer AmarZafar ZafarKhan Khan Arshad Arshad Ahmad Amar Ahmad MirMir Director Director Director Director Mohammed Anwar Pervez, OBE, HPk SirSir Mohammed Anwar Pervez, OBE, HPk Chairman Chairman
63. Notes to and forming Unconsolidated Profit part and of Loss the Unconsolidated Account Financial Statements UNCONSOLIDATED PROFIT AND LOSS ACCOUNT THE YEAR ENDED DECEMBER 31 , 2017 For the year ended December 31, FOR 2017 Note Mark-up / return / interest earned Mark-up / return / interest expensed Net mark-up / return / interest income 23 24 Provision against loans and advances - net Reversal of provision against lendings to financial institutions - net Provision for diminution in value of investments - net Bad debts written off directly 10.3 8.7 9.3 10.5 Non mark-up / return / interest expenses Administrative expenses Other provisions / write offs - net Workers' Welfare Fund Other charges Total non mark-up / return / interest expenses Profit before taxation Taxation - Current Taxation - Prior Taxation - Deferred 107,205,820 50,781,440 56,424,380 98,219,214 41,176,686 57,042,528 1,173,304 (8,260) 1,339,258 92,992 2,597,294 53,827,086 504,901 (15,500) 891,684 97,781 1,478,866 55,563,662 12,617,676 2,360,881 1,878,141 4,398,560 2,292 904,592 22,162,142 75,989,228 12,318,684 3,266,559 1,701,016 5,364,463 (2,184) 960,104 23,608,642 79,172,304 27 28 29 30 35,349,864 (389,069) 808,704 59,688 35,829,187 40,160,041 31,903,598 260,848 922,449 69,813 33,156,708 46,015,596 31 31 31 14,396,887 (2,037,348) 2,379,270 14,738,809 25,421,232 14,898,709 2,100,381 1,286,394 18,285,484 27,730,112 Net mark-up / return / interest income after provisions Non mark-up / return / interest income Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Gain on sale of securities - net Unrealized gain / (loss) on revaluation of investments classified as held for trading Other income Total non mark-up / return / interest income 2017 2016 ------- (Rupees in '000) ------- 25 9.4 26 Profit after taxation ----------- (Rupees) ----------32 Earnings per share - basic and diluted 20.77 22.65 The annexed notes from 1 to 48 and annexures form an integral part of these unconsolidated financial statements. Aameer AameerKarachiwalla Karachiwalla Chief ChiefFinancial FinancialOfficer Officer Sima Sima Kamil Kamil President President & & Chief Chief Executive Executive Officer Officer AmarZafar ZafarKhan Khan Arshad Arshad Ahmad Amar Ahmad MirMir Director Director Director Director Mohammed Anwar Pervez, OBE, HPk SirSir Mohammed Anwar Pervez, OBE, HPk Chairman Chairman Annual Report 2017 61
64. Unconsolidated Notes to and forming Statement part of of theComprehensive Unconsolidated Financial Income Statements UNCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31 , 2017 For the year ended December 31, 2017 2017 2016 ------- (Rupees in '000) ------25,421,232 Profit after taxation 27,730,112 Other comprehensive income: Items that will not be reclassified to profit or loss in subsequent periods Remeasurement loss of defined benefit obligations Related deferred tax reversal Items that may be reclassified to profit or loss in subsequent periods Exchange differences on translation of net investment in foreign branches Other comprehensive income transferred to equity (165,566) 57,948 (107,618) (107,434) 37,602 (69,832) 850,249 (720,809) 26,163,863 26,939,471 (13,711,039) 4,798,863 (8,912,176) (2,283,241) 799,135 (1,484,106) 17,251,687 25,455,365 Items that may be reclassified to profit or loss in subsequent periods Deficit arising on revaluation of available for sale securities Related deferred tax reversal Total comprehensive income during the year - net of tax The annexed notes from 1 to 48 and annexures form an integral part of these unconsolidated financial statements. AameerKarachiwalla Karachiwalla Aameer ChiefFinancial FinancialOfficer Officer Chief 62 United Bank Limited Sima Kamil Kamil Sima & President & Chief Executive Executive Officer Officer Chief Amar Ahmad MirMir AmarZafar ZafarKhan Khan Arshad Arshad Ahmad Director Director Director Director SirSir Mohammed Anwar Pervez, OBE, HPk Mohammed Anwar Pervez, OBE, HPk Chairman Chairman
65. Notes to and forming Unconsolidated Cash part Flow of the Statement Unconsolidated Financial Statements UNCONSOLIDATED CASH FLOW STATEMENT31 , FOR 2017 THE YEAR ENDED DECEMBER 31, 2017 For the year ended December Note CASH FLOW FROM OPERATING ACTIVITIES Profit before taxation Less: Dividend income Adjustments: Depreciation on operating fixed assets Depreciation on Islamic financing against leased assets (Ijarah) Amortization Workers' Welfare Fund Provision for retirement benefits Provision for compensated absences Provision against loans and advances - net Reversal of provision against lendings to financial institutions - net Provision for diminution in value of investments - net Reversal of provision in respect of investments disposed off during the year (Reversal of provision) / charge against off balance sheet items Gain on sale of operating fixed assets - net Gain on sale of ijarah assets -net Bad debts written-off directly Unrealized (gain) / loss on revaluation of investments classified as held for trading Provision against other assets - net (Increase) / decrease in operating assets Lendings to financial institutions Held for trading securities Advances Other assets (excluding advance taxation) Increase / (decrease) in operating liabilities Bills payable Borrowings Deposits and other accounts Other liabilities (excluding current taxation) Payments on account of staff retirement benefits Income taxes paid Net cash inflow from operating activities CASH FLOW FROM INVESTING ACTIVITIES Net investments in available for sale securities Net investments in held to maturity securities Net investments in subsidiaries and associates Dividend income received Investment in operating fixed assets Sale proceeds from disposal of operating fixed assets Sale proceeds from disposal of ijarah assets Net cash outflow from investing activities CASH FLOW FROM FINANCING ACTIVITIES Dividends paid Net cash outflow from financing activities Exchange differences on translation of net investment in foreign branches Increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 33 2017 2016 ------- (Rupees in '000) ------40,160,041 2,360,881 37,799,160 46,015,596 3,266,559 42,749,037 2,034,205 197,824 373,007 808,704 672,894 24,687 1,173,304 (8,260) 1,339,258 (49,101) (599,097) (57,935) (96) 92,992 (2,292) 45,888 6,045,982 43,845,142 1,607,107 205,186 314,870 922,449 158,912 315,084 504,901 (15,500) 891,684 (569,357) 27,081 (44,273) (44,685) 97,781 2,184 143,908 4,517,332 47,266,369 512,373 (96,810,953) (95,987,553) (1,788,536) (194,074,669) (10,058,019) 3,606,415 (55,651,884) 1,031,748 (61,071,740) 1,631,894 311,100,846 109,360,203 2,512,487 424,605,430 274,375,903 (1,122,778) (19,794,270) 253,458,855 (1,635,317) 38,417,672 128,651,878 1,573,196 167,007,429 153,202,058 (608,600) (21,816,894) 130,776,564 (199,987,800) (7,507,546) 3,475,252 2,395,626 (6,686,963) 81,029 72,260 (208,158,142) (31,378,975) (66,271,443) 3,895,310 3,158,032 (5,927,402) 91,203 191,657 (96,241,618) (15,479,932) (15,479,932) (16,256,676) (16,256,676) 850,249 30,671,030 (720,809) 17,557,461 146,427,855 177,098,885 128,870,394 146,427,855 The annexed notes from 1 to 48 and annexures form an integral part of these unconsolidated financial statements. AameerKarachiwalla Karachiwalla Aameer Chief Financial Officer Chief Financial Officer Sima Kamil Kamil Sima President & President & Chief Executive Officer Chief Executive Officer Amar Ahmad MirMir AmarZafar ZafarKhan Khan Arshad Arshad Ahmad Director Director Director Director SirSir Mohammed Anwar Pervez, OBE, HPk Mohammed Anwar Pervez, OBE, HPk Chairman Chairman Annual Report 2017 63
66. Unconsolidated Notes to and forming Statement part of of theChanges Unconsolidated in Equity Financial Statements UNCONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended December 31 , 2017FOR THE YEAR ENDED DECEMBER 31, 2017 Share capital Statutory reserve Capital reserve Exchange translation Unappropriated profit Total ---------------------------------------------------- (Rupees in '000) ---------------------------------------------------12,241,798 Balance as at December 31, 2015 24,424,604 13,977,699 55,222,960 105,867,061 Transactions with owners for the year ended December 31, 2016 Final cash dividend - December 31, 2015 declared subsequent to the year end at Rs.4.0 per share - - - (4,896,719) (4,896,719) Interim cash dividend - March 31, 2016 declared at Rs.3.0 per share - - - (3,672,539) (3,672,539) Interim cash dividend - June 30, 2016 declared at Rs.3.0 per share - - - (3,672,539) (3,672,539) - - - (3,672,539) (15,914,336) (3,672,539) (15,914,336) Profit after taxation for the year ended December 31, 2016 Other comprehensive income - net of tax Total comprehensive income for the year ended December 31, 2016 - - 27,730,112 (69,832) 27,660,280 27,730,112 (790,641) 26,939,471 Transfer from surplus on revaluation of fixed assets to unappropriated profit - net of tax - - Transfer to statutory reserve - Interim cash dividend - September 30, 2016 declared at Rs.3.0 per share Total comprehensive income for the year ended December 31, 2016 12,241,798 Balance as at December 31, 2016 2,773,011 27,197,615 (720,809) (720,809) 13,256,890 50,377 (2,773,011) 64,246,270 50,377 116,942,573 Transactions with owners for the year ended December 31, 2017 Final cash dividend - December 31, 2016 declared subsequent to the year end at Rs.4.0 per share - - - (4,896,719) (4,896,719) Interim cash dividend - March 31, 2017 declared at Rs.3.0 per share - - - (3,672,539) (3,672,539) Interim cash dividend - June 30, 2017 declared at Rs.3.0 per share - - - (3,672,539) (3,672,539) - - - (3,672,539) (15,914,336) (3,672,539) (15,914,336) Profit after taxation for the year ended December 31, 2017 Other comprehensive income - net of tax Total comprehensive income for the year ended December 31, 2017 - - 25,421,232 (107,618) 25,313,614 25,421,232 742,631 26,163,863 Transfer from surplus on revaluation of fixed assets to unappropriated profit - net of tax - Transfer to statutory reserve - Interim cash dividend - September 30, 2017 declared at Rs.3.0 per share Total comprehensive income for the year ended December 31, 2017 Balance as at December 31, 2017 12,241,798 2,542,123 29,739,738 850,249 850,249 14,107,139 50,566 (2,542,123) 71,153,991 50,566 127,242,666 Appropriations recommended by the Board of Directors subsequent to the year ended December 31, 2017 are disclosed in note 46 to these unconsolidated financial statements. The annexed notes from 1 to 48 and annexures form an integral part of these unconsolidated financial statements. Aameer AameerKarachiwalla Karachiwalla Chief ChiefFinancial FinancialOfficer Officer 64 United Bank Limited Sima Kamil President & Executive Officer Officer Chief Executive AmarZafar ZafarKhan Khan Arshad Arshad Ahmad Amar Ahmad MirMir Director Director Director Director Mohammed Anwar Pervez, OBE, HPk SirSir Mohammed Anwar Pervez, OBE, HPk Chairman Chairman
67. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING OF THE UNCONSOLIDATED For the year endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 1. STATUS AND NATURE OF BUSINESS United Bank Limited (the Bank) is a banking company incorporated in Pakistan and is engaged in commercial banking and related services. The Bank's registered office and principal office are situated at UBL Building, Jinnah Avenue, Blue Area, Islamabad and at UBL Head Office, I. I. Chundrigar Road, Karachi respectively. The Bank operates 1,361 (2016: 1,341) branches inside Pakistan including 93 (2016: 47) Islamic Banking branches and 2 (2016: 2) branches in Export Processing Zones. The Bank also operates 18 (2016: 18) branches outside Pakistan. The Bank is a subsidiary of Bestway (Holdings) Limited which is incorporated in the United Kingdom. The Bank's ordinary shares are listed on Pakistan Stock Exchange. Its Global Depository Receipts (GDRs) are on the list of the UK Listing Authority and the London Stock Exchange Professional Securities Market. These GDRs are also eligible for trading on the International Order Book System of the London Stock Exchange. Further, the GDRs constitute an offering in the United States only to qualified institutional buyers in reliance on Rule 144A under the US Securities Act of 1933 and an offering outside the United States in reliance on Regulation S. 2. BASIS OF PRESENTATION 2.1 In accordance with the directives of the Federal Government regarding the shifting of the banking system to Islamic modes, the State Bank of Pakistan (SBP) 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 unconsolidated financial statements as such, but are restricted to the amount of facility actually utilized and the appropriate portion of mark-up thereon. The Islamic Banking branches of the Bank have complied with the requirements set out under the Islamic Financial Accounting Standards issued by the Institute of Chartered Accountants of Pakistan (ICAP) and notified under the provisions of the repealed Companies Ordinance, 1984. 2.2 Key financial figures of the Islamic Banking branches are disclosed in note 44 to these unconsolidated financial statements. 3. STATEMENT OF COMPLIANCE 3.1 These unconsolidated financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of: - International Financial Reporting Standards (IFRS) and interpretations issued by the International Accounting Standards Board (IASB) as are notified under the Companies Ordinance, 1984; Islamic Financial Accounting Standards (IFAS) issued by the Institute of Chartered Accountants of Pakistan as are notified under the Companies Ordinance, 1984; Provisions of and directives issued by the Banking Companies Ordinance, 1962; Provisions of and directives issued under the Companies Ordinance, 1984; and Directives issued by the Securities and Exchange Commission of Pakistan (SECP) and the SBP from time to time. Wherever the requirements of the Companies Ordinance, 1984, the Banking Companies Ordinance, 1962 or the directives issued by the SECP and the SBP differ with the requirements of IFRS or IFAS, the requirements of the Companies Ordinance, 1984, the Banking Companies Ordinance, 1962 or the said directives prevail. The Companies Ordinance, 1984 has been repealed after the enactment of the Companies Act, 2017. However, as allowed by the SECP vide its circular number 23/2017 dated October 4, 2017, these unconsolidated financial statements have been prepared in accordance with the provisions of the repealed Companies Ordinance, 1984. 3.2 The SBP, vide BSD Circular letter No. 10, dated August 26, 2002 has deferred the applicability of International Accounting Standard 39, Financial Instruments: Recognition and Measurement and International Accounting Standard 40, Investment Property for banking companies till further instructions. Moreover, SBP vide BPRD circular no. 4, dated February 25, 2015 has deferred the applicability of Islamic Financial Accounting Standards (IFAS) 3, Profit and Loss Sharing on Deposits. Further, according to the notification of the SECP issued vide SRO 411(I)/2008 dated April 28, 2008, IFRS 7, Financial Instruments: Disclosures has not been made applicable for banks. Accordingly, the requirements of these standards have not been considered in the preparation of these unconsolidated financial statements. However, investments have been classified and valued in accordance with the requirements of various circulars issued by the SBP. Further, segment information is being disclosed in accordance with SBP’s prescribed format as per BSD circular 4 dated February 17, 2006 which prevails over the requirements specified in IFRS 8. 3.3 SECP vide its notification SRO 633 (I)/2014 dated July 10, 2014, adopted IFRS 10 effective from the periods starting from June 30, 2014. However, vide its notification SRO 56 (I)/2016 dated January 28, 2016, it has been notified that the requirements of IFRS 10 and section 237 of the Companies Ordinance, 1984 will not be applicable with respect to the investment in mutual funds established under trust structure. 6 Annual Report 2017 65
68. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED For the year ended December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 3.4 These unconsolidated financial statements represent the separate financial statements of the Bank. The consolidated financial statements of the Bank and its subsidiaries are presented separately. 3.5 Standards, interpretations and amendments to approved accounting standards that are not yet effective The following revised standards, amendments and interpretations with respect to the approved accounting standards would be effective from the dates mentioned below against the respective standard or interpretation: Effective date (annual periods beginning on or after) Standard, Interpretation or Amendment - IFRS 2 - Share-based Payments - (Amendments) IAS 28 - Investments in Associates and Joint Ventures - (Improvement) IFRIC 22 - Foreign Currency Transactions and Advance Consideration IFRIC 23 - Uncertainty over Income Tax Treatments IFRS 3 - Business Consideration - (Amendments) IFRS 11 - Joint Venture - (Amendments) IAS 12 - Income Taxes - (Amendments) IFRS 15 - Revenue from contracts with customers IFRS 9 - Financial Instruments: Classification and Measurement IFRS 9 - Financial Instruments: Classification and Measurement - (Amendments) January 01, 2018 January 01, 2018 January 01, 2018 January 01, 2018 January 01, 2018 January 01, 2018 July 01, 2018 July 01, 2018 July 01, 2018 January 01, 2019 - IFRS 15 - Revenue from contracts with customers - The Bank is currently in the process of assessing the potential impacts of changes required in revenue recognition policies upon adoption of the standard. - IFRS 9 - Financial Instruments - The Bank is currently awaiting instructions from SBP as applicability of IAS 39 was deferred by SBP till further instructions. The Bank expects that the adoption of remaining amendments, improvements and interpretations will not affect its financial statements in the period of initial application. In addition to above, the Companies Act 2017 has been enacted on May 31, 2017 and according to the circular referred to in note number 3.1 of these financial statements, the Act would be applicable on the financial statements of the Bank effective from January 1, 2018. This would result in additional disclosures and certain changes in financial statements presentation. The SBP vide BPRD circular no. 2 dated January 25, 2018 has specified the new reporting format for the financial statements of banking companies. The new format has revised the disclosure requirements and will become applicable for the financial statements of the Bank for the year ending December 31, 2018. 3.6 Standards, interpretations and amendments to approved accounting standards that are effective in the current year. There are certain new and amended standards, interpretations and amendments that are mandatory for the Bank's accounting periods beginning on or after January 01, 2017 but are considered not to be relevant or do not have any significant effect on the Bank's operations and therefore not detailed in these financial statements. 4. BASIS OF MEASUREMENT 4.1 Accounting convention These unconsolidated financial statements have been prepared under the historical cost convention except that certain operating fixed assets / non-banking assets acquired in satisfaction of claims have been stated at revalued amounts, certain investments and derivative financial instruments have been stated at fair value and net obligations in respect of defined benefit schemes are carried at their present values. 4.2 Critical accounting estimates and judgments The preparation of these unconsolidated financial statements in conformity with approved accounting standards requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and income and expenses. It also requires management to exercise judgment in the application of its accounting policies. The estimates and 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 recognized 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. 66 United Bank Limited 7
69. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING OF THE UNCONSOLIDATED For the year endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 Significant accounting estimates and areas where judgments were made by management in the application of accounting policies are as follows: i) ii) classification of investments (notes 5.3 and 9); provision against investments (notes 5.3 and 9.3), lendings to financial institutions (note 8.7) and advances (notes 5.4 and 10.3); iii) income taxes (notes 5.8 and 31); iv) staff retirement benefits (notes 5.10 and 35); v) fair value of derivatives (notes 5.15.2 and 18.3); vi) operating fixed assets, revaluation, depreciation and amortization (notes 5.5 and 11); vii) impairment (note 5.7); and viii) valuation of non-banking assets acquired in satisfaction of claims (note 5.6). 5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies adopted in the preparation of these unconsolidated financial statements are consistent with those of the previous financial year. 5.1 Cash and cash equivalents Cash and cash equivalents for the purpose of the cash flow statement consist of cash and balances with treasury banks and balances with other banks. 5.2 Lendings to / borrowings from financial institutions The Bank enters into transactions of reverse repos and repos at contracted rates for a specified period of time. These are recorded as under: 5.2.1 Purchase under resale agreements Securities purchased under agreement to resell (reverse repo) are included in lendings to financial institutions. The differential between the purchase price and the resale price is amortized over the period of the agreement and recorded as income. Securities held as collateral are not recognized in the unconsolidated 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. 5.2.2 Sale under repurchase agreements Securities sold subject to a repurchase agreement (repo) are retained in the unconsolidated financial statements as investments and the counterparty liability is included in borrowings from financial institutions. The differential between the sale price and the repurchase price is amortized over the period of the agreement and recorded as an expense. 5.2.3 Bai Muajjal The securities sold under Bai Muajjal agreement are derecognised on the date of disposal. Receivable against such sale is recognised at the agreed sale price. The difference between the sale price and the carrying value on the date of disposal is taken to income on straight line basis. 5.3 Investments Investments of the Bank, other than investments in subsidiaries and associates, are classified as held for trading, held to maturity and available for sale. Held for trading These are securities which are either acquired for generating a profit from short-term fluctuations in market prices, interest rate movements and dealer's margin, or are securities included in a portfolio in which a pattern of short term profit taking exists. Held to maturity These are securities with fixed or determinable payments and fixed maturities, in respect of which the Bank has the positive intent and ability to hold to maturity. 8 Annual Report 2017 67
70. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED For the year ended December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 Available for sale These are investments, other than those in subsidiaries and associates, that do not fall under the held for trading or held to maturity categories. Initial measurement All “regular way” purchases and sales of investments are recognized on the trade date, i.e. the date that the Bank commits to purchase or sell the investment. Regular way purchases or sales are purchases or sales of investments that require delivery of investments within the time frame generally established by regulation or convention in the market place. Investments are initially recognized at fair value which, in the case of investments other than held for trading, includes transaction costs associated with the investments. Transaction costs on investments held for trading are expensed as incurred. 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. 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 below 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 company 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. Provisions for diminution in the value of other securities are made for impairment, if any. Investments in Subsidiaries and Associates Investments in subsidiaries and associates are valued at cost less impairment, if any. A reversal of an impairment loss on subsidiaries and associates is recognized in the profit and loss account as it arises provided the increased carrying value does not exceed cost. Gains and losses on disposal of investments in subsidiaries and associates are included in the profit and loss account. 5.4 Advances Advances are stated net of specific and general provisions which are charged to the profit and loss account. Specific provisions against domestic advances and general provision against domestic loans to small enterprises and consumer loans are determined on the basis of the Prudential Regulations and other directives issued by the SBP. General and specific provisions pertaining to overseas advances are made in accordance with the requirements of the regulatory authorities of the respective countries. If circumstances warrant, the Bank, from time to time, makes general provisions against weaknesses in its portfolio on the basis of management's estimation. Advances are written off when there is no realistic prospect of recovery. The amount so written off is a book entry and does not necessarily prejudice the Bank's right of recovery against the customer. The Bank determines write-offs in accordance with the criteria prescribed by the SBP vide BPRD Circular No. 06 dated June 05, 2007. 68 United Bank Limited 9
71. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING OF THE UNCONSOLIDATED For the year endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 5.4.1 Islamic financings and related assets Receivables under Murabaha financing represent cost price plus an agreed mark-up on deferred sale arrangement. Markup income is recognised on a straight line basis over the period of the instalments. Ijarah financing represents arrangements whereby the Bank (being the owner of assets) transfers its usufruct to its customers for an agreed period at an agreed consideration. Assets leased out under Ijarah are stated at cost less accumulated depreciation and accumulated impairment losses, if any. These are depreciated over the term of the lease. Ijarah income is recognized on an accrual basis. Diminishing Musharaka is partnership agreement between the Bank and its customer for financing vehicle or plant and machinery. The receivable is recorded to the extent of Bank's share in the purchase of asset. Income is recognised on accrual basis. 5.5 Operating fixed assets and depreciation 5.5.1 Tangible Property and equipment, other than land (which is not depreciated) and capital work-in-progress, are stated at cost or revalued amount less accumulated depreciation and accumulated impairment losses, if any. Land is carried at revalued amount less impairment losses while capital work-in-progress is stated at cost less impairment losses. The cost and the accumulated depreciation of property and equipment of foreign branches include exchange differences arising on currency translation at the year-end rates of exchange. Depreciation is calculated so as to write off the depreciable amount of the assets over their expected useful lives at the rates specified in note 11.2 to these unconsolidated financial statements. The depreciation charge for the year is calculated on a straight line basis after taking into account the residual value, if any. The residual values and useful lives are reviewed and adjusted, if appropriate, at each statement of financial position date. Depreciation on additions is charged from the month the asset is available for use. No depreciation is charged in the month of disposal. Land and buildings are revalued by professionally qualified valuers with sufficient regularity to ensure that their net carrying value does not differ materially from their fair value. A surplus arising on revaluation is credited to the surplus on revaluation of fixed assets account. Any deficit arising on subsequent revaluation of fixed assets is adjusted against the balance in the above mentioned surplus account as allowed under the provisions of the repealed Companies Ordinance, 1984. The surplus on revaluation of fixed assets, to the extent of incremental depreciation, is transferred to unappropriated profit. Gains and losses on sale of fixed assets are included in the profit and loss account, except that the related surplus on revaluation of fixed assets (net of deferred tax) is transferred directly to unappropriated profit. Major renewals and improvements are capitalized and the assets so replaced, if any, are retired. Normal repairs and maintenance are charged to the profit and loss account as and when incurred. 5.5.2 Intangible assets Intangible assets are stated at cost less accumulated amortization and accumulated impairment losses, if any. The cost and the accumulated amortization of intangible assets of foreign branches include exchange differences arising on currency translation at the year-end rates of exchange. Amortization is calculated so as to write off the amortizable amount of the assets over their expected useful lives at the rates specified in note 11.3 to these unconsolidated financial statements. The amortization charge for the year is calculated on a straight line basis after taking into account the residual value, if any. The residual values and useful lives are reviewed and adjusted, if appropriate, at each statement of financial position date. Amortization on additions is charged from the month the asset is available for use. No amortization is charged in the month of disposal. Gains and losses on sale of intangible assets are included in the profit and loss account. 10 Annual Report 2017 69
72. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED For the year ended December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 5.6 Non banking assets acquired in satisfaction of claims Non banking assets acquired in satisfaction of claims are carried at revalued amounts less accumulated depreciation. These assets are revalued by professionally qualified valuers with sufficient regularity to ensure that their net carrying value does not differ materially from their fair value. A surplus arising on revaluation of property is credited to the 'surplus on revaluation of non-banking assets' account and any deficit arising on revaluation is taken to profit and loss account directly. Legal fees, transfer costs and direct costs of acquiring title to property are charged to the profit and loss account and not capitalised. 5.7 Impairment Impairment of available for sale equity investments Available for sale equity investments are impaired when there has been a significant or prolonged decline in their fair value below their cost. The determination of what is significant or prolonged requires judgment. In making this judgment, the Bank evaluates, among other factors, the normal volatility in share price. Impairment of investments in subsidiaries and associates The Bank considers that a decline in the recoverable value of the investment in a subsidiary or an associate below its cost may be evidence of impairment. Recoverable value is calculated as the higher of fair value less costs to sell and value in use. An impairment loss is recognized when the recoverable value falls below the carrying value and is charged to the profit and loss account. A subsequent reversal of an impairment loss, upto the cost of the investment in the subsidiary or the associate, is credited to the profit and loss account. Impairment in non-financial assets (excluding deferred tax) The carrying amounts of non-financial assets are reviewed at each reporting date for impairment whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be recoverable. If such indication exists, and where the carrying value exceeds the estimated recoverable amount, assets are written down to their recoverable amount. The resulting impairment loss is charged to the profit and loss account except for an impairment loss on revalued assets, which is adjusted against the related revaluation surplus to the extent that the impairment loss does not exceed the revaluation surplus. 5.8 Taxation 5.8.1 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. 5.8.2 Prior years The taxation charge for prior years represents adjustments to the tax charge relating to prior years, arising from assessments / changes in laws and changes in estimates made during the current year. 5.8.3 Deferred Deferred tax is recognized using the balance sheet method on all major temporary differences between the amounts attributed to assets and liabilities for financial reporting purposes and the 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 statement of financial position date. Deferred tax assets are recognized only to the extent that it is probable that future taxable profits will be available against which the assets can be utilized. The carrying amount of deferred tax assets is reviewed at each statement of financial position 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 utilized. 70 United Bank Limited 11
73. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING OF THE UNCONSOLIDATED For the year endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 The Bank also recognizes deferred tax asset / liability on the deficit / surplus on revaluation of fixed assets / non-banking assets acquired in satisfaction of claims and securities which is adjusted against the related deficit / surplus in accordance with the requirements of IAS 12, Income Taxes. 5.9 Provisions Provisions are recognized when the Bank has a legal or constructive obligation as a result of past events which makes it probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made. Provision against identified non-funded losses is recognized when intimated and reasonable certainty exists that the Bank will be required to settle the obligation. The provision is charged to the profit and loss account net of expected recovery and the obligation is classified under other liabilities. Provisions are reviewed at each statement of financial position date and are adjusted to reflect the current best estimate. 5.10 Staff retirement and other benefits 5.10.1 Staff retirement benefit schemes The Bank operates the following staff retirement schemes for its employees: a) For new employees and for those who opted for the below mentioned conversion option introduced in 2001, the Bank operates: - an approved contributory provident fund (defined contribution scheme); and - an approved gratuity scheme (defined benefit scheme). b) For employees who have not opted for the conversion option introduced in 2001, the Bank operates: - an approved non-contributory provident fund in lieu of the contributory provident fund; and - an approved funded pension scheme, introduced in 1986 (defined benefit scheme). In 2001, the Bank modified the pension scheme and introduced a conversion option for employees covered under option (b) above to move to option (a). This conversion option ceased on December 31, 2003. The Bank also operates benevolent fund for all its eligible employees (defined benefit scheme). Annual contributions towards defined benefit schemes are made on the basis of actuarial advice using the Projected Unit Credit Method. For the defined contribution scheme, the Bank pays contributions to the fund on a periodic basis. The Bank has no further payment obligation once the contributions have been paid. The contributions are recognized as an expense when the obligation to make payments to the fund has been established. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is available. 5.10.2 Other benefits a) Employees' compensated absences The Bank makes provisions for compensated vested and non-vested absences accumulated by its eligible employees on the basis of actuarial advice under the Projected Unit Credit Method. b) Post retirement medical benefits (defined benefit scheme) The Bank provides post retirement medical benefits to eligible retired employees. Provision is made on the basis of actuarial advice under the Projected Unit Credit Method. c) Employee motivation and retention scheme The Bank has a long term motivation and retention scheme for its employees. The liability of the Bank in respect of the scheme for each year, if any, is fixed, and is accounted for in the year to which the scheme relates. 12 Annual Report 2017 71
74. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED For the year ended December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 5.10.3 Remeasurement of defined benefit obligations Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in other comprehensive income when they occur with no subsequent recycling through the profit and loss account. Remeasurement gains and losses pertaining to long term compensated absences are recognized in the profit and loss account immediately. 5.11 Subordinated loans Subordinated loans are initially recorded at the amount of proceeds received. Mark-up accrued on subordinated loans is recognised separately as part of other liabilities and is charged to the profit and loss account over the period on an accrual basis. 5.12 5.13 Borrowings / deposits a) Borrowings / deposits are recorded at the amount of proceeds received. b) The cost of borrowings / deposits is recognized on an accrual basis as an expense in the period in which it is incurred. Revenue recognition Revenue is recognized to the extent that the economic benefits associated with a transaction will flow to the Bank and the revenue can be reliably measured. The following recognition criteria must be met before revenue is recognized. 5.13.1 Advances and investments Mark-up / return / interest on performing advances and investments is recognized on a time proportionate basis over the term of the advances and investments that takes into account the effective yield of the asset. Where debt securities are purchased at a premium or discount, such premium / discount is amortized through the profit and loss account over the remaining period of maturity of the debt securities. Interest or mark-up recoverable on non-performing or classified advances and investments is recognized on a receipt basis. 5.13.2 Dividend income Dividend income is recognised when the right to receive the dividend is established. 5.13.3 Fee, brokerage and commission income Fee, brokerage and commission income is recognized on an accrual basis. 5.13.4 Grants Grants received are recorded as income when the right to receive the grant, based on the related expenditure having been incurred, has been established. 5.14 Foreign currencies 5.14.1 Functional and presentation currency Items included in these unconsolidated financial statements are measured using the currency of the primary economic environment in which the Bank operates. These unconsolidated financial statements are presented in Pakistani Rupees, which is the Bank's functional and presentation currency. 72 United Bank Limited 13
75. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING OF THE UNCONSOLIDATED For the year endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 5.14.2 Foreign currency transactions Transactions in foreign currencies are translated to rupees at the foreign exchange rates prevailing on the transaction date. Monetary assets and liabilities in foreign currencies are expressed in rupee terms at the rates of exchange prevailing at the statement of financial position date. Forward foreign exchange contracts and foreign bills purchased are valued in rupees at the forward foreign exchange rates applicable to their respective maturities. Non-monetary assets and liabilities in foreign currencies are expressed in rupee terms at the rates of exchange prevailing at the date of initial recognition of the non-monetary assets / liabilities. 5.14.3 Foreign operations The assets and liabilities of foreign operations are translated to rupees at exchange rates prevailing at the statement of financial position date. The results of foreign operations are translated at the average rates of exchange for the year. 5.14.4 Translation gains and losses Translation gains and losses are taken to the profit and loss account, except those arising on translation of the net investment in foreign branches which are taken to capital reserves (Exchange Translation Reserve) until the disposal of the net investment, at which time these are recognised in the profit and loss account. 5.14.5 Contingencies and commitments Commitments for outstanding forward foreign exchange contracts are disclosed in these unconsolidated financial statements at contracted rates. Contingent liabilities / commitments denominated in foreign currencies are expressed in rupee terms at the rates of exchange prevailing at the statement of financial position date. 5.15 Financial instruments 5.15.1 Financial assets and liabilities Financial assets and liabilities carried on the statement of financial position include cash and bank balances, lendings to financial institutions, investments, advances, certain receivables, bills payable, borrowings from financial institutions, deposits, subordinated loans and certain payables. The particular recognition methods adopted for significant financial assets and financial liabilities are disclosed in the individual policy notes associated with them. 5.15.2 Derivative financial instruments Derivative financial instruments are initially recognized at fair value on the date on which the derivative contract is entered into and are subsequently re-measured at fair value using appropriate valuation techniques. All derivative financial instruments are carried as assets when their fair value is positive and liabilities when their fair value is negative. Any change in the fair value of derivative financial instruments during the period is taken to the profit and loss account. 5.15.3 Hedge accounting The Bank makes use of derivative instruments to manage exposures to interest rate, foreign currency and credit risks. In order to manage particular risks, the Bank may undertake a hedge. The Bank applies hedge accounting for transactions which meet the specified criteria. At the inception of the hedging relationship, the Bank formally documents the relationship between the hedged item and the hedging instrument, including the nature of the risk, the objective and strategy for undertaking the hedge and the method that will be used to assess the effectiveness of the hedging relationship. A formal assessment is also undertaken to ascertain whether the hedging instrument is expected to be highly effective in offsetting the designated risk in the hedged item. A hedge is regarded as highly effective if, during the period for which the hedge is designated, changes in the fair value or cash flows attributable to the hedged item are expected to be offset between 80% to 125% by corresponding changes in the fair value or cash flows attributable to the hedging instrument. Cash flow hedges For qualifying cash flow hedges, the fair value gain or loss associated with the effective portion of the cash flow hedge is recognised initially in the statement of changes in equity, and recycled through the profit and loss account in the periods when the hedged item will affect profit or loss. Any gain or loss on the ineffective portion of the hedging instrument is recognised in the profit and loss account immediately. 14 Annual Report 2017 73
76. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED For the year ended December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the hedged item is ultimately recognised in the profit and loss account. 5.15.4 Off setting Financial assets and financial liabilities are set off and the net amount is reported in the unconsolidated financial statements when there is a legally enforceable right to set off and the Bank intends to either settle on a net basis, or to realize the assets and to settle the liabilities simultaneously. 5.16 Segment reporting A segment is a distinguishable component of the Bank that is engaged either in providing particular products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), and is subject to risks and rewards that are different from those of other segments. 5.16.1 Business segments (a) Corporate finance Corporate finance includes services provided in connection with mergers and acquisitions, project finance and the underwriting / arrangement of debt and equity instruments through syndications, Initial Public Offerings and private placements. (b) Trading and sales Trading and sales includes fixed income, equity, foreign exchange, credit, funding, own position securities, lendings and borrowings and derivatives for hedging and market making. (c) Retail banking Retail banking includes retail and consumer lending and deposits, banking services, cards and branchless banking. (d) Commercial banking Commercial banking includes project finance, working capital finance, trade finance, import and export, factoring, leasing, lending, deposits and guarantees. (e) Others Others includes functions which cannot be classified in any of the above segments. 5.16.2 Geographical segments The Bank operates in following geographical regions: 5.17 Pakistan Middle East United States of America Export Processing Zones in Karachi and Sialkot Dividends and appropriations to reserves Dividends and appropriations to reserves are recorded in the year in which these are approved, except appropriations required by law which are recorded in the period to which they pertain. 5.18 Earnings per share The Bank presents basic and diluted earnings per share (EPS). 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. 74 United Bank Limited 15
77. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND OF THE UNCONSOLIDATED For the yearFORMING endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 6. Note CASH AND BALANCES WITH TREASURY BANKS In hand Local currency Foreign currency 2017 2016 ------- (Rupees in '000) ------9,133,747 4,617,292 13,751,039 13,072,593 4,896,410 17,969,003 With State Bank of Pakistan in Local currency current accounts Foreign currency current accounts Foreign currency deposit account 6.1 6.2 6.3 With other central banks in Foreign currency current accounts Foreign currency deposit accounts 47,566,242 2,603,208 7,374,423 57,543,873 33,315,897 2,307,913 6,841,899 42,465,709 6.4 6.5 30,652,807 7,272,440 37,925,247 48,257,470 105,058 157,582,687 31,773,168 1,775,653 33,548,821 37,422,940 100,388 131,506,861 With National Bank of Pakistan in local currency current accounts National Prize Bonds 6.1 This represents current accounts maintained with the SBP under the Cash Reserve Requirement of section 22 of the Banking Companies Ordinance, 1962. 6.2 This represents a US Dollar settlement account maintained with the SBP and current accounts maintained with the SBP to comply with statutory requirements. 6.3 This represents account maintained with the SBP to comply with the Special Cash Reserve requirement. The return on this account is declared by the SBP on a monthly basis and as at December 31, 2017, it carries mark-up at the rate of 0.37% (2016: 0.00%) per annum. 6.4 Deposits with other central banks are maintained to meet the minimum cash reserves and capital requirements pertaining to the foreign branches of the Bank. 6.5 These represent placements with overseas central banks and carry mark-up at rates ranging from 1.22% to 1.50% (2016: 0.75%) per annum. Note 7. BALANCES WITH OTHER BANKS Inside Pakistan In deposit accounts 7.1 Outside Pakistan In current accounts In deposit accounts 7.2 2017 2016 ------- (Rupees in '000) ------- 6,000,007 6,000,007 2,825,007 2,825,007 7,280,182 6,236,009 13,516,191 5,342,117 6,753,870 12,095,987 19,516,198 14,920,994 7.1 These carry mark-up at rates ranging from 5.60% to 5.70% (2016: 5.80% to 5.95%) per annum. 7.2 These carry mark-up at rates ranging from 0.13% to 5.25% (2016: 0.10% to 1.84%) per annum and include balances amounting to Rs. 220.834 million (2016: Rs. 1,004.146 million), maintained with an overseas bank against the statutory reserves requirement of a foreign branch. 16 Annual Report 2017 75
78. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED For the year ended December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 8. Note LENDINGS TO FINANCIAL INSTITUTIONS Call money lending Repurchase agreement lendings Bai Muajjal receivable from State Bank of Pakistan Bai Muajjal receivable from other financial institutions Other lendings to financial institutions 8.2 8.3 8.4 8.5 & 8.6 Provision against lendings to financial institutions 8.1 2017 2016 ------- (Rupees in '000) ------- 8.7 585,000 6,931,953 3,109,215 23,870,481 34,496,649 (832,475) 33,664,174 1,500,000 11,226,452 22,247,898 34,974,350 (806,063) 34,168,287 19,991,458 14,505,191 34,496,649 19,335,529 15,638,821 34,974,350 Particulars of lendings to financial institutions - gross In local currency In foreign currencies 8.2 This represents unsecured lending carrying mark-up at a rate of 5.75% per annum (2016: 5.25% per annum) and is due to mature by January 2018. 8.3 Securities held as collateral against repurchase agreement lendings 2017 Held by Bank 2016 Further given as collateral / sold Total Held by Bank Further given as collateral / sold Total ----------------------------------------------- (Rupees in '000) ----------------------------------------------- Market Treasury Bills 6,931,953 - 6,931,953 - - # - 8.4 This represents Bai Muajjal agreements entered into with State Bank of Pakistan (SBP) whereby the Bank has sold sukuks having carrying value of Rs. 2,948.799 million (2016: Rs. nil) on deferred payment basis. The average return on these transactions is 5.44% per annum (2016: nil). The balances are due to mature latest by June 2018. 8.5 Lendings pertaining to domestic operations carry mark-up at rates ranging from 0.00% to 8.19% per annum (2016: 0.00% to 8.14% per annum) and are due to mature latest by November 2022. Lendings pertaining to overseas operations carry mark-up at rates ranging from 2.61% to 6.02% per annum (2016: 1.20% to 4.13% per annum) and are due to mature latest by February 2022. 8.6 This includes an unsecured subordinated loan amounting to Rs. 299.076 million (2016: Rs. 257.916 million) to United National Bank Limited (UBL UK), a subsidiary, and is due to mature by October 2018. The loan carries mark-up at a rate of six months LIBOR + 2% per annum payable semi-annually, with principal to be paid at maturity. The right of the Bank is subordinated as to the receipt of principal and mark-up to all other indebtedness of United Bank UK (including deposits). 8.7 This represents provision made against lendings to financial institutions with movement as follows: 2017 2016 ------- (Rupees in '000) ------Opening balance Exchange adjustments Reversals for the year Amounts written off Closing balance 76 United Bank Limited 806,063 37,210 (8,260) (2,538) 832,475 17 822,485 (922) (15,500) 806,063
79. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO year AND FORMING OF THE UNCONSOLIDATED For the endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 9. INVESTMENTS 9.1 Investments by type Note Held for trading securities Market Treasury Bills Pakistan Investment Bonds Available for sale securities Market Treasury Bills Pakistan Investment Bonds Government of Pakistan Sukuk Government of Pakistan Eurobonds Ordinary shares of listed companies Preference shares Ordinary shares of unlisted companies Investment in REIT Term Finance Certificates Foreign bonds - sovereign Foreign bonds - others Held to maturity securities Market Treasury Bills Pakistan Investment Bonds Government of Pakistan Eurobonds Government of Pakistan Sukuk Term Finance Certificates Sukuks Participation Term Certificates Debentures Foreign bonds - sovereign Foreign bonds - others Recovery note CDC SAARC Fund Commercial Paper Associates United Growth and Income Fund UBL Liquidity Plus Fund UBL Money Market Fund UBL Retirement Savings Fund UBL Government Securities Fund UBL Gold Fund UBL Asset Allocation Fund Al Ameen Islamic Cash Fund Al Ameen Islamic Aggressive Income Fund Al Ameen Islamic Sovereign Fund Al Ameen Islamic Asset Allocation Fund Al Ameen Islamic Financial Planning Fund UBL Insurers Limited Khushhali Bank Limited Oman United Exchange Company, Muscat DHA Cogen Limited 9.7 Subsidiaries United National Bank Limited (UBL UK) UBL (Switzerland) AG UBL Fund Managers Limited UBL Bank (Tanzania) Limited United Executors and Trustees Company Limited Provision for diminution in value of investments Investments - net of provision Surplus on revaluation of available for sale securities Surplus / (deficit) on revaluation of held for trading securities Total investments 2017 2016 Held by Given as Held by Given as Total Total Bank collateral Bank collateral -------------------------------------------------- (Rupees in '000) -------------------------------------------------59,117,369 582,376 59,699,745 45,383,907 45,383,907 104,501,276 582,376 105,083,652 8,120,078 154,805 8,274,883 108,314,347 23,830,510 19,102,273 14,591,647 18,362,304 391,315 258,507 458,590 441,406 25,512,258 10,450,615 221,713,772 194,204,632 205,729,962 399,934,594 302,518,979 229,560,472 19,102,273 14,591,647 18,362,304 391,315 258,507 458,590 441,406 25,512,258 10,450,615 621,648,366 25,117,903 184,088,469 7,233,271 14,053,787 16,007,107 372,636 243,084 458,590 556,284 19,250,876 9,500,569 276,882,576 47,933,801 96,854,633 144,788,434 8,120,078 154,805 8,274,883 73,051,704 280,943,102 7,233,271 14,053,787 16,007,107 372,636 243,084 458,590 556,284 19,250,876 9,500,569 421,671,010 6,601,781 311,766,517 5,574,671 6,626,766 10,512,247 437 2,266 9,784,641 1,279,617 340,333 240 227,224 352,716,740 - 6,601,781 311,766,517 5,574,671 6,626,766 10,512,247 437 2,266 9,784,641 1,279,617 340,333 240 227,224 352,716,740 26,968,740 289,522,875 6,897,076 683,000 4,715,333 9,024,950 2,795 2,266 6,608,534 357,609 322,399 228 345,105,805 - 26,968,740 289,522,875 6,897,076 683,000 4,715,333 9,024,950 2,795 2,266 6,608,534 357,609 322,399 228 345,105,805 10,079 9,850 216,000 301,751 240,000 832,485 14,152 1,624,317 - 10,079 9,850 216,000 301,751 240,000 832,485 14,152 1,624,317 419,308 10,079 9,850 30,000 2,699,175 100,000 680,000 10,470 25,944 50,000 100,000 504,690 240,000 832,485 6,981 5,718,982 - 419,308 10,079 9,850 30,000 2,699,175 100,000 680,000 10,470 25,944 50,000 100,000 504,690 240,000 832,485 6,981 5,718,982 9.3 2,855,223 589,837 100,000 1,322,014 30,100 4,897,174 640,651,748 (3,768,660) 445,318,501 - 2,855,223 589,837 100,000 1,322,014 30,100 4,897,174 1,085,970,249 (3,768,660) 2,855,223 589,837 100,000 1,322,014 30,100 4,897,174 640,879,420 (2,428,208) 144,788,434 - 2,855,223 589,837 100,000 1,322,014 30,100 4,897,174 785,667,854 (2,428,208) 20.2 636,883,088 3,601,858 445,318,501 5,980,887 1,082,201,589 9,582,745 638,451,212 13,646,446 144,788,434 9,647,338 783,239,646 23,293,784 9.4 119 2,173 2,292 640,485,065 451,301,561 1,091,786,626 18 (2,184) 652,095,474 154,435,772 (2,184) 806,531,246 Annual Report 2017 77
80. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED For the year ended December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 Note 9.2 Investments by segment Federal Government Securities Market Treasury Bills Pakistan Investment Bonds Government of Pakistan Sukuk Government of Pakistan Eurobonds Foreign Securities Market Treasury Bills Sovereign bonds CDC SAARC Fund Recovery note Other bonds Ordinary shares Listed companies Unlisted companies Preference shares Term Finance Certificates Listed Unlisted Sukuks Debentures Participation Term Certificates 407,020,255 541,909,365 19,102,273 20,166,318 988,198,211 96,090,512 570,620,782 7,916,271 20,950,863 695,578,428 6,601,781 35,296,899 240 340,333 11,730,232 53,969,485 12,050,010 25,859,410 228 322,399 9,858,178 48,090,225 18,362,304 258,507 18,620,811 16,007,107 243,084 16,250,191 391,315 372,636 1,179,370 5,888,802 7,068,172 1,179,803 4,091,814 5,271,617 10,512,247 9,024,950 2,266 2,266 437 2,795 Commercial Paper 227,224 Investment in REIT 458,590 458,590 6,521,491 10,616,156 1,085,970,249 785,667,854 Investments in subsidiaries and associates Total investments at cost Provision for diminution in value of investments 9.3 Surplus on revaluation of available for sale securities Surplus / (deficit) on revaluation of held for trading securities 19 (2,428,208) 783,239,646 20.2 9,582,745 23,293,784 9.4 2,292 1,091,786,626 Total investments United Bank Limited (3,768,660) - 1,082,201,589 Investments - net of provision 78 2017 2016 ------- (Rupees in '000) ------- (2,184) 806,531,246
81. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND OF THE UNCONSOLIDATED For the yearFORMING endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 9.3 Provision for diminution in value of investments 9.3.1 Opening balance Exchange adjustments Note Charge / (reversals) Charge for the year Reversals Reversed on disposal Amounts written off Closing balance 9.3.2 2,428,208 51,363 2,132,692 (1,263) 1,370,128 (30,870) 1,339,258 (49,101) (1,068) 3,768,660 963,556 (71,872) 891,684 (569,357) (25,548) 2,428,208 1,824,076 128,508 97,616 2,107 354,688 2,406,995 1,218,667 137,129 97,616 335,934 1,789,346 41,851 117,841 239,487 340,370 437 2,266 742,252 619,413 3,768,660 41,851 42,650 226,867 322,433 2,795 2,266 638,862 2,428,208 1,824,076 128,508 354,688 2,307,272 1,218,667 137,129 335,934 1,691,730 139,467 117,841 241,594 340,370 437 2,266 841,975 619,413 3,768,660 139,467 42,650 226,867 322,433 2,795 2,266 736,478 2,428,208 Provision for diminution in value of investments by type Available for sale securities Ordinary shares of listed companies Ordinary shares of unlisted companies Term Finance Certificates Foreign bonds Preference shares Held to maturity securities Term Finance Certificates Sukuks Foreign bonds Recovery note Participation Term Certificates Debentures 9.3.4 Subsidiaries 9.3.3 2017 2016 ------- (Rupees in '000) ------- Provision for diminution in value of investments by segment Equity securities Listed companies Unlisted companies Preference shares Debt securities Term Finance Certificates Sukuks Foreign bonds Recovery note Participation Term Certificates Debentures 9.3.4 Subsidiaries 9.3.4 This represents provision made against Bank's investment in subsidiary company UBL Bank (Tanzania) Limited (also refer note 21.10). 9.4 Unrealized gain / (loss) on revaluation of held for trading securities Market Treasury Bills Pakistan Investment Bonds 2017 2016 ------- (Rupees in '000) ------1,563 729 2,292 20 (1,962) (222) (2,184) Annual Report 2017 79
82. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED For the year ended December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 9.5 Investments include securities which are held by the Bank to comply with the statutory liquidity requirements as set out under Section 29 of the Banking Companies Ordinance, 1962. 9.6 Investments include Rs. 282.000 million (2016: Rs. 282.000 million) held by the SBP and National Bank of Pakistan as pledge against demand loan, TT / DD discounting facilities and foreign exchange exposure limit sanctioned to the Bank and Rs. 5.000 million (2016: Rs. 5.000 million) held by the Controller of Military Accounts (CMA) under Regimental Fund Arrangements. 9.7 As a result of exercise of a pledge in 2013, the Bank holds 20.99% of the issued and paid up capital of DHA Cogen Limited without any consideration having been paid. Consequently, DHA Cogen Limited is classified as an associated company. 9.8 Information relating to investments required to be disclosed as part of the financial statements under the SBP's BSD Circular No. 4 dated February 17, 2006, and details in respect of the quality of available for sale securities are disclosed in Annexure 'A' which forms an integral part of these unconsolidated financial statements. 9.9 Investments include amounts aggregating to Rs. 2,175.182 million which have been classified as loss in accordance with the requirements of Prudential Regulations prescribed by SBP. Provision has however, not been made against them as these investments are secured by way of guarantee from the Government of Pakistan. 10. ADVANCES Note Loans, cash credits, running finances, etc. In Pakistan Outside Pakistan Islamic financings and related assets 44.3 Performing Non-performing Total 2017 2016 2017 2016 2017 2016 ---------------------------------------------- (Rupees in '000) -------------------------------------------------------- 388,577,958 120,436,863 509,014,821 317,697,928 127,913,711 445,611,639 25,313,698 22,880,311 48,194,009 29,717,889 12,053,537 41,771,426 413,891,656 143,317,174 557,208,830 347,415,817 139,967,248 487,383,065 22,106,385 7,277,360 94,421 94,614 22,200,806 7,371,974 18,330,853 46,027,549 64,358,402 595,479,608 13,976,584 39,203,743 53,180,327 506,069,326 2,784,397 2,784,397 51,072,827 2,700,944 2,700,944 44,566,984 21,115,250 46,027,549 67,142,799 646,552,435 16,677,528 39,203,743 55,881,271 550,636,310 (38,734,988) (38,734,988) (37,396,612) (37,396,612) (38,734,988) (3,255,254) (41,990,242) (37,396,612) (3,128,774) (40,525,386) 12,337,839 7,170,372 604,562,193 510,110,924 Bills discounted and purchased Payable in Pakistan Payable outside Pakistan Advances - gross Provision against advances - Specific - General Advances - net of provision 10.3 (3,255,254) (3,255,254) 592,224,354 (3,128,774) (3,128,774) 502,940,552 Performing Non-performing Total 2017 2016 2017 2016 2017 2016 ---------------------------------------------- (Rupees in '000) -------------------------------------------------------- 10.1 Particulars of advances - gross 10.1.1 In local currency In foreign currencies 415,892,300 179,587,308 595,479,608 329,236,693 176,832,633 506,069,326 27,820,386 23,252,441 51,072,827 32,166,038 12,400,946 44,566,984 443,712,686 202,839,749 646,552,435 361,402,731 189,233,579 550,636,310 10.1.2 Short term Long term 371,012,232 224,467,376 595,479,608 304,284,529 201,784,797 506,069,326 51,072,827 51,072,827 44,566,984 44,566,984 371,012,232 275,540,203 646,552,435 304,284,529 246,351,781 550,636,310 80 United Bank Limited 21
83. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND OF THE UNCONSOLIDATED For the yearFORMING endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 10.2 Advances include Rs. 51,072.827 million (2016: Rs. 44,566.984 million) which have been placed under non-performing status as detailed below: 2017 Category of classification Other Assets Especially Mentioned * Substandard Doubtful Loss Category of classification Other Assets Especially Mentioned * Substandard Doubtful Loss Classified advances Provision required Provision held Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total ------------------------------------------------------------------------------ (Rupees in '000) -----------------------------------------------------------------------------81,653 1,062,286 1,452,224 25,596,353 28,192,516 4,209,307 6,517,005 12,153,999 22,880,311 81,653 5,271,593 7,969,229 37,750,352 51,072,827 2,012 258,707 783,804 24,512,775 25,557,298 803,453 2,308,654 10,065,583 13,177,690 2,012 1,062,160 3,092,458 34,578,358 38,734,988 2,012 258,707 783,804 24,512,775 25,557,298 803,453 2,308,654 10,065,583 13,177,690 2016 Classified advances Provision required Provision held Domestic Overseas Total Domestic Overseas Total Domestic Overseas ------------------------------------------------------------------ (Rupees in '000) -----------------------------------------------------------------126,711 908,055 2,471,496 29,007,185 32,513,447 1,259,239 2,216,423 8,577,875 12,053,537 126,711 2,167,294 4,687,919 37,585,060 44,566,984 3,576 222,697 1,203,332 27,881,140 29,310,745 276,506 795,729 7,013,632 8,085,867 3,576 499,203 1,999,061 34,894,772 37,396,612 3,576 222,697 1,203,332 27,881,140 29,310,745 276,506 795,729 7,013,632 8,085,867 2,012 1,062,160 3,092,458 34,578,358 38,734,988 Total 3,576 499,203 1,999,061 34,894,772 37,396,612 * The Other Assets Especially Mentioned category pertains to agricultural finance and advances to small enterprises. 10.3 Particulars of provision against advances Note Opening balance Exchange adjustments Charge / (reversals) Charge for the year Reversals Transfers in - net Amounts written off Closing balance 10.3.3 10.5 2017 2016 Specific General Total Specific General Total ------------------------------------------------ (Rupees in '000) -----------------------------------------------37,396,612 507,720 3,128,774 (56,686) 40,525,386 451,034 37,536,034 12,926 4,081,996 (107,002) 41,618,030 (94,076) 5,588,802 (4,598,664) 990,138 653,818 (813,300) 38,734,988 183,166 183,166 3,255,254 5,771,968 (4,598,664) 1,173,304 653,818 (813,300) 41,990,242 5,687,885 (4,336,764) 1,351,121 515,625 (2,019,094) 37,396,612 (846,220) (846,220) 3,128,774 5,687,885 (5,182,984) 504,901 515,625 (2,019,094) 40,525,386 10.3.1 General provision represents provision amounting to Rs. 247.323 million (2016: Rs. 218.074 million) against consumer finance portfolio, Rs. 49.088 million (2016: Rs. 39.088 million) against advances to small enterprises as required by the Prudential Regulations issued by the SBP and Rs. 2,630.143 million (2016: Rs. 2,382.615 million) pertaining to overseas advances to meet the requirements of the regulatory authorities of the respective countries in which the overseas branches operate. General provision also includes Rs. 328.700 million (2016: Rs. 488.997 million) which is based on regulatory instructions. 10.3.2 The Bank has availed the benefit of Forced Sale Value (FSV) of certain mortgaged properties held as collateral against nonperforming advances as allowed under BSD Circular 1 of 2011. Had the benefit under the said circular not been taken by the Bank, the specific provision against non-performing advances would have been higher by Rs. 24.540 million (2016: Rs. 56.375 million). The FSV benefit availed is not available for the distribution of cash or stock dividend to shareholders. 10.3.3 This includes provision reversals amounting to Rs. nil (2016: Rs. 444.034 million) as a result of settlement through debt asset swap arrangements with various customers. 10.3.4 Particulars of provision against advances In local currency In foreign currencies 2017 2016 Specific General Total Specific General Total ------------------------------------------------ (Rupees in '000) -----------------------------------------------25,185,167 13,549,821 38,734,988 22 296,411 2,958,843 3,255,254 25,481,578 16,508,664 41,990,242 28,963,336 8,433,276 37,396,612 257,162 2,871,612 3,128,774 29,220,498 11,304,888 40,525,386 Annual Report 2017 81
84. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING OF THE UNCONSOLIDATED For the year endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 10.4 Exposure amounting to Rs. 7,283.300 million relating to certain facilities of Power Holding (Pvt.) Limited, which is a government guaranteed loan, has not been classified as non-performing, pursuant to a relaxation given by SBP in this respect. The relaxation is valid upto January 31, 2018. Note 10.5 2017 2016 ------- (Rupees in '000) ------- Particulars of write-offs 10.5.1 Against provisions Directly charged to profit and loss account 10.3 813,300 92,992 906,292 2,019,094 97,781 2,116,875 10.5.2 Write-offs of Rs. 500,000 and above Write-offs below Rs. 500,000 10.6 627,618 278,674 906,292 1,901,454 215,421 2,116,875 10.6 Details of loan write-offs of Rs. 500,000 and above 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 during the year ended December 31, 2017 is given in Annexure 'B' to the unconsolidated financial statements. This includes amounts charged off without prejudice to the Bank's right to recovery. Note 10.7 Particulars of loans and advances to executives, directors, associated companies etc. Balance at the beginning of the year Loans granted during the year Repayments made during the year Balance at the end of the year 11. 11.1 11.2 11.3 13,040,213 66,643,167 (80,771,606) (14,128,439) 8,171,504 57,892,210 (48,632,480) 9,259,730 22,299,943 4,420,500 40,797,947 986,117 46,204,564 2,924,670 31,679,912 977,176 35,581,758 3,662,319 748,107 10,074 4,420,500 2,454,913 421,205 48,380 172 2,924,670 Capital work-in-progress Civil works Equipment Software Advances to suppliers and contractors 82 22,299,943 OPERATING FIXED ASSETS Capital work-in-progress Property and equipment Intangible assets 11.1 2017 2016 ------- (Rupees in '000) ------- United Bank Limited 23
85. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND OF THE UNCONSOLIDATED For the yearFORMING endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 11.2 Property and equipment 2017 Cost / Revaluation Surplus on revaluation / Exchange / At At January Additions / (reversal of Other December 1, 2017 (deletions) accumulated adjustments 31, 2017 depreciation) Owned Accumulated Depreciation Charge for Reversal Exchange / At At January the year / due to Other December 1, 2017 (depreciation revaluation adjustments 31, 2017 on deletions) Net book value at December 31, 2017 Annual rate of depreciation % -------------------------------------------------------------------------------------------------- (Rupees in '000) -------------------------------------------------------------------------------------------------- Freehold land 5,025,317 Leasehold land 16,240,938 Buildings on freehold land 862,552 1,302,649 (13,413) - 1,408,308 - - 4,353,002 - 6,433,625 - - - 86 21,883,262 1,337 - - 747,940 86,146 43,128 - (129,273) - (326,854) 248 4,734 5,705,980 2.5 - 5 14,661 (129,273) - 590,178 (326,854) 672 5,710,714 146,370 184,970 - 73 - 6,433,625 - 1,410 21,881,852 - 747,940 5 - Buildings on leasehold land 4,865,948 580,770 - Leasehold Improvements 3,323,255 640,896 (4,866) - 17,375 3,976,660 2,014,261 338,896 (3,006) - 14,334 2,364,485 1,612,175 10 - 20 Furniture and fixtures 1,558,198 281,676 (65,372) - 10,342 1,784,844 1,013,634 134,120 (64,979) - 7,169 1,089,944 694,900 10 - 25 10,644,148 1,932,760 (1,349,481) - 39,107 11,266,534 7,818,559 1,263,895 (1,346,362) - 21,552 7,757,644 3,508,890 540,563 45,910 (102,360) - (1,490) 482,623 300,700 69,196 (98,069) - (1,789) 270,038 212,585 43,060,919 4,784,661 (1,535,492) 66,092 52,286,202 11,381,007 2,034,205 (1,512,416) 41,587 11,488,255 40,797,947 Electrical, office and computer equipment Vehicles 2017 6,366,149 (456,127) Cost / Revaluation Surplus on revaluation / Exchange / At At January Additions / (reversal of Other December 1, 2016 (deletions) accumulated adjustments 31, 2016 depreciation) Owned 2016 (456,127) 10 - 33.33 20 - 25 Accumulated Depreciation Charge for Reversal Exchange / At At January the year / due to Other December 1, 2016 (depreciation revaluation adjustments 31, 2016 on deletions) Net book value at December 31, 2016 Annual rate of depreciation % -------------------------------------------------------------------------------------------------- (Rupees in '000) -------------------------------------------------------------------------------------------------- Freehold land 5,062,242 (36,925) - Leasehold land 15,675,141 565,799 - - Buildings on freehold land 862,552 - - 5,025,317 - - - (2) 16,240,938 1,339 - - - - 862,552 43,018 43,128 - - (15) 4,865,948 69,121 77,254 - - (2) - 5,025,317 - 1,337 16,239,601 - 86,146 776,406 5 146,370 4,719,578 2.5 - 5 Buildings on leasehold land 1,505,242 3,360,721 - - Leasehold Improvements 2,893,387 428,113 - - 1,755 3,323,255 1,727,172 289,543 - - (2,454) 2,014,261 1,308,994 10 - 20 Furniture and fixtures 1,327,593 244,206 (9,660) - (3,941) 1,558,198 929,834 97,006 (9,405) - (3,801) 1,013,634 544,564 10 - 25 Electrical, office and computer equipment 8,684,198 2,048,837 (68,900) - (19,987) 10,644,148 6,857,266 1,025,849 (68,046) - 3,490 7,818,559 2,825,589 498,057 122,615 (78,201) - 540,563 299,509 74,327 (70,176) - (2,960) 300,700 239,863 36,508,412 6,770,291 (193,686) - (24,098) 43,060,919 9,927,259 1,607,107 (147,627) - (5,732) 11,381,007 31,679,912 Vehicles 2016 (1,908) 24 (5) - 10 - 33.33 20 - 25 Annual Report 2017 83
86. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING OF THE UNCONSOLIDATED For the year endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 11.3 Intangible assets 2017 Cost At January 1, 2017 Additions / (deletions) Accumulated Amortization Exchange / other adjustments At December 31, 2017 At January 1, 2017 Charge for Exchange / At December the year / other 31, 2017 (reversal on adjustments deletion) Net book value at December 31, 2017 Annual rate of amortisation % ---------------------------------------------------------------------------------------------- (Rupees in '000) ---------------------------------------------------------------------------------------------Software 4,011,668 387,043 (539,606) 29,990 3,889,095 3,034,492 Additions / (deletions) 35,067 2,902,978 986,117 Charge for Exchange / At December the year / other 31, 2016 (reversal on adjustments deletion) Net book value at December 31, 2016 10 - 33.33 2016 Accumulated Amortization Cost At January 1, 2016 373,007 (539,588) Exchange / other adjustments At December 31, 2016 At January 1, 2016 Annual rate of amortisation % ---------------------------------------------------------------------------------------------- (Rupees in '000) ---------------------------------------------------------------------------------------------Software 11.4 3,724,219 292,320 (2,799) (2,072) 4,011,668 2,734,877 314,870 (1,928) (13,327) 3,034,492 977,176 10 - 33.33 Revaluation of properties The properties of the Bank have been revalued by independent professional valuers as at December 31, 2017. The revaluation was carried out by M/s. Engineering Pakistan Int'l (Pvt) Ltd., M/s. M. J. Surveyors (Pvt) Ltd., M/s Harvestor Services (Pvt) Ltd., and M/s Iqbal A. Nanjee & Co. (Pvt) Ltd. on the basis of professional assessment of present market values which resulted in an increase in surplus by Rs. 6,366.149 million. The total surplus arising against revaluation of fixed assets as at December 31, 2017 amounts to Rs. 26,424.375 million. Had there been no revaluation, the carrying amount of the revalued assets at December 31 would have been as follows: 2017 2016 ------- (Rupees in '000) ------Freehold land Leasehold land Buildings on freehold land Buildings on leasehold land 11.5 Carrying amount of temporarily idle property of the Bank 11.6 The cost of fully depreciated assets still in use Furniture and fixtures Electrical, office and computer equipment Vehicles Leasehold improvements Softwares 84 United Bank Limited 25 745,657 3,187,670 171,269 4,240,426 745,657 1,898,434 184,043 3,816,412 62,572 81,790 404,536 4,664,786 84,442 558,445 1,606,098 7,318,307 356,574 4,835,007 137,171 256,080 1,880,547 7,465,379
87. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING OF THE UNCONSOLIDATED For the year endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 11.7 Details of disposal of operating fixed assets The information relating to operating fixed assets disposed off during the year is given in Annexure 'C' and is an integral part of these unconsolidated financial statements. Note 12. 12.1 2017 2016 ------- (Rupees in '000) ------- OTHER ASSETS Income / mark-up accrued in local currency Income / mark-up accrued in foreign currency 22,925,435 8,374,110 31,299,545 23,806,234 5,724,754 29,530,988 Advance taxation - net of provision for taxation 12.1 Receivable from staff retirement fund Receivable from other banks against telegraphic transfers and demand drafts Unrealized gain on forward foreign exchange contracts Rebate receivable - net Unrealized gain on derivative financial instruments 18.3.1 & 22.2 Suspense accounts Stationery and stamps on hand Non banking assets acquired in satisfaction of claims Advances, deposits, advance rent and other prepayments Others 18,151,744 632,808 270,941 2,336,596 529,870 76,884 488,272 100,024 1,630,956 1,156,901 3,965,118 60,639,659 10,781,770 376,634 758,923 564,223 893,968 204,498 409,513 117,189 2,343,457 1,024,436 2,543,938 49,549,537 Provision held against other assets Other assets - net of provisions (6,574,655) 54,065,004 (4,818,584) 44,730,953 12.2 The Income Tax returns of the Bank have been filed up to the tax year 2017 (accounting year ended December 31, 2016) and were deemed to be assessed under section 120 of the Income Tax Ordinance, 2001 (Ordinance) unless amended by the Commissioner of Inland Revenue. The income tax authorities have issued amended assessment orders for the tax years 2003 to 2017, and created additional tax demands (including disallowances of provisions made prior to Seventh Schedule) of Rs.12,928 million (2016: Rs.13,723 million), which have been fully paid as required under the law. The Bank has filed appeals before the various appellate forums against these amendments. Where the appellate authorities have allowed relief on certain issues, the assessing authorities have filed appeals before higher appellate forums. Where the appellate authorities have not allowed relief the Bank has filed appeals before higher appellate forums. The management of the Bank is confident that the appeals will be decided in favour of the Bank. The tax returns for Azad Kashmir (AK) and Gilgit Baltistan (GB) branches have been filed upto the tax year 2017 (financial year 2016) under the provisions of section 120(1) read with section 114 of the Ordinance and in compliance with the terms of the agreement between banks and the Azad Kashmir Council in May 2005. The returns filed are considered as deemed assessment orders under the law. The tax authorities have also carried out monitoring for Federal Excise Duty, Sales tax and withholding taxes covering period from year ended 2007 to 2016. Consequently various addbacks and demands were raised creating a total demand of Rs. 919 million (2016: Rs. 1,245 million). The Bank has filed appeals against all such demands and is confident that these would be decided in the favour of the Bank. The tax returns for overseas branches have been filed upto the year ended December 31, 2016 under the provisions of the laws prevailing in the respective countries and are deemed as assessed unless opened for reassessment. 26 Annual Report 2017 85
88. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING OF THE UNCONSOLIDATED For the year endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 12.2 Note Provision against other assets Opening balance Exchange adjustments Charge / (reversals) Charge for the year Reversals 28 Transfers in - net Amounts written off Closing balance 13. 2017 2016 ------- (Rupees in '000) ------4,818,584 194,361 4,825,077 (4,888) 110,799 (64,911) 45,888 1,547,266 (31,444) 6,574,655 161,419 (17,511) 143,908 817,630 (963,143) 4,818,584 CONTINGENT ASSETS There were no contingent assets as at the statement of financial position date. 14. BILLS PAYABLE In Pakistan Outside Pakistan 15. 497,363,081 15,287,384 512,650,465 181,622,033 19,927,586 201,549,619 489,038,459 23,612,006 512,650,465 181,321,268 20,228,351 201,549,619 19,375,930 10,250 17,312,481 36,698,661 450,489,798 487,188,459 14,702,567 19,550 11,955,687 26,677,804 153,643,464 180,321,268 9,713,596 1,196,470 14,551,940 25,462,006 14,188,048 300,765 6,739,538 21,228,351 512,650,465 201,549,619 Particulars of borrowings In local currency In foreign currencies 15.2 11,041,529 714,893 11,756,422 BORROWINGS In Pakistan Outside Pakistan 15.1 12,968,512 419,804 13,388,316 Details of borrowings Secured Borrowings from the State Bank of Pakistan under: Export refinance scheme Refinance facility for modernization of SME Long term financing facility 15.3 15.4 15.5 Repurchase agreement borrowings 15.6 Unsecured Call borrowings Overdrawn nostro accounts Other borrowings 86 United Bank Limited 15.7 15.8 27
89. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND OF THE UNCONSOLIDATED For the yearFORMING endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 15.3 The Bank has entered into an agreement with the SBP for extending export finance to customers. As per the terms of the agreement, the Bank has granted the SBP the right to recover the outstanding amounts from the Bank at the date of maturity of the finances by directly debiting the Bank's current account maintained with the SBP. These borrowings are repayable within six months, latest by June 2018. These carry mark-up at rates ranging from 1.00% to 2.00% per annum (2016: 1.00% to 2.00% per annum). 15.4 These borrowings have been obtained from the SBP under a scheme to finance modernization of Small and Medium Enterprises by providing financing facilities for setting up of new units, purchase of new plant and machinery for Balancing, Modernization and Replacement (BMR) of existing units and financing for import / local purchase of new generators upto a maximum capacity of 500 KVA. These borrowings are repayable latest by October 2019 and carry mark-up at a rate of 6.25% per annum (2016: 6.25% per annum). 15.5 These borrowings have been obtained from the SBP for providing financing facilities to exporters for adoption of new technologies and modernization of their plant and machinery. These borrowings are repayable latest by December 2027. These carry mark-up at rates ranging from 2.00% to 9.70% per annum (2016: 2.00% to 10.90% per annum). 15.6 These repurchase agreement borrowings are secured against Pakistan Investment Bonds and Treasury Bills and carry mark-up at rates ranging from 5.75% to 5.85% per annum (2016: 5.50% to 5.90% per annum). These borrowings are repayable latest by February 2018. The carrying value of securities given as collateral against these borrowings is given in note 9.1. 15.7 These are unsecured borrowings carrying mark-up at rates ranging from 0.1% to 5.8% per annum (2016: 0.25% to 5.85% per annum), and are repayable latest by March 2018. 15.8 These borrowings carry mark-up at rates ranging from 2.57% to 4.80% per annum (2016: 2.00% to 4.74% per annum), and are repayable latest by June 2019. 2017 2016 ------- (Rupees in '000) ------- 16. DEPOSITS AND OTHER ACCOUNTS Customers Fixed deposits Savings deposits Sundry deposits Margin deposits Current accounts - remunerative Current accounts - non-remunerative Financial Institutions Remunerative deposits Non-remunerative deposits 16.1 318,615,028 385,426,820 29,461,274 5,488,869 5,890,387 471,084,661 1,215,967,039 283,620,672 370,630,580 22,515,064 4,226,027 10,398,987 417,210,008 1,108,601,338 56,802,291 16,477,921 73,280,212 1,289,247,251 57,476,874 13,808,836 71,285,710 1,179,887,048 982,783,323 306,463,928 1,289,247,251 899,260,468 280,626,580 1,179,887,048 Particulars of deposits and other accounts In local currency In foreign currencies 28 Annual Report 2017 87
90. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED For the year ended December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 Note 17. DEFERRED TAX LIABILITY - NET Deferred tax liability - net 17.1 2017 2016 ------- (Rupees in '000) ------- 17.1 2,611,941 4,691,544 Movement in temporary differences during the year 2017 Recognised At January 1, At December Others in profit and 2017 31, 2017 loss account ------------------------------ (Rupees in '000) -----------------------------Deductible temporary differences on - Workers' Welfare Fund - Provision against off-balance sheet items, post retirement employee benefits, advances and others 618,785 3,995,109 4,613,894 Taxable temporary differences on - Surplus on revaluation of fixed assets / nonbanking assets - Surplus on revaluation of investments - Accelerated tax depreciation 283,046 - 901,831 (2,569,563) (2,286,517) (123,468) (123,468) 1,302,078 2,203,909 (582,889) (8,152,824) (569,725) (9,305,438) 27,228 (119,981) (92,753) (216,522) 4,798,863 4,582,341 (772,183) (3,353,961) (689,706) (4,815,850) (4,691,544) (2,379,270) 4,458,873 (2,611,941) 2016 Recognised At January 1, At December Others in profit and 2016 31, 2016 loss account ------------------------------ (Rupees in '000) -----------------------------Deductible temporary differences on - Workers' Welfare Fund - Provision against off-balance sheet items, post retirement employee benefits, advances and others 529,704 5,108,105 5,637,809 Taxable temporary differences on - Surplus on revaluation of fixed assets / nonbanking assets - Surplus on revaluation of investments - Accelerated tax depreciation 88 United Bank Limited 29 89,081 (1,154,539) (1,065,458) (550,593) (8,951,959) (321,663) (9,824,215) 27,126 (248,062) (220,936) (4,186,406) (1,286,394) - 618,785 41,543 41,543 3,995,109 4,613,894 (59,422) 799,135 739,713 (582,889) (8,152,824) (569,725) (9,305,438) 781,256 (4,691,544)
91. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND OF THE UNCONSOLIDATED For the yearFORMING endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 Note 18. 18.1 OTHER LIABILITIES Mark-up / return / interest payable in local currency Mark-up / return / interest payable in foreign currency 12,542,134 1,763,565 14,305,699 11,559,480 1,378,004 12,937,484 Accrued expenses Branch adjustment account Deferred income Unearned commission and income on bills discounted Provision against off - balance sheet obligations Unrealized loss on forward foreign exchange contracts Payable to staff retirement fund Deferred liabilities Unrealized loss on derivative financial instruments Workers' Welfare Fund payable Insurance payable against consumer assets Dividend payable Others 4,274,091 1,021,326 636,710 1,461,167 65,982 862,899 17,251 3,380,920 3,176 2,576,660 331,840 631,030 607,675 30,176,426 4,590,522 1,366,415 658,882 754,235 676,021 941,293 3,401,628 2,630 1,767,957 241,621 196,626 344,215 27,879,529 18.1 35.4 18.2 18.3.1 & 22.2 Provision against off - balance sheet obligations Opening balance Exchange adjustments (Reversal) / charge during the year 18.2 28 676,021 (10,942) (599,097) 65,982 657,129 (8,189) 27,081 676,021 Deferred liabilities Provision for post retirement medical benefits Provision for compensated absences Deferred liability for outsourced services Deferred liability - overseas 18.3 2017 2016 ------- (Rupees in '000) ------- 35.4 1,463,703 1,225,727 169,466 522,024 3,380,920 1,328,199 1,438,941 181,344 453,144 3,401,628 Unrealized gain / (loss) on derivative financial instruments - net Note - Interest rate swaps - Cross currency swaps - FX options - Forward purchase contracts of government securities - Forward sale contracts of government securities Contract / notional amount Unrealized gain / (loss) 2017 2016 2017 2016 -------------------------- (Rupees in '000) -------------------------- 18.3.1 4,358,641 166,736 7,870,890 1,478 12,397,745 6,986,094 522,051 426,162 4,998,400 3,553,866 16,486,573 Note 18.3.1 Unrealized gain / (loss) on derivative financial instruments - net Unrealized gain on derivative financial instruments Unrealized loss on derivative financial instruments 12 18 22.2 30 74,865 (1,155) (2) 73,708 197,083 5,459 (2,391) 1,717 201,868 2017 2016 ------- (Rupees in '000) ------76,884 (3,176) 73,708 204,498 (2,630) 201,868 Annual Report 2017 89
92. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED For the year ended December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 19. SHARE CAPITAL 19.1 Authorized Capital 2017 2016 (Number of shares) 2,000,000,000 19.2 2,000,000,000 Ordinary shares of Rs.10 each 20,000,000 20,000,000 5,180,000 7,061,798 12,241,798 5,180,000 7,061,798 12,241,798 Issued, subscribed and paid-up capital 2017 2016 (Number of shares) 518,000,000 706,179,687 1,224,179,687 19.3 2017 2016 ------- (Rupees in '000) ------- 518,000,000 706,179,687 1,224,179,687 Fully paid-up ordinary shares of Rs.10 each Issued for cash Issued as bonus shares In 2007, the Bank was admitted to the official list of the UK Listing Authority and to the London Stock Exchange Professional Securities Market for trading of Global Depository Receipts (GDRs), each representing four ordinary shares issued by the Bank. The GDRs constitute an offering in the United States only to qualified institutional buyers in reliance on Rule 144A under the U.S Securities Act of 1933 and an offering outside the United States in reliance on Regulation S. Holders of GDRs are entitled, subject to the provisions of the depository agreement, to receive dividends, if any, and rank pari passu with other equity shareholders in respect of such entitlement. However, the holders of GDRs have no voting rights or other direct rights of shareholders with respect to the ordinary shares underlying such GDRs. Subject to the terms and restrictions set out in the offering circular dated June 25, 2007, the deposited ordinary shares in respect of which the GDRs were issued may be withdrawn by the GDR holders from the depository facility. Upon withdrawal, the holders will rank pari passu with other ordinary shareholders in respect of voting powers. As at December 31, 2017, 1,318,827 (2016: 1,845,734) GDRs, representing 5,275,310 (2016: 7,382,938) shares were in issue. 19.4 Major shareholders (holding more than 5% of total paid-up capital) Name of shareholder Number of shares held Bestway (Holdings) Limited Bestway Cement Limited 19.5 2017 631,728,895 93,649,744 Percentage of shareholding 51.60% 7.65% 2016 631,728,895 93,649,744 Percentage of shareholding 51.60% 7.65% As at December 31, 2017, Bestway Group (Bestway) held 61.46% (2016: 61.46%) shareholding (including GDRs) of the Bank. 2017 2016 Shares of the Bank held by its associates ------- (Number of shares) ------UBL Asset Allocation Fund UBL Stock Advantage Fund 225,900 1,645,800 1,871,700 Note 20. Number of shares held SURPLUS ON REVALUATION OF ASSETS - NET OF DEFERRED TAX 114,200 1,153,000 1,267,200 2017 2016 ------- (Rupees in '000) ------- Surplus arising on revaluation of assets - net of tax Fixed assets / non-banking assets Available for sale securities 90 United Bank Limited 20.1 20.2 31 25,835,597 6,228,784 32,064,381 19,703,328 15,140,960 34,844,288
93. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND OF THE UNCONSOLIDATED For the yearFORMING endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 20.1 Surplus on revaluation of fixed assets / non-banking assets Note Surplus on revaluation of fixed assets / non-banking assets as at January 1 Revaluation of fixed assets / non-banking assets during the year Exchange adjustments 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 Less: Related deferred tax liability on: Revaluation as at January 1 Revaluation of fixed assets / non-banking assets during the year Exchange adjustments Incremental depreciation charged on related assets 20.2 2017 2016 ------- (Rupees in '000) ------20,286,217 17.1 17.1 20,193,941 6,399,394 (37) 169,861 (82) (50,566) (50,377) (27,228) 6,321,563 26,607,780 (27,126) 92,276 20,286,217 582,889 216,535 (13) (27,228) 772,183 550,593 59,451 (29) (27,126) 582,889 25,835,597 19,703,328 (3,034) 6,285,489 1,780,418 28,475 1,491,397 9,582,745 (3,353,961) 6,228,784 (9,729) 14,625,102 7,432,229 (5,420) 104,054 1,147,548 23,293,784 (8,152,824) 15,140,960 15,500,693 929,470 5,425,848 21,856,011 10,418,980 1,277,955 6,148,339 17,845,274 Surplus / (deficit) on revaluation of available for sale securities Market Treasury Bills Pakistan Investment Bonds Listed shares REIT Investment Term Finance Certificates, Sukuks, other bonds etc. Foreign bonds Related deferred tax liability 21. CONTINGENCIES AND COMMITMENTS 21.1 Direct credit substitutes 17.1 Contingent liabilities in respect of guarantees given favouring: Government Banking companies and other financial institutions Others 21.2 Transaction-related contingent liabilities Contingent liabilities in respect of performance bonds, bid bonds, warranties, etc. given favouring: Government Banking companies and other financial institutions Others 21.3 128,096,424 8,408,147 57,086,219 193,590,790 114,871,452 7,068,771 38,178,662 160,118,885 74,060,985 112,328,937 186,389,922 68,406,750 99,806,262 168,213,012 12,743,798 12,381,804 Trade-related contingent liabilities Contingent liabilities in respect of letters of credit opened favouring: Government Others 21.4 Other contingencies 21.4.1 Claims against the Bank not acknowledged as debts These mainly represent counter claims filed by the borrowers for restricting the Bank from disposal of assets (such as mortgaged / pledged assets kept as security). 32 Annual Report 2017 91
94. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING OF THE UNCONSOLIDATED For the year endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 Based on legal advice and / or internal assessments, management is confident that the matters will be decided in the Bank's favour and the possibility of any outcome against the Bank is remote and accordingly no provision has been made in these financial statements. 21.4.2 Penalties amounting to Rs. 4.058 billion have been levied by the FE Adjudication Court of the State Bank of Pakistan relating to alleged contraventions of the requirements of foreign exchange regulations with respect to issuance and certification of E-Forms by the Bank to certain customers (exporters) who failed to submit the export documents thereagainst. Consequently, foreign exchange on account of export proceeds have not been repatriated. The Bank maintains that it fully discharged its liability, in accordance with the law and has filed a civil suit in the High Court of Sindh challenging the levy of the penalty. The High Court has granted a stay on action being taken against the Bank. The management, based on the advice from legal counsel, is confident that the view of the Bank will prevail and the Bank will not be exposed to any loss on this account. 21.4.3 United Bank Limited Yemen (“UBL”) issued two Standby Letters of Credit (SBLCs) for USD 12 million (Rs. 1,325 million) and USD 13 million (Rs. 1,435 million) in favour of Ministry of Oil and Minerals, Yemen (MOM) against the counter SBLCs of a foreign bank. In March 2015, the counter party to the underlying performance agreement notified MOM of suspension of the SBLCs due to force majeure. In September 2015, MOM filed a law suit against UBL at the Preliminary Commercial Court in Sana’a, Yemen claiming payment of both SBLCs for the total sum of USD 25 million (Rs. 2,760 million). During the course of the last year, no major debate was held as all hearings of the commercial case were adjourned to subsequent dates, due to either non-appearance of legal counsel of MOM or non-submission of responses by MOM, as required by legal counsel of UBL. As per provisions of Yemeni procedural law, if 60 days lapse from the last hearing without the case being reinitiated/followed up by the plaintiff, the case shall be considered as if not filed and all procedures have to be re-initiated afresh. In light of the foregoing provision of law, and non-follow up by MOM for over 60 days, UBL counsel submitted a motion to dismiss the case. On September 25, 2017 the Honourable judge presiding over the commercial case filed by MOM against UBL in Yemen, accepted UBL’s motion to drop the case. In light of the foregoing, the case filed by MOM against UBL in Yemen stands dismissed. Although the case against UBL, Yemen has been dismissed by the Honourable judge, the said dismissal is on the basis of a procedural lapse by MOM in pursuing the case, and not on the actual merits. Hence MOM can reinitiate the case against UBL afresh. The ICC Award has also been announced whereby ICC has accepted the request of Reliance to declare Force Mejure as per the terms of the Production Sharing Agreement (PSA) between Reliance and MOM. In terms of the ICC Award, the PSA stands cancelled. Based on the legal advice of the Bank's legal counsel in Yemen and in view of facts surrounding the matter, management is of the view that it is unlikely that there will be any financial impact on the Bank. 21.4.4 UBL & its New York Branch have entered into a Written Agreement in 2013 with the Federal Reserve Bank of New York (FRBNY) to address certain compliance and risk management matters relating primarily to compliance with Anti Money Laundering Regulations including the Banking Secrecy Act. Management is in the process of addressing the matters highlighted in the Written Agreement and in the subsequent inspections. While the Bank seeks to comply with all possible laws and regulations and at this stage there is no indication of any financial impact, it is not possible to ascertain the eventual outcome of these matters. 21.5 For contingencies relating to taxation, refer note 12.1 and for an update on pension matter, refer note 46.2. 21.6 Commitments to extend credit The Bank makes commitments to extend credit in the normal course of its business but these being revocable commitments do not attract any significant penalty or expense if the facility is unilaterally withdrawn. 21.7 92 Commitments in respect of forward foreign exchange contracts 2017 2016 ------- (Rupees in '000) ------- Purchase 210,187,425 186,835,721 Sale 180,864,234 162,987,703 United Bank Limited 33
95. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND OF THE UNCONSOLIDATED For the yearFORMING endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 21.8 21.9 2017 2016 ------- (Rupees in '000) ------- Commitments in respect of derivatives Interest rate swaps Cross currency swaps FX options - purchased FX options - sold Forward purchase of government securities Forward sale of government securities 4,358,641 83,368 83,368 7,870,890 1,478 6,986,094 522,051 213,081 213,081 4,998,400 3,553,866 Commitments in respect of capital expenditure 1,987,978 2,755,836 21.10 UBL Bank (Tanzania) Limited (UBTL) is a wholly owned subsidiary of UBL (the Bank). The operating losses of UBTL in the last two years along with the adverse exchange movement in Tanzanian Shilling against Pak Rupee has resulted in a significant decline in net assets value of the subsidiary. As at December 31, 2017, its capital is below the regulatory requirement. Management of UBTL has requested the Bank to inject additional capital and the Bank has approved capital injection of USD 9.4 million (Rs. 1,037.922 million). The Bank has started the regulatory approval process for transfer of funds for capital injection. The Bank has also provided a comfort letter to the management of UBTL confirming its financial and operational support. Management expects UBTL to continue to operate as a going concern. 22. DERIVATIVE INSTRUMENTS Derivatives are a type of financial contract, the value of which is determined by reference to one or more underlying assets or indices. The major categories of such contracts include forwards, futures, swaps and options. Derivatives also include structured financial products that have one or more of the characteristics of forwards, futures, swaps and options. The Bank, as an Authorized Derivative Dealer (ADD), is an active participant in the Pakistan derivatives market and offers a wide variety of derivatives products covering both hedging and market making to satisfy customers’ needs. Where required, specific approval is sought from the SBP for each transaction. The authority for approving policies lies with the Board of Directors (BoD) and the Board Risk and Compliance Committee (BRCC). The Risk Management Committee (RMC) is responsible for ensuring compliance with these policies. With regard to derivatives, the RMC is authorized to: - Review the derivatives business with reference to market risk exposure and assign various limits in accordance with the risk appetite of the Bank. Review the Derivatives Business Policy and recommend approval to the BRCC / BoD. Review and approve derivatives product programs. Authorize changes in procedures and processes regarding derivatives and structured products. Overall responsibility for derivatives trading activity lies with the Treasury and Capital Markets Group. Measurement and monitoring of market and credit risk exposure and limits and its reporting to senior management and the BoD is done by Treasury Middle Office (TMO), which also coordinates with the business regarding approvals for derivatives risk limits. Treasury Operations records derivatives activity in the Bank’s books, and handles its reporting to the SBP. Derivatives risk management There are a number of risks undertaken by the Bank, which need to be monitored and assessed. Credit risk Credit risk refers to the risk of non-performance or default by a party to a derivatives transaction, resulting in an adverse impact on the Bank’s profitability. Credit risk associated with derivatives transactions is categorized into settlement risk and pre-settlement risk. Credit proposals for derivatives transactions are approved by the Credit Committee. The credit exposure of each counterparty is estimated and monitored against approved counterparty limits by TMO on a daily basis. Market risk The Bank, as a policy, hedges back-to-back all Options transactions. In addition, the Bank does not carry any exchange risk on its Cross Currency Swaps portfolio as it hedges the exposure in the interbank market. To manage the interest rate risk of Interest Rate Derivatives, the Bank has implemented various limits which are monitored and reported by TMO on a daily basis. 34 Annual Report 2017 93
96. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED For the year ended December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 Liquidity risk Derivatives transactions, usually being non-funded in nature, do not carry a specific funding liquidity risk. The liquidity risk arises from the fact that in Pakistan, interest rate derivatives generally have a uni-directional demand, and no perfect hedge is available. The Bank mitigates its risk by limiting the portfolio in terms of tenor, notional and sensitivity limits, and can also hedge its risk by taking on and off balance sheet positions in the interbank market, where available. Operational risk The staff involved in the trading, settlement and risk management of derivatives is carefully trained to deal with the complexities involved in the process. Adequate systems and controls are in place to carry out derivatives transactions smoothly. Each transaction is processed in accordance with the product program or a transaction memo, which contains detailed guidance on the accounting and operational aspects of the transaction to further mitigate operational risk. In addition, TMO and the Compliance and Control Department are assigned the responsibility of monitoring any deviation from policies and procedures. The Bank’s Audit and Inspection Group also reviews this function, with a regular review of systems, transactional processes, accounting practices and end-user roles and responsibilities. The Bank uses FX and Derivatives module of Treasury System which provides an end-to-end valuation solution, supports the routine transactional process and provides analytical tools to measure various risk exposures, carry out stress tests and sensitivity analysis. TMO produces various reports on a periodic basis which are reviewed by senior management. These reports provide details of the derivatives business profile such as outstanding positions, profitability, risk exposures and the status of compliance with limits. 22.1 Product analysis 2017 Interest rate swaps With banks for Hedging Market making With other entities Market making Total Hedging Market making Cross currency swaps Number of contracts Notional principal (Rupees in '000) Number of contracts Notional principal (Rupees in '000) 1 1 2 413,071 316,499 729,570 - - 5 3,629,071 - 1 6 7 413,071 3,945,570 4,358,641 - FX options Forward purchase contracts of government securities Forward sale contracts of government securities Number of contracts Number of contracts Number of contracts Notional principal (Rupees in '000) 6 - 6 83,368 83,368 - 6 83,368 - - 6 6 12 83,368 83,368 166,736 - - 5 5 Notional principal (Rupees in '000) 7,870,890 7,870,890 - 5 5 7,870,890 7,870,890 - 2 2 - 2 2 Total Notional Principal Notional principal (Rupees in '000) (Rupees in '000) 1,478 1,478 496,439 8,188,867 8,685,306 - 3,712,439 1,478 1,478 496,439 11,901,306 12,397,745 2016 Interest rate swaps With banks for Hedging Market making With other entities Market making Total Hedging Market making 94 United Bank Limited Cross currency swaps Number of contracts Notional principal (Rupees in '000) Number of contracts 2 1 3 669,047 34,866 703,913 - 5 6,282,181 - 2 6 8 669,047 6,317,047 6,986,094 - 1 1 Notional principal (Rupees in '000) FX options Forward sale contracts of government securities Number of contracts Number of contracts Number of contracts Notional principal (Rupees in '000) 4 - 4 213,081 213,081 4 213,081 - 4 4 8 213,081 213,081 426,162 - 522,051 522,051 - - 1 1 Forward purchase contracts of government securities 522,051 522,051 35 1 1 Notional principal (Rupees in '000) 4,998,400 4,998,400 - 1 1 4,998,400 4,998,400 - 2 2 - Notional principal (Rupees in '000) (Rupees in '000) 3,553,866 3,553,866 882,128 9,109,183 9,991,311 - 2 2 Total Notional Principal 3,553,866 3,553,866 6,495,262 882,128 15,604,445 16,486,573
97. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING OF THE UNCONSOLIDATED For the year endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 22.2 Maturity analysis of derivatives Remaining maturity Upto 1 month 1 to 3 months 3 to 6 months 1 to 2 years 2 to 3 Years 5 to 10 years Remaining maturity 4 11 3 6 1 1 26 90,234 6,760,752 216,000 4,835,194 316,500 179,065 12,397,745 7 5 2 3 3 8,765,347 735,133 69,732 648,000 6,268,361 16,486,573 20 On lendings to financial institutions Call money lending Securities purchased under resale agreements Bai Muajjal with SBP / other financial institutions Other lendings to financial institutions On investments in Held for trading securities Available for sale securities Held to maturity securities On deposits with financial institutions (3,173) 6,807 64,158 5,432 484 73,708 (2,391) (239) (2,630) 1,717 5,459 251 46,347 150,724 204,498 (674) 5,459 12 46,347 150,724 201,868 33,366,136 30,394,552 148,823 472,376 427,359 1,029,106 2,077,664 172,303 138,814 47,028 900,222 1,258,367 1,990,140 38,756,902 30,709,792 71,456,834 305,186 107,205,820 1,073,887 34,803,969 30,428,244 66,306,100 260,195 98,219,214 31,676,334 16,786,983 1,860,048 458,075 50,781,440 29,136,354 10,197,470 1,443,153 399,709 41,176,686 18,585 3,612,720 3,631,305 209,673 557,582 4,398,560 11,461 3,507,471 3,518,932 1,054,440 791,091 5,364,463 MARK-UP / RETURN / INTEREST EXPENSED On deposits On securities sold under repurchase agreements On other short term borrowings On long term borrowings 25. 6,807 64,161 5,432 484 76,884 2017 2016 ------- (Rupees in '000) ------- MARK-UP / RETURN / INTEREST EARNED On loans and advances to customers 24. (3,173) (3) (3,176) 2016 Notional Unrealized principal (Loss) Gain Net ------------------------------------- (Rupees in '000) ---------------------------------- No. of contracts Upto 1 month 1 to 3 months 3 to 6 months 1 to 2 years 2 to 3 years 5 to 10 years 23. 2017 Notional Unrealized principal (Loss) Gain Net ------------------------------------- (Rupees in '000) ---------------------------------- No. of contracts GAIN ON SALE OF SECURITIES - NET Federal government securities Market Treasury Bills Pakistan Investment Bonds Ordinary shares of listed companies Other securities 36 Annual Report 2017 95
98. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING OF THE UNCONSOLIDATED For the year endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 Note 26. OTHER INCOME Charges recovered Rent on properties Income from dealing in derivatives Gain on sale of operating fixed assets - net Gain on sale of Ijarah assets - net Income from sale of non-banking assets Gain on trading liabilities - net 26.1 26.1 - 96 450,214 211,306 93,351 44,273 44,685 20,574 95,701 960,104 6,375 14,199 20,574 ADMINISTRATIVE EXPENSES Salaries, allowances etc. Charge for compensated absences Medical expenses Contribution to defined contribution plan Charge / (reversal) in respect of defined benefit obligations Rent, taxes, insurance, electricity etc. Depreciation on operating fixed assets Depreciation on Islamic financing against leased assets (Ijarah) Amortization Outsourced service charges including sales commission Communications Banking service charges Cash transportation charges Stationery and printing Legal and professional charges Advertisement and publicity Repairs and maintenance Travelling Office running expense Vehicle expense Entertainment Cartage, freight and conveyance Insurance expense Auditors' remuneration Training and seminars Brokerage expenses Subscriptions Donations Non-executive Directors' fees Zakat paid by overseas branch Miscellaneous expenses 27.1 537,162 210,772 32,793 57,935 96 65,834 904,592 The Bank earned an income of Rs. nil (2016: Rs. 20.574 million) against sale of following non-banking assets: Agricultural open land situated in Lahore Commercial open plot situated in Faisalabad 27. 2017 2016 ------- (Rupees in '000) ------- 27.1 11.2 44.4 11.3 27.2 27.3 12,557,693 24,687 709,527 264,844 408,050 4,514,851 2,034,205 197,824 373,007 4,609,423 1,305,505 1,216,853 890,061 631,065 626,743 1,070,902 1,532,772 294,686 859,063 202,054 203,099 92,310 109,493 76,887 151,089 25,410 81,057 109,929 48,721 75,828 52,226 35,349,864 11,370,646 315,084 608,785 237,496 (78,584) 4,203,455 1,607,107 205,186 314,870 4,565,397 1,094,953 1,113,498 647,034 669,106 410,827 703,838 1,416,833 254,657 776,296 184,210 237,801 96,569 111,267 71,798 116,008 18,441 89,555 86,933 41,963 283,971 128,598 31,903,598 This includes accrual of employee benefits in the form of awards / bonus to all permanent staff including the Chief Executive Officer and is determined on the basis of employees' evaluation and the Bank's performance during the year. The aggregate benefit determined in respect of all permanent staff amounted to Rs. 1,353.989 million (2016: Rs.1,531.067 million). United Bank Limited 37
99. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND OF THE UNCONSOLIDATED For the yearFORMING endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 27.2 Auditors' remuneration 2017 KPMG Taseer A. F. Ferguson Overseas Total Hadi & Co. & Co. Auditors --------------------------------- (Rupees in '000) --------------------------------- Audit fee Fee for audit of EPZ branch Fee for tax and other certifications Out of pocket expenses 8,051 250 9,925 4,629 22,855 8,051 5,657 3,623 17,331 27,007 9,064 630 36,701 43,109 250 24,646 8,882 76,887 2016 KPMG Taseer A. F. Ferguson Overseas Total Hadi & Co. & Co. Auditors ------------------------------------------- (Rupees in '000) ------------------------------------------Audit fee Fee for audit of EPZ branch Fee for tax and other certifications Out of pocket expenses 27.3 7,668 250 7,237 3,429 18,584 7,668 5,400 2,566 15,634 Details of donations 27,953 9,322 305 37,580 43,289 250 21,959 6,300 71,798 2017 2016 ------- (Rupees in '000) ------- Donations individually exceeding Rs. 0.1 million Namal Education Foundation Memon Medical Institute Hospital Lahore University of Management Sciences Murshid Hospital & Healthcare Center Forman Christian College Shalamar Hospital Indus Earth Trust Hilal-e-Ahmer Abdul Sattar Edhi Foundation Bahauddin Zakaria University NFC Institute of Engineering & Technology District Hospital, Gwadar Nasra Schools Akhuwat Hisaar Foundation SOS Children's Villages of Pakistan Marie Adelaide Leprosy Centre Patients Aid Foundation Developments in Literacy (Fundraiser) The Citizens Foundation Shaukat Khanum Memorial Hospital The Kidney Center Post Graduate Training Institute Old Associates of Kinnaird Society Karachi Rotary Club of Karachi Metropolitan Donations individually not exceeding Rs. 0.1 million 50,000 15,000 10,000 7,000 5,000 5,000 4,975 3,840 1,554 1,195 1,260 1,000 1,000 980 850 500 500 250 - 50,000 10,000 5,000 5,000 4,943 4,600 3,840 980 850 500 500 300 250 150 25 109,929 20 86,933 27.3.1 Donations were not made to any donee in which a Director or his spouse had any interest. 28. Note OTHER PROVISIONS / WRITE OFFS - NET Provision against other assets - net (Reversal of provision) / charge against off balance sheet items Other provisions 29. 12.2 18.1 2017 2016 ------- (Rupees in '000) ------45,888 (599,097) 164,140 (389,069) 143,908 27,081 89,859 260,848 WORKERS' WELFARE FUND Under the Workers' Welfare Ordinance, 1971, the Bank has accrued Workers' Welfare Fund at 2% of profit before tax as per the financial statements or declared income as per the income tax return, whichever is higher. 38 Annual Report 2017 97
100. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED For the year ended December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 The Bank has made full provision for Workers' Welfare Fund based on profit for the respective years. The Supreme Court of Pakistan vide its order dated November 10, 2016 has held that the amendments made in the law introduced by the Federal Government for the levy of Workers' Welfare Fund were not lawful. The Federal Board of Revenue has filed review petitions against this order which are currently pending. Legal advice obtained on the matter indicates that consequent to filing of these review petitions, the judgment may not currently be treated as conclusive. Accordingly, the Bank maintains its provision in respect of WWF. 30. 2017 2016 ------- (Rupees in '000) ------- OTHER CHARGES Penalties imposed by the SBP Other penalties 31. 59,431 257 59,688 TAXATION 69,082 731 69,813 2017 Domestic Azad Kashmir Overseas Total -------------------------------- (Rupees in '000) ------------------------------ Current Prior years Deferred 14,064,204 459,533 949,617 15,473,354 446,329 14,374 460,703 (113,646) (2,496,881) 1,415,279 (1,195,248) 14,396,887 (2,037,348) 2,379,270 14,738,809 2016 Domestic Azad Kashmir Overseas Total -------------------------------- (Rupees in '000) -----------------------------Current Prior years Deferred 31.1 32. 12,996,987 1,700,687 1,245,524 15,943,198 414,484 6,476 420,960 1,487,238 399,694 34,394 1,921,326 14,898,709 2,100,381 1,286,394 18,285,484 2017 2016 ------- (Rupees in '000) ------- Relationship between tax expense and accounting profit Accounting profit for the year 40,160,041 46,015,596 Tax on income @ 35% (2016: 35%) Tax effect of items that are either not included in determining taxable profit or taxed at reduced rates (permanent differences) Tax - prior years (net of deferred tax) Others Tax charge 14,056,014 16,105,459 20,831 721,583 (59,619) 14,738,809 24,435 2,116,858 38,732 18,285,484 2017 2016 ------- (Rupees in '000) ------- EARNINGS PER SHARE Profit after taxation for the year 25,421,232 27,730,112 ------- (Number of shares) ------Weighted average number of ordinary shares 1,224,179,687 1,224,179,687 ---------- (Rupees) ---------20.77 Earnings per share - basic and diluted 22.65 32.1 Diluted earnings per share has not been presented separately as the Bank does not have any convertible instruments in issue as at December 31, 2017 or 2016. 33. CASH AND CASH EQUIVALENTS Note Cash and balances with treasury banks Balances with other banks 98 United Bank Limited 6 7 39 2017 2016 ------- (Rupees in '000) ------157,582,687 19,516,198 177,098,885 131,506,861 14,920,994 146,427,855
101. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO year AND FORMING OF THE UNCONSOLIDATED For the endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 33.1 Reconciliation of movement of liabilities to cash flows arising from financing activities Liabilities Bills payable Balance as at January 1, 2017 Changes from financing cash flows Dividend Paid Borrowings Other liabilities Liability-related Changes in bills payable Changes in borrowings Changes in deposits and other accounts Changes in other liabilities - Cash based - Dividend payable - Non-cash based Transfer of profit to reserve Total Liability related other changes Total Equity related other changes Balance as at December 31, 2017 35.1 General description Unappropriated profit - - - - - - - - - - - - - - - - 1,631,894 - 311,100,846 - 109,360,203 1,631,894 13,388,316 311,100,846 512,650,465 109,360,203 1,289,247,251 2,512,487 434,404 (649,994) 2,296,897 30,176,426 12,241,798 2,542,123 2,542,123 850,249 43,846,877 (15,479,932) (434,404) (2,542,123) (2,976,527) 25,364,180 71,153,991 2017 2016 ------------ (Number) ------------ Permanent On contract Bank's own staff strength Outsourced Total DEFINED BENEFIT PLANS Reserves - STAFF STRENGTH 35. Share capital ------------------------------------------------------------------------ (Rupees in '000) ----------------------------------------------------------------------------------------11,756,422 201,549,619 1,179,887,048 27,879,529 12,241,798 40,454,505 64,246,270 Other Changes 34. Equity Deposits and other accounts 11,035 50 11,085 3,686 14,771 9,735 39 9,774 4,379 14,153 The Bank operates a funded pension scheme established in 1975. The Bank also operates a funded gratuity scheme for new employees and for those employees who have not opted for the pension scheme. The Bank also operates a benevolent fund scheme and provides post retirement medical benefits to eligible retired employees. The benevolent fund scheme and the post-retirement medical scheme cover all regular employees of the Bank who joined the Bank preprivatization. The liabilities of the Bank in respect of these schemes are determined based on actuarial valuations carried out using the Projected Unit Credit Method. Actuarial valuations of the defined benefit schemes are carried out every year and the latest valuation was carried out as at December 31, 2017. 35.2 Number of Employees under the scheme The number of employees covered under the following defined benefit schemes are: - Pension fund Gratuity fund Benevolent fund Post retirement medical benefit scheme 2017 2016 ---------- (Number) ---------6,798 9,394 4,051 9,804 6,829 7,984 4,386 9,839 The pension fund, benevolent fund and post retirement medical benefit schemes include 5,600 (2016: 5,499), 2,124 (2016: 2,214) and 8,064 (2016: 7,861) members respectively who have retired or whose widows are receiving the benefits. 35.3 Principal actuarial assumptions The actuarial valuations were carried out as at December 31, 2017 using the following significant assumptions: 2017 2016 ---------- Per annum ---------Discount rate / expected rate of return on plan assets Expected rate of salary increase Expected rate of increase in pension Expected rate of increase in medical benefit 8.25% 6.25% 2.25% 2.25% 40 8.00% 6.00% 2.00% 2.00% Annual Report 2017 99
102. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED For the year ended December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 35.4 Reconciliation of (receivable from) / payable to defined benefit plans Note 2016 Post Post Pension Gratuity Benevolent retirement Pension Gratuity Benevolent retirement fund fund fund fund fund fund medical medical benefit benefit ------------------------------------------------------------------------ (Rupees in '000) -----------------------------------------------------------------------Present value of obligations Fair value of plan assets (Receivable) / payable 35.5 2017 2,698,870 (3,176,096) (477,226) 728,822 (711,571) 17,251 2,932,255 8,196 123,653 (456,036) 98,242 (7,440) 2,698,870 652,457 106,921 52,899 (131,663) 48,208 728,822 3,077,541 233,079 1,595 (179,066) 42,947 3,176,096 429,243 1,463,703 (494,386) (65,143) 1,463,703 2,932,255 (3,077,541) (145,286) 652,457 (711,805) (59,348) 453,193 1,328,199 (501,671) (48,478) 1,328,199 453,193 1,328,199 6,630 4,250 35,702 111,493 (69,152) (138,529) 2,870 158,290 429,243 1,463,703 3,034,259 8,518 130,399 (507,085) 148,998 117,166 2,932,255 625,414 108,203 56,784 (111,140) (26,804) 652,457 711,805 57,468 103,679 (163,857) 2,476 711,571 501,671 39,434 2,468 2,468 (56,965) 5,310 494,386 2,884,308 266,470 332,855 (522,251) 116,159 3,077,541 652,318 59,104 111,594 (133,843) 22,632 711,805 899,017 77,332 2,814 2,814 (496,542) 16,236 501,671 (145,286) (12,645) (2,988) (1,595) 179,066 (456,036) (59,348) (658) 102,352 (103,679) 163,857 (131,663) (48,478) 1,328,199 (1,068) 430 115,743 (2,468) 56,965 (69,152) (138,529) 149,951 (4,193) 21,445 (332,855) 522,251 (507,085) (26,904) (492) 105,883 (111,594) 133,843 (111,140) (432,053) 1,188,710 (475) (33,669) 111,380 (2,814) 496,542 (70,819) (128,259) (37,742) (477,226) 46,390 17,251 (1,372) 158,290 (65,143) 1,463,703 5,200 (145,286) (48,944) (59,348) (5,190) 156,368 (48,478) 1,328,199 8,196 (109,426) 98,242 106,921 (4,569) - 8,518 (136,071) 148,998 108,203 (2,320) - 4,877 (38,546) - Movement in defined benefit obligations Obligations at the beginning of the year Current service cost Interest cost Benefits paid by the Bank Return allocated to other funds Re-measurement loss / (gain) Obligations at the end of the year 35.6 35.8.1 466,964 1,188,710 7,691 4,211 38,786 107,169 (70,819) (128,259) 10,571 156,368 453,193 1,328,199 Movement in fair value of plan assets Fair value at the beginning of the year Interest income on plan assets Contribution by the Bank Contribution by the employees Amount paid by the fund to the Bank Re-measurements gain / (loss) Fair value at the end of the year 35.7 - - Movement in (receivable) / payable under defined benefit schemes Opening balance Mark-up receivable on Bank's balance with the fund Charge / (reversal) for the year Contribution by the Bank Amount paid by the fund to the Bank Benefits paid by the Bank Re-measurement loss / (gain) recognised in OCI during the year Closing balance 35.8 Charge for defined benefit plans 35.8.1 Cost recognised in profit and loss Current service cost Net interest on defined benefit asset / liability Return allocated to other funds Employees' contribution 35.8.1.1 (2,988) - 6,630 (3,732) (2,468) 102,352 430 4,250 111,493 115,743 21,445 - - 105,883 (33,669) 4,211 107,169 111,380 35.8.1.1 This represents return allocated to those employees who exercised the conversion option offered in the year 2001, as referred to in note 5.10.1. 35.8.2 Re-measurements recognised in OCI during the year 2017 Loss / (gain) on obligation Financial assumptions Experience adjustment Return on plan assets over interest income Adjustment for mark-up Total re-measurements recognised in OCI 100 United Bank Limited 2016 Post Post Pension Gratuity Benevolent retirement Pension Gratuity Benevolent retirement fund fund fund fund fund fund medical medical benefit benefit ------------------------------------------------------------------------ (Rupees in '000) -----------------------------------------------------------------------(1,877) (5,563) (42,947) 12,645 (37,742) 1,099 47,109 (2,476) 658 46,390 41 (2,748) 5,618 (5,310) 1,068 (1,372) (1,704) 159,994 158,290 140,079 (22,913) (116,159) 4,193 5,200 (3,922) (22,882) (22,632) 492 (48,944) 9,445 1,126 (16,236) 475 (5,190) 182,530 (26,162) 156,368
103. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING OF THE UNCONSOLIDATED For the year endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 35.9 Components of plan assets Cash and cash equivalents - net of current liabilities Ordinary shares Term finance certificates Mutual Funds units Pakistan Investment Bonds Special Savings Certificates Other 2017 2016 Pension Gratuity Benevolent Pension Gratuity Benevolent fund fund fund fund fund fund -------------------------------------------- (Rupees in '000) -------------------------------------------15,421 133,055 72,289 1,414,048 1,541,283 3,176,096 6,018 8,098 143,061 18,275 446,196 89,923 711,571 2,403 20,458 8,178 192,907 270,440 494,386 13,559 169,105 81,013 1,414,882 1,398,982 3,077,541 2,767 10,407 6,239 398,146 281,346 12,900 711,805 1,688 23,704 10,619 192,283 273,377 501,671 35.9.1 The funds primarily invest in government securities and accordingly do not carry any significant credit risk. These are subject to interest rate risk based on market movements. Investment in term finance certificates are subject to credit risk and interest rate risks, while equity securities are subject to price risk. These risks are regularly monitored by Trustees of the employee funds. 35.10 Sensitivity analysis Sensitivity analysis has been performed by varying one assumption keeping all other assumptions constant and calculating the impact on the present value of the defined benefit obligations under the various employee benefit schemes. The increase / (decrease) in the present value of defined benefit obligations as a result of change in each assumption is summarized below: 2017 Post retirement medical benefit ------------------------------- (Rupees in '000) --------------------------Pension fund Increase in Discount Rate by 1% Decrease in Discount Rate by 1% Increase in expected future increment in salary by 1% Decrease in expected future increment in salary by 1% Increase in expected future increment in pension by 1% Decrease in expected future increment in pension by 1% Increase in expected future increment in medical benefit by 1% Decrease in expected future increment in medical benefit by 1% (80,665) 91,531 83,295 (73,931) - Gratuity fund Benevolent fund (47,929) 54,676 58,902 (52,413) - (23,062) 25,955 - (143,511) 172,762 163,227 (138,843) Although the analysis does not take account of the full distribution of expected cash flows, it does provide an approximation of the sensitivity of the assumptions shown. 35.11 Expected contributions to be paid to the funds in the next financial year The Bank contributes to the pension and gratuity funds according to the actuary's advice. Contribution to the benevolent fund is made by the Bank as per the rates set out in the benevolent fund scheme. Based on actuarial advice, management estimates that the expected contribution and charge / (reversal) for the year ending December 31, 2018, would be as follows: 2018 Post retirement medical benefit ------------------------------ (Rupees in '000) ----------------------Pension fund Expected contribution Expected (reversal) / charge for the year 42 Gratuity fund Benevolent fund - 129,818 - 118,719 (32,009) 129,818 (1,160) 118,719 Annual Report 2017 101
104. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED For the year ended December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 35.12 Maturity profile 2017 Pension fund The weighted average duration of the obligation (in years) 35.13 Gratuity fund 6.13 7.01 Benevolent fund Post retirement medical benefit 5.14 9.80 Funding Policy The Bank endeavours to ensure that liabilities under the various employee benefit schemes are covered by the Fund on any valuation date having regards to the various actuarial assumptions such as projected future salary increase, expected future contributions to the fund, projected increase in liability associated with future service and the projected investment income of the Fund. 36. OTHER EMPLOYEE BENEFITS 36.1 Defined contribution plan The Bank operates a contributory provident fund scheme for 7,394 (2016: 7,981) employees who are not in the pension scheme. The employer and employee each contribute 8.33% of the basic salary to the funded scheme every month. 36.2 Employee Motivation and Retention Scheme The Bank has a long term motivation and retention scheme for its employees. The liability of the Bank in respect of the scheme for each year, if any, is fixed, and is accounted for in the year to which the scheme relates. The scheme is managed by separate Trusts formed in respect of each year. During the year, Rs. nil (2016: Rs. 38.748 million) and Rs. nil (2016: Rs. 1.437 million) were received by the Executives and the Chief Executive respectively from the scheme. No new Trust was set up during the current year. 37. COMPENSATION OF DIRECTORS AND EXECUTIVES President / Chief Executive Officer Directors Executives 2017 2016 2017 2016 2017 2016 ---------------------------------------------------------- (Rupees in '000) ---------------------------------------------------------Fees Managerial remuneration Charge for defined benefit plans 48,721 41,963 201,483 - 129,907 - - - 4,580,212 - 4,793,916 - 732 1,638 - - 1,025,765 449,837 Charge for defined contribution plan 4,167 3,630 - - 144,114 109,310 Rent and house maintenance 4,361 4,191 - - 778,719 678,631 Utilities 1,456 1,407 - - 374,141 330,939 Medical 22 - - - 169,768 151,684 449,304 Conveyance Others Number of persons - - - - 469,262 4,011 3,394 - - 1,380,637 269,351 216,233 144,167 48,721 41,963 8,922,618 7,232,972 2 1 10 8 1,999 1,794 The amount paid to President /Chief Executive Officer of the Bank includes an amount of Rs. 51.364 million paid during the year as severance cost on cessation of employment to the outgoing President / Chief Executive Officer. The Bank's President / Chief Executive Officer and certain Executives are provided with use of Bank maintained cars and household equipment. In addition to the above, all Executives including the Chief Executive Officer of the Bank, are also entitled to certain short and long term employee benefits which are disclosed in note 36.2 to these unconsolidated financial statements. 102 United Bank Limited 43
105. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO year AND FORMING OF THE UNCONSOLIDATED For the endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 38. FAIR VALUE OF FINANCIAL INSTRUMENTS 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, other than investments in associates and subsidiaries, 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. 38.1 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 asset 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: 2017 Carrying / Notional value On balance sheet financial instruments Financial assets measured at fair value - Investments Government Securities (T-bills, PIBs, GoP Sukuks and Eurobonds) Foreign Bonds - Sovereign Foreign Bonds - others Ordinary shares of listed companies Debt securities (TFCs) Investment in REIT Financial assets not measured at fair value - Investments (HTM, unlisted ordinary shares, preference shares, subsidiaries and associates) Off balance sheet financial instruments Forward purchase and sale of foreign exchange contracts Fair value Level 1 Level 2 Level 3 Total -------------------------------------(Rupees in '000)----------------------------- 677,712,990 26,301,802 10,579,141 18,318,646 372,265 458,590 733,743,434 18,318,646 458,590 18,777,236 677,712,990 26,301,802 10,579,141 372,265 714,966,198 - 677,712,990 26,301,802 10,579,141 18,318,646 372,265 458,590 733,743,434 358,043,192 1,091,786,626 18,777,236 714,966,198 - 733,743,434 391,051,659 - 1,473,697 - 1,473,697 4,358,641 - 74,865 - 74,865 - - - - 166,736 - - - - 7,870,890 - (1,155) - (1,155) 1,478 - (2) - (2) Interest rate swaps Cross currency swaps - FX options - purchased and sold Forward purchase of government securities Forward sale of government securities 44 Annual Report 2017 103
106. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO year AND FORMING OF THE UNCONSOLIDATED For the endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 2016 Carrying / Notional value Level 1 398,870,094 - 398,870,094 - 398,870,094 19,399,674 - 19,399,674 - 19,399,674 9,799,161 - 9,799,161 - 22,220,669 - 562,722 Fair value Level 2 Level 3 Total -----------------------------------------(Rupees in '000)--------------------------- On balance sheet financial instruments Financial assets measured at fair value - Investments Government Securities (T-bills, PIBs, GoP Sukuks and Eurobonds) Foreign Bonds - Sovereign Foreign Bonds - others Ordinary shares of listed companies 9,799,161 22,220,669 22,220,669 - Debt securities (TFCs) 562,722 Investment in REIT 453,170 453,170 - 562,722 451,305,490 22,673,839 428,631,651 355,225,756 22,673,839 428,631,651 - - 453,170 - 451,305,490 Financial assets not measured at fair value - Investments (HTM, unlisted ordinary shares, preference shares, subsidiaries and associates) 806,531,246 Off balance sheet financial instruments Forward purchase and sale of foreign exchange contracts - - 451,305,490 349,823,424 - (377,070) - (377,070) 6,986,094 - 197,083 - 197,083 Cross currency swaps 522,051 - 5,459 - 5,459 FX options - purchased and sold 426,162 - - - - Forward purchase of government securities 4,998,400 - (2,391) - (2,391) Forward sale of government securities 3,553,866 - 1,717 - 1,717 Interest rate swaps 38.2 Certain categories of operating fixed assets (land and buildings) and non-banking assets acquired in satisfactions of claims are carried at revalued amounts (level 3 measurement) determined by professional valuers based on their assessment of the market values as disclosed in note 11 and note 12 respectively. 38.3 Valuation techniques used in determination of fair values within level 2 and level 3. Debt Securities The fair value of Federal Government securities is determined using the prices / rates available on Mutual Funds Association of Pakistan (MUFAP) and the fair value of other corporate and foreign government securities is determined using the rates from Reuters / Bloomberg. Derivatives The fair valuation techniques include forward pricing and swap models using present value calculations. Operating fixed assets and non-banking assets acquired in satisfaction of claims Land, buildings and non-banking assets acquired in satisfaction of claims 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 certainty. Accordingly, a qualitative disclosure of sensitivity has not been presented in these unconsolidated financial statements. 104 United Bank Limited 45
107. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND OF THE UNCONSOLIDATED For the yearFORMING endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 39. SEGMENT DETAILS WITH RESPECT TO BUSINESS ACTIVITIES For the year ended December 31, 2017 Corporate Trading and Retail Commercial Inter segment Others finance sales banking banking elimination -------------------------------------------------------- (Rupees in '000) -------------------------------------------------------Total income Total expenses Profit before tax Segment return on assets (ROA) Segment cost of funds 728,028 83,459 644,569 94.6% 0.1% 28,459,780 1,048,272 27,411,508 1.7% 4.7% 33,189,275 29,255,281 3,933,994 0.2% 2.5% 13,681,504 6,241,896 7,439,608 0.9% 3.9% 2,527,935 1,797,573 730,362 - - For the year ended December 31, 2016 Corporate Trading and Retail Commercial Inter segment Others finance sales banking banking elimination -------------------------------------------------------- (Rupees in '000) -------------------------------------------------------Total income Total expenses Profit before tax Segment return on assets (ROA) Segment cost of funds 687,888 98,333 589,555 101.1% 0.0% 34,151,640 1,875,185 32,276,455 2.3% 4.6% 30,148,323 26,603,042 3,545,281 0.2% 2.6% 13,257,465 5,659,441 7,598,024 1.0% 4.0% 2,405,854 399,573 2,006,281 - - As at December 31, 2017 Corporate Trading and Retail Commercial Inter segment Others finance sales banking banking elimination -------------------------------------------------------- (Rupees in '000) -------------------------------------------------------Segment assets (gross of NPLs provisions) Segment non performing loans (NPLs) Segment provision held against NPLs Segment liabilities 1,349,731 674,163 515,863 222,650 1,191,478,552 1,003,160 1,002,844 1,166,049,759 1,218,452,821 8,893,156 7,184,741 1,209,340,738 590,868,153 40,435,757 29,999,451 556,587,922 138,693,863 66,591 32,089 10,600,016 (1,094,726,686) (1,094,726,686) As at December 31, 2016 Corporate Trading and Retail Commercial Inter segment Others finance sales banking banking elimination -------------------------------------------------------- (Rupees in '000) -------------------------------------------------------Segment assets (gross of NPLs provisions) Segment non performing loans (NPLs) Segment provision held against NPLs Segment liabilities 1,121,938 674,671 507,379 233,008 892,875,447 1,603,361 1,584,978 855,174,842 1,082,965,053 10,364,636 8,476,832 1,072,484,615 511,304,109 31,859,524 26,790,721 480,003,978 114,463,896 64,792 36,702 5,650,527 (987,782,808) (987,782,808) Segment assets and liabilities include inter segment balances. Transactions between reportable segments are based on an appropriate transfer pricing mechanism using agreed rates. 40. TRUST ACTIVITIES The Bank is not engaged in any significant trust activities. However, it acts as custodian for some of the Term Finance Certificates it arranges and distributes on behalf of its customers. 41. RELATED PARTY TRANSACTIONS The Bank has related party transactions with its associates, subsidiary companies, employee benefit plans and its Directors and executive officers (including their associates). The Bank enters into transactions with related parties in the normal course of business. Contributions to and accruals in respect of staff retirement benefits and other benefit plans are made in accordance with the actuarial valuations / terms of the contribution plan. Remuneration to the executives / officers is determined in accordance with the terms of their appointment. Details of transactions with related parties during the year, other than those which have been disclosed elsewhere in these unconsolidated financial statements, are as follows: 46 Annual Report 2017 105
108. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED For the year ended December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 41.1 RELATED PARTY TRANSACTIONS Balances with other banks In current accounts In deposit accounts 2017 2016 Key Key Other related Other related Directors management Subsidiaries Associates Directors management Subsidiaries Associates parties parties personnel personnel ------------------------------------------------------------------------------- (Rupees in '000) ------------------------------------------------------------------------------- - 826,843 2,150,574 2,977,417 - - - - 1,462,437 1,648,597 3,111,034 Lendings to financial institutions - - 299,076 - - - - 571,712 375,000 Investments Opening balance Investment made during the year Investment redeemed / disposed off during the year Closing balance - - 4,897,174 4,897,174 3,895,328 3,895,328 - - 4,897,174 4,897,174 6,914,292 484,690 (1,680,000) 5,718,982 Provision for diminution in value of investments - - 619,412 98,414 - - - 2,339 11,574 (8,610) 5,303 94,142 132,389 (78,107) (14,865) 133,559 - 2,155,149 2,155,149 706 18,822 (17,189) 2,339 96,464 62,900 (88,936) 23,714 94,142 - 2,155,149 2,155,149 Provision held against advances - - - 2,155,149 - - - 2,155,149 Other Assets Interest mark-up accrued Receivable from staff retirement funds Prepaid insurance Other receivable - Provision against other assets - - Borrowings Opening balance Borrowings during the year Settled during the year Closing balance - - 463,422 3,285,075 (2,419,684) 1,328,813 Overdrawn Nostros - - 619,456 Advances Opening balance Addition during the year Repaid during the year Transfer in / (out) - net Closing balance Deposits and other accounts Opening balance Received during the year Withdrawn during the year Transfer (out) / in - net Closing balance Other Liabilities Interest / mark-up payable on deposits and borrowings Payable to staff retirement fund Unearned income Contingencies and Commitments Letter of guarantee Forward foreign exchange contracts purchase Forward foreign exchange contracts sale Cross Currency Swap 26 7,714,425 30,436,836 (32,458,694) 7,996 5,700,563 - 8 159,946 1,499,352 (1,501,217) (118,975) 39,106 40,412 - - - - 5,718,982 123,171 (4,217,836) 1,624,317 - 16,907,692 65,331,493 (79,612,943) (136) 2,626,106 - 1,320 13,029 13,201 3,178 82,071 632,808 30,164 - - - 30,164 - - 167,100 512,650 (679,750) - - - - - 474,532 474,532 - - 295,565 8,882,222 2,196,112 28,701,550 260,729,404 176,337,511 (28,527,633) (255,237,393) (174,752,255) (6,952,995) (708,121) 469,482 7,421,238 3,073,247 47 7 7,934,549 25,536,998 (25,757,122) 7,714,425 - 67 1,919 903 42,810 - 27,740 17,251 11,462 86,513 - - 240,856 2,786,626 2,760,430 - 24,884 - - - - 3,895,328 3,895,328 114,844 7,907,012 59,472,461 (50,471,781) 16,907,692 - 4,144 5,206 - 235,602 376,634 30,164 - - 30,164 - 167,100 167,100 - 34 - - 1,989 10,018 1,248,164 2,814,871 (3,599,613) 463,422 52,522 1,255,187 (1,143,273) (4,490) 159,946 - - - 336,192 6,655,457 1,822,423 25,753,279 129,962,337 115,760,189 (25,793,906) (127,735,572) (115,386,860) 360 295,565 8,882,222 2,196,112 23,486 205 29,777 - 4,454 10,420 242,281 6,083,795 6,225,246 - 23,574 522,051 198,737 203,148 - 2017 2016 Key Key Other related Other related management Subsidiaries Associates Directors management Subsidiaries Associates parties parties personnel personnel ------------------------------------------------------------------------------- (Rupees in '000) ------------------------------------------------------------------------------- Directors Mark-up / return / interest earned Commission / charges recovered Dividend income Net gain on sale of securities Other income Mark-up / return / interest paid Remuneration paid Post employment benefits Non-executive directors' fee Net charge for defined contribution plans Net charge / (reversal) for defined benefit plans Other expenses 106 - 94 126,120 48,721 - 4,969 367 1,909 51,044 1,523 527,837 161,301 11,831 35,460 99,287 330,367 18,303 490,962 14,572 480,242 12,716 10 242 - 5,186 533 2,621 40,496 460 693,423 83,862 28,098 39,948 296,728 470,389 6,461 501,888 23,535 791,303 12,514 1,074 803,447 22,728 - 28,467 - 537,815 2,552 64,187 264,844 99,794 129,510 218,848 41,963 - 1,266 702,909 23,266 - 14,573 - 255,670 55,621 34,176 237,496 (338,394) 120,737 Insurance premium paid - - - 442,463 - - - - 239,187 - Insurance claims settled - - - 206,675 - - - - 112,467 - United Bank Limited 47
109. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND OF THE UNCONSOLIDATED For the yearFORMING endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 42. CAPITAL ADEQUACY 42.1 The State Bank of Pakistan (SBP) through its BPRD Circular No. 6 dated August 15, 2013 has issued Basel III Capital instructions for Banks / DFIs. The revision to the previously applicable Capital Adequacy Regulations pertain to components of eligible capital and related deductions. The amendments have been introduced with an aim to further strengthen the existing capital related rules. Basel III instructions have become effective from December 31, 2013; however, there is a transitional phase during which the complete requirements would become applicable with full implementation by December 31, 2019. The Bank’s capital adequacy is reported using the rules and ratios provided by the State Bank of Pakistan. The capital adequacy ratio is a measure of the amount of a Bank's capital expressed as a percentage of its risk weighted assets (RWAs). Banking operations are categorized as either Trading Book or Banking Book and RWAs are determined according to specific treatments as per the requirements of SBP that measure the varying levels of risk attached to on-balance sheet and off-balance sheet exposures. Under the current capital adequacy regulations, credit risk and market risk exposures are measured using the Standardized Approach and operational risk is measured using the Basic Indicator Approach. Credit risk mitigants are also applied against the Bank’s exposures based on eligible collateral. The Bank performs its Internal Capital Adequacy Assessment Process (ICAAP) as per the guidelines provided by the SBP. The ICAAP has been approved by the Bank’s Board of Directors and submitted to the SBP. The Bank additionally covers risks not yet included under Pillar I, so as to carry adequate capital to cater for any future business requirements. 42.2 Capital Management The objective of managing capital is to safeguard the Bank's ability to continue as a going concern. It is the policy of the Bank to maintain a strong capital base so as to maintain investor, depositor and market confidence and to sustain future development of the business. The Bank aims to maintain an optimum level of capital along with maximizing shareholders’ return as we consider a sound capital position as more appropriate as opposed to leverage supporting business growth. Statutory minimum capital and capital adequacy requirements The SBP through its BSD Circular No. 07 dated April 15, 2009 has prescribed the minimum paid-up capital (net of accumulated losses) for Banks to be raised to Rs.10,000 million by the year ending December 31, 2015. The paid-up capital of the Bank for the year ended December 31, 2017 stood at Rs.12,241.798 million (2016: Rs.12,241.798 million) and is in compliance with SBP requirements. Banks are also required to maintain a minimum Capital Adequacy Ratio (CAR) of 10.0% plus capital conservation buffer of 1.275% of the risk weighted exposures of the Bank. Further, under Basel III instructions, Banks are also required to maintain a Common Equity Tier 1 (CET 1) ratio and Tier 1 ratio of 6.0% and 7.5%, respectively, as at December 31, 2017. As at December 31, 2017 the Bank is fully compliant with prescribed ratios as the Bank’s CAR is 15.45% whereas CET 1 and Tier 1 ratios both stood at 11.28%. The Bank and its individually regulated operations have complied with all capital requirements throughout the year. Tier 1 capital comprises of Common Equity Tier 1 (CET 1) and Additional Tier 1 (AT 1) capital. CET 1 capital includes fully paid-up capital, balance in share premium account, reserve for issue of bonus shares, general reserves as per the financial statements and net unappropriated profits. AT 1 capital includes instruments meeting the prescribed SBP criteria e.g. perpetual non-cumulative preference shares. The deductions from Tier 1 capital include mainly: i) ii) iii) iv) v) vi) vii) viii) ix) Book value of goodwill / intangibles; Shortfall in provision; Deficit on revaluation of available for sale investments - AFS & fixed assets; Defined benefit pension fund asset; Investment in own shares; Reciprocal cross holdings in equity capital instruments of other banks, financial institutions and insurance companies; Investment in mutual funds above a prescribed ceiling; Threshold deductions applicable from 2014 on deferred tax assets and certain investments; 10% of investments in majority capital instruments or other financial subsidiaries not consolidated in the statement of financial position during transition phase. Tier 2 capital includes general provisions for loan losses, surplus on the revaluation of fixed assets, fixed income financial instruments (AFS) and equity investments (AFS), foreign exchange translation reserves and subordinated debts (meeting the revised eligibility criteria). The deductions from Tier 2 include mainly: i) ii) Reciprocal cross holdings in other capital instruments of other banks, financial institution and insurance companies; 10% of investments in majority capital instruments or other financial subsidiaries not consolidated in the statement of financial position, during transition phase. 48 Annual Report 2017 107
110. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 42.3 1 2 3 4 5 6 7 8 9 10 11 Capital Adequacy Ratio (CAR) disclosure template: 2017 2016 ------------------------ (Rupees in '000) -------------------Amount Amount Common Equity Tier 1 capital (CET1): Instruments and reserves Fully Paid-up Capital/ Capital deposited with SBP Balance in Share Premium Account Reserve for issue of Bonus Shares Discount on Issue of shares General/ Statutory Reserves Gain/(Losses) on derivatives held as Cash Flow Hedge Unappropriated/unremitted profits/ (losses) Minority Interests arising from CET1 capital instruments issued to third parties by consolidated bank subsidiaries (amount allowed in CET1 capital of the consolidation group) CET 1 before Regulatory Adjustments Total regulatory adjustments applied to CET1 (Note 42.3.1) Common Equity Tier 1 16 17 18 19 20 Additional Tier 1 (AT 1) Capital Qualifying Additional Tier-1 capital instruments plus any related share premium of which: Classified as equity of which: Classified as liabilities Additional Tier-1 capital instruments issued to third parties by consolidated subsidiaries (amount allowed in group AT 1) of which: instrument issued by subsidiaries subject to phase out AT1 before regulatory adjustments Total regulatory adjustment applied to AT1 capital (Note 42.3.2) Additional Tier 1 capital after regulatory adjustments Additional Tier 1 capital recognized for capital adequacy 21 Tier 1 Capital (CET1 + admissible AT1) (11+20) 12 13 14 15 12,241,798 29,739,738 71,153,991 12,241,798 27,197,615 64,246,270 113,135,527 2,485,648 110,649,879 103,685,683 2,607,744 101,077,939 - - - - 110,649,879 101,077,939 29 30 31 32 33 34 35 36 37 38 39 40 Tier 2 Capital Qualifying Tier 2 capital instruments under Basel III plus any related share premium Tier 2 capital instruments subject to phaseout arrangement issued under pre-Basel III rules Tier 2 capital instruments issued to third parties by consolidated subsidiaries (amount allowed in group tier 2) of which: instruments issued by subsidiaries subject to phase out General provisions or general reserves for loan losses-up to maximum of 1.25% of Credit Risk Weighted Assets 3,255,254 Revaluation Reserves (net of taxes) 28,431,199 of which: Revaluation reserves on fixed assets 22,887,581 of which: Unrealized gains/losses on AFS 5,543,618 Foreign Exchange Translation Reserves 14,107,139 Undisclosed/Other Reserves (if any) T2 before regulatory adjustments 45,793,592 Total regulatory adjustment applied to T2 capital (Note 42.3.3) 598,381 45,195,211 Tier 2 capital (T2) after regulatory adjustments Tier 2 capital recognized for capital adequacy 40,892,332 Portion of Additional Tier 1 capital recognized in Tier 2 capital Total Tier 2 capital admissible for capital adequacy 40,892,332 TOTAL CAPITAL (T1 + admissible T2) (21+39) 151,542,211 3,128,774 27,092,425 15,282,476 11,809,949 13,256,890 43,478,089 1,195,328 42,282,761 39,598,094 39,598,094 140,676,033 41 Total Risk Weighted Assets (RWA) {for details refer Note 42.6} 929,617,344 24 25 26 27 28 46 47 48 49 Capital Ratios and buffers (in percentage of risk weighted assets) CET1 to total RWA Tier-1 capital to total RWA Total capital to total RWA Bank specific buffer requirement (minimum CET1 requirement plus capital conservation buffer plus any other buffer requirement) of which: capital conservation buffer requirement of which: countercyclical buffer requirement of which: D-SIB or G-SIB buffer requirement CET1 available to meet buffers (as a percentage of risk weighted assets) 50 51 52 National minimum capital requirements prescribed by SBP CET1 minimum ratio Tier 1 minimum ratio Total capital minimum ratio 42 43 44 45 108 United Bank Limited 49 981,041,653 - 11.28% 11.28% 15.45% 10.87% 10.87% 15.13% 7.28% 1.28% 4.00% 6.65% 0.65% 4.22% 6.0% 7.5% 10.0% 6.0% 7.5% 10.0%
111. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 2017 Amount Amounts subject to Pre-Basel III treatment Regulatory Adjustments and Additional Information 42.3.1 Common Equity Tier 1 capital: Regulatory adjustments 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 ------------------------ (Rupees in '000) -------------------- Goodwill (net of related deferred tax liability) All other intangibles (net of any associated deferred tax liability) 1,075,580 Shortfall in provisions against classified assets* Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability) Defined-benefit pension fund net assets 248,158 Reciprocal cross holdings in CET1 capital instruments of banking, financial and insurance entities 563,529 Cash flow hedge reserve Investment in own shares/ CET1 instruments Securitization gain on sale Capital shortfall of regulated subsidiaries Deficit on account of revaluation from bank's holdings of fixed assets/ AFS Investments in the capital instruments of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold) Significant investments in the common stocks of banking, financial and insurance entities that are outside the scope of regulatory consolidation (amount above 10% threshold) Deferred Tax Assets arising from temporary differences (amount above 10% threshold, net of related tax liability) Amount exceeding 15% threshold of which: significant investments in the common stocks of financial entities of which: deferred tax assets arising from temporary differences National specific regulatory adjustments applied to CET1 capital Investments in TFCs of other banks exceeding the prescribed limit Any other deduction specified by SBP (mention details) Adjustment to CET1 due to insufficient AT1 and Tier 2 to cover deductions 598,381 Total regulatory adjustments applied to CET1 (sum of 1 to 21) 2,485,648 42.3.2 Additional Tier-1 : regulatory adjustments 23 24 25 26 27 28 29 30 2016 Amount Investment in mutual funds exceeding the prescribed limit [SBP specific adjustment] Investment in own AT1 capital instruments Reciprocal cross holdings in Additional Tier 1 capital instruments of banking, financial and insurance entities Investments in the capital instruments of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold) Significant investments in the capital instruments of banking, financial and insurance entities that are outside the scope of regulatory consolidation Adjustments to Additional Tier 1 due to insufficient Tier 2 to cover deductions Portion of deduction applied 50:50 to Tier-1 and Tier-2 capital based on pre-Basel III treatment which, during transitional period, remain subject to deduction from additional tier-1 capital Total regulatory adjustment applied to AT1 capital (sum of 23 to 29) 949,816 248,158 56,662 334,864 14,160 1,252,243 2,607,745 - 56,915 - - - - - 598,381 598,381 598,381 1,195,328 1,252,243 598,381 - 598,381 1,195,328 - 42.3.3 Tier 2 Capital: regulatory adjustments 31 32 33 34 35 36 Portion of deduction applied 50:50 to Tier-1 and Tier-2 capital based on pre-Basel III treatment which, during transitional period, remain subject to deduction from tier-2 capital Reciprocal cross holdings in Tier 2 instruments of banking, financial and insurance entities Investment in own Tier 2 capital instrument Investments in the capital instruments of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold) Significant investments in the capital instruments issued by banking, financial and insurance entities that are outside the scope of regulatory consolidation Total regulatory adjustment applied to T2 capital (sum of 31 to 35) (i) (ii) (iii) (iv) 38 39 40 41 42 43 44 - 598,381 1,195,328 2017 2016 ------------------- Rupees in '000 -------------------Amount Amount 42.3.4 Additional Information 37 - Risk Weighted Assets subject to pre-Basel III treatment Risk weighted assets in respect of deduction items (which during the transitional period will be risk weighted subject to Pre-Basel III Treatment) of which: deferred tax assets of which: Defined-benefit pension fund net assets of which: Recognized portion of investment in capital of banking, financial and insurance entities where holding is -------- less than 10% of the issued common share capital of the entity of which: Recognized portion of investment in capital of banking, financial and insurance entities where holding ----------- --- is more than 10% of the issued common share capital of the entity Amounts below the thresholds for deduction (before risk weighting) Non-significant investments in the capital of other financial entities Significant investments in the common stock of financial entities Deferred tax assets arising from temporary differences (net of related tax liability) Applicable caps on the inclusion of provisions in Tier 2 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to standardized approach (prior to application of cap) Cap on inclusion of provisions in Tier 2 under standardized approach Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internal ratings-based approach (prior to application of cap) Cap for inclusion of provisions in Tier 2 under internal ratings-based approach 50 - - - - - - - - - - Annual Report 2017 109
112. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED FINANCIAL STATEMENTS For theYEAR year ended December FOR THE ENDED DECEMBER 31 , 2017 31, 2017 42.4 Capital Structure Reconciliation Step 1 Balance Sheet as per published financial statements As at Dec 31, Under regulatory scope of consolidation 157,582,687 157,582,687 Balances with other banks 19,516,198 19,516,198 Lending to financial institutions 33,664,174 33,664,174 1,091,786,626 1,091,786,626 604,562,193 604,562,193 46,204,564 46,204,564 As at Dec 31, 2017 2017 --------- (Rupees in '000) --------- Assets Cash and balances with treasury banks Investments Advances Operating fixed assets Deferred tax assets - net - - Other assets 54,065,004 54,065,004 Total assets 2,007,381,446 2,007,381,446 Liabilities & Equity Bills payable Borrowings Deposits and other accounts Sub-ordinated loans 13,388,316 512,650,465 1,289,247,251 1,289,247,251 - Liabilities against assets subject to finance lease - Deferred tax liability - net - 2,611,941 2,611,941 30,176,426 30,176,426 1,848,074,399 1,848,074,399 Share capital 12,241,798 12,241,798 Reserves 43,846,877 43,846,877 Unappropriated profit 71,153,991 71,153,991 127,242,666 127,242,666 32,064,381 32,064,381 2,007,381,446 2,007,381,446 Other liabilities Total liabilities Total equity Surplus on revaluation of assets - net of deferred tax Total liabilities and equity 110 13,388,316 512,650,465 United Bank Limited 51
113. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 42.4 Capital Structure (Contd.) Step 2 Balance Sheet as per published financial statements Under Reference regulatory scope of consolidation As at Dec 31, As at Dec 31, 2017 2017 --------- (Rupees in '000) --------- Assets Cash and balances with treasury banks 157,582,687 Balances with other banks 19,516,198 Lendings to financial institutions 33,664,174 Investments 1,091,786,626 of which: Non-significant capital investments in capital of other financial institutions exceeding -------- 10% threshold of which: significant capital investments in financial sector entities exceeding regulatory threshold of which: Mutual Funds exceeding regulatory threshold of which: reciprocal crossholding of capital instrument 563,529 of which: Investment in own shares/ CET1 instruments Advances 604,562,193 shortfall in provisions/ excess of total EL amount over eligible provisions under IRB general provisions reflected in Tier 2 capital 3,255,254 Fixed Assets 46,204,564 of which: Goodwill of which: Intangibles 1,075,580 Deferred Tax Assets of which: DTAs excluding those arising from temporary differences of which: DTAs arising from temporary differences exceeding regulatory threshold Other assets 54,065,004 of which: Defined-benefit pension fund net assets 248,158 Total assets 2,007,381,446 157,582,687 19,516,198 33,664,174 1,091,786,626 563,529 604,562,193 3,255,254 46,204,564 1,075,580 54,065,004 248,158 2,007,381,446 Liabilities & Equity Bills payable Borrowings Deposits and other accounts Sub-ordinated loans of which: eligible for inclusion in AT1 of which: eligible for inclusion in Tier 2 Liabilities against assets subject to finance lease Deferred tax liabilities of which: DTLs related to goodwill of which: DTLs related to intangible assets of which: DTLs related to defined pension fund net assets of which: other deferred tax liabilities Other liabilities Total liabilities 13,388,316 512,650,465 1,289,247,251 2,611,941 2,611,941 30,176,426 1,848,074,399 13,388,316 512,650,465 1,289,247,251 2,611,941 2,611,941 30,176,426 1,848,074,399 Share capital of which: amount eligible for CET1 of which: amount eligible for AT1 Reserves of which: portion eligible for inclusion in CET1(provide breakup) of which: portion eligible for inclusion in Tier 2 Unappropriated profit/ (losses) Minority Interest of which: portion eligible for inclusion in CET1 of which: portion eligible for inclusion in AT1 of which: portion eligible for inclusion in Tier 2 Surplus on revaluation of assets of which: Revaluation reserves on Property of which: Unrealized Gains/Losses on AFS In case of Deficit on revaluation (deduction from CET1) Total liabilities and equity 12,241,798 12,241,798 43,846,877 29,739,738 14,107,139 71,153,991 32,064,381 25,835,597 6,228,784 2,007,381,446 12,241,798 12,241,798 43,846,877 29,739,738 14,107,139 71,153,991 32,064,381 25,835,597 6,228,784 2,007,381,446 52 a b c d e f g j k h i l m n o p q r s t u v w x y z aa ab Annual Report 2017 111
114. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 42.4 Capital Structure (Contd.) Step 3 Component of regulatory capital reported by bank (Rupees in '000) Source based on reference number from step 2 12,241,798 29,739,738 71,153,991 (s) Common Equity Tier 1 capital (CET1): Instruments and reserves 1 2 3 4 5 6 7 Fully Paid-up Capital/ Capital deposited with SBP Balance in Share Premium Account Reserve for issue of Bonus Shares General/ Statutory Reserves Gain/(Losses) on derivatives held as Cash Flow Hedge Unappropriated/unremitted profits/(losses) Minority Interests arising from CET1 capital instruments issued to third party by consolidated bank subsidiaries (amount allowed in CET1 capital of the consolidation group) 8 CET 1 before Regulatory Adjustments 113,135,527 (u) (w) (x) Common Equity Tier 1 capital: Regulatory adjustments 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Goodwill (net of related deferred tax liability) All other intangibles (net of any associated deferred tax liability) Shortfall of provisions against classified assets Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability) Defined-benefit pension fund net assets Reciprocal cross holdings in CET1 capital instruments Cash flow hedge reserve Investment in own shares/ CET1 instruments Securitization gain on sale Capital shortfall of regulated subsidiaries Deficit on account of revaluation from bank's holdings of property/ AFS Investments in the capital instruments of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold) Significant investments in the capital instruments issued by banking, financial and insurance entities that are outside the scope of regulatory consolidation (amount above 10% threshold) Deferred Tax Assets arising from temporary differences (amount above 10% threshold, net of related tax liability) Amount exceeding 15% threshold of which: significant investments in the common stocks of financial entities of which: deferred tax assets arising from temporary differences National specific regulatory adjustments applied to CET1 capital Investment in TFCs of other banks exceeding the prescribed limit Any other deduction specified by SBP (mention details) Regulatory adjustment applied to CET1 due to insufficient AT1 and Tier 2 to cover deductions Total regulatory adjustments applied to CET1 (sum of 9 to 25) Common Equity Tier 1 1,075,580 248,158 563,529 - (j) - (o) (k) - (p) (f) {(h) - (r)} * x% {(l) - (q)} * x% (d) (ab) - (a) - (ac) - (ae) - (b) - (ad) - (af) 598,381 2,485,648 110,649,879 (i) Additional Tier 1 (AT 1) Capital 31 Qualifying Additional Tier-1 instruments plus any related share premium 32 of which: Classified as equity 33 of which: Classified as liabilities 34 Additional Tier-1 capital instruments issued by consolidated subsidiaries and held by third parties (amount allowed in group AT 1) 35 of which: instrument issued by subsidiaries subject to phase out 36 AT1 before regulatory adjustments 112 United Bank Limited 53 - (t) (m) (y)
115. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 Component of regulatory capital reported by bank (Rupees in '000) Source based on reference number from step 2 Additional Tier 1 Capital: regulatory adjustments 37 38 39 40 41 42 43 44 45 46 Investment in mutual funds exceeding the prescribed limit (SBP specific adjustment) Investment in own AT1 capital instruments Reciprocal cross holdings in Additional Tier 1 capital instruments Investments in the capital instruments of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold) Significant investments in the capital instruments issued by banking, financial and insurance entities that are outside the scope of regulatory consolidation Portion of deduction applied 50:50 to core capital and supplementary capital based on pre-Basel III treatment which, during transitional period, remain subject to deduction from tier-1 capital Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover deductions Total of Regulatory Adjustment applied to AT1 capital Additional Tier 1 capital Additional Tier 1 capital recognized for capital adequacy Tier 1 Capital (CET1 + admissible AT1) - - (ac) - (ad) 598,381 598,381 110,649,879 Tier 2 Capital 47 Qualifying Tier 2 capital instruments under Basel III 48 Capital instruments subject to phase out arrangement from tier 2 (Pre-Basel III instruments) 49 Tier 2 capital instruments issued to third party by consolidated subsidiaries (amount allowed in group tier 2) 50 of which: instruments issued by subsidiaries subject to phase out 51 General Provisions or general reserves for loan losses-up to maximum of 1.25% of Credit Risk Weighted Assets 52 Revaluation Reserves eligible for Tier 2 53 of which: portion pertaining to Property 54 of which: portion pertaining to AFS securities 55 Foreign Exchange Translation Reserves 56 Undisclosed/Other Reserves (if any) 57 T2 before regulatory adjustments Tier 2 Capital: regulatory adjustments 58 Portion of deduction applied 50:50 to core capital and supplementary capital based on pre-Basel III treatment which, during transitional period, remain subject to deduction from tier-2 capital 59 Reciprocal cross holdings in Tier 2 instruments 60 Investment in own Tier 2 capital instrument 61 Investments in the capital instruments of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold) 62 Significant investments in the capital instruments issued by banking, financial and insurance entities that are outside the scope of regulatory consolidation 63 Amount of Regulatory Adjustment applied to T2 capital 64 Tier 2 capital (T2) 65 Tier 2 capital recognized for capital adequacy 66 Excess Additional Tier 1 capital recognized in Tier 2 capital 67 Total Tier 2 capital admissible for capital adequacy TOTAL CAPITAL (T1 + admissible T2) 54 - (n) - (z) 3,255,254 22,887,581 5,543,618 14,107,139 45,793,592 (g) portion of (aa) (v) 598,381 - 598,381 45,195,211 40,892,332 40,892,332 151,542,211 (ae) (af) Annual Report 2017 113
116. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 42.5 Main Features Template of Regulatory Capital Instruments Disclosure template for main features of regulatory capital instruments Main Features Common Shares 1 Issuer United Bank Limited 2 Unique identifier (e.g. PSX Symbol or Bloomberg identifier etc.) 3 Governing law(s) of the instrument On PSX “UBL” and on Bloomberg “UBLS”. Relevant Capital Market Laws Regulatory treatment 4 Transitional Basel III rules Common Equity Tier 1 5 Post-transitional Basel III rules Common Equity Tier 1 6 Eligible at solo/ group / group & solo 7 Instrument type Group & Standalone Ordinary Shares 8 Amount recognized in regulatory capital (Currency in PKR thousands, as of reporting date) 9 Par value of instrument 10 Accounting classification 11 Original date of issuance 12 Perpetual or dated 13 14 15 16 12,241,798 Rs 10 each Shareholders' equity 1959 Perpetual Original maturity date No maturity Issuer call subject to prior supervisory approval Not applicable Optional call date, contingent call dates and redemption amount Not applicable Subsequent call dates, if applicable Not applicable Coupons / dividends 17 Fixed or floating dividend/ coupon Not applicable 18 Coupon rate and any related index/ benchmark Not applicable 19 Existence of a dividend stopper 20 Fully discretionary, partially discretionary or mandatory 21 Existence of step up or other incentive to redeem 22 Noncumulative or cumulative 23 Fully discretionary No Not applicable Convertible or non-convertible Non Convertible 24 If convertible, conversion trigger(s) Not applicable 25 If convertible, fully or partially Not applicable 26 If convertible, conversion rate Not applicable 27 If convertible, mandatory or optional conversion Not applicable 28 If convertible, specify instrument type convertible into Not applicable 29 If convertible, specify issuer of instrument it converts into Not applicable 30 Write-down feature Not applicable 31 If write-down, write-down trigger(s) Not applicable 32 If write-down, full or partial Not applicable 33 If write-down, permanent or temporary Not applicable 34 114 No If temporary write-down, description of write-up mechanism Not applicable 35 Position in subordination hierarchy in liquidation (specify instrument type immediately senior to instrument) 36 Non-compliant transitioned features Not applicable 37 If yes, specify non-compliant features Not applicable United Bank Limited 55 Common equity (ranks after all creditors including depositors)
117. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 42.6 Risk Weighted Assets Capital Requirements * 2017 Risk Weighted Assets 2016 2017 2016 ------------------ (Rupees in '000) --------------- Credit Risk On-Balance sheet Sovereign 6,355,542 6,214,276 63,555,415 62,142,764 Public Sector entities 1,714,490 978,715 17,144,899 9,787,149 Banks 4,589,997 4,442,695 45,899,970 44,426,950 28,637,437 28,300,317 286,374,375 283,003,175 3,140,810 2,128,835 31,408,096 21,288,345 146,777 140,495 1,467,766 1,404,945 1,855,459 1,239,924 18,554,589 12,399,239 146,578 176,922 1,465,785 1,769,225 Unlisted equity investments 16,825 12,161 168,249 121,605 Commercial Entity 55,872 55,872 558,720 558,720 4,512,898 3,463,194 45,128,983 34,631,942 Corporate Retail Residential Mortgages Past Due loans Listed equity investments Operating Fixed Assets Significant investment 1,196,762 896,496 11,967,623 8,964,960 Other assets 2,010,382 1,443,125 20,103,821 14,431,245 54,379,829 49,493,027 543,798,291 494,930,264 12,030,098 10,100,831 120,300,979 101,008,311 230,654 165,447 2,306,540 1,654,469 12,260,752 10,266,278 122,607,519 102,662,780 10,651,273 11,901,688 133,140,907 148,771,103 3,068,131 3,816,538 38,351,638 47,706,729 Off-Balance sheet Non-market related Market related Market Risk Interest rate risk Equity position risk Foreign Exchange risk Operational Risk 227,132 219,847 2,839,150 2,748,088 13,946,536 15,938,073 174,331,695 199,225,920 11,224,332 91,811,449 10,623,870 86,321,248 140,304,148 981,041,653 132,798,380 929,617,344 * Based on minimum capital requirement excluding capital conservation buffer. Capital Adequacy Ratio Total eligible regulatory capital held 151,542,211 140,676,033 Total risk weighted assets 981,041,653 929,617,344 CET1 to total RWA 11.28% 10.80% Tier-1 capital to total RWA 11.28% 10.80% Total capital to total RWA 15.45% 15.13% 56 Annual Report 2017 115
118. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 42.7 Credit risk - General disclosures The Bank follows the Standardized Approach for its credit risk exposures, which sets out fixed risk weights corresponding to external credit ratings or type of exposure, whichever is applicable. Under the Standardized Approach, the capital requirement is based on the credit rating assigned to counterparties by External Credit Assessment Institutions (ECAIs) duly recognized by the SBP. The Bank selects particular ECAIs for each type of exposure. The Bank utilizes the credit ratings assigned by Pakistan Credit Rating Agency (PACRA), Japan Credit Rating Company Limited – Vital Information Systems (JCR-VIS), Fitch, Moody’s and Standard & Poors (S & P). The Bank also utilizes rating scores of Export Credit Agencies (ECAs) participating in the “Arrangement on Officially Supported Export Credits”. Types of exposure and ECAIs used FITCH P - Corporates Banks Sovereigns Public sector enterprises Moody's P P - S&P P - PACRA P P P JCR-VIS P P P ECA scores P - Mapping to SBP Rating Grades For all exposures, the selected ratings are translated to the standard rating grades given by the SBP. The mapping tables used for converting ECAI ratings to SBP rating grades are given below: Long Term Rating Grades mapping SBP Rating grade 1 2 3 4 5 6 Fitch Moody’s S&P PACRA JCR-VIS ECA Scores AAA AA+ AA AAA+ A ABBB+ BBB BBBBB+ BB BBB+ B BCCC+ and below Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 Ba1 Ba2 Ba3 B1 B2 B3 Caa1 and below AAA AA+ AA AAA+ A ABBB+ BBB BBBBB+ BB BBB+ B BCCC+ and below AAA AA+ AA AAA+ A ABBB+ BBB BBBBB+ BB BBB+ B BCCC+ and below AAA AA+ AA AAA+ A ABBB+ BBB BBBBB+ BB BBB+ B BCCC+ and below 0 1 Moody’s P-1 P-1 P-2 P-3 Others S&P A-1+ A-1 A-2 A-3 Others PACRA A-1+ A-1 A-2 A-3 Others JCR-VIS A-1+ A-1 A-2 A-3 Others Short Term Rating Grades mapping SBP Rating Grade S1 S1 S2 S3 S4 116 United Bank Limited Fitch F1 F1 F2 F3 Others 57 2 3 4 5 6 7
119. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 42.8 Credit exposures subject to Standardized Approach Exposures Cash and cash equivalents Claims on Federal and Provincial Governments and SBP, denominated in PKR Foreign currency claims on SBP arising out of statutory obligations in Pakistan Claims on other sovereigns and on Government of Pakistan or provincial governments or SBP denominated in currencies other than PKR Corporates Rating category / risk weights 2017 ----------------- (Rupees in '000) ----------------- 2016 ----------------- (Rupees in '000) ----------------- Amount outstanding Amount outstanding - 13,856,096 - 848,000,473 - 9,861,122 1 2 3 4,5 6 Unrated 22,083 31,589,539 5,686,029 16,706,423 25,125,380 79,129,454 0 1 2 3,4 5,6 Unrated-1 Unrated-2 81,936,427 42,514,689 6,586,648 215,177,056 125,570,435 471,785,255 Deduction CRM - Net amount Deduction CRM 13,856,096 18,069,390 395,104,188 497,451,486 9,861,122 9,135,162 22,083 31,589,539 5,686,029 16,706,423 25,125,380 79,129,454 1,121,551 27,915,202 3,753,370 11,270,408 28,941,753 73,002,284 829,713 92,711 1,328,580 23,371,972 6,265,130 81,106,714 42,421,978 5,258,068 191,805,084 119,305,305 57,666,917 24,694,145 1,497,260 220,747,322 116,409,462 867 19,648 27,370,889 78,875 57,666,050 24,674,497 1,497,260 193,376,433 116,330,587 31,888,106 439,897,149 421,015,106 27,470,279 393,544,827 1,043,412 1,106 199,683 623,749 1,867,950 362,206 84,911 3,261,702 3,708,819 452,896,285 - 18,069,390 128,836,359 - 368,615,127 9,135,162 - 1,2,3 4,5 6 Unrated 1,043,412 1,106 199,683 623,749 1,867,950 Banks - others 0 1 2,3 4,5 6 Unrated 112,967,688 39,986,682 13,601,990 169,067 37,435,676 204,161,103 50,459,505 4,629 50,464,134 62,508,183 39,986,682 13,601,990 169,067 37,431,047 153,696,969 116,701,304 34,671,927 9,389,435 4,345,866 30,569,544 195,678,076 60,202,146 60,202,146 56,499,158 34,671,927 9,389,435 4,345,866 30,569,544 135,475,930 Public sector enterprises 0 1 2,3 4,5 6 Unrated 37,134,144 15,493,120 116,208,041 168,835,305 14,720,942 5,511,702 93,185,453 113,418,097 22,413,202 9,981,418 23,022,588 55,417,208 23,912,438 10,690,051 90,347,819 124,950,308 12,736,928 5,503,637 73,513,237 91,753,802 11,175,510 5,186,414 16,834,582 33,196,506 75% 35% 50,032,514 4,193,617 54,226,131 6,397,977 6,397,977 43,634,537 4,193,617 47,828,154 33,881,001 4,014,129 37,895,130 3,836,605 3,836,605 30,044,396 4,014,129 34,058,525 Equity investments - Listed - Unlisted - Commercial Entity (Holding greater than 10%) 100% 150% 1000% 1,465,785 112,166 55,872 1,633,823 1,465,785 112,166 55,872 1,633,823 1,769,225 81,070 55,872 1,906,167 - 1,769,225 81,070 55,872 1,906,167 Past due loans secured against mortgage of residential property: - less than 20% provided - greater than 20% provided 100% 50% 24,786 50,443 75,229 - 24,786 50,443 75,229 Past due loans - others - Less than 20% provided - Between 20% to 50% provided - More than 50% provided 150% 100% 50% 8,843,913 4,672,597 1,232,245 14,748,755 - 8,843,913 4,672,597 1,232,245 14,748,755 4,722,399 4,778,654 973,957 10,475,010 - 4,722,399 4,778,654 973,957 10,475,010 Significant investment Fixed assets Others 250% 100% 100% 4,787,049 45,128,983 20,501,417 - 4,787,049 45,128,983 20,501,417 3,585,984 34,631,942 14,982,412 - 3,585,984 34,631,942 14,982,412 - 1,938,522,916 58 - - 655,064,599 - 1,283,458,317 - 1,121,551 27,915,202 3,753,370 11,270,408 28,941,753 73,002,284 Claims on banks with maturity less than 3 months and denominated in foreign currency Retail portfolio Claims fully secured by Residential mortgage - - Net amount 1,446,562,505 312,099,191 362,206 84,911 3,261,702 3,708,819 1,134,463,315 Annual Report 2017 117
120. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED For the year ended December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 Credit Risk: Disclosures with respect to Credit Risk Mitigation for Standardized Approach The Bank has adopted the Comprehensive Approach of Credit Risk Mitigation for the Banking Book. Under this approach, cash, lien on deposits, government securities and eligible guarantees etc. are considered as eligible collateral. The Bank has in place detailed guidelines with respect to the valuation and management of each of these types of collateral. Where the Bank’s exposure to an obligor is secured by eligible collateral, the Bank reduces its exposure for the calculation of capital requirement by the realizable amount of the collateral, adjusted for any applicable haircuts. No credit risk mitigation benefit is taken in the Trading Book. For each asset class, the risk weights as specified by the SBP or corresponding to the SBP rating grades are applied to the net amount for the calculation of Risk Weighted Assets. 42.9 Leverage Ratio The State Bank of Pakistan (SBP) through its BPRD Circular No. 06 of 2013 has issued instructions regarding implementation of parallel run of leverage ratio reporting and its components from December 31, 2013 to December 31, 2017.During this period the final calibration, and any further adjustments to the definition, will be completed, with a view to set the leverage ratio as a separate capital standard on December 31, 2018. Banks are required to disclose the leverage ratio from December 31, 2015. The Basel III leverage ratio is defined as the capital measure (the numerator) divided by the exposure measure (the denominator), with this ratio expressed as a percentage: Leverage Ratio = Tier 1 capital (after related deductions) Total Exposure The Leverage ratio of the Bank for the year ended December 31, 2017 stood at 3.85% (2016: 4.85%) and is in compliance with SBP minimum requirement of 3%. The decrease in leverage ratio by 101 bps is mainly due to balance sheet growth in asset expansion through higher REPO funding. 2017 2016 --------- (Rupees in '000) --------On-Balance Sheet Assets Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances Operating fixed assets Deferred tax assets Financial Derivatives (A.1) Other assets Total Assets (A) Derivatives (On-Balance Sheet) Interest Rate Equity Foreign Exchange & gold Precious Metals (except gold) Commodities Credit Derivatives (protection bought & sold) Any other derivatives Total Derivatives (A.1) 118 United Bank Limited 59 157,582,687 19,516,198 33,664,174 1,090,624,716 604,562,193 45,128,984 2,430,968 51,651,524 2,005,161,444 131,506,861 14,920,994 34,168,287 804,944,138 510,110,924 34,631,942 792,340 43,962,233 1,575,037,719 75,350 2,355,618 2,430,968 283,749 508,591 792,340
121. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND OF THE UNCONSOLIDATED For the yearFORMING endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 Off-Balance Sheet Items excluding derivatives Direct Credit Substitutes (i.e. Acceptances, general guarantees for indebtness etc.) Performance-related Contingent Liabilities (i.e. Guarantees) Trade-related Contingent Liabilities (i.e. Letter of Credits) Lending of securities or posting of securities as collaterals Undrawn committed facilities (which are not cancellable) Unconditionally cancellable commitments Commitments in respect of operating leases Commitments for the acquisition of operating fixed assets Other commitments Total Off-balance sheet items excluding Derivatives (B) Commitments in respect of Derivatives - Off Balance Sheet Items (Derivatives having negative fair value are also included) Interest Rate Equity Foreign Exchange & gold Precious Metals (except gold) Commodities Credit Derivatives (protection sold and bought) Other derivatives Total Derivatives (C) 47,930,903 141,066,095 161,511,733 451,301,561 60,461,972 8,765,075 1,987,978 873,025,317 40,243,856 110,067,510 145,823,726 153,557,471 45,085,158 9,694,433 2,755,836 507,227,990 20,954 1,957,040 1,977,994 34,582 1,791,964 1,826,546 110,649,879 2,880,164,756 3.84% Tier-1 Capital Total Exposures (sum of A,B and C) Leverage Ratio 43. 2017 2016 --------- (Rupees in '000) --------- 101,077,939 2,084,092,255 4.85% RISK MANAGEMENT This section presents information about the Bank’s exposure to and its management and control of risks, in particular, the primary risks associated with its use of financial instruments such as credit, market, liquidity and operational risks. The Bank has an integrated risk management structure in place. The Board Risk and Compliance Committee (BRCC) oversees the entire risk management process of the Bank. Furthermore, Risk Management Committee has been formed which looks at all risks collectively at senior management level. The committee is chaired by the President and comprises of Heads of all Risk areas, Finance, Business etc. The Risk and Credit Policy Group is responsible for the development and implementation of all risk policies as approved by the BRCC / BoD. The group is organized into the functions of Market & Treasury Risk, Financial Institution Risk, Credit Policy, Research & Operational Risk, Consumer Credit Policy, Credit Risk Management, Basel II, IT security and International Risk. Each risk function is headed by a senior manager who reports directly to the Group Executive, Risk and Credit Policy. The role of the Risk and Credit Policy Group includes: - Determining guidelines relating to the Bank’s risk appetite. - Recommending risk management policies in accordance with the Prudential Regulations, Basel II / III framework and international best practices. - Reviewing policies / manuals and ensuring that these are in accordance with BRCC / BoD approved risk management policies. - Developing systems and resources to review the key risk exposures of the Bank. - Approving credits and granting approval authority to qualified and experienced individuals. - Reviewing the adequacy of credit training across the Bank. - Organizing portfolio reviews focusing on quality assessment, risk profiles, industry concentrations etc. - Setting systems to identify significant portfolio indicators, problem credits and level of provisioning required. - Establish an extensive Information Security (IS) Program and governance structure to manage the Security of the Information assets. 60 Annual Report 2017 119
122. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED For the year ended December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 43.1 Credit risk Credit risk is the risk that a customer or counterparty may not settle an obligation for full value, either when due or at any time thereafter. This risk arises from the potential that a customer's or counterparty’s willingness or ability to meet such an obligation is impaired, resulting in an economic loss to the Bank. The credit risk management process is driven by the Bank's Risk Management Policy, Credit Policy for Corporate, Commercial, SME & Agri and Credit Manual, which provides policies and procedures in relation to credit initiation, approval, documentation and disbursement, credit maintenance and remedial management. Individual credit authorities are delegated to credit officers by the Group Executive - Risk & Credit Policy (authorized by BoD), according to their seasoning / maturity. Approvals for Consumer loans are centralized, while approval authorities for International, Corporate, Commercial, SME and Agri exposures are delegated at a Country / Regional level. Furthermore, credit authorities are also delegated to business teams in various regions for Commercial, SME & Agri lending. All credit policy functions domestic & international are centrally organized. Concentrations of credit risk exist if clients are engaged in similar activities, or are located in the same geographical region, or have comparable economic characteristics such that their ability to meet contractual obligations would be similarly affected by changes in economic, political or other conditions. The Bank manages, limits and controls concentrations of credit risk to individual counterparties and groups, and to industries, where appropriate. Limits are also applied to portfolios or sectors where the Bank considers it appropriate to restrict credit risk concentrations, or to areas of higher risk, or to control the rate of portfolio growth. 43.2 Segmental information 43.2.1 Segments by class of business 2017 Gross advances (Rupees in '000) Chemical and pharmaceuticals Agri business Textile spinning Textile weaving Textile composite Textile others Cement Sugar Shoes and leather garments Automobile and transportation equipment Financial Insurance Electronics and electrical appliances Production and transmission of energy Paper and allied Surgical and metal Contractors Wholesale traders Fertilizer dealers Sports goods Food industries Airlines Cables Construction Containers and ports Engineering Glass and allied Hotels Infrastructure Media Polyester and fiber Telecommunication Individuals Others 120 United Bank Limited Percent Deposits (Rupees in '000) Percent Contingencies and commitments (Rupees in '000) Percent 13,651,120 61,820,554 19,632,554 8,064,605 29,260,256 15,300,533 5,420,193 23,037,545 2,774,178 18,285,949 44,498,807 13,388,390 139,830,523 3,364,088 6,497 5,964,159 25,319,424 16,219,433 45,499 26,059,934 9,706,217 1,041,023 27,252,802 16,440,176 499,906 1,897,497 3,982,326 19,791,165 49,429,921 44,567,161 2.11% 9.56% 3.04% 1.25% 4.53% 2.37% 0.84% 3.56% 0.43% 2.83% 6.88% 0.00% 2.07% 21.63% 0.52% 0.00% 0.92% 3.92% 2.51% 0.01% 4.03% 1.50% 0.16% 4.22% 0.00% 2.54% 0.08% 0.29% 0.00% 0.00% 0.62% 3.06% 7.65% 6.89% 4,086,744 19,383,732 434,937 295,862 1,541,897 323,334 1,323,257 422,558 16,572,823 18,725,491 23,128,194 4,440,226 51,989,989 760,350 4,062,357 13,168,265 28,856,230 5,327,313 89,923 7,236,961 3,485,898 247,769 24,399,468 200,253 6,066,427 121,642 7,981,970 2,696,025 432,939 4,163 3,431,404 792,868,836 245,140,014 0.32% 1.50% 0.03% 0.02% 0.00% 0.12% 0.03% 0.10% 0.03% 1.29% 1.45% 1.79% 0.34% 4.03% 0.06% 0.32% 1.02% 2.24% 0.41% 0.01% 0.56% 0.27% 0.02% 1.89% 0.02% 0.47% 0.01% 0.62% 0.21% 0.03% 0.00% 0.27% 61.50% 19.01% 3,581,890 51,088 4,776,919 5,336,393 4,651,051 2,771,727 4,570,879 320,855 382,135 6,612,205 520,062,497 3,936,529 60,219,220 2,495,350 85,103 23,280,267 2,335,837 2,915,454 1,998,862 217,879 599,911 24,323,202 15,990,043 187,578 131,577 1,089,130 21,812,712 2,731,962 109,367,667 0.43% 0.01% 0.58% 0.65% 0.56% 0.34% 0.55% 0.04% 0.05% 0.80% 62.90% 0.00% 0.48% 7.28% 0.30% 0.01% 2.82% 0.28% 0.35% 0.00% 0.24% 0.03% 0.07% 2.94% 0.00% 1.93% 0.02% 0.02% 0.00% 0.00% 0.13% 2.64% 0.33% 13.23% 646,552,435 100.00% 1,289,247,251 100.00% 826,835,922 100.00% 61
123. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND OF THE UNCONSOLIDATED For the yearFORMING endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 2016 Gross advances (Rupees in '000) Chemical and pharmaceuticals Agri business Textile spinning Textile weaving Textile composite Textile others Cement Sugar Shoes and leather garments Automobile and transportation equipment Financial Insurance Electronics and electrical appliances Production and transmission of energy Paper and allied Surgical and metal Contractors Wholesale traders Fertilizer dealers Sports goods Food industries Airlines Cables Construction Containers and ports Engineering Glass and allied Hotels Infrastructure Media Polyester and fiber Telecommunication Individuals Others 11,247,768 57,047,144 18,055,669 6,691,939 25,607,196 15,228,871 5,182,402 6,376,894 2,458,083 17,612,083 36,007,524 14,790,288 106,235,639 3,848,787 7,034 8,141,350 19,785,045 18,005,581 41,990 23,863,907 12,739,537 782,524 26,151,063 13,863,026 501,930 1,852,660 4,527,773 15,659,911 45,440,606 32,882,086 550,636,310 Percent 2.04% 10.36% 3.28% 1.22% 4.65% 2.77% 0.94% 1.16% 0.45% 3.20% 6.54% 0.00% 2.69% 19.29% 0.70% 0.00% 1.48% 3.59% 3.27% 0.01% 4.33% 2.31% 0.14% 4.75% 0.00% 2.52% 0.09% 0.34% 0.00% 0.00% 0.82% 2.84% 8.25% 5.97% 100.00% Deposits (Rupees in '000) 3,337,614 12,950,830 413,205 319,156 2,397,836 2,410,307 2,388,205 787,972 6,293,256 14,074,360 24,854,391 4,596,421 45,825,379 589,135 4,559,269 8,731,584 32,794,395 556,736 80,479 7,463,153 2,550,346 457,963 17,018,282 151,778 3,421,095 160,710 702,989 1,716,401 774,621 6,308 9,817,664 732,563,365 235,121,843 1,179,887,048 Percent 0.28% 1.10% 0.04% 0.03% 0.00% 0.20% 0.20% 0.20% 0.07% 0.53% 1.19% 2.11% 0.39% 3.88% 0.05% 0.39% 0.74% 2.78% 0.05% 0.01% 0.63% 0.22% 0.04% 1.44% 0.01% 0.29% 0.01% 0.06% 0.15% 0.07% 0.00% 0.83% 62.09% 19.93% 100.00% Contingencies and commitments (Rupees in '000) Percent 2,911,636 52,778 4,255,496 1,933,418 3,365,109 2,205,971 1,890,002 315,140 327,094 7,471,237 453,144,196 675,306 49,314,330 1,706,322 77,526 26,609,262 5,520,961 4,874,513 1,908,394 783,838 626,743 15,062,235 1,282,181 11,760,689 149,988 2,092,784 948,722 21,033,604 3,951,369 101,373,964 727,624,808 0.40% 0.01% 0.58% 0.27% 0.46% 0.30% 0.26% 0.04% 0.04% 1.03% 62.28% 0.00% 0.09% 6.78% 0.23% 0.01% 3.66% 0.76% 0.67% 0.00% 0.26% 0.11% 0.09% 2.07% 0.18% 1.62% 0.02% 0.29% 0.00% 0.00% 0.13% 2.89% 0.54% 13.93% 100.00% 43.2.1.1 Advances under Production and transmission of energy category include Rs. 68,334.655 million (2016: Rs. 52,634.931 million) secured by way of guarantee from the Government of Pakistan. 43.2.2 Segment by Sector 2017 Gross advances (Rupees in '000) Public / Government Private 195,173,734 451,378,701 646,552,435 646,552,435 Percent 30.19% 69.81% 100.00% Gross advances (Rupees in '000) Public / Government Private 153,653,795 396,982,515 550,636,310 62 Percent 27.90% 72.10% 100.00% Deposits (Rupees in '000) 177,099,804 1,112,147,447 1,289,247,251 1,289,247,251 2016 Percent 13.74% 86.26% 100.00% Deposits (Rupees in '000) 146,930,185 1,032,956,863 1,179,887,048 Percent 12.45% 87.55% 100.00% Contingencies and commitments (Rupees in '000) Percent 106,128,242 720,707,680 826,835,922 12.84% 87.16% 100.00% Contingencies and commitments (Rupees in '000) Percent 96,756,329 630,868,479 727,624,808 13.30% 86.70% 100.00% Annual Report 2017 121
124. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED For the year ended December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 43.2.3 Details of non performing advances and specific provisions by class of business segment 2017 2016 Classified Specific Classified Specific advances provision held advances provision held ---------------------------------------------------------- (Rupees in '000) ---------------------------------------------------------Chemical and pharmaceuticals Agri business Textile spinning Textile weaving Textile composite Textile others Sugar Shoes and leather garments Automobile and transportation equipment Financial Electronics and electrical appliances Production and transmission of energy Paper and allied Wholesale traders Fertilizer dealers Sports goods Food industries Construction Engineering Hotels Polyester and fiber Individuals Others 148,319 426,525 4,108,702 318,110 3,997,470 2,815,147 80,712 1,958,526 164,904 2,109,787 2,884,904 5,506,846 599,466 4,412,121 65,759 5,813,962 2,175,146 1,134,465 589,060 1,577,051 4,681,558 5,504,287 51,072,827 148,319 321,387 4,108,702 317,384 3,970,378 2,809,019 80,712 1,010,093 164,226 2,109,709 1,557,519 4,823,734 265,191 2,938,015 65,759 3,483,604 2,175,146 67,145 589,060 1,577,051 2,742,177 3,410,658 38,734,988 148,244 380,707 4,156,868 408,409 4,288,595 4,000,574 848,069 689,772 173,155 1,596,722 1,260,205 6,140,951 163,708 3,541,543 67,623 2,441,732 2,523,191 1,203,086 475,494 1,699,294 4,999,976 3,359,066 44,566,984 148,244 256,571 4,156,868 408,409 3,982,674 3,995,053 776,819 689,772 172,705 1,596,722 471,505 5,052,753 163,708 2,538,281 67,623 2,049,338 2,521,191 135,766 475,494 1,699,294 3,183,651 2,854,171 37,396,612 43.2.4 Details of non performing advances and specific provision by sector 2017 2016 Classified Specific Classified Specific advances provision held advances provision held ---------------------------------------------------------- (Rupees in '000) ---------------------------------------------------------Public / Government Private 1,089,630 49,983,197 51,072,827 22,313 38,712,675 38,734,988 1,089,630 43,477,354 44,566,984 22,313 37,374,299 37,396,612 43.2.5 Geographical segment analysis 2017 Contingencies and commitments ---------------------------------------------------------- (Rupees in '000) ---------------------------------------------------------Profit / (loss) before taxation Pakistan operations Middle East United States of America Export Processing Zones 40,497,797 (418,992) (18,138) 99,374 (337,756) 40,160,041 122 United Bank Limited 63 Total assets employed Net assets employed 1,725,021,647 112,312,787 497,653,213 319,455,085 5,388,061 2,436,770 327,279,916 43,838,832 2,544,829 610,599 46,994,260 325,427,656 941,817 2,813,236 329,182,709 2,052,301,563 159,307,047 826,835,922
125. Notes to and forming part of the Unconsolidated Financial Statements Assets NOTES TO AND OF THE UNCONSOLIDATED For the yearFORMING endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 2016 Profit / (loss) before taxation Total assets employed Net assets employed Contingencies and commitments ---------------------------------------------------------- (Rupees in '000) --------------------------------------------------------Pakistan operations Middle East United States of America Export Processing Zones 41,679,626 1,305,891,720 107,445,556 435,170,035 4,226,809 37,206 71,955 4,335,970 299,091,186 11,573,555 1,534,998 312,199,739 41,366,373 2,462,422 512,510 44,341,305 288,267,417 16,326 4,171,030 292,454,773 46,015,596 1,618,091,459 151,786,861 727,624,808 Total assets employed include intra group items of Rs. 44,920.118 million (2016: Rs. 40,540.436 million). 43.3 Market Risk Market risk is the risk that the fair value of a financial instrument will fluctuate due to movements in market prices. It results from changes in interest rates, exchange rates and equity prices as well as from changes in the correlations between them. Each of these components of market risk consists of a general market risk and a specific market risk that is driven by the nature and composition of the portfolio. Measuring and controlling market risk is usually carried out at a portfolio level. However, certain controls are applied, where necessary, to individual risk types, to particular books and to specific exposures. Controls are also applied to prevent any undue risk concentrations in trading books, taking into account variations in price, volatility, market depth and liquidity. These controls include limits on exposure to individual market risk variables as well as limits on concentrations of tenors and issuers. Trading activities are centered in the Treasury and Capital Markets Group which facilitates clients and also runs proprietary positions. The Bank is active in the cash and derivative markets for equity, interest rate and foreign exchange. The Market and Treasury Risk division performs market risk management activities. Within this division, the Market Risk Management unit is responsible for the development and review of market risk policies and processes, and is involved in research, financial modeling and testing / implementation of risk management systems, while Treasury Middle Office is responsible for implementation and monitoring of market risk and other policies, escalation of deviations to senior management, and MIS reporting. The functions of the Market Risk Management unit are as follows: - To keep the market risk exposure within the Bank’s risk appetite as assigned by the BoD and the BRCC. - To develop, review and upgrade procedures for the effective implementation of market risk management policies approved by the BoD and BRCC. - To review new product proposals and propose / recommend / approve procedures for the management of their market risk. Various limits are assigned to different businesses on a product / portfolio basis. The products are approved through product programs, where risks are identified and limits and parameters are set. Any transactions / products falling outside these product programs are approved through separate transaction / product memos. - To maintain a comprehensive database for performing risk analysis, stress testing and scenario analysis. Stress testing activities are performed on a quarterly basis on both the Banking and Trading books. 64 Annual Report 2017 123
126. Notes to and forming part of the Unconsolidated Financial Statements Assets NOTES TO AND FORMING PART OF THE UNCONSOLIDATED For the year ended December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 43.3.1 Foreign Exchange Risk 2017 Off - balance Net currency sheet items exposure ----------------------------- (Rupees in '000) ----------------------------- Pakistan Rupee US Dollar Pound Sterling Japanese Yen Euro UAE Dirham Bahraini Dinar Qatari Riyal Other Currencies Assets Liabilities 1,656,631,057 200,362,848 1,703,961 21,160 1,734,727 100,481,863 13,708,941 25,724,415 7,012,474 2,007,381,446 1,467,891,982 101,295,462 19,908,975 6,848 8,554,198 191,225,121 22,243,314 29,296,607 7,651,892 1,848,074,399 Assets Liabilities 1,248,172,097 173,342,067 2,674,719 21,492 1,667,112 98,808,232 13,468,415 26,785,382 12,611,507 1,577,551,023 1,074,639,549 97,588,465 19,584,949 6,528 8,007,130 160,743,572 20,218,063 31,840,101 13,135,805 1,425,764,162 (30,679,274) (98,381,371) 18,563,742 (11,770) 6,959,689 89,151,353 9,037,609 4,230,555 1,129,467 - 158,059,801 686,015 358,728 2,542 140,218 (1,591,905) 503,236 658,363 490,049 159,307,047 2016 Off - balance Net currency sheet items exposure ----------------------------- (Rupees in '000) ----------------------------- Pakistan Rupee US Dollar Pound Sterling Japanese Yen Euro UAE Dirham Bahraini Dinar Qatari Riyal Other Currencies (23,292,889) (73,845,865) 17,163,381 (11,749) 6,490,019 61,312,602 6,309,942 4,916,279 958,280 - 150,239,659 1,907,737 253,151 3,215 150,001 (622,738) (439,706) (138,440) 433,982 151,786,861 Foreign Exchange Risk is the risk that the fair value of a financial instrument will fluctuate due to changes in foreign exchange rates. Exposures are monitored by currency to ensure that they remain within the established limits for each currency. Exposures are also monitored on an overall basis to ensure compliance with the Bank’s SBP approved Foreign Exchange Exposure Limit. The Bank is an active participant in the cash and derivatives markets for currencies and carries currency risk from these trading activities, conducted primarily by the Treasury and Capital Markets Group (TCM). These trading exposures are monitored through prescribed stress tests and sensitivity analyses. The Bank's reporting currency is the Pakistan Rupee, but its assets, liabilities, income and expenses are denominated in multiple currencies. From time to time, TCM proactively hedges foreign currency exposures resulting from its market making activities, subject to pre-defined limits. 43.3.2 Equity position risk Equity position risk is the risk that the fair value of a financial instrument will fluctuate due to changes in the prices of individual stocks or the levels of equity indices. The Bank’s equity book comprises of held for trading (HFT) and available for sale (AFS) portfolios. The objective of the HFT portfolio is to make short-term capital gains, whilst the AFS portfolio is maintained with a medium term view of earning both capital gains and dividend income. Product program manuals have been developed to provide guidelines on the objectives and policies, risks and mitigants, limits and controls for the equity portfolios of the Bank. 43.3.3 Yield / interest rate risk Interest rate risk is the risk that fair value of a financial instrument will fluctuate as a result of changes in interest rates, including changes in the shape of yield curves. Interest rate risk is inherent in many of the Bank's businesses and arises from mismatches between the contractual maturities or the re-pricing of on and off balance sheet assets and liabilities. The interest rate sensitivity profile is prepared on a quarterly basis based on the re-pricing or contractual maturities of assets and liabilities. Interest rate risk is monitored and managed by performing periodic gap analysis, sensitivity analysis and stress testing and taking appropriate actions where required. 124 United Bank Limited 65
127. Annual Report 2017 125 43 .3.4 60,852,538 159,307,047 4,358,641 (4,358,641) 83,368 (83,368) 7,870,890 (1,478) 210,187,425 (180,864,234) 37,192,603 135,647,112 Total net assets Off-balance sheet financial instruments Interest Rate Derivatives - Long position Interest Rate Derivatives - Short position Cross Currency Swap - Long position Cross Currency Swap - Short position FX Options - Long position FX Options - Short position Forward Purchase of Government Securities Forward Sale of Government Securities Foreign currency forward purchases Foreign currency forward sales Off-balance sheet Gap Total Yield / Interest Rate Risk Sensitivity Gap (450,387,133) (450,387,133) 45,117 (45,117) 7,870,890 (1,478) 91,889,070 (80,096,355) 19,662,127 (470,049,260) 447,089,202 542,727,025 989,816,227 182,164,822 519,766,967 592,224,354 12,337,839 29,804,539 1,936,916,417 13,388,316 512,650,465 1,289,247,251 23,175,876 1,838,461,908 14,646,863 11,386,016 9,122,335 302,446,931 157,582,687 19,516,198 33,664,174 1,091,786,626 Net non financial assets Cumulative Yield / Interest Rate Risk Sensitivity Gap Over 1 month Upto 1 month to 3 months Over 3 months to 6 months Over 6 months to 1 year Over 1 year to 2 years Over 2 years to 3 years 2017 Exposed to yield / interest rate risk Over 3 years to 5 years Over 5 years to 10 years Over 10 years Non-interest bearing financial instruments 66 (124,384,774) 326,002,359 (1,358,641) 38,251 (38,251) 69,370,562 (55,972,882) 12,039,039 313,963,320 36,319,852 75,858,572 112,178,424 225,788,685 426,141,744 850,000 7,633,400 191,869,659 (19,473,249) 104,911,525 168,000 (3,000,000) 45,266,129 (39,020,675) 3,413,454 101,498,071 7,718,255 54,089,603 61,807,858 139,217,575 163,305,929 10,715,431 13,372,923 20,537,358 40,010,607 3,661,664 (5,774,322) (2,112,658) 42,123,265 2,674,198 23,749,397 26,423,595 16,657,815 68,546,860 2,783,462 49,105,583 158,646,534 138,109,176 3,874,141 3,874,141 134,235,035 18,281,748 6,407,918 24,689,666 8,793,356 158,924,701 2,128,293 148,003,052 253,542,105 94,895,571 316,500 316,500 94,579,071 2,773,380 2,773,380 5,832,683 97,352,451 91,519,768 371,607,789 118,065,684 - 118,065,684 50,622,850 50,622,850 6,551,485 168,688,534 1,213,113 160,923,936 473,118,506 101,510,717 - 101,510,717 5,971,492 5,971,492 3,916,941 107,482,209 103,565,268 481,235,615 8,117,109 - 8,117,109 - 3,300,992 8,117,109 4,816,117 135,647,112 (345,588,503) - (345,588,503) 13,388,316 567,210 527,047,014 23,175,876 564,178,416 12,337,839 29,804,539 218,589,913 142,935,824 7,280,182 68,140 26,163,389 ------------------------------------------------------------------------------------------------------------------ (Rupees in '000) ------------------------------------------------------------------------------------------------------------------ 98,454,509 5.35% 2.63% - - 0.03% 1.87% 5.27% 7.39% 6.20% % Total On-balance sheet gap Liabilities Bills payable Borrowings Deposits and other accounts Other liabilities Assets Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances Performing Non-performing Other assets On-balance sheet financial instruments Effective yield / interest rate Mismatch of interest rate sensitive assets and liabilities FOR THE ENDED DECEMBER 31, 2017 For theYEAR year ended December 31, 2017 Notes to FORMING and forming of the Unconsolidated NOTES TO AND PART OF THEpart UNCONSOLIDATED FINANCIAL STATEMENTS Financial Statements
128. 131 ,506,861 14,920,994 34,168,287 806,531,246 502,940,552 7,170,372 28,770,658 1,526,008,970 11,756,422 201,549,619 1,179,887,048 22,147,747 1,415,340,836 5.28% 2.69% - 41,118,727 151,786,861 6,986,094 (6,986,094) 522,051 (522,051) 213,081 (213,081) 4,998,400 (3,553,866) 186,835,721 (162,987,703) 25,292,552 135,960,686 Total net assets Off-balance sheet financial instruments Interest Rate Derivatives - Long position Interest Rate Derivatives - Short position Cross Currency Swap - Long position Cross Currency Swap - Short position FX Options - Long position FX Options - Short position Forward Purchase of Government Securities Forward Sale of Government Securities Foreign currency forward purchases Foreign currency forward sales Off-balance sheet Gap Total Yield / Interest Rate Risk Sensitivity Gap Cumulative Yield / Interest Rate Risk Sensitivity Gap 110,668,134 Net non financial assets - Upto 1 month Over 1 month to 3 months Over 6 months to 1 year Over 1 year to 2 years Over 2 years to 3 years Over 3 years to 5 years Over 5 years to 10 years Over 10 years Non-interest bearing financial instruments (542,353,402) (542,353,402) 143,248 (143,248) 4,998,400 (3,553,866) 58,295,855 (59,953,361) (212,972) (542,140,430) 67 (225,169,148) 317,184,254 634,181 (1,282,181) 522,051 (522,051) 69,833 (69,833) 72,456,371 (55,208,929) 16,599,442 300,584,812 27,568,121 61,355,687 88,923,808 297,318,124 389,508,620 89,285,288 139,951,289 163,011,950 519,079,769 682,091,719 2,000,000 19,610,513 70,579,983 8,617,552 7,578,877 3,376,955 31,092,617 (179,751,699) 45,417,449 69,732 (5,069,732) 43,763,031 (36,849,566) 1,913,465 43,503,984 7,843,330 47,933,323 55,776,653 72,894,699 99,280,637 3,851,990 22,533,948 (137,990,311) 41,761,388 12,320,464 (10,975,847) 1,344,617 40,416,771 3,026,274 15,629,871 18,656,145 11,442,402 59,072,916 523,002 47,107,512 (1,229,112) 136,761,199 648,000 648,000 136,113,199 99,944 4,969,275 5,069,219 7,304,847 141,182,418 4,703,225 129,174,346 109,559,533 110,788,645 5,634,181 (634,181) 5,000,000 105,788,645 11,702,862 11,702,862 6,561,660 117,491,507 1,305,313 109,624,534 253,768,618 144,209,085 - 144,209,085 43,416,816 43,416,816 4,845,977 187,625,901 797,289 181,982,635 436,169,768 182,401,150 - 182,401,150 346,482 346,482 5,505,909 182,747,632 177,241,723 447,705,621 11,535,853 - 11,535,853 - 7,781,646 11,535,853 3,754,207 135,960,686 (311,744,935) - (311,744,935) 11,756,422 475,452,963 22,147,747 509,357,132 7,170,372 28,770,658 197,612,197 122,889,309 5,342,117 33,439,741 ------------------------------------------------------------------------------------------------------------------ (Rupees in '000) ------------------------------------------------------------------------------------------------------------------ 0.01% 1.56% 4.48% 8.29% 6.36% % Total On-balance sheet gap Liabilities Bills payable Borrowings Deposits and other accounts Other liabilities Assets Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances Performing Non-performing Other assets On-balance sheet financial instruments Effective yield / interest rate NOTES TO AND FORMING PART OF THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 Over 3 months to 6 months 2016 Exposed to yield / interest rate risk United Bank Limited For the year ended December 31, 2017 Notes to and forming part of the Unconsolidated Financial Statements 126
129. Annual Report 2017 127 The Bank ’s approach to liquidity management is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking sustained damage to business franchises. A centralized approach is adopted, based on an integrated framework incorporating an assessment of all material known and expected cash flows and the availability of collateral which could be used to secure additional funding if required. The framework entails careful monitoring and control of the daily liquidity position, and regular liquidity stress testing under a variety of scenarios. These encompass both normal and stressed market conditions, including general market crises and the possibility that access to markets could be impacted by a stress event affecting some part of the Bank’s business. The Assets and Liabilities Management Committee (ALCO) of the Bank is responsible for the oversight of liquidity management and meets on a monthly basis or more frequently, if required. Liquidity risk is the risk that the Bank may be unable to meet its obligations or to fund increases in assets as they fall due without incurring unacceptable cost or losses. Liquidity risk Represented by: Share capital Reserves Unappropriated profit Surplus on revaluation of assets Net assets Liabilities Bills payable Borrowings Deposits and other accounts Deferred tax liability Other liabilities Assets Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances - Performing Advances - Non-performing Operating fixed assets Other assets 2,970,203 447,611,743 179,579,073 12,351,470 642,512,489 (15,450,494) 13,388,316 512,650,465 1,289,247,251 2,611,941 30,176,426 1,848,074,399 159,307,047 12,241,798 43,846,877 71,153,991 32,064,381 159,307,047 89,913,377 14,602,634 9,041,581 340,225,152 170,091,670 158,240 3,029,341 627,061,995 Upto 1 month 157,582,687 19,516,198 33,664,174 1,091,786,626 592,224,354 12,337,839 46,204,564 54,065,004 2,007,381,446 Total 2,174,339 33,840,914 126,357,593 3,945,431 166,318,277 82,257,077 2,654,124 1,048,963 1,626,255 145,596,085 86,027,314 1,737,644 9,884,969 248,575,354 68 2,130,939 10,397,739 90,202,539 3,825,199 106,556,416 (19,198,129) 2,601,148 10,258,087 9,214,224 59,413,954 2,628,476 3,242,398 87,358,287 6,112,835 3,052,380 88,860,593 652,985 1,333,462 100,012,255 58,147,605 3,765,496 3,864,601 2,950,962 70,788,499 55,479,294 319,766 20,991,242 158,159,860 1,594,065 108,988,402 652,985 1,487,242 112,722,694 95,308,377 5,238,298 4,303,201 147,404,193 45,536,927 579,893 4,968,559 208,031,071 817,862 76,965,467 652,985 895,629 79,331,943 66,431,174 4,019,487 2,590,888 90,314,607 44,426,170 1,297,646 3,114,319 145,763,117 1,797,851 99,514,214 652,986 982,402 102,947,453 142,816,114 6,373,987 2,893,200 163,122,249 65,833,802 2,098,558 5,441,771 245,763,567 13,276,930 151,259,967 951,644 165,488,541 3,679,365 10,278,978 107,168,261 46,262,099 2,623,194 2,835,374 169,167,906 260,981 367,519,403 4,403,947 372,184,331 (254,684,042) 32,737,792 17,953,356 19,153,124 12,337,839 34,761,147 557,031 117,500,289 2017 Over 1 month Over 3 months Over 6 months Over 1 year to Over 2 years Over 3 years Over 5 years Over 10 years to 3 months to 6 months to 1 year 2 years to 3 years to 5 years to 10 years --------------------------------------------------------------------------------------------------- (Rupees in '000) --------------------------------------------------------------------------------------------------- Assets and Liabilities having contractual maturity dates are bucketed as per their respective maturities. The maturity profile of non-contractual deposits and bills payable is estimated using an Exponentially Weighted Moving Average model based on data for the last seven years. The maturity profile of certain non-contractual assets and liabilities which are related to specific assets and liabilities follows the maturity profile of the underlying asset or liability. The maturity profile of other non-contractual assets and liabilities is expected to follow historical patterns of behaviour. The methodology and the assumptions used to derive the maturity profile of non-contractual assets and liabilities have been approved by ALCO. 43.4.1 Maturities of assets and liabilities - based on working prepared by the Assets and Liabilities Management Committee (ALCO) of the Bank 43.4 FOR THE YEAR ENDED DECEMBER 31, 2017 NOTESthe TO AND FORMING PART OF THE UNCONSOLIDATED For year ended December 31, 2017FINANCIAL STATEMENTS Notes to and forming part of the Unconsolidated Financial Statements
130. 128 United Bank Limited Share capital Reserves Unappropriated profit Surplus on revaluation of assets Represented by : Net assets Liabilities Bills payable Borrowings Deposits and other accounts Deferred tax liability Other liabilities Assets Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances - Performing Advances - Non-performing Operating fixed assets Other assets FOR THE YEAR ENDED DECEMBER 31, 2017 Upto 1 month Over 3 months to 6 months Over 1 year to 2 years 2016 Over 6 months to 1 year Over 2 years to 3 years Over 3 years to 5 years Over 5 years to 10 years Over 10 years (73,311,805) 151,786,861 12,241,798 40,454,505 64,246,270 34,844,288 151,786,861 3,011,259 163,928,135 143,143,116 9,273,476 319,355,986 76,592,440 12,920,994 2,627,465 31,738,157 116,263,682 194,110 5,707,333 246,044,181 11,756,422 201,549,619 1,179,887,048 4,691,544 27,879,529 1,425,764,162 131,506,861 14,920,994 34,168,287 806,531,246 502,940,552 7,170,372 35,581,758 44,730,953 1,577,551,023 58,799,113 2,204,387 15,023,397 138,494,886 2,160,321 157,882,991 4,041,134 2,000,000 16,318,642 70,108,740 117,781,565 1,148,514 5,283,509 216,682,104 69 (13,814,577) 2,160,388 8,223,042 90,930,243 464,337 101,778,010 3,960,472 3,566,375 8,671,646 49,053,920 1,755,526 20,955,494 87,963,433 (3,159,380) 4,380,388 3,261,913 97,940,038 1,172,886 2,460,228 109,215,453 5,733,293 823,002 66,608,308 21,185,362 266,389 11,439,719 106,056,073 70,750,270 186,168 86,994,141 1,172,886 1,123,745 89,476,940 4,936,702 5,510,853 134,155,282 15,038,818 559,163 26,392 160,227,210 49,666,105 194,690 84,547,486 1,172,886 1,017,112 86,932,174 3,418,617 4,830,387 101,991,780 25,772,686 560,123 24,686 136,598,279 171,222,516 817,585 101,096,692 1,172,886 1,114,490 104,201,653 5,421,144 225,825 198,044,685 66,319,700 5,388,772 24,043 275,424,169 (6,696,867) 9,426,000 255,633,054 4,902,255 269,961,309 15,990,082 265,738 173,990,678 70,886,027 1,880,420 251,497 263,264,442 (101,668,514) 488,689 181,107,392 5,363,565 186,959,646 11,412,977 21,221,970 20,638,792 7,170,372 23,828,741 1,018,280 85,291,132 --------------------------------------------------------------------------------------------------- (Rupees in '000) --------------------------------------------------------------------------------------------------- Total Over 1 month to 3 months NOTESthe TO AND FORMING PART OF THE UNCONSOLIDATED For year ended December 31, 2017FINANCIAL STATEMENTS Notes to and forming part of the Unconsolidated Financial Statements
131. Annual Report 2017 129 Share capital Reserves Unappropriated profit Surplus on revaluation of assets Represented by : Net assets Bills payable Borrowings Deposits and other accounts Deferred tax liability - net Other liabilities Liabilities Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances Operating fixed assets Other assets Assets 12,241,798 43,846,877 71,153,991 32,064,381 159,307,047 13,388,316 512,650,465 1,289,247,251 2,611,941 30,176,426 1,848,074,399 159,307,047 157,582,687 19,516,198 33,664,174 1,091,786,626 604,562,193 46,204,564 54,065,004 2,007,381,446 13,388,316 446,287,487 1,078,312,202 2,611,941 26,792,330 1,567,392,276 (855,081,647) 157,582,687 13,699,986 8,689,334 337,426,579 170,091,670 158,240 24,662,133 712,310,629 35,672,501 83,620,332 3,176 119,296,009 155,898,888 1,898,963 2,104,355 176,531,742 86,027,314 1,737,644 6,894,879 275,194,897 70 9,394,460 47,706,577 57,101,037 22,757,638 9,345,758 5,752,247 59,413,954 2,628,476 2,718,240 79,858,675 2,873,683 26,810,878 29,684,561 102,344,211 52,648 3,863,291 53,132,994 55,479,294 319,766 19,180,779 132,028,772 1,456,730 24,542,133 25,998,863 141,011,544 3,864,601 4,528,293 112,464,633 45,536,927 579,893 36,060 167,010,407 164,227 11,472,507 11,636,734 164,710,269 2,670,887 127,914,280 44,426,170 1,297,646 38,020 176,347,003 1,432,538 10,062,135 11,494,673 224,201,561 2,462,256 165,261,392 65,833,802 2,098,558 40,226 235,696,234 14,735,325 6,633,560 21,368,885 134,479,068 106,930,173 46,262,099 2,623,194 32,487 155,847,953 633,514 86,927 3,380,920 4,101,361 68,985,515 6,372,586 31,490,963 34,761,147 462,180 73,086,876 2017 Over 1 Over 3 Over 6 Over 1 year Over 2 years Over 3 years Over 5 years Over 10 Total Upto 1 month month to 3 months to 6 months to 1 to 2 years to 3 years to 5 years to 10 years years months months year --------------------------------------------------------------------------------------------- (Rupees in '000) --------------------------------------------------------------------------------------------- The maturity profile presented below has been prepared as required by IFRS on the basis of contractual maturities, except for products that do not have a contractual maturity which are shown in the first bucket. 43.4.2 Maturities of assets and liabilities - based on contractual maturity of the assets and liabilities of the Bank FOR THE YEAR ENDED DECEMBER 31, 2017 NOTESthe TO AND FORMING PART OF THE UNCONSOLIDATED For year ended December 31, 2017FINANCIAL STATEMENTS Notes to and forming part of the Unconsolidated Financial Statements
132. 130 United Bank Limited Share capital Reserves Unappropriated profit Surplus on revaluation of assets Represented by : Net assets Bills payable Borrowings Deposits and other accounts Deferred tax liability - net Other liabilities Liabilities Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances Operating fixed assets Other assets Assets 12,241,798 40,454,505 64,246,270 34,844,288 151,786,861 11,756,422 201,549,619 1,179,887,048 4,691,544 27,879,529 1,425,764,162 151,786,861 131,506,861 14,920,994 34,168,287 806,531,246 510,110,924 35,581,758 44,730,953 1,577,551,023 11,756,422 163,175,690 979,014,011 4,691,544 24,085,260 1,182,722,927 (815,317,911) 131,506,861 12,920,994 2,941,260 78,824,599 116,263,682 194,110 24,753,510 367,405,016 15,100,193 88,780,326 281,444 104,161,963 92,643,779 2,000,000 16,318,642 54,956,011 117,781,565 1,148,514 4,601,010 196,805,742 71 8,683,435 50,220,338 69,012 58,972,785 15,544,220 3,252,452 17,863,289 49,053,920 1,755,526 2,591,818 74,517,005 2,762,490 18,804,119 9,622 21,576,231 59,227,008 823,002 47,088,767 21,185,362 266,389 11,439,719 80,803,239 118,277 26,415,337 26,533,614 127,950,838 5,510,853 133,349,226 15,038,818 559,163 26,392 154,484,452 198,880 7,529,916 7,728,796 133,453,813 5,194,313 109,630,801 25,772,686 560,123 24,686 141,182,609 1,379,672 9,053,455 10,433,127 245,124,844 127,765 183,697,691 66,319,700 5,388,772 24,043 255,557,971 9,729,395 69,546 9,798,941 240,593,230 177,374,227 70,886,027 1,880,420 251,497 250,392,171 401,587 3,434,191 3,835,778 52,567,040 3,746,635 27,809,164 23,828,741 1,018,278 56,402,818 2016 Over 1 Over 3 Over 6 Over 1 year Over 2 years Over 3 years Over 5 years Over 10 Total Upto 1 month month to 3 months to 6 months to 1 to 2 years to 3 years to 5 years to 10 years years months months year --------------------------------------------------------------------------------------------- (Rupees in '000) --------------------------------------------------------------------------------------------- For the year ended December 31, 2017 Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017
133. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 43.4.3 Liquidity Coverage Ratio Liquidity Risk Management framework is guided by BoD (Board of Directors) and BRCC (Board Risk and Credit Committee). Global ALCO and International ALCO supervise the liquidity risk management as per their TORs. Market & Treasury Risk Division is responsible to propose, recommend and institutionalize liquidity risk management policy which is approved by the Board. Asset & Liability Committee (ALCO) is responsible for reviewing and approving the liquidity risk limits, ensuring the liquidity risk management practices are in line with the defined strategy. ALCO is also responsible to recommend Liquidity Risk policy for approval to BRCC / BOD. Liquidity risk is defined as the risk that a bank does not have sufficient financial resources to meet its obligation and commitments as they fall due and have no other choice to secure funds at a higher cost. The Bank ensures to maintain a diversified portfolio of liquid assets and funding base. Sources of funding comprise of a good mix of core deposits. All liquidity limits including deposit concentration is reviewed in ALCO on a periodic basis. The Bank performs its Liquidity stress test on a periodic basis in order to ensure that sufficient liquidity is always available in order to fulfill Bank’s financial commitment. Stress testing technique is also used to identify the potential impact of extreme yet plausible events or movements on the value of a portfolio. Stress testing scenarios are developed in guidance provided by the regulator. The Bank also has in place approved Liquidity Contingency Plan. Further Liquidity Risk Management is quantified by Liquidity coverage ratio and Net Stable funding ratio as communicated by the Regulator. Liquidity Coverage Ratio (LCR) refers to the highly liquid assets held by the bank to meet its short term obligations. LCR is used as a tool to manage liquidity risk. LCR has two components: High Quality Liquid Asset (HQLA) and total net cash outflows. HQLA comprises of those assets that can be readily sold or employed as collateral for obtaining fund. HQLA structure has been divided into 1) cash and treasury balance, 2) marketable securities, 3) corporate debt securities with credit rating, 4) non-financial equity shares. Total unweighted1 Total weighted2 value value (average) (average) -----------(Rupees in '000)------ HIGH QUALITY LIQUID ASSETS 1 2 2.1 2.2 3 3.1 3.2 3.3 4 5 5.1 5.2 5.3 6 7 8 Total High Quality Liquid Assets (HQLA) Retail deposits and deposits from small business customers of which: stable deposit Less stable deposit Unsecured wholesale funding of which: Operational deposits (all counterparties) Non-operational deposits (all counterparties) Unsecured debt Secured wholesale funding Additional requirements of which: Outflows related to derivative exposures and other collateral requirements Outflows related to loss of funding on debt products Credit and Liquidity facilities Other contractual funding obligations Other contingent funding obligations TOTAL CASH OUTFLOWS 9 10 11 12 CASH INFLOWS Secured lending Inflows from fully performing exposures Other cash inflows TOTAL CASH INLFOWS 414,579,250 820,412,073 82,041,207 263,429 382,106,697 - 65,857 227,845,124 1,108,867 112,817 69,550,397 323,929,880 112,817 6,955,040 16,196,494 334,325,406 133,763,198 14,831,063 76,418,926 2,269,533 78,688,459 Total Adjusted Value 414,579,250 255,636,947 162.18% TOTAL HQLA TOTAL NET CASH OUTFLOWS LIQUIDITY COVERAGE RATIO 1 Unweighted values must be calculated as outstanding balances maturing or callable within 30 days (for inflows and outflows) 2 Weighted values must be calculated after the application of respective haircuts (for HQLA) or inflow and outflow rates (for inflows and outflows) 3 Adjusted values must be calculated after the application of both (i) haircuts and inflow and outflow rates and (ii) any applicable caps i.e. cap on level 2B and level 2 assets for HQLA and cap on inflows. 72 Annual Report 2017 131
134. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED FINANCIAL STATEMENTS For theYEAR year ended December FOR THE ENDED DECEMBER 31 , 2017 31, 2017 43.4.4 Net Stable Funding Ratio Net Stable Funding Ratio (NSFR) is used to reduce funding risk over a longer time horizon by requiring banks to fund their activities with sufficiently stable sources of funding in order to mitigate the risk of future funding stress. The NSFR limits overreliance on short-term wholesale funding, encourages better assessment of funding risk across all on and off balance sheet items and promotes funding stability. The ratio is defined as the amount of Available Stable Funding (ASF), relative to the amount of Required Stable Funding (RSF). LR IX Unweighted Value By Residual Maturity * No Maturity Below 6 months 6 months to 1 year and below 1 year above 1 year Weighted Value ---------------------------------------------------------'(Rupees in '000)------------------------------------------------------------\ ASF Item 1 Capital: 2 Regulatory capital 3 Other capital instruments 4 Retail deposits and deposit from small business customers: 5 Stable deposits 6 Less stable deposits 7 Wholesale funding: 8 Operational deposits 9 Other wholesale funding 10 Other liabilities: 11 NSFR derivative liabilities 12 All other liabilities and equity not included in other categories 13 Total ASF 110,649,879 40,892,332 19 20 396,139,205 - 491,850,396 42,698,667 Performing loans to non-financial corporate clients, loans to retail and small business customers, and loans to sovereigns, central banks and PSEs, of which: With a risk weight of less than or equal to 35% under the Basel II Standardised Approach for credit risk 21 Securities that are not in default and do not qualify as HQLA including exchange-traded equities. 22 Other assets: Physical traded commodities, including gold 23 24 Assets posted as initial margin for derivative contracts 25 NSFR derivative assets 26 NSFR derivative liabilities before deduction of variation margin posted All other assets not included in the above categories 27 28 Off-balance sheet items 29 Total RSF 30 Net Stable Funding Ratio (%) - - RSF Item 14 Total NSFR High Quality Liquid Assets (HQLA) 15 Deposits held at other financial institutions for operational purposes 16 Performing loans and securities: 17 Performing loans to financial institutions secured by Level 1 HQLA Performing loans to financial institutions secured by 18 non-Level 1 HQLA and unsecured performing loans to financial institutions - - - - 88,860,593 804,247,453 3,052,380 652,985 17,747,689 1,958,956 110,649,879 40,892,332 721,963,866 253,691,789 1,436,842 1,128,634,708 - - - - - - - - - - - - 693,195 - 3,446,387 - 6,931,953 - 10,098,279 3,863,291 - - - 181,629,479 154,385,057 - - - 47,782,921 31,058,899 - - - 37,530,651 31,901,053 - - - - - - - - - 1,547,405 - 627,823,150 454,410,776 331,241,881 303,655,584 492,767,068 1,547,405 839,284,716 24,638,353 1,086,955,065 103.83% *The unweighted value by residual maturity is based on working prepared by Assets and Liabilities Management Committee (ALCO) of the Bank. 132 United Bank Limited 73
135. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND OF THE UNCONSOLIDATED For the yearFORMING endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 43.5 Operational risk Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. The Operational Risk Division is primarily responsible for the oversight of operational risk management across the Bank. The operational risk management framework of the Bank is governed by the Operational Risk Management Policy and Procedures, while the implementation is supported by an operational risk management system and designated operational risk coordinators within different units across the bank. The framework is in line with international best practices, flexible enough to implement in stages and permits the overall approach to evolve in response to organizational learning and future requirements. Loss data, collected through a well defined program, is evaluated and processes are reviewed for improvements in mitigation techniques. Periodic workshops are conducted for Risk & Control Self Assessment and key risk exposures are identified and assessed against existing controls to evaluate improvement opportunities. Key Risk Indicators are also defined for monitoring of risk exposures. New products, systems, activities and processes are subject to comprehensive operational risk assessments, before implementation. Business Continuity Plans have been implemented across the bank, clearly defining the roles and responsibilities of respective stakeholders, and covering recovery strategy, IT and structural backups, scenario and impact analyses and testing directives. The outsourcing policy has also been augmented to address risks associated with such arrangements. 44. ISLAMIC BANKING BUSINESS The Bank operates 93 (2016: 47) Islamic Banking branches and 156 (2016: 141) Islamic Banking windows. The statement of financial position of the Bank's Islamic Banking branches as at December 31 is as follows: Note ASSETS Cash and balances with treasury banks Balances with other banks Due from financial institutions Investments Islamic financing and related assets Operating fixed assets Due from Head Office Other assets Total Assets 44.2 44.3 LIABILITIES Bills payable Due to financial institutions Deposits and other accounts Current accounts - non remunerative Current accounts - remunerative Saving accounts Term deposits Deposits from financial institutions - remunerative Deposits from financial institutions - non remunerative Due to Head Office Other liabilities NET ASSETS REPRESENTED BY: Islamic Banking Fund Accumulated losses 2017 2016 --------- (Rupees in '000) --------5,428,040 6,551,518 3,694,215 25,401,968 22,110,626 299,950 421,843 63,908,160 2,327,107 2,862,278 12,726,452 13,104,677 7,284,386 155,843 9,365,555 143,903 47,970,201 400,973 1,500,000 238,126 - 25,163,438 1,293,692 11,839,659 982,345 20,462,360 34,505 59,775,999 9,752,775 2,520,018 2,994,848 1,299,848 28,773,229 45,340,718 61,035 327,658 62,065,665 1,842,495 721,401 46,300,245 1,669,956 2,181,000 (362,502) 1,818,498 23,997 1,842,495 Surplus on revaluation of assets 74 2,181,000 (609,289) 1,571,711 98,245 1,669,956 Annual Report 2017 133
136. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED For the year ended December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 The profit and loss account of the Bank's Islamic Banking branches for the year ended December 31 is as follows: 2017 2016 --------- (Rupees in '000) --------Return earned Return expensed Net return 2,885,492 1,757,642 1,127,850 Provision against loans and advances - net Reversal of provision for diminution in value of investments - net 2,593 2,593 1,125,257 1,469 (2,182) (713) 641,547 81,376 18,143 (438) 18,067 117,148 1,242,405 67,432 12,683 4,299 47,802 132,216 773,763 984,160 11,458 995,618 246,787 849,931 131 850,062 (76,299) (609,289) (362,502) (532,990) (609,289) Net return after provisions Other Income Fee, commission and brokerage income Income from dealing in foreign currencies (Loss) / Gain on sale of securities - net Other income Total other income Other Expenses Administrative expenses Other provisions - net Total other expenses Profit / (Loss) for the year Accumulated losses brought forward Accumulated losses carried forward Remuneration to Shariah Board and Advisor 44.1 2,053,224 1,412,390 640,834 6,477 6,058 648 793 (1,320) 121 2,342 1,404 (3,098) 648 Charity Fund Opening balance Addition during the year Payments during the year Closing balance 44.2 This includes Bai Muajjal arrangement entered into with SBP and with various financial Institutions whereby the Bank sold sukuks having carrying value of Rs. 2,948.799 million (2016: Rs. 11,073.312 million) on deferred payment basis. The average return on these transactions is 5.44% per annum (2016: 5.60% per annum). The balances are due to mature latest by June 2018. 44.3 Islamic financing and related assets Note Financings Murabaha Musharaka running finance Ijarah Diminishing Musharaka 44.4 Advances Advances and receivables against Ijarah Advances for Diminishing Musharaka Advances for Murabaha Profit and other receivables against financings and advances Gross Islamic financing and related assets Provision against financings and advances 134 United Bank Limited 75 2017 2016 --------- (Rupees in '000) --------720,017 15,000,000 490,963 4,358,154 20,569,134 242,391 620,848 6,203,709 7,066,948 53,539 1,255,734 88,165 1,397,438 234,234 22,200,806 (90,180) 22,110,626 120,828 87,892 21,998 230,718 74,308 7,371,974 (87,588) 7,284,386
137. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND OF THE UNCONSOLIDATED For the yearFORMING endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 44.4 Ijarah 2017 Cost Accumulated Depreciation Charge / Net book value At December (Depreciation at December 31, 2017 on deletions) 31, 2017 ----------------------------------------------------------- (Rupees in '000) -------------------------------------------------------------------- At January 1, 2017 1,039,790 Additions / (Deletions) 140,103 (254,769) At December 31, 2017 At January 1, 2017 925,124 418,942 197,824 (182,605) 434,161 490,963 2016 Cost Accumulated Depreciation Charge / Net book value At January 1, Additions / At December At January 1, At December (Depreciation at December 2016 (Deletions) 31, 2016 2016 31, 2016 on deletions) 31, 2016 ----------------------------------------------------------- (Rupees in '000) -------------------------------------------------------------------1,191,438 258,436 (410,084) 1,039,790 476,868 205,186 (263,112) 418,942 620,848 44.5 Disclosures for profit and loss distribution and pool management UBL Ameen (the Mudarib) maintains following pools which accept deposits on the basis of Mudaraba from depositors (Rabbulmaal). Pool funds are invested in Islamic modes of financing and investments. The profit earned on the pool is therefore susceptible to the same market and credit risks as discussed in note 43 to the unconsolidated financial statements. Ameen Daily Munafa Account (ADMA) Pool The ADMA pool consists of deposits for the ADMA product. The net return on the pool is arrived at after deduction of direct costs from the gross return earned on the pool. From the net return, profit is paid to the Mudarib in the ratio of the Mudarib’s equity in the pool to the total pool. The balance represents the distributable profit. Special Pool(s) Separate pool(s) are created where the customers desire to invest in high yield assets. These pool(s) rates are higher than the general pool depending on the assets. In case of loss in special pool, the loss will be borne by the special pool members. The net return on the pool is arrived at after deduction of direct costs from the gross return earned on the pool. From the net return, profit is paid to the Mudarib in the ratio of the Mudarib’s equity in the pool to the total pool. The balance represents the distributable profit. Treasury Pool(s) Treasury pool(s) are managed on the basis of Musharakah, Mudarabah and Wakalah, wherein UBL Ameen and FI share actual return earned by the pool according to pre-defined profit sharing ratio and Wakalah fee. General Pool The General pool consists of all other remunerative deposits. UBL Ameen (the Mudarib) accept deposits on the basis of Mudaraba from depositors (Rabbulmaal). The net return on the pool is arrived at after deduction of direct costs from the gross return earned on the pool. The entire net return after paying equity share to Mudarib is considered as distributable profit of the pool. For all pools, the Mudarib’s share is deducted from the distributable profit to calculate the profit to be allocated to depositors. The allocation of the profit to various deposit categories is determined by the amount invested in that category relative to the total pool, as well as by the weightage assigned to the various deposit categories. The Mudarib’s share for the year ended December 31, 2017 is Rs. 594.34 million (25.0% of distributable profit). Of this, an amount of Rs. 180.74 million (30.4% of Mudarib share) was distributed back to depositors as Hiba. The rate of profit earned on average earning assets was 6.11% per annum and the rate of profit paid on average deposits was 3.70% per annum. 76 Annual Report 2017 135
138. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND FORMING PART OF THE UNCONSOLIDATED For the year ended December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 2017 2016 --------- (Rupees in '000) --------- 44.6 Deployment of Mudaraba based deposits by class of business Chemical and pharmaceuticals Agri business 660,178 1,513,718 1,683,908 Textile 65,769 1,878,541 Sugar 15,173,178 Financial - 9,765,643 15,640,744 Food industries 505,996 511,211 Engineering 788,210 506,268 Hotel - Plastic 151,298 Individuals 3,213 33,347 1,220,035 370,273 Production and Transmission of energy 10,598,235 9,280,999 Government of Pakistan Securities 15,969,260 5,190,245 Others 45. 769,053 686,414 181,592 57,206,809 35,940,519 YEMEN OPERATIONS As a result of political and economic crisis, liquidity crisis for both local and foreign currency aggravated. During the crisis, in the initial phase of the war the Central Bank of Yemen (CBY) kept the exchange parity unchanged, however in April 2016, the Central bank devalued Yemeni Riyal and revised the US$ to Riyal parity from YER 214.89 to YER 250.25 (16.45% devaluation). In the middle of August, 2017, Central Bank of Yemen–Aden Headquarter changed exchange rate mechanism from fixed rate to floating rate. Effective August 15, 2017 CBY Aden abolished exchange rate of YER 250.25/US$ and instructed all financial institutions to use market rate published by CBY, Aden. Since then CBY Aden devalued YER to current levels of YER 393/US$ while CBY Sana’a has maintained the earlier exchange rate regime and parity of YER 250.25/US$. Despite devaluation, Yemeni Riyal continued to lose its value in the open market and is currently traded at a further lower parity. The bank has taken multiple steps to cover for the losses emanating from this currency devaluation which will be continued going forward to contain the exchange risk. Out of the 3 branches in Yemen, UBL is currently operating with 2 branches in Sana’a and Hodeida under close supervision of executives at the Business Continuity Plan (BCP) office, Karachi. The Branch in Aden is closed due to restricted access to the premises in which it is located. Customers of Aden branch are being served from the other two branches. To support the team in Yemen branches, the Camp Office situated in Karachi, Pakistan is in continuous coordination with the team in Yemen to ensure that they are provided unstinted support and assistance whenever required. Ever since the crises started, the Bank’s risk is being managed very closely with a clear strategy to de-risk the Yemen Book as far as practicable. As a result of this the bank has been able to reduce its clean exposure substantially, however prevailing liquidity crisis and recent devaluation of YER has adversely affected the book. Going forward, the strategy is to continuously reduce bank’s credit exposure without executing any new business and continue maintaining investments in local currency sovereign bonds. The management has taken appropriate measures to support the sustainability of the Bank’s business as may be required in the prevalent circumstances and is of the view that as such there is no issue on going concern on UBL Yemen operations in the foreseeable future. 136 United Bank Limited 77
139. Notes to and forming part of the Unconsolidated Financial Statements NOTES TO AND OF THE UNCONSOLIDATED For the yearFORMING endedPART December 31 , 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 46. NON-ADJUSTING EVENT AFTER THE BALANCE SHEET DATE 46.1 The Board of Directors in its meeting held on February 19, 2018 has proposed a cash dividend in respect of 2017 of Rs. 4 per share (2016: Rs. 4 per share). In addition, the Directors have also announced a bonus issue of nil (2016: nil). These appropriations will be approved in the forthcoming Annual General Meeting. The unconsolidated financial statements for the year ended December 31, 2017 do not include the effect of these appropriations which will be accounted for in the unconsolidated financial statements for the year ending December 31, 2018. 46.2 The Bank is a party to a Suo Moto case No. 20/2016 and Constitution Petition No. 45 of 2016 in the Honourable Supreme Court of Pakistan. Through these cases, the Honourable Supreme Court has taken up the matter relating to pension arrangements of certain banks which were previously under the control of the Federal Government. Various applications had been filed by ex-employees of those banks in Suo Moto case contesting the freezing of their pensions and discontinuation of its indexation. The Bank maintains that being a private employer, it is not under any legal obligation to increase the pension of the employees and that post privatization, the new management gave multiple notices up to December 31, 2003 to allow employees to convert their end of service benefits from Pension Fund to Gratuity Fund. During the course of hearing of the above cases, the Supreme Court of Pakistan indicated that the concerned Banks may, on their own, consider increasing the pension of their ex-employees. The Bank understands that although it is not legally liable to change the benefit plan however, purely on humanitarian basis and for the betterment of its ex-employees from a prospective date and future indexation mechanism, it has prepared and submitted a proposal before the Honourable Supreme Court of Pakistan whereby minimum pension has been fixed to Rs. 5,250/- with 5% increase every year. In response to the proposal submitted by the Bank, the Supreme Court of Pakistan in its hearing held on February 13, 2018 has ordered, at its discretion, fixation of minimum pension of Rs 8,000/- per month with 5 percent indexation on an annual basis and that the said increase would be on a prospective basis. Detailed Judgement has not been received till date. In the meantime, the Bank has also initiated an exercise to assess the impact of the revision which, among other things, includes life verification process of the pensioners. Based on initial actuarial estimates, the impact of increase in pension will range between Rs 3.4 billion to Rs 5.9 billion. The estimated amount can only be finalised after receipt of written court order and completion of life verification exercise. Suitable amendments in the pension plan will be made accordingly. As required under the approved accounting standards, the impact of the revision will be accounted for in the financial statements of the Bank as past service cost in the financial year 2018 once the plan is formally approved. 47. DATE OF AUTHORIZATION These financial statements were authorized for issue on February 19, 2018 by the Board of Directors of the Bank. 48. GENERAL 48.1 Comparatives Comparative information has been reclassified, rearranged or additionally incorporated in these unconsolidated financial statements for the purposes of better presentation. 48.2 Figures have been rounded off to the nearest thousand rupees unless otherwise stated. Aameer Karachiwalla Aameer Karachiwalla Chief Financial Officer Chief Financial Officer Sima Kamil Sima Kamil President & President Chief Executive&Officer Chief Executive Officer Amar Zafar Khan Arshad Ahmad Mir Amar Zafar Khan Arshad Ahmad Mir Director Director Director Director 78 Sir Mohammed Anwar Pervez, OBE, HPk Sir MohammedChairman Anwar Pervez, OBE, HPk Chairman Annual Report 2017 137
140. Annexure Annexure ‘A’ 'A' as as referred referred to to in in note note 9.8 9.8 of of the the Bank’s Bank's Unconsolidated Unconsolidated Financial Financial Statements Statements 1) Particulars of investments held in listed companies and Modaraba Investee Number of shares / certificates held Available for sale securities Paid up value per share / certificate Total paid up value Cost (Rupees) ---------------------- (Rupees in '000) ---------------------- Investments in ordinary shares Agritech Limited DP World Engro Corporation Limited Engro Fertilizers Limited Fatima Fertilizer Company Limited Fauji Cement Limited Fauji Fertilizer Company Limited Fauji Fertilizer Bin Qasim Limited Ghani Gases Limited Gharibwal Cement Limited Hub Power Company Limited Hum Network Limited Indus Dyeing & Manufacturing Company Limited Kohat Cement Limited Kohinoor Spinning Mills Limited Kot Addu Power Company Limited Lucky Cement Limited Nishat Chunian Power Limited Oil & Gas Development Company Limited Pakistan Telecommunication Company Limited Pakistan Petroleum Limited Pakistan State Oil Limited Saif Power Limited Soneri Bank Limited Pak Oilfields Limited 15,975,876 6,926 1,935,000 6,669,000 22,400,000 16,500,000 17,750,000 46,699,000 15,586,048 5,950,000 38,189,500 3,654,000 484,890 1,895,000 3,580,000 79,422,000 830,000 18,306,500 3,940,000 27,338,000 3,707,600 1,800,000 10,237,000 22,291,500 824,950 10 2,010 10 10 10 10 10 10 10 10 10 1 10 10 5 10 10 10 10 10 10 10 10 10 10 159,759 13,919 19,350 66,690 224,000 165,000 177,500 466,990 155,860 59,500 381,895 3,654 4,849 18,950 17,900 794,220 8,300 183,065 39,400 273,380 37,076 18,000 102,370 222,915 8,250 559,228 19,885 597,627 603,631 569,358 578,292 1,996,503 1,894,542 356,703 281,959 1,819,518 59,243 533,428 390,240 61,892 3,688,420 592,327 349,216 593,890 598,914 596,559 579,373 339,456 337,311 364,789 18,362,304 Investments in Real Estate Investment Trust Dolmen City REIT 41,690,000 10 416,900 458,590 3,666,668 95,720 10 3,705 36,667 354,648 36,667 354,648 391,315 Investments in preference shares Masood Textile Mills Limited JSC Alliance Bank 138 United Bank Limited
141. Annexure Annexure ‘A’ 'A' as as referred referred to to in in note note 9.8 9.8 of of the the Bank’s Bank's Unconsolidated Financial Statements Unconsolidated Financial Statements 2) Particulars of investments held in unlisted companies Based on audited accounts as at Number of shares / certificates held Break-up value per share Paid up value per share Rupees Rupees 18.3% 5,500 228,378 1,000 5,500 31-Mar-17 10.2% 1,530,000 10 10 15,300 31-Dec-16 World Bridge Connect Inc. 9.9% 1,979,295 First Women Bank Limited 2.2% 7,698,441 10 10 21,100 31-Dec-16 Tahira Raza National Institutional Facilitation Technologies (Pvt.) Limited 9.1% 2,266,607 25 10 1,526 30-Jun-17 Haider Wahab National Investment Trust Limited 8.3% 79,200 9,419 100 100 30-Jun-17 Manzoor Ahmed News-VIS Credit Information Services (Pvt.) Limited 4.7% 32,500 1 10 325 30-Jun-17 Faheem Ahmad Techlogix International Limited 4.2% 4,455,829 7 5 50,702 31-Dec-16 Salman Akhtar & Kewan Khawaja (Co Chief Executive) Investee Percentage of holding (%) Cost (Rupees in '000) Name of Chief Executive Shareholding more than 10% Pakistan Agricultural Storage & Services Corporation Limited Pakistan Mortgage and Refinance Company Limited Muhammad Khan Khichi N.Kokularupon Narayanasamy Shareholding upto 10% Kay Textile Mills Limited Not available 377,800 SME Bank Limited 1.7% 3,975,003 SWIFT 0.0% 25 MasterCard Incorporated 0.0% Cinepax Limited The Benefit Company B.S.C Not available Not available Not available Not available 77,606 Not available Not available 3,778 Not available Not available 10 26,950 31-Dec-16 Ihsan ul Haq Khan 495,821 16,532 2,905 31-Dec-16 Gottfried Leibbrandt 461 580 427 - 31-Dec-16 Ajay Banga 8.4% 5,037,200 33 10 50,372 30-Jun-17 Hashim Raza 1.0% 311 172,024 29,284 2,343 31-Dec-16 Abdul Wahed AlJanahi - 258,507 Annual Report 2017 139
142. Annexure Annexure ‘A’ 'A' as as referred referred to to in in note note 9.8 9.8 of of the the Bank’s Bank's Unconsolidated Unconsolidated Financial Financial Statements Statements 3) Particulars of bonds Investee Terms of Redemption Interest / Principal Profit Rate of Interest / Profit Outstanding Amount (Rupees in '000) Available for sale securities Government of Pakistan Sukuk Government of Pakistan XVIII Government of Pakistan XIX Government of Pakistan Ijarah Sukuk - XVI Islamic Republic of Pakistan 2019 - Sukuk Islamic Republic of Pakistan 2021 - Sukuk At Maturity At Maturity At Maturity At Maturity At Maturity Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually 5.590% 5.240% Cut off yield of 6M T-Bills minus 50 bps 6.750% 5.500% 6,040,936 5,904,326 4,000,000 1,104,173 2,052,838 19,102,273 Government of Pakistan - Eurobonds Islamic Republic of Pakistan - 2019 - Eurobond Islamic Republic of Pakistan - 2024 - Eurobond Islamic Republic of Pakistan - 2025 - Eurobond Islamic Republic of Pakistan - 2027 - Eurobond At Maturity At Maturity At Maturity At Maturity Bi-annually Bi-annually Bi-annually Bi-annually 7.250% 8.250% 8.250% 6.875% 2,203,012 7,233,796 4,158,324 996,515 14,591,647 Foreign bonds - sovereign Angola 2019 Arab Republic of Egypt 2020 Arab Republic of Egypt 2025 Government of Dubai Bond 2020 Government of Dubai Bond 2022 Kingdom of Bahrain Bond 2020 Kingdom of Bahrain Bond 2026 Kingdom of Jordan 2026 Kingdom of Jordan 2027 Republic of Kenya Republic of Nigeria 2023 Kingdom of Oman 2026 Republic of Portugal 2024 Republic of Sri Lanka Bond 2020 Republic of Sri Lanka Bond 2021 Republic of Sri Lanka Bond 2022 Republic of Sri Lanka Bond 2026 Republic of Turkey 2022 Republic of Turkey 2026 Republic of Vietnam State of Qatar Bond 2030 Turkey Sukuks 2021 United Republic of Tanzania At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity Quarterly Bi-annually Bi-annually Bi-annually Quarterly Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually 7.000% 5.750% 5.880% 7.750% 6.450% 5.500% 7.000% 6.125% 5.750% 5.875% 6.375% 4.750% 5.125% 6.250% 6.250% 5.875% 6.825% 6.250% 4.875% 4.800% 9.750% 4.251% 7.452% 316,848 818,000 885,546 1,654,268 1,467,526 1,150,637 2,409,094 1,428,591 441,478 1,587,223 1,091,132 885,139 495,775 1,086,840 864,236 1,420,372 877,207 1,892,918 551,549 330,870 2,770,873 44,167 1,041,969 25,512,258 Foreign bonds - others AK Bank 2022 Bank of Ceylon Bank of Ceylon 2018 CBQ Finance 2019 Dubai Electricity and Water Authority 2018 Dubai Electricity and Water Authority 2020 EMAAR 2019 Ezdan Sukuk Company Limited Garanti 2022 ICD Sukuk 2027 IPIC GMTN 2022 Jebel Ali Free Zone Authority 2019 PTA Bank 2018 Qatari Diar QSC 2020 At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually 5.000% 5.325% 6.875% 7.500% 3.000% 7.375% 8.500% 4.375% 5.250% 5.000% 5.500% 7.000% 6.375% 5.000% 440,924 136,510 239,867 497,560 3,532,985 1,574,868 89,124 138,030 330,056 1,651,615 214,582 1,014,901 313,102 276,491 10,450,615 140 United Bank Limited
143. Annexure ‘A’ as referred to in note 9.8 of the Bank’s Annexure 'A' as Financial referred toStatements in note 9.8 of the Bank's Unconsolidated Unconsolidated Financial Statements 3) Particulars of bonds (Contd.) Investee Terms of Redemption Interest / Principal Profit Rate of Interest / Profit Outstanding Amount (Rupees in '000) Held to maturity securities Government of Pakistan - Eurobonds Islamic Republic of Pakistan - 2024 - Eurobond Islamic Republic of Pakistan - 2025 - Eurobond Islamic Republic of Pakistan - 2027 - Eurobond At Maturity At Maturity At Maturity Bi-annually Bi-annually Bi-annually 8.250% 8.250% 6.875% Sukuks Al Baraka Bank (Pakistan) Limited Fatima Fertilizer Company Limited K-Electric Limited Neelum Jehlum Hydropower Company (Pvt) Limited Pakistan International Airlines Limited* Sitara Peroxide Limited Sui Northern Gas Pipelines Limited Sui Southern Gas Company Limited WAPDA Bonds - Sukuk III WAPDA Bonds - Dassu 2,203,946 2,815,931 554,794 5,574,671 Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Monthly Bi-annually Bi-annually At Maturity At Maturity Bi-annually Bi-annually Quarterly Bi-annually Bi-annually Monthly Bi-annually Bi-annually Bi-annually Bi-annually 6M KIBOR plus 125bps 6M KIBOR plus 110bps 3M KIBOR plus 100bps 6M KIBOR plus 113bps 6M KIBOR plus 175bps 1M KIBOR plus 100bps 6M KIBOR plus 110bps 6M KIBOR plus 110bps 6M KIBOR plus 100bps 6M KIBOR plus 145bps 142,857 681,600 2,250,000 3,575,000 890,000 118,110 943,763 800,000 242,857 868,060 10,512,247 Foreign bonds - sovereign Arab Republic of Egypt 2020 Arab Republic of Egypt 2025 Bahrain 2026 Kingdom of Jordan 2026 Kingdom of Jordan 2027 Qatar Government Bonds 2030 Republic of Kenya Republic of Portugal 2024 Republic of Sri Lanka Bond 2020 Republic of Sri Lanka Bond 2022 Republic of Sri Lanka Bond 2025 Republic of Sri Lanka Bond 2026 Republic of Tanzania Republic of Turkey 2022 Republic of Turkey 2026 Turkey Sukuks 2021 At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually 5.750% 5.875% 7.000% 6.125% 5.750% 9.750% 5.875% 5.125% 6.250% 5.875% 6.850% 6.825% 7.452% 6.250% 4.875% 4.251% 818,502 885,397 1,319,611 767,852 441,478 1,065,501 938,340 495,775 274,504 221,160 551,264 876,653 154,928 377,848 551,659 44,169 9,784,641 Foreign securities - others AK Bank 2022 Bank of Ceylon Ezdan Sukuk Company Limited Garanti 2022 JSC Alliance Bank - US $ Discount Bonds At Maturity At Maturity At Maturity At Maturity At Maturity Bi-annually Bi-annually Bi-annually Bi-annually Quarterly 5.000% 5.325% 4.375% 5.250% 10.500% JSC Alliance Bank - US $ Recovery Notes At Maturity N/A N/A 440,924 136,517 138,030 324,653 239,493 1,279,617 340,333 1,619,950 *These sukuks are classified, however, no provision has been maintained as these are secured by Government of Pakistan guarantee. 4) Particulars of Debentures Investee Private Sector Effef Industries Limited Effef Industries Limited Khyber Textile Mills Limited Morgah Valley Limited Morgah Valley Limited Terms of Redemption Principal Interest Rate of Interest Outstanding Amount (Rupees in '000) Overdue Overdue Overdue Overdue Overdue Overdue Overdue Overdue Overdue Overdue 11.00% 14.00% 14.00% 11.00% 14.00% 1,017 379 394 316 160 2,266 Annual Report 2017 141
144. Annexure ‘A’ as as referred referred to toin innote note9.8 9.8ofofthe theBank's Bank’s Annexure 'A' Unconsolidated Financial Statements Statements Unconsolidated Financial 5) Particulars of investments in term finance certificates Investee No. of Certificates held Available for sale securities Paid up Total Paid Outstanding value per Name of Chief Executive up value Amount certificate (Rupees) ------------- (Rupees in '000) ------------- Unlisted Azgard Nine Limited Pakistan International Airlines Corporation TFC* 12,944 1,700 5,000 5,000 64,720 8,500 60,000 30,000 24,200 5,000 5,000 5,000 300,000 150,000 121,000 Listed Azgard Nine Limited MCB Bank Limited TFC (formerly NIB Bank Ltd) Bank Alfalah Limited TFC 64,720 Ahmed H. Shaikh 8,498 Musharraf Rasool Cyan 73,218 97,615 Ahmed H. Shaikh 149,790 Imran Maqbool 120,783 Nauman Ansari 368,188 441,406 Held to Maturity Unlisted Pakistan International Airlines Corporation TFC* Security Leasing Corporation Limited Al-Azhar Textile Mills Limited Bentonite (Pakistan) Limited Cast-N-Link Products Limited Standard Chartered Bank Pakistan Azgard Nine Limited Askari Commercial Bank Limited WAPDA 408,867 40,000 14 14 16 75,000 12,297 120,000 300,000 5,000 5,000 774,670 268,894 1,064,039 5,000 5,000 5,000 5,000 2,044,335 200,000 10,845 3,765 17,025 375,000 61,485 600,000 1,500,000 48,600 30,000 83,833 5,000 5,000 5,000 243,000 150,000 419,165 Listed Bank Alfalah Limited MCB Bank Limited TFC (formerly NIB Bank Ltd) Soneri Bank Limited 1,276,685 30,807 5,418 3,417 2,549 375,000 61,115 599,280 3,461,313 5,815,584 Musharraf Rasool Cyan Farah Azeem Mirza Aurangzeb Baig Khalid Shakeel Nisar Ahmed Shahzad Dada Ahmed H. Shaikh Syed Majeedullah Husaini Retired Lt. Gen Muzammil Hussain 242,562 Nauman Ansari 149,790 Imran Maqbool 418,830 Muhammad Aftab Manzoor 811,182 6,626,766 *These TFCs are classified, however, no provision has been maintained as these are secured by Government of Pakistan guarantee. 6) Particulars of participation term certificates Investee Morgah Valley Limited 142 United Bank Limited No. of Certificates held 16 Paid up Total Paid Outstanding value per Name of Chief Executive up value Amount certificate ------------- (Rupees in '000) ------------(Rupees) 29,250 468 437 Air Marshal (R) A. Rahim Khan
145. Annexure Annexure ‘A’ 'A' as as referred referred to to in in note note 9.8 9.8 of of the the Bank’s Bank's Unconsolidated Financial Statements Unconsolidated Financial Statements 7) Quality of investments classified as available for sale (AFS) Investee Investments in ordinary shares Agritech Limited DP World Engro Corporation Limited Engro Fertilizers Limited Fatima Fertilizer Company Limited Fauji Cement Limited Fauji Fertilizer Company Limited Fauji Fertilizer Bin Qasim Limited Ghani Gases Limited Gharibwal Cement Limited Hub Power Company Limited Hum Network Limited Indus Dyeing & Manufacturing Company Limited Kohat Cement Limited Kohinoor Spinning Mills Limited Kot Addu Power Company Limited Lucky Cement Limited Nishat Chunian Power Limited Oil & Gas Development Company Limited Pakistan Telecommunication Company Limited Pakistan Petroleum Limited Pak Oilfields Pakistan State Oil Limited Saif Power Limited Soneri Bank Limited Market Value (Rupees in '000) 77,803 19,114 531,641 451,625 691,712 412,665 1,404,203 1,659,682 238,467 143,455 3,475,245 29,853 212,823 269,014 11,313 4,280,846 429,450 602,467 641,393 359,749 763,432 490,235 527,598 296,156 298,706 Credit Rating Unrated Baa3 AA AAAAUnrated AA Unrated AAAA+ A+ A+ A Unrated AA+ Unrated AAAA Unrated Unrated Unrated AA A+ AA- 18,318,647 Investments in Real Estate Investment Trust Dolmen City REIT Investee Investments in preference shares Masood Textile Mills Limited JSC Alliance Bank 458,590 Cost (Rupees in '000) AM2 Credit Rating 36,667 354,648 391,315 Unrated Caa2 5,500 15,300 Unrated AA 77,606 21,100 1,526 100 325 50,702 3,778 26,950 2,905 50,372 2,343 258,507 Unrated AUnrated AM2+ Unrated Unrated Unrated B Unrated A2 Unrated Unrated Investments in unlisted shares Shareholding more than 10% Pakistan Agricultural Storage & Services Corporation Limited Pakistan Mortgage and Refinance Company Limited Shareholding upto 10% World Bridge Connect Inc. First Women Bank Limited National Institutional Facilitation Technologies (Pvt.) Limited National Investment Trust Limited News-VIS Credit Information Services (Pvt.) Limited Techlogix International Limited Kay Textile Mills Limited SME Bank Limited SWIFT MasterCard Incorporated Cinepax Limited The Benefit Company B.S.C Annual Report 2017 143
146. Annexure ‘A’ as referred to in note 9.8 of the Bank’s Annexure 'A' as Financial referred toStatements in note 9.8 of the Bank's Unconsolidated Unconsolidated Financial Statements 7) Quality of investments classified as available for sale (AFS) (Contd.) Particulars Federal Government Securities Market Treasury Bills Pakistan Investment Bonds Government of Pakistan Ijarah Sukuk Government of Pakistan Ijarah Sukuk - XVIII Government of Pakistan Ijarah Sukuk - XIX Government of Pakistan Ijarah Sukuk - XVI Islamic Republic of Pakistan 2019 - Sukuk Islamic Republic of Pakistan 2021 - Sukuk Government of Pakistan - Euro bond Islamic Republic of Pakistan - 2019 - Euro Bond Islamic Republic of Pakistan - 2024 - Euro Bond Islamic Republic of Pakistan - 2025 - Euro Bond Islamic Republic of Pakistan - 2027 - Euro Bond Foreign bonds - sovereign Angola 2019 Arab Republic of Egypt 2020 Arab Republic of Egypt 2025 Government of Dubai Bond 2020 Government of Dubai Bond 2022 Kingdom of Bahrain Bond 2020 Kingdom of Bahrain Bond 2026 Kingdom of Jordan 2026 Kingdom of Jordan 2027 Republic of Kenya Republic of Nigeria 2023 Kingdom of Oman 2026 Republic of Portugal 2024 Republic of Sri Lanka Bond 2020 Republic of Sri Lanka Bond 2021 Republic of Sri Lanka Bond 2022 Republic of Sri Lanka Bond 2026 Republic of Turkey 2022 Republic of Turkey 2026 Republic of Vietnam State of Qatar Bond 2030 Turkey Sukuks 2021 United Republic of Tanzania Foreign bonds - others AK Bank 2022 Bank of Ceylon Bank of Ceylon 2018 CBQ Finance 2019 Dubai Electricity and Water Authority 2018 Dubai Electricity and Water Authority 2020 EMAAR 2019 Ezdan Sukuk Company Limited Garanti 2022 ICD Sukuk 2027 IPIC GMTN 2022 Jebel Ali Free Zone Authority 2019 PTA Bank 2018 Qatari Diar QSC 2020 Term finance certificates Listed Azgard Nine Limited MCB Bank Limited TFC (formerly NIB Bank Ltd) Bank Alfalah Limited TFC Unlisted Azgard Nine Limited Pakistan International Airlines Corporation TFC 144 United Bank Limited Market Value (Rupees in '000) Credit Rating 302,515,945 235,845,961 538,361,906 Unrated - Government Securities Unrated - Government Securities 6,044,400 5,896,460 4,028,400 1,145,955 2,044,051 19,159,266 Score7 Score7 Score7 Score7 Score7 2,255,694 7,693,756 4,182,661 997,768 15,129,879 Score7 Score7 Score7 Score7 323,224 845,917 919,844 1,729,796 1,558,080 1,155,336 2,426,735 1,431,548 442,003 1,636,715 1,137,490 891,562 521,900 1,128,396 893,783 1,507,540 903,386 1,925,895 545,188 354,212 2,893,753 44,639 1,082,677 26,299,619 Score5 Score6 Score6 Score2 Score2 Score4 Score4 Score5 Score5 Score6 Score5 Score3 Unrated Score6 Score5 Score6 Score6 Score4 Score4 Score5 Score3 Score4 Score6 443,467 136,355 239,565 500,956 3,539,002 1,663,155 93,502 126,717 333,092 1,643,977 212,703 1,041,019 317,800 289,899 10,581,209 Ba1 B1 B+ A2 BBB+ BBB+ Baa3 Ba1 BBBUnrated aa2 BBBBB Unrated 97,615 152,120 122,931 372,666 Defaulted A+ AA- 64,720 8,498 73,218 Defaulted Defaulted
147. Annual Report 2017 145 Fahim Rice Mills Haji Ameer Jan Soomroo (Late) Ghari Khero Road, Usta Muhammad, District Jafarabad, Balochistan. Mr. Denim (Pvt) Limited Munir Ahmed Bhatti 53-F Industrial Estate, Main Boulevard, Mrs. Chanda Munir Kot Lakhpat, Lahore Qadeer Ahmed Abid Ali & Co. Raza Rice Mill, Dera Allah Yar Road, Khan Pur Dewan - E Khas Commercial Complex Qaddafi Stadium Lahore. Scotland Cotton Factory Near Pipli Adda Khanewal Road, Vehari. Noor Habib Textile Industries (Pvt) Limited 63-Industrial Area, Shahrah E Hamdard, Kot Lakhpat, Lahore Gulzar Industries Mazhar Maghob 68-Mozang Road Lahore, 1-E Golding Road, Lahore. Apex Corporation Office: 1-19, Arkay Square Shara-ELiaquat, Karachi Factory: Wh-4, Sector-16-B, North Karachi Ind. Area Karachi Asia Spinning Mills Suit # 12, 2Nd Floor, Shan Arcade, New Garden Town, Lahore M. Idrees Engineering Mr. Muhammad Idrees Opposite Railway Station Nishatabad, Faisalabad Bhatti Petrolium Services Mr. Muhammad Siddique Bhatti Shamki Bhattian 35-Km Multan Road, Mr. Muhammad Iqbal Bhatti Lahore Mr. Abbas Ali Bhatti Mr. Ejaz Mehmood Bhatti Mr. Fiaz Mehmood Bhatti Mr. Riaz Mehmood Bhatti United Tex 2Nd Floor, Ladies Shopping Center, Chowk Noori Building Islampur, Lahore. Mughal Paint House Nishter Road, Deepal Pur Mr. Cod Pakistan (Pvt) Limited 39-C, Ahmed Block, New Garden Town Lahore 5 6 7 8 9 10 11 12 13 14 15 16 17 18 4 Muhammad Amir Shah Muhammad Arzish Firdousi Mirza Fayyaz Ahmed Muhammad Naseer Malik Ghulam Mustafa Naseer Ahmed Iftikhar Ahmed Asif Jameel Muhammad Kashif Imran Liaquat Hassan Ali Muhammad Haroon Muhammad Faisal Ali Muhammad Aamir Muhammad Alamgir Muhamad Akram Muhammad Nisar Mrs. Musarat Akram Mrs. Tasneem Kauser Muhammad Akram Pervaiz Sh. Abdul Waheed Qadeer Ahmed Abid Ali Shahzada Alamgir Shah Fazeelat Alamgir Muhammad Tariq Javed Saad Rasool Abdul Rasheed Syed Abid Hasan Syed Mohsin Hasan Muhammad Zafar Rafiq Zainal Textile (Pvt) Limited 31-Peco Road, Township Lahore Marrel Fibre Mills (Pvt) Limited 23 - Industrial Estate, Multan Maymar Holding (Pvt) Limited Suit # 201, 2Nd Floor, Al-Khaleej Tower, Shaheed E Millat Road, BMCHS, Karachi 3 2 Haji Muhammad Aslam Rai Riaz Khan Muhammad Akram Dr. Arshad Habib Mst. Raana Ch. Dr. Ali Haider Muhammad Arshad Khalid Maqbool Name of individuals / partners / proprietors / directors Aslam Textile Mills Limited Pull Korian, Samundri Road, Faisalabad Name and Address 1 Sr. No. 35202-3411893-1 35202-6092543-9 35301-5770259-9 35201-9483529-7 35202-6610057-7 35202-9809355-1 35202-2861174-3 35202-2730063-7 35202-2487519-9 33100-6477681-9 35202-2877681-7 35402-0953728-3 35402-4913256-5 35402-5745727-4 35402-4819206-5 35402-1984679-7 42201-7830984-7 42201-7736839-7 42201-6746831-1 42201-9065885-1 42201-2942460-9 35202-2388412-5 35201-8362333-9 35202-3082500-7 35201-7407960-0 35202-0502079-6 36603-9751786-5 35202-3240443-9 53404-2157256-1 53404-1982259-7 35202-9316192-7 35202-6648935-8 53404-2907677-3 35200-1535632-9 35202-0135722-6 36302-8399251-7 36302-7860103-1 4220149549779 5440095475061 5440036011181 4220104656453 33100-0891113-3 33104-7634103-1 33100-3976619-5 33100-0949705-9 274-56-422781 35201-0121302-9 33100-9902563-5 33303-7818018-3 CNIC Number Ghulam Mohy Ud Din Nasim Ahmed Firdousi Ahmed Din Malik Muhammad Siddiqui Said Muhammad Bhatti [Deceased] Muhammad Siddique Bhatti Muhammad Siddique Bhatti Muhammad Siddique Bhatti Muhammad Siddique Bhatti Muhammad Siddique Bhatti Mr. Abdul Haq Muhammad Ashiq Muhammad Ashiq Muhammad Ashiq Jameel Ahmed Jameel Ahmed Liaquat Ali Barkat Ali Barkat Ali Hassan Ali Hassan Ali Muhammad Haroon Muhammad Marghob Noor Muhammad Noor Muhammad Muhammad Akram Muhammad Nisar Niaz Ahmed Muhammad Siddique Ameer Jan Abul Aziz Muhammad Akram Bhatti Munir Ahmed Bhatti Abdul Hakeem Syed Muhammad Shah S.Alamgir Shah Ghulam Rasool Muhammad Tariq Javed Hashim M. Shamim Syed Khaliq Hasan Syed Khaliq Hasan Haji M. Rafeeq Ch. Ahmed Din Rai Hidayat Khan Ahmed Din Habibullah Khan Muhammad Ejaz Mehr Khan Muhammad Qasim Fateh Muhammad Father / Husband Name 3,750 8,999 11,300 10,000 26,000 22,395 21,302 1,094 27,535 6,024 38,221 20,006 197,110 27,332 442,500 122,243 238,428 370,789 Principal - - - - - - - 1,620 - - - - - - - - - - Interest / Markup (Debited) 3,960 3,699 5,076 5,127 5,459 5,670 7,115 5,673 9,534 10,176 10,535 22,057 36,053 23,900 81,982 94,515 42,510 81,892 Interest / Markup (Undebited) 3,960 3,699 5,076 5,127 5,459 5,670 7,115 7,293 9,534 10,176 10,535 22,057 36,053 23,900 81,982 94,515 42,510 81,892 Interest / Markup (Total) - - - - - - - - - - - - - - - - - - Others (Debited) At the beginning - - - - - - - - - - - - - - - - - - Others (Undebited) - - - - - - - - - - - - - - - - - - 7,710 12,699 16,376 15,127 31,459 28,065 28,416 8,387 37,068 16,200 48,756 42,063 233,164 51,232 524,482 216,759 280,938 452,682 Total - - - - - - - - - - - 10,006 - 13,832 - - 77,843 182,873 Principal - - - - - - - 1,620 - - - - - - - - - - Interest / Markup (Debited) 3,510 3,649 4,876 4,949 5,459 5,670 6,916 5,567 7,691 10,176 10,256 22,057 35,553 23,900 76,982 91,759 42,510 81,892 Interest / Markup (Undebited) 3,510 3,649 4,876 4,949 5,459 5,670 6,916 7,187 7,691 10,176 10,256 22,057 35,553 23,900 76,982 91,759 42,510 81,892 Interest / Markup (total) - - - - - - - - - - - - - - - - - - Others (Debited) Written off - - - - - - - - - - - - - - - - - - Others (Undebited) - - - - - - - - - - - - - - - - - - Others (total) 3,510 3,649 4,876 4,949 5,459 5,670 6,916 7,187 7,691 10,176 10,256 32,063 35,553 37,732 76,982 91,759 120,353 264,765 Total Rupees in '000 Consolidated Financial Statements Others (Total) Annexure 'B' as ‘B’ referred in note 10.6to of the Consolidated Financial Statementsand Annexure as toreferred in Bank's noteUnconsolidated 10.6 of theand Bank’s Unconsolidated Details of loans written off of Rs. above and above Details of loans written off500,000 of Rs.and 500,000
148. 146 United Bank Limited Aust Fish Farm House # F-189,Attock City, Attock Al-Rehman Steel Industries Plot#31/7, Industrial Estate, Gadoon Amazai, Distt. Swabi. Bilal Telecom Corner Katchery Road, Opposite District Counsel Office, Sargodha Saleem Grinding Works Plot No.B-18, B-19 & B-20, Sector 1A/4, North Karachi Achee Enterprises House # 1725/19, Jafri Street, Baldia Township Karachi Crystal Grain Commission Shop Old Grain Market, Qila Didar Singh, Gujranwala. Khokhar Construction House No. 595, Street # 69, I-8.3, Islamabad Al-Hameed Cotton Ginners Mouza Bait Panuhan Tehsil Ali Pur Mian Khan Commission Shop Ghala Mandi Sheikhan, Faizabad, Tehsil & District Nankana. Masood Ahmed Maqsood Ahmed House # 23, Street No.2, Masjid Hafiz Wali, Main Bazar Paki Thathi, Samanabad, Lahore. Shazia Khan Shazia Khan A-22, Ground Floor, Hina Garden, Block-19, Gulistan-E-Jauhar, Karachi. Naseer Flour & General Mills W-547 Ratta Road, Rawalpindi Siddique Ilyas Textiles E-1, Millat Road, Link Defence Road, Lahore. Al Asar Traders Fazal Abbas Mochi Wala Mohallah, Near Lari Adda Mouza Bhowana. Muslim Packages Village Addah Daska Road, Sialkot Atacomo Industries 71 Sharah-E-Quaid-E-Azam Lahore. Muhammad Ameer Khan Basti Danwariwala Husainabad P.O Lodhran S Zafar Ullah Jan (Sufi Dairy Farm) Shaikhan Kaly Shaikhan Kaly Tehsil & Distt Peshawar S Zafar Ullah Jan (Sufi Dairy Farm) Shaikhan Kaly Shaikhan Kaly Tehsil & Distt Peshawar S Zafar Ullah Jan (Sufi Dairy Farm) Shaikhan Kaly Shaikhan Kaly Tehsil & Distt Peshawar 23 24 25 26 27 28 29 30 31 32 34 35 37 38 39 40 36 33 22 21 Muhammad Ameer Khan Hafiz Muhammad Riaz (Late) Muhammad Razzaq Muhammad Ilyas Siddique Naseer Ud Din Mian Khan Malik Abdul Hameed (Deceased) Muhammad Imran Waheed Ghulam Rasool Liaquat Ali Muhammad Imran Akram Muhammad Ayaz Jafri Muhammad Nadeem Mrs. Zubaida Begum Mrs. Seema Nadeem Muhammad Bilal Imtiaz Malik M. Fayyaz M. Ayub Malik M. Afzal Malik Ashraaf Hussain Ch. Maqsood Qadir Ch Maqsood Qadir House No.7-8, Main Alfalah Town, Badian Road, Lahore. 20 Ehsan Elahi Name of individuals / partners / proprietors / directors Artism Furniture Ehsan Plaza, Sharah-E-Quaid-EAzam, Chiniot. Name and Address 19 Sr. No. Details ofof loans written off of Rs. above and above Details loans written off500,000 of Rs.and 500,000 17301-4165050-5 17301-4165050-5 17301-4165050-5 36203-9201116-1 34601-2089414-3 33201-5944796-5 35201-5596841-9 37405-6004057-7 42301-0824488-2 35202-1648194-1 35402-7006444-3 32301-1087471-1 61101-6845611-3 34202-7700458-1 34101-2375985-7 42101-8251552-1 42201-1615920-3 42101-8954950-5 42101-1504881-6 38403-3235262-3 61101-9113263-1 37101-1960103-3 35201-84404557 33201-1656435-5 CNIC Number Sheikh Nasr Ullah Sheikh Nasr Ullah Sheikh Nasr Ullah Faqeer Muhammad Khan Hafiz Riaz Uddin Khushi Muhammad Muhammad Arif Mian Muhammad Siddique Rafiq-Ud-Din Rasheed Khan Muhammad Shareef Ahmed Ali Din Muhammad Malik Abdul Hameed Ghulam Rasool Ghulam Ali Ch.Muhammad Akram Shafqat Ullah Jafri Haji Abdul Rasheed Haji Abdul Rasheed Muhammad Nadeem Imtiaz Ahmed Malik Chiragh Din Ishtiaque Hussain Ch. Mushtaq Ahmad Allah Ditta Father / Husband Name 1,604 1,688 58 396 671 1,090 1,100 1,995 3,619 1,839 1,757 2,000 1,305 5,289 4,000 4,500 9,000 3,000 1,332 1,908 9,314 6,600 Principal - - - 509 127 - - - - - - - - - - - - - 339 - - - Interest / Markup (Debited) 3,062 3,228 1,221 25 - 764 761 833 1,182 1,130 984 1,155 1,130 1,087 1,318 1,488 1,636 1,757 2,249 2,499 3,268 3,280 Interest / Markup (Undebited) 3,062 3,228 1,221 534 127 764 761 833 1,182 1,130 984 1,155 1,130 1,087 1,318 1,488 1,636 1,757 2,588 2,499 3,268 3,280 Interest / Markup (Total) - - - - - - - - - - - - - - - - - - - - - - Others (Debited) At the beginning - - - - - - - - - - - - - - - - - - - - - - Others (Undebited) - - - - - - - - - - - - - - - - - - - - - - Others (Total) 4,666 4,916 1,279 930 798 1,854 1,861 2,829 4,801 2,969 2,741 3,155 2,435 6,375 5,318 5,988 10,636 4,757 3,920 4,407 12,583 9,880 Total - - - - 471 - - - - - - - - - - - - - - - - - Principal - - - 500 127 - - - - - - - - - - - - - - - - - Interest / Markup (Debited) 3,062 3,228 1,221 - - 687 761 783 801 819 841 1,060 1,085 1,086 1,248 1,488 1,536 1,757 2,020 2,357 3,268 3,280 Interest / Markup (Undebited) 3,062 3,228 1,221 500 127 687 761 783 801 819 841 1,060 1,085 1,086 1,248 1,488 1,536 1,757 2,020 2,357 3,268 3,280 Interest / Markup (total) - - - - - - - - - - - - - - - - - - - - - - Others (Debited) Written off - - - - - - - - - - - - - - - - - - - - - - Others (Undebited) - - - - - - - - - - - - - - - - - - - - - - Others (total) 3,062 3,228 1,221 500 598 687 761 783 801 819 841 1,060 1,085 1,086 1,248 1,488 1,536 1,757 2,020 2,357 3,268 3,280 Total Rupees in '000 Annexure 'B' as‘B’ referred in note 10.6to of in the Bank's Consolidated Financial Statements Annexure as to referred note Unconsolidated 10.6 of theand Bank’s Unconsolidated and Consolidated Financial Statements
149. Annual Report 2017 147 M /S Bismillah Cold Storage Pasrur Road, Sialkot M/S Bismillah Cold Storage Pasrur Road, Sialkot Rose Agriculture Farm Village & Po Gunnianwala Tehsil Wazirabal, Distt Gujranwala Rose Agriculture Farms Village & Po Gunnianwala Tehsil Wazirabal, Distt Gujranwala Fazal Hussain Village Pathanki, Tehsil Wazirabad, Distt Gujranwala M/S Usa Dairy Farm Muhammad Shafi Village Saidra Khurd, Ahml Pur, Tehsil & Distt Sialkot M/S Usa Dairy Farm Muhammad Shafi Village Saidra Khurd, Ahml Pur, Tehsil & Distt Sialkot Towellers Limited Ws 30-31 Block 1 Federal B Area Karachi Haq Poultry Farm Araup Village Tehsil & District Gujranwala Asad Dairy Farm Bakhray Wali Goindke Tehsil Daska Dist Sialkot Muhammad Javed Matloob Village Madina Colony Ali Pur Chatta Tehsil Wazirabad Distt Gujranwala Muhammad Hussain Village Khandoki P/O Satrah Tehsil Pasror Distt Sialkot Awais Dairy Farm Sansara Goraya Tehsil And Dist Gujranwala Awais Dairy Farm Sansara Goraya Tehsil And Dist Gujranwala Muhammad Sadique Village Qila Didar Singh Distt Gujranwala Amman Ullah Jasrat Po Chinot Chinot Jhang Fazal Abbas Village Douluwala P.O.Chiniot. Tehsil Chiniot. Jhang. Chiniot.Village Douluwala P.O.Chiniot.Tehsil Chiniot.Jhang. 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Ejaz Dying & Finishing Mills (Pvt.) Limited 10 K.M. Raiwind Road, Lahore. Pakistan 43 Fazal Abbas Amman Ullah Muhammad Sadique Muhammad Jamil Muhammad Jamil Muhammad Hussain Muhammad Javed Matloob Shamim Asad Mehar Ali Mehreen Obaid Fazal Hussain Hammad Raza Shahzad Akbar Hammad Raza Shahzad Akbar Muhammad Anjum Tariq Mehmood Muhammad Imran Muhammad Usman Muhammad Anjum Tariq Mehmood Muhammad Imran Muhammad Usman Faisal Ejaz Shanza Faisal S Zafar Ullah Jan (Sufi Dairy Farm) Shaikhan Kaly Shaikhan Kaly Tehsil & Distt Peshawar 42 Name of individuals / partners / proprietors / directors S Zafar Ullah Jan (Sufi Dairy Farm) Shaikhan Kaly Shaikhan Kaly Tehsil & Distt Peshawar Name and Address 41 Sr. No. Details ofof loans written off of Rs. above and above Details loans written off500,000 of Rs.and 500,000 3320185457681 3320151410661 34103-5910752-7 34101-8329113-3 34101-8329113-3 34601-6449082-7 34104-0628967-7 34601-9201401-1 34101-2608176-9 34603-2274178-3 34603-2274178-3 34101-2339664-7 34104-9217770-1 34104-0617752-1 34104-9217770-1 34104-0617752-1 34603-3224315-1 34603-2230793-7 34603-0767869-3 34603-2223044-9 34603-3224315-1 34603-2230793-7 34603-0767869-3 34603-2223044-9 35202-1356476-3 35202-2144959-6 17301-4165050-5 17301-4165050-5 CNIC Number Allah Yar Shah Malik Sultan Ghulam Qadir Muhammad Haleem Muhammad Haleem Allah Ditta Ch. Muhammad Matloob Chatah Raz Maula Rehmat Ali Raza Agha Bajo Bajo Umer Din Manzoor Hussain Manzoor Hussain Muhammad Tufail Shamas-ud-Din Muhammad Tufail Shamas-ud-Din Muhammad Tufail Shamas-ud-Din Muhammad Tufail Shamas-ud-Din Sheikh Ejaz Ahmed Faisal Ejaz Sheikh Nasr Ullah Sheikh Nasr Ullah Father / Husband Name 1,000 600 125 800 1,000 295 199 154 550 19,379 378 61 400 - 638 1,796 600 619,179 54 - Principal - - 737 1,186 1,395 644 612 666 1,104 - 600 940 563 2,038 1,184 2,152 1,915 - - - Interest / Markup (Debited) 659 285 1 57 41 7 17 4 28 - - - - - - 191 57 432,770 1,689 951 Interest / Markup (Undebited) 659 285 739 1,243 1,437 651 629 670 1,132 - 600 940 563 2,038 1,184 2,343 1,972 432,770 1,689 951 Interest / Markup (Total) - - - 27 - 17 27 32 27 - - - - - - - - - - - Others (Debited) At the beginning - - - - - - - - - - - - - - - - - - - - Others (Undebited) - - - 27 - 17 27 32 27 - - - - - - - - - - - Others (Total) 1,659 885 864 2,069 2,437 963 855 856 1,709 19,379 978 1,002 963 2,038 1,822 4,139 2,572 1,051,949 1,743 951 Total 1,000 600 - - - - - - - 19,379 - - - - - - - 243,179 - - Principal - - 727 1,186 1,395 614 612 656 1,104 - 539 940 553 2,038 1,022 2,152 1,915 - - - Interest / Markup (Debited) 659 285 - - - - - - - - - - - - - 191 57 432,770 1,689 951 Interest / Markup (Undebited) 659 285 727 1,186 1,395 614 612 656 1,104 - 539 940 553 2,038 1,022 2,343 1,972 432,770 1,689 951 Interest / Markup (total) - - - - - - - - - - - - - - - - - - - - Others (Debited) Written off - - - - - - - - - - - - - - - - - - - - Others (Undebited) - - - - - - - - - - - - - - - - - - - - Others (total) 1,659 885 727 1,186 1,395 614 612 656 1,104 19,379 539 940 553 2,038 1,022 2,343 1,972 675,949 1,689 951 Total Rupees in '000 Annexure as to referred note Unconsolidated 10.6 of theand Bank’s Unconsolidated and Consolidated Financial Statements Annexure 'B' as‘B’ referred in note 10.6to of in the Bank's Consolidated Financial Statements
150. 148 United Bank Limited Allah Nawaz Malik Allah Nawaz Malik Al Mustafa 1378 /A Akbar Road Multan Hafeez Ahmad Khan Chak No.537/Eb Vehari Muhammad Asghar Chak No.190/Wb P.O Garha Mor Tehsil Melsi Distt. Vehari Muhammad Nasir Khan Mouza Badh Ghulam Vehari Muhammad Baligh-Ur-Rehman Mouza Allahbad Vehari Mohammad Asim Chak # 21 Nb Po Bhalwal Tehsil Bhalwal District Sargodha Khalid Poultry Farms Ghouri Malauan P/O Bhadiana Main Pasroor Road Distt. Sialkot Jamal Muhammad Chah Baghwalarana Wahanpo Chadhar Waladist Multan Malik Fida Hussain Basti Ghallo Nagar Mouza Sabra Jalalpur Pirwala Multanbasti Ghallo Nagarmouza Sabrajalalpur Pirwala Zahoor Ahmad Khan Basti Pipal Wala Mouza Sals Adar Teh. & Distt. Lodhran Muhammad Azhar Muhammad Azhar Chak No 111/6R P/O Faqir Wali, Teh Haroon Abad, Bahawal Nagar Muhammad Arshad & M Asghar Chak No 173/M Po Chak No, 172/M Chishtian, Bahawalnagar Syed Sadiq Hussain Shah Village Abid Da Kot, P.O Jogay Kot Naubahar, Tehsil & District Nankana Sahib Habib Ahmed Chak No 52 Jb Faisalabad Muhammad Hanif Khan Khairpur P.O Sandral Muhammad Shakoor Village Baroky P/O Gunna Kalan Tehsil & Distt. Sialkot Ashiq Hussain Vpo Shani Gondal Tehsil & Distt. Sialkot Abdul Waheed Village Pindi Bajwa P/O Kul Bajwa Sialkot Muhammad Pervaiz Jandiala Dabwala Tehsil Wazirabad Distt. Gujranwal Ali Muhammad Village Panj Garayan Tehsil Wazirabad Distt. Gujranwal Muhammad Nawaz Chak#111/6R Haroonabad 64 65 67 70 71 72 73 74 75 76 77 80 81 82 83 84 79 78 69 68 66 Mr Khursheed Ahmed Saif Pur P/O Maan Kot, Tehsil Kabir Wala Distt. Khanewal 63 Muhammad Nawaz Ali Muhammad Muhammad Pervaiz Abdul Waheed Ashiq Hussain Muhammad Shakoor Muhammad Hanif Khan Habib Ahmed Syed Sadiq Hussain Shah Muhammad Arshad & M Asghar Zahoor Ahmad Khan Malik Fida Hussain Jamal Muhammad Khalid Ijaz Mohammad Asim Muhammad Baligh-Ur-Rehman Muhammad Nasir Khan Muhammad Asghar Hafeez Ahmad Khan Mr Khursheed Ahmed Muhammad Hassan Shah Mohammad Hassan Shah Village Pinyo Khidry P.O Udero Lal, Tando Adam, Matyari 62 Intekhab Haider & Hasina Akhta Name of individuals / partners / proprietors / directors Intekhab Haider & Hasina Akhta Ada Mehmood Kot Teh.Ahmad Pur Sial Distt.Jhang Name and Address 61 Sr. No. Details ofofloans written off of Rs. above and above Details loans written off 500,000 of Rs. and 500,000 3110416714815 3410423335851 3410402728359 3460395191441 3460399852003 3460304694077 3820111828305 3310055828323 3520279980065 3110273792715 3110416714747 3620317843853 3630108478945 3630332694915 3460371903653 3840138019495 3630264385381 3660382099501 3660263636735 3660314114187 3630204438739 3610234837985 4130531783747 3320214177845 CNIC Number Asgher Ali Nawab Din Faiz Ahmed Abdul Rashid Bahawal Baksh M.Alam Khizer Hayat Fazal Ilahi Syed Dewaan Ali Shah M. Ali Azher Piran Ditta Khan Malik Mureed Hussain Malik Ghulam Haider M.Ijaz Muhammad Zargam Khan Khakwani Muhammad Ahmad Fathe Muhammad Fazal Ahmad Shabbir Ahmed Rab Nawaz Manzoor Hussain Haji Noor Muhammad Safdar Ali Khan Father / Husband Name 402 500 500 450 459 400 475 420 470 7,491 1,000 1,000 800 731 700 600 4,000 1,000 1,000 682 1,900 1,300 776 1,770 Principal - - - - - - - - - - - - - - - - - - - - - - - - Interest / Markup (Debited) 171 284 143 214 194 190 271 239 268 4,271 480 570 456 - 410 341 1,903 570 570 458 1,372 721 439 891 Interest / Markup (Undebited) 171 284 143 214 194 190 271 239 268 4,271 480 570 456 - 410 341 1,903 570 570 458 1,372 721 439 891 Interest / Markup (Total) - - - - - - - - - - - - - - - - - - - - - - - - Others (Debited) At the beginning - - - - - - - - - - - - - - - - - - - - - - - - Others (Undebited) - - - - - - - - - - - - - - - - - - - - - - - - Others (Total) 572 784 642 664 653 590 746 659 738 11,762 1,480 1,570 1,256 731 1,110 941 5,903 1,570 1,570 1,140 3,272 2,021 1,215 2,662 Total 402 500 500 450 409 400 475 420 470 7,491 1,000 1,000 800 731 700 600 4,000 1,000 1,000 682 1,900 1,300 776 1,770 Principal - - - - - - - - - - - - - - - - - - - - - - - - Interest / Markup (Debited) 171 284 143 214 194 190 271 239 268 4,271 480 570 456 - 421 341 1,903 570 570 458 1,372 721 439 891 Interest / Markup (Undebited) 171 284 143 214 194 190 271 239 268 4,271 480 570 456 - 421 341 1,903 570 570 458 1,372 721 439 891 Interest / Markup (total) - - - - - - - - - - - - - - - - - - - - - - - - Others (Debited) Written off - - - - - - - - - - - - - - - - - - - - - - - - Others (Undebited) - - - - - - - - - - - - - - - - - - - - - - - - Others (total) 572 784 642 664 603 590 746 659 738 11,762 1,480 1,570 1,256 731 1,121 941 5,903 1,570 1,570 1,140 3,272 2,021 1,215 2,662 Total Rupees in '000 Annexure as referred toof in 10.6 of the and Bank’s Unconsolidated and Consolidated Financial Statements Annexure 'B' as‘B’ referred to in note 10.6 the note Bank's Unconsolidated Consolidated Financial Statements
151. Annual Report 2017 149 Muhammad Ishfaq Chah Bihari Wala Mouza Fateh Pur Lodhran Dunya Pur Waseem Sajjad Basti Allah Rassi , Ranipur, Lodhran Asif Iqbal Chak No. 163/9-L Sahiwal Muhammad Ramzan Ramzan House Chowk Latifabad Mouza Noshehra Arrey Wahan Muhammad Azeem Muhammad Azeem Chak No.162/9-L Sahiwal Tajamal Hussain & M Tanveer Tajamal Hussain & M Tanveer Chak No.45/5-L Sahiwal Muhammad Yaseen Malik Muhammad Yaseen Malik Uper Story H No 1775/3-A Tariqabad Multan Iqbal Ahmed E/47 Ward No 9 Railway Streekal Colony Sukkur Zulfiqar Ahmed H No 1316 Circular Road Muhalla Kamharan Sambrial Sialkot Syed Arsalan Ali Fl No L-409 Rufi Lake Drive Block 19 Gulistan-E-Johar Karachi Muhammad Faheem 258-25-, Eid Gha Colony Unit Nu 8, Block C-2 Near ShakranI Muhammad Qayoum Muhammad Qayoum H No 102/1 Sector 11-D New Karachi Hamid Ali Dahro Banglow No 10/142 State Bank Defence Hyderabad Zeeshan Habib H # 1 Habib House Khyber Colony Muhammad Naveed Ashraf H No B-I-937/7-E-5 St No 2 Muslim Town Sadiqabad Rawalpindi Adeel Rauf H No 53 St No 26 As Muhalla Rah Galla Wala Muhammad Saleem Muhammad Saleem Plot No.11 1St Floor,St. No.3 Faqeera Goth,Near New Sabzi Mandi Scheme 33 ,Karachi. Ishtiaq Hussain Ishtiaq Hussain H No 2197/C4 Qadri Street Humayun Road Near Khayam Cinema Multan Javed Akhter Po Thatha Langar Kot Nakka Sangla Hill Road Ansar Butt Qamar Sialvi Road Allah Lok Colony Mohammad Akbar H No A-03-A/2 Phase 2 DHA 88 89 90 92 95 96 97 98 99 100 101 103 104 105 106 107 108 102 94 93 91 Muhammad Ashraf Muhammad Ashraf Ward No. 11 Tehsil & District Lodhran 87 Mohammad Akbar Ansar Butt Javed Akhter Adeel Rauf Muhammad Naveed Ashraf Zeeshan Habib Hamid Ali Dahro Muhammad Faheem Syed Arsalan Ali Zulfiqar Ahmed Iqbal Ahmed Muhammad Ramzan Asif Iqbal Waseem Sajjad Muhammad Ishfaq Dilshad Ali Dilshad Ali S/O Jamshed Ali H. No. 661, Ward No. 11 Tehsil & District Lodhran. 86 Name of individuals / partners / proprietors / directors Waqas Khan Waqas Khan Mohalla Pepal Wala, P/O Khas Tehsil & District Lodhran. Name and Address 85 Sr. No. Details loans written off 500,000 of Rs. and 500,000 Details ofofloans written off of Rs. above and above 4230114437319 3420103516571 3430212510955 3630221316475 5340569956991 3520221672209 3740503628789 1110114324603 4130331677855 4210114383191 4130495233591 4210115995787 3460107615515 4330337159641 3630220941363 3650275041393 3650174189981 3660209812991 3650146130065 3620301865517 3620135051101 3620317804647 3620394690133 3620317843877 CNIC Number Zia Ul Islam Jaffery Abdul Majeed Butt Akhter Mushtaq Hussain Saleem Rauf Ashraf Ali Chaudhr Habib Muhammad Nawaz Dahro M Raees Nasir Intikhab Ali Muhammad Sharif Manzoor Ahmed Mahar Muhammad Ramzan Muhammad Shafiq Muhammad Shafi Ghulam Muhammad Abdul Sattar Abdul Ghafoor Muhammad Boota Jamshed Ali Jamshed Ali Zahoor Ahmad Khan Father / Husband Name 560 502 949 605 562 1,039 711 1,112 517 521 638 540 502 546 501 497 471 427 350 475 475 450 450 450 Principal 52 26 - - - - - - - - - - - - - - - - - - - - - - Interest / Markup (Debited) - - - - - - - - - - - - - - - 237 224 167 231 271 271 257 256 244 Interest / Markup (Undebited) 52 26 - - - - - - - - - - - - - 237 224 167 231 271 271 257 256 244 Interest / Markup (Total) - - - - - - - - - - - - - - - - - - - - - - 7 3 Others (Debited) At the beginning - - - - - - - - - - - - - - - - - - - - - - - - Others (Undebited) - - - - - - - - - - - - - - - - - - - - - - Others (Total) 7 3 618 531 949 605 562 1,039 711 1,112 517 521 638 540 502 546 501 734 695 593 581 746 746 707 706 694 Total 560 502 949 605 562 1,039 711 1,112 517 521 638 540 502 546 501 497 471 427 350 475 475 450 450 450 Principal 52 26 - - - - - - - - - - - - - - - - - - - - - - Interest / Markup (Debited) - - - - - - - - - - - - - - - 237 224 167 236 271 271 257 256 244 Interest / Markup (Undebited) 52 26 - - - - - - - - - - - - - 237 224 167 236 271 271 257 256 244 Interest / Markup (total) - - - - - - - - - - - - - - - - - - - - - - 7 3 Others (Debited) Written off - - - - - - - - - - - - - - - - - - - - - - - - Others (Undebited) - - - - - - - - - - - - - - - - - - - - - - Others (total) 7 3 618 531 949 605 562 1,039 711 1,112 517 521 638 540 502 546 501 734 695 593 586 746 746 707 706 694 Total Rupees in '000 Annexure as referred toof in 10.6 of the and Bank’s Unconsolidated and Consolidated Financial Statements Annexure 'B' as‘B’ referred to in note 10.6 the note Bank's Unconsolidated Consolidated Financial Statements
152. 150 United Bank Limited Prince Salim Khan Prince Salim Khan H No 82 Margalla Road F-6 /2 Ali Gohar Ali Gohar Flat No F-9 4Th Floor Bara Dari Apartment 13-D Block Gulshan E Iqbal Atiq Ur Rehman H No 1 St No 27 F-8/1 Inayat Ullah Khan H No 590,St No 80/89 Sector No 3 Gulshanabad Adyala Road Khalid Zafar Khalid Zafar House 976, Street 92, I-8/4, Arif Khan Arif Khan Bannu House Nawan Sher Link Road Nawan Sher Raj Kumar Mudassar Maqbool Mudassar Maqbool H # 48, Block D-2, Wapda Employess Housing Society Lahore Pak 54000 Shamim Akhter Qureshi Shamim Akhter Qureshi Flat No 305 Sammar Classic Block H North Nazimabad Near Zia Uddin Hospital Karachi. Mohammad Shehzad Raza House No. 617, Nargis Block, Allama Iqbal Town Lahore Pak 54000 Deeba Ghaffar H # P-332, St. # 14, Model Town-B, Faisalabad Faisalabad Pak 38000 Zafar Ullah Khan Zafar Ullah Khan H # 123, Block H,Model Town Society, Lahore Lahore Pak 54000 Saeed Ahmad Sas Logistics Suit No 7 Nawaz Plaza 2Nd Floor Girl College Road Faisalabad Mohammad Asghar Tabbasum 22-G Dha Phase I Commercial Area Lahore Sohail Mukhtar House No. 16, Block Gg, Phase-4, Dha Lahore Pak 54000 Ghullam Muhy Ud Din Ghullam Muhy Ud Din H # 229, Block Q, Model Town Extension Scheme, Lahore Pak 54000 Azim Adil Shaikh Bungalow # 22/Ii Khayaban-E-Tariq, Phase Vi Dha Karachi Pak Liaqat Hussain H No 24-K Kb Colony New Airport Road Lahore Syed Qamar Abbas Jaffri House No: 104/1, 25Th Street Off Khayaban-E-Muhafiz, Phase 6, Dha. 112 114 116 118 119 120 121 122 123 124 125 127 128 129 130 126 117 115 113 Rubina Badar House No 71 B Kashana Hydri Peoples Colony Mumtazabad Multan 111 Syed Qamar Abbas Jaffri Liaqat Hussain Lahore Azim Adil Shaikh Sohail Mukhtar Mohammad Asghar Tabbasum Saeed Ahmad Deeba Ghaffar Mohammad Shehzad Raza Raj Kumar Inayat Ullah Khan Atiq Ur Rehman Rubina Badar Rana Shahid Mehmood Rana Shahid Mehmood H No 1 Bahawalpur Road Qasimpur Colony , 110 Hamid Ali Name of individuals / partners / proprietors / directors Hamid Ali H No G-601-A St No 10 Dav College Road Name and Address 109 Sr. No. Details ofof loans written off of Rs. above and above Details loans written off500,000 of Rs.and 500,000 4230184440791 3610220603039 4250179137247 3520230216563 3520226542435 3520165898161 3310043265117 3520230102803 3310004551212 3520290361127 4210115534837 3520263528457 4410435803531 1310116761055 3740522161161 7150157618331 6110119731513 5150572229631 7150273727585 4230134843626 3630229314577 3740502513013 CNIC Number Syed Shamsheer Haider M Saeed Ahmad Sheikh Rehmat Ullah Mukhtar Ahmad Ghullam Ali Bashir Ahmed Mian Akbar Ali (Late) Abdul Ghaffar Mohammad Yahya Late Abdus Salam Quraishi Maqbool Ahmed Nandlal Farzand Ali Khan Zafar Ahmed Hamayat Ullah Khan Mohammad Ishtiaq Alam Khan M G Ali Khan Asim Gilani Rana Noor Ul Hassan Abdul Majeed Father / Husband Name 25,449 4,894 15,654 1,089 5,525 1,605 736 2,279 836 396 1,862 8,757 12 497 498 496 75 999 228 439 445 449 Principal 14,790 10,917 13,312 2,564 6,103 6,910 664 15,095 572 2,476 1,271 9,222 - 60 44 56 63 76 62 61 46 61 Interest / Markup (Debited) - - - - - - - - - - - - - - - - - - - - - - Interest / Markup (Undebited) 14,790 10,917 13,312 2,564 6,103 6,910 664 15,095 572 2,476 1,271 9,222 - 60 44 56 63 76 62 61 46 61 Interest / Markup (Total) 90 381 775 225 372 319 192 517 196 306 255 325 321 12 10 15 395 6 263 18 29 7 Others (Debited) At the beginning - - - - - - - - - - - - - - - - - - - - - - Others (Undebited) 7 90 381 775 225 372 319 192 517 196 306 255 325 321 12 10 15 395 6 263 18 29 Others (Total) 40,330 16,192 29,741 3,877 12,000 8,835 1,592 17,891 1,604 3,179 3,387 18,304 332 568 552 567 534 1,082 553 518 521 517 Total - - - - - - - - - - - 1,687 - 497 498 496 75 999 228 439 445 449 Principal 15,764 11,057 13,649 2,604 5,582 6,934 664 15,061 574 2,485 1,288 9,287 355 60 44 56 63 76 62 61 46 61 Interest / Markup (Debited) - - - - - - - - - - - - - - - - - - - - - - Interest / Markup (Undebited) 15,764 11,057 13,649 2,604 5,582 6,934 664 15,061 574 2,485 1,288 9,287 355 60 44 56 63 76 62 61 46 61 Interest / Markup (total) 90 151 103 126 89 143 81 129 125 136 75 129 252 12 10 15 395 6 263 18 29 7 Others (Debited) Written off - - - - - - - - - - - - - - - - - - - - - - Others (Undebited) 7 90 151 103 126 89 143 81 129 125 136 75 129 252 12 10 15 395 6 263 18 29 Others (total) 15,854 11,208 13,752 2,730 5,672 7,077 745 15,190 700 2,621 1,364 11,103 607 568 552 567 534 1,082 553 518 521 517 Total Rupees in '000 Annexure as to referred note Unconsolidated 10.6 of theand Bank’s Unconsolidated and Consolidated Financial Statements Annexure 'B' as‘B’ referred in note 10.6to of in the Bank's Consolidated Financial Statements
153. Annual Report 2017 151 Qasier Ali H # 6/7, Chamba House Lane, Opp Race Course, Lahore Pak 54000 Shahid Aslam Shahid Aslam H # 149, Block B, Rechs, Lahore Pak 54000 Imran Younas Imran Younas House No. 53-B, Main Fazal Park, Street Masjid Fazal Rabi, Shad Bagh, Lahore Pak 54000 Shahid Aslam Shahid Aslam H # 149, Block B, Rechs, Lahore Pak 54000 Amt Ul Noor P/108 St No 4 Al-Masoom Town Faisalabad Zahid Pervaiz Zahid Pervaiz H # P-174,St # 2, Part 1,Scheme 212, Sir Syed Town,Faisalabad Javed Akhtar Javed Akhtar H No 81-A Block A Officers Colony No 2 Madina Town Faisalabad Ghulam Shabbir Galal H No B-335 Phase 2 Gulshan-EHadeed Bin Qasim Karachi Syed Saeed Akhtar Abedi H No 14 2Nd Floor St No 92 I-8/4 Islamabad Muhammad Riaz H No A-292 Block 3 Gulshan-E-Iqbal Muhammad Umer Muhammad Umer Umer And Nasir Cloth House Shop No 66-67 Lahore Block Azam Cloth Mkt Lahore Muhammad Abdul Sala Khan D-376 Navi Housing Scheme Zamzama Clifton Karachi Karachi Manzoor Qadir Qadiri International Shop No: 4 1St Floor Teerandaz Market Bull Road Adjuscent Brandrath Road Lahore Zahid Riaz Sardar Zahid Riaz Sardar H No 07 St No 01 Army Officers Colony Morgah Rawalpindi/Islamabad Fawad Akram Sufi 94-N Model Town Extention Upper Portion Lahore Lahore Parvez Ali Jat Maratab Old Tracter Parts Sanghar Road Jamali Market ,Nawabshah Saadat Rafiq Saadat Rafiq H No S-13-S 8Th Sunset Dha Phase 2 Ext Karachi Akram Khurshid H.No. 6, St No. 15, F-6/3, Islamabad Muhammad Saeed Muhammad Saeed Saeed Oil Merchants 100 Liaqat Road Liaqat Market ,Sargodha 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 Akram Khurshid Parvez Ali Jat Fawad Akram Sufi Manzoor Qadir Muhammad Abdul Sala Khan Muhammad Riaz Syed Saeed Akhtar Abedi Ghulam Shabbir Galal Amt Ul Noor Qasier Ali Syed Kamran Mukhtar Syed Kamran Mukhtar H No 40 Phase 2 Defence Officers Housing Scheme Malir Cantt Near Race Course Karachi. 132 Riyaz H Usman Name of individuals / partners / proprietors / directors Riyaz H Usman H No 19/5-A Muhammad Ali Housing Society Opp Awami Markaz Name and Address 131 Sr. No. Details ofof loans written off of Rs. above and above Details loans written off500,000 of Rs.and 500,000 3840332558069 6110119169297 4230198407131 4540229935115 3520217803975 3740555131757 3520251037737 4220185393419 3520224070631 4220184162293 6110196286917 4250182088439 3310074447609 3310022790773 3310005660174 3520228272135 3520112874997 3520228272135 3520280168775 4250111654289 4230180695865 CNIC Number Abdul Ahad Dar A Rasheed Khan Muhammad Ishfaq Abdul Razzak Syed Akhtar Hussain Rahib Ali Abdul Aziz Muhammad Shafi Wasim Ahmad Tariq Muhammad Aslam Muhammad Younas Muhammad Aslam M Aslam Syed Mukhtar Ahmed H.Usman Father / Husband Name 471 466 154 433 206 167 4,518 1,518 2,627 3,384 3,969 1,017 6,805 2,739 4,983 4,027 9,421 4,027 1,693 682 9,668 Principal 374 566 513 687 677 625 7,630 1,575 2,590 2,594 4,363 917 5,536 2,776 7,504 4,354 5,138 4,354 4,545 6,351 11,364 Interest / Markup (Debited) - - - - - - - - - - - - - - - - - - - - - Interest / Markup (Undebited) 374 566 513 687 677 625 7,630 1,575 2,590 2,594 4,363 917 5,536 2,776 7,504 4,354 5,138 4,354 4,545 6,351 11,364 Interest / Markup (Total) 45 64 96 110 65 103 281 138 274 375 412 274 605 309 402 384 466 384 301 170 656 Others (Debited) At the beginning - - - - - - - - - - - - - - - - - - - - - Others (Undebited) 45 64 96 110 65 103 281 138 274 375 412 274 605 309 402 384 466 384 301 170 656 Others (Total) 890 1,096 763 1,230 948 895 12,429 3,232 5,492 6,353 8,743 2,208 12,946 5,824 12,890 8,765 15,026 8,765 6,538 7,202 21,687 Total 94 76 136 103 105 80 - - - - - - - - - - - - - - - Principal 388 571 523 691 678 628 7,740 1,707 2,264 1,234 4,220 963 5,853 2,904 7,728 4,530 5,498 4,530 4,579 6,332 11,629 Interest / Markup (Debited) - - - - - - - - - - - - - - - - - - - - - Interest / Markup (Undebited) 388 571 523 691 678 628 7,740 1,707 2,264 1,234 4,220 963 5,853 2,904 7,728 4,530 5,498 4,530 4,579 6,332 11,629 Interest / Markup (total) 45 61 55 66 65 67 180 138 139 133 156 130 127 116 121 139 115 139 119 110 139 Others (Debited) Written off - - - - - - - - - - - - - - - - - - - - - Others (Undebited) 45 61 55 66 65 67 180 138 139 133 156 130 127 116 121 139 115 139 119 110 139 Others (total) 527 708 714 859 848 775 7,920 1,846 2,403 1,367 4,376 1,093 5,980 3,020 7,848 4,669 5,613 4,669 4,698 6,443 11,768 Total Rupees in '000 Annexure 'B' as‘B’ referred in note 10.6to of in the note Bank's Unconsolidated Consolidated Financial Statements Annexure as to referred 10.6 of theand Bank’s Unconsolidated and Consolidated Financial Statements
154. 152 United Bank Limited Muhammad Saleem Shamsi Sohaib Traders Shop No 12A ,Manzoor Square Noman Street, Plaza Quarters Karachi Muhammad Shan M Shan Material Store Qadar House 38-B Shahalam Mkt Standard Chartard Aqeel Muzaffar Ali Road Muhallah Ahata Aabqari Sharaqpur Sharif District Sheiekhupura Naveed Ahmad Sulehria Naveed Ahmad Sulehria House No. 94-J, Near Firdous Market, Gulberg-III Lahore. Muhammad Kamran H No 1824 Anarkali Bazar Muhammad Waqas H No 73 St No 2 Madina Colony Akram Park Shadbagh Asif Zafar Chaudhry Zafar Stationers Hatti Chowk Saddar Rawalpindi Gauhar Rehman Gauhar Rehman State Life Building 8 Ist Floor Kashmir Road Saddar Cantt Near Mobilink Rawalpindi Farhan Baber Askari Automobile Engineering 29-C Pcsir Co Operative Staf Soiciety, Main College Road, Lahore Javed Ahmed Javed Ahmed M/S Pir Sarfaraz Ahmed A-81 4Th Floor Habib Chamber Blk 14 Gulshan E Iqbal ,Karachi Khalique Mehmood Ksc-516 Pmb Colony (Pak Muslim Barma Colony) Mauripur Road Karachi Muhammad Rafi H No 120 Nishtar Block Allama Iqbal Town Amir Rauf H No 352-A St No 12 Taj Colony Abdul Jabbar H No 60/V Farid Town Muhammad Sarwar H No 2-Z-A St No A Madina Town Ijaz Ahmad Adda Noor Pur Muhammad Asif H No P-47 St No 6 Muhammad Pura Nr Jamia Masjid Mubarik Ahl E Hadis Muhammad Aslam Taj Hardware Store P-46 Sonehri Town Satiana Road Faisalabad 155 156 157 158 159 161 162 163 164 165 166 167 172 171 170 169 168 160 Shoukat Umer Shoukat Umer Commersial Corporation Shop No.10 Manzoor Square Noman Street Plaza Quarter Karachi. 154 Muhammad Aslam Muhammad Asif Ijaz Ahmad Muhammad Sarwar Abdul Jabbar Amir Rauf Muhammad Rafi Khalique Mehmood Farhan Baber Asif Zafar Chaudhry Muhammad Waqas Muhammad Kamran Aqeel Muhammad Shan Muhammad Saleem Shamsi Baz Muhammad Khan Baz Muhammad Khan Bm Trading Co Off # 5022 M Ashoor Building Namak Mandi,Ubl ,Peshawar 153 Name of individuals / partners / proprietors / directors Muhammad Alamgir Khan Muhammad Alamgir Khan E-22/10-B St No 7 Arain Lane Officers Colony Lahore Name and Address 152 Sr. No. Details ofof loans written off of Rs. above and above Details loans written off500,000 of Rs.and 500,000 3310007576403 3310006189637 3640207849471 3310007230687 3530119100525 3310007221079 3630213330613 4230154308397 4200031384883 3520014545185 3740540435099 3740595427543 3520282070533 3110162500699 3520201806249 3540115709465 3520258691569 4220106947735 4210165769335 1730114403467 3520114427277 CNIC Number Muhammad Ashraf Ghulam Murtaza Urf Mohsin Choudhry Ali Ahmad Ch Khusi Muhammad Allah Yar Abdul Rauf Abdul Rasheed Father / Husband Name 602 598 722 502 600 501 501 982 410 398 308 438 396 470 325 336 368 370 373 478 255 Principal - - - - - - - 701 473 400 430 487 302 508 367 363 429 399 439 547 391 Interest / Markup (Debited) - - - - - - - - - - - - - - - - - - - - - Interest / Markup (Undebited) - - - - - - - 701 473 400 430 487 302 508 367 363 429 399 439 547 391 Interest / Markup (Total) - - - - - - - 143 102 51 83 96 74 110 44 72 49 90 97 63 38 Others (Debited) At the beginning - - - - - - - - - - - - - - - - - - - - - Others (Undebited) - - - - - - - 143 102 51 83 96 74 110 44 72 49 90 97 63 38 Others (Total) 602 598 722 502 600 501 501 1,827 986 849 821 1,021 772 1,088 737 771 846 859 909 1,087 684 Total 602 598 722 502 600 501 501 182 44 115 85 - 106 - 95 98 138 109 110 142 73 Principal - - - - - - - 878 546 455 476 504 365 571 404 407 461 427 467 572 400 Interest / Markup (Debited) - - - - - - - - - - - - - - - - - - - - - Interest / Markup (Undebited) - - - - - - - 878 546 455 476 504 365 571 404 407 461 427 467 572 400 Interest / Markup (total) - - - - - - - 96 58 51 48 56 39 61 44 45 48 48 53 63 38 Others (Debited) Written off - - - - - - - - - - - - - - - - - - - - - Others (Undebited) - - - - - - - 96 58 51 48 56 39 61 44 45 48 48 53 63 38 Others (total) 602 598 722 502 600 501 501 1,156 648 620 609 560 510 632 543 549 647 584 630 776 512 Total Rupees in '000 Annexure as referred 10.6 of theand Bank’s Unconsolidated and Consolidated Financial Statements Annexure 'B' as‘B’ referred to in note 10.6to of in the note Bank's Unconsolidated Consolidated Financial Statements
155. Annual Report 2017 153 Syed Afzal Muhammad M /S Macca Traders Plot No 4/759 Ground Floor Block 4 Shah Faisal Colony Karachi Sameera Wasif, H No 25 Block A Masson Road Lahore Sheikh Muhammad Saleem H No 983 Sector A/3 Gali No 47 Saeedabad Baldia Town ,Karachi Mukhtiyar Ali H No 586 Sher Waz Gali Street 2 Firdous Colony ,Hyderabad Muhammad Ali Muhammad Ali Ali Bearing Shop 979 Ali Bearing Gari Khata ,Hyderabad Manjeet Singh Manjeet Singh 111-108, Moon Valley Hotel Appartment, Khalid Bin Al Waleed St. (Bank St.), Bur Dubai, Dubai, UAE Rajesh Kumar Gangaram P.O. Box:51744 Dubai,UAE Muhammad Akram P.O.Box # 380483, Sharjah-U.A.E Anil Kumar P.O.Box 241585 Dubai- U.A.E Ali Sultan Abdulla Saeed P.O. Box:16204 Alain,U.A.E Marina Bagunu Eatan P.O. Box 2144,Dubai,U.A.E Falipinas Roque Casaje P.O. Box 25311,Dubai,U.A.E Peer Mohammad P.O. Box 1700,Al Ain,U.A.E Mohammed Adel Ahmed M. Hamam P.O. Box 1038,Dubai,U.A.E 176 177 178 179 180 181 182 189 188 187 186 185 184 183 Muhammad Ahmed Grace Mobile 6 Qadri Chember Hall Road Lahore 175 Mukhtiyar Ali Sheikh Muhammad Saleem Sameera Wasif, Syed Afzal Muhammad Muhammad Ahmed Iftikhar Ahmad Iftikhar Ahmad Anum Shoes Company F-2712,Moti Bazar Inside Masti Gate Lahore. 174 Riaz Hussain Name of individuals / partners / proprietors / directors Riaz Hussain H. No. 1648, Bilal Colony, Moh. Noor Shah Bukhari, Ahmed Pur East. Name and Address 173 Sr. No. Details ofof loans written off of Rs. above and above Details loans written off500,000 of Rs.and 500,000 4130397260561 4130307291315 4240195360699 3520276594404 4220102717977 3520278245517 3520229354941 3120150849561 CNIC Number Sardar Mohan Singh Wasif Rasheed Syed Noor Muhammad Muhammad Yousaf Muhammad Hussain Muhammad Bakhsh Father / Husband Name 2,572,545 - - - - - - 386 677 72,085 501 503 501 500 502 501 501 784 Principal 191,784 2,121 919 689 945 - - 172 48 2,788 - - - - - - - - Interest / Markup (Debited) 943,332 - - - - - - - - - - - - - - - - - Interest / Markup (Undebited) 1,135,116 2,121 919 689 945 - - 172 48 2,788 - - - - - - - - Interest / Markup (Total) 12,287 - - - - - - 58 34 - - - - - - - - - Others (Debited) At the beginning - - - - - - - - - - - - - - - - - - Others (Undebited) 12,287 - - - - - - 58 34 - - - - - - - - - Others (Total) 3,719,947 2,121 919 689 945 - - 617 760 74,872 501 503 501 500 502 501 501 784 Total 627,618 2,121 904 611 866 515 535 642 817 12,779 501 503 501 500 502 501 501 784 Principal 188,520 - - - - - - - - 2,788 - - - - - - - - Interest / Markup (Debited) 929,961 - - - - - - - - - - - - - - - - - Interest / Markup (Undebited) 1,118,481 - - - - - - - - 2,788 - - - - - - - - Interest / Markup (total) 5,507 - - - - - - - - - - - - - - - - - Others (Debited) Written off - - - - - - - - - - - - - - - - - - Others (Undebited) 5,507 - - - - - - - - - - - - - - - - - Others (total) 1,751,606 2,121 904 611 866 515 535 642 817 15,567 501 503 501 500 502 501 501 784 Total Rupees in '000 Annexure 'B' as‘B’ referred to in note 10.6to of in the note Bank's Unconsolidated Consolidated Financial Statements Annexure as referred 10.6 of theand Bank’s Unconsolidated and Consolidated Financial Statements
156. Annexure ‘C’ as referred to in note 11.7 of the Bank’s Annexure 'C' as referred to in note 11.7 of the Bank's Unconsolidated FinancialStatements Statements Unconsolidated Financial Disposals of operating fixed assets during the year 2017 Cost Items having book value of more than Rs. 250,000 or cost of more than Rs. 1,000,000 Land & Building Freehold Land Plot No 16 Jhelum Accumulated Book Sale depreciation value proceeds --------------(Rupees in '000)-------------- Mode of disposal 13,413 - 13,413 15,000 Auction 9,545 27,961 2,605 6,206 1,084 1,370 1,389 1,389 1,389 1,511 1,502 1,453 1,453 1,453 1,453 1,453 1,460 1,453 1,453 1,453 1,502 1,502 1,510 1,502 1,489 1,502 1,502 1,570 1,581 7,731 25,165 1,993 5,585 650 1,233 1,250 1,250 1,250 1,360 1,352 1,308 1,308 1,308 1,308 1,308 1,314 1,308 1,308 1,308 1,502 1,502 1,510 1,502 1,340 1,352 1,502 1,413 1,423 1,814 2,796 612 621 434 137 139 139 139 151 150 145 145 145 145 145 146 145 145 145 149 150 157 158 3,866 10,000 1,578 2,566 720 994 917 981 979 1,166 1,177 1,135 1,010 1,001 1,090 1,057 1,151 1,114 1,071 1,123 1,101 1,189 1,097 1,089 1,124 1,172 1,140 1,105 1,297 Buy Back Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction 82,695 73,643 9,052 45,010 1,039 1,014 1,014 1,014 1,014 1,782 1,954 8,831 1,039 1,014 1,014 1,014 1,014 1,782 1,954 8,831 - 65 65 65 65 65 850 300 1,475 1,970,159 1,969,530 629 19,544 2,075,098 2,052,004 23,094 81,029 Particulars of Buyers Mr.Naseer Ahmed Vehicles ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### Mercedes Benz E 200 Mercedes Benz S500L Honda Civic VTEC Honda Accord Suzuki Cultus VXRi Suzuki APV Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Electrical, office and computer equipment ATM Machine ATM Machine ATM Machine ATM Machine ATM Machine Generator Generator Items having book value of less than Rs. 250,000 and cost of less than Rs. 1,000,000 Others Total 154 United Bank Limited Auction Auction Auction Auction Auction Auction Auction Syed Javed - Employee Asim Iqbal Zia Ul Haq Asim Iqbal UBL Insurers Limited Saeed Ur Rehman Nusrat Iqbal Muhammad Atif Essani Muhammad Arif Said Faqir Wasim Mirza Numeri Abrar Muhammad Atif Essani Muhammad Atif Essani Muhammad Atif Essani Isha Enterprises Said Faqir Numeri Abrar Saleem Ahmed Siddiqui Numeri Abrar Isha Enterprises Numeri Abrar Muhammad Imran Younus Saleem Ahmed Siddiqui Numeri Abrar Numeri Abrar Saeed Ur Rehman Syed Zuhaib Ahmed Imad Iqbal Abbasi NCR Corporation NCR Corporation NCR Corporation NCR Corporation NCR Corporation UBL Insurers Limited UBL Insurers Limited
157. A .F. Ferguson & Co. Chartered Accountants State Life Building No. 1- C I.I. Chundrigar Road Karachi 74000 KPMG Taseer Hadi & Co. Chartered Accountants Sheikh Sultan Trust Building No. 2, Beaumont Road Karachi 75530 Auditors’ Report to the Members We have audited the annexed consolidated financial statements comprising consolidated statement of financial position of United Bank Limited (the Bank) and its subsidiary companies as at December 31, 2017 and the related consolidated profit and loss account, consolidated statement of comprehensive income, consolidated cash flow statement and consolidated statement of changes in equity together with the notes forming part thereof, for the year then ended. We have also expressed separate opinion on the financial statements of United Bank Limited. The financial statements of the subsidiary UBL Fund Managers Limited was audited by A.F. Ferguson & Co., Chartered Accountants. The financial statements of subsidiaries United National Bank Limited, UBL (Switzerland) AG and UBL Bank (Tanzania) Limited were audited by other firms of auditors whose reports have been furnished to us and our opinion, in so far as it relates to the amounts included for such subsidiaries, is based solely on the reports of such other auditors. The financial statements of the subsidiary United Executors and Trustees Company Limited has been consolidated based on un-audited financial information. These consolidated financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. Our audit was conducted in accordance with the International Standards on Auditing and accordingly included such tests of accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the consolidated financial statements present fairly the financial position of the Bank and its subsidiary companies as at December 31, 2017 and the results of their operations for the year then ended. A.F. Ferguson & Co. KPMG Taseer Hadi & Co. Engagement Partner: Salman Hussain Engagement Partner: Mazhar Saleem Chartered Accountants Chartered Accountants Dated: February 28, 2018 Karachi Annual Report 2017 155
158. Consolidated Statement of Financial Position As at December 31 , 2017 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT DECEMBER 31, 2017 Note 2017 2016 ------------------ (Rupees in ‘000) ------------------ ASSETS Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments 6 7 8 9 161,119,170 35,549,112 35,893,920 1,124,921,300 133,467,502 32,267,304 35,484,586 838,262,274 Advances Performing Non-performing - net of provision 10 10 629,824,756 12,681,964 642,506,720 529,818,148 7,963,998 537,782,146 11 50,384,077 54,986,201 2,105,360,500 39,298,927 45,179,521 1,661,742,260 13,392,978 517,082,159 1,366,157,914 4,375 2,980,466 31,248,846 1,930,866,738 11,759,012 205,865,131 1,245,791,616 3,558 5,230,571 29,363,148 1,498,013,036 174,493,762 163,729,224 20 12,241,798 47,203,516 76,651,713 136,097,027 12,241,798 42,615,188 68,939,008 123,795,994 Non-controlling interest 21 4,810,519 140,907,546 4,227,693 128,023,687 Surplus on revaluation of assets - net of deferred tax 22 33,586,216 174,493,762 35,705,537 163,729,224 CONTINGENCIES AND COMMITMENTS 23 Operating fixed assets Deferred tax asset - net Other assets 12 LIABILITIES Bills payable Borrowings Deposits and other accounts Subordinated loans Liabilities against assets subject to finance lease Deferred tax liability - net Other liabilities 14 15 16 17 18 19 NET ASSETS REPRESENTED BY: Share capital Reserves Unappropriated profit Total equity attributable to the equity holders of the Bank The annexed notes from 1 to 50 and annexures form an integral part of these consolidated financial statements. Aameer Karachiwalla Aameer Karachiwalla Chief Financial Officer Chief Financial Officer 156 United Bank Limited Sima Kamil Sima Kamil President & President Chief Executive & Officer Chief Executive Officer Amar Zafar Khan Arshad Ahmad Mir Amar Zafar Khan Arshad Ahmad Director DirectorMir Director Director Sir Mohammed Anwar Pervez, OBE, HPk Sir Mohammed Anwar Pervez, OBE, HPk Chairman Chairman
159. Consolidated Profit and Loss Account CONSOLIDATED ANDDecember LOSS ACCOUNT FOR2017 THE YEAR ENDED DECEMBER 31 , 2017 For the yearPROFIT ended 31, Note Mark-up / return / interest earned Mark-up / return / interest expensed Net mark-up / return / interest income 25 26 Provision against loans and advances - net Reversal of provision against lendings to financial institutions - net Provision for diminution in value of investments - net Bad debts written off directly 10.3 8.6 9.3 10.5 Non mark-up / return / interest expenses Administrative expenses Other provisions / write offs - net Workers' Welfare Fund Other charges Total non mark-up / return / interest expenses Share of profit of associates Profit before taxation Taxation - Current Taxation - Prior Taxation - Deferred 110,579,895 52,487,753 58,092,142 101,755,044 42,933,935 58,821,109 1,877,257 (8,260) 719,845 187,443 2,776,285 55,315,857 624,626 (15,500) 898,109 97,781 1,605,016 57,216,093 14,831,990 1,733,757 2,150,117 4,797,686 2,207 780,328 24,296,085 79,611,942 14,377,568 2,276,408 1,955,790 5,609,581 (1,221) 916,264 25,134,390 82,350,483 29 30 31 32 38,455,334 (389,069) 814,699 59,688 38,940,652 459,702 41,130,992 35,022,240 231,368 930,022 69,818 36,253,448 1,057,248 47,154,283 33 33 33 14,701,343 (2,031,665) 2,264,725 14,934,403 15,305,737 2,251,412 1,594,832 19,151,981 26,196,589 28,002,302 26,190,302 6,287 26,196,589 27,782,758 219,544 28,002,302 Net mark-up / return / interest income after provisions Non mark-up / return / interest income Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Gain on sale of securities - net Unrealized gain / (loss) on revaluation of investments classified as held for trading Other income Total non mark-up / return / interest income 2017 2016 ------ (Rupees in ‘000) ------ 27 9.4 28 Profit after taxation Attributable to: Equity shareholders of the Bank Non-controlling interest ------------ (Rupees) -----------34 Earnings per share - basic and diluted 21.39 22.70 The annexed notes from 1 to 50 and annexures form an integral part of these consolidated financial statements. Aameer Karachiwalla Aameer Karachiwalla Chief Financial Officer Chief Financial Officer Sima Kamil Sima Kamil President & President & Chief Executive Officer Chief Executive Officer Amar Zafar Khan Arshad Ahmad Mir Amar Zafar Khan Arshad Ahmad Mir Director Director Director Director Sir Mohammed Anwar Pervez, OBE, HPk Sir Mohammed Anwar Pervez, OBE, HPk Chairman Chairman Annual Report 2017 157
160. Consolidated Statement of Comprehensive Income For the yearSTATEMENT ended December 31 , 2017 CONSOLIDATED OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2017 2017 2016 ------- (Rupees in '000) ------Profit after tax for the year attributable to: Equity shareholders of the Bank Non-controlling interest 26,190,302 6,287 26,196,589 27,782,758 219,544 28,002,302 Other comprehensive income: Items that will not be reclassified to profit or loss in subsequent periods Remeasurement (loss) / gain of defined benefit obligations Equity shareholders of the Bank Non-controlling interest Related deferred tax reversal (105,675) 42,655 47,646 (15,374) (151,624) (36,110) 37,602 (150,132) Items that may be reclassified to profit or loss in subsequent periods Exchange differences on translation of net investment in foreign branches and subsidiaries Equity shareholders of the Bank Non-controlling interest 2,031,733 668,725 2,700,458 (1,830,062) (1,030,080) (2,860,142) 28,881,673 24,992,028 Deficit arising on revaluation of available for sale securities Related deferred tax reversal (13,022,882) 4,479,294 (8,543,588) (1,411,776) 799,135 (612,641) Total comprehensive income during the year - net of tax 20,338,085 24,379,387 Other comprehensive income transferred to equity Items that may be reclassified to profit or loss in subsequent periods The annexed notes from 1 to 50 and annexures form an integral part of these consolidated financial statements. Aameer AameerKarachiwalla Karachiwalla Chief ChiefFinancial FinancialOfficer Officer 158 United Bank Limited Sima Sima Kamil Kamil President President & & Chief Chief Executive Executive Officer Officer AmarZafar ZafarKhan Khan Arshad Arshad Ahmad Amar Ahmad MirMir Director Director Director Director Mohammed Anwar Pervez, OBE, HPk SirSir Mohammed Anwar Pervez, OBE, HPk Chairman Chairman
161. Consolidated Cash Flow Statement For the yearCASH ended 31 , 2017 CONSOLIDATED FLOWDecember STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2017 Note CASH FLOW FROM OPERATING ACTIVITIES Profit before taxation Less: Dividend income Less: Share of profit of associates Adjustments: Depreciation on operating fixed assets Depreciation on Islamic financing against leased assets (Ijarah) Amortization Workers' Welfare Fund Provision for retirement benefits Charge for compensated absences Provision against loans and advances - net Reversal of provision against lendings to financial institutions - net Provision for diminution in value of investments - net Reversal of provision in respect of investments disposed off during the year (Reversal of provision) / charge against off balance sheet items Gain on sale of operating fixed assets - net Gain on sale of ijarah assets - net Bad debts written off directly Unrealized loss / (gain) on revaluation of investments classified as held for trading Finance charges on leased assets Provision against other assets - net (Increase) / decrease in operating assets Lendings to financial institutions Held for trading securities Advances Other assets (excluding advance taxation) Increase / (decrease) in operating liabilities Bills payable Borrowings Deposits and other accounts Other liabilities (excluding current taxation) Payments on account of staff retirement benefits Income taxes paid Net cash flow from operating activities CASH FLOW FROM INVESTING ACTIVITIES Net investments in available for sale securities Net investments in held to maturity securities Net investments in associates Dividend income received Investment in operating fixed assets Sale proceeds from disposal of operating fixed assets Sale proceeds from disposal of ijarah assets Net cash outflow from investing activities 2017 2016 ----------- (Rupees in '000) ----------41,130,992 (1,733,757) (459,702) 38,937,533 47,154,283 (2,276,408) (1,057,248) 43,820,627 2,151,157 197,824 436,392 814,699 820,115 24,687 1,877,257 (8,260) 719,845 (55,525) (599,097) (57,983) (96) 187,443 (2,207) 570 45,888 6,552,709 45,490,242 1,714,992 205,186 383,371 930,022 298,805 315,084 624,626 (15,500) 898,109 (978,855) 27,081 (44,329) (44,685) 97,781 1,221 400 143,908 4,557,217 48,377,844 (401,074) (96,681,848) (107,059,262) (2,516,131) (206,658,315) (9,555,345) 3,711,930 (50,695,443) 993,408 (55,545,450) 1,633,966 311,217,028 120,366,298 1,451,657 434,668,949 273,500,876 (1,270,181) (19,570,676) 252,660,019 (1,636,732) 41,633,044 125,838,552 1,014,068 166,848,932 159,681,326 (736,963) (23,661,738) 135,282,625 (199,190,229) (8,969,936) 4,193,675 1,768,502 (6,764,956) 81,186 72,260 (208,809,498) (16,328,652) (73,399,383) 1,881,572 2,167,881 (6,358,861) 91,422 191,657 (91,754,364) CASH FLOW FROM FINANCING ACTIVITIES Payment in respect of leased obligation Dividends paid to: - Equity shareholders of the Bank - Non-controlling interest Net cash outflow from financing activities (2,078) (1,715) (15,479,932) (135,493) (15,617,503) (16,407,693) (16,409,408) Exchange differences on translation of net investment in foreign branches and subsidiaries attributable to: - Equity shareholders of the Bank - Non-controlling interest Increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year 2,031,733 668,725 30,933,476 165,734,806 (1,830,062) (1,030,080) 24,258,711 141,476,095 196,668,282 165,734,806 35 Cash and cash equivalents at the end of the year The annexed notes from 1 to 50 and annexures form an integral part of these consolidated financial statements. Aameer Karachiwalla Aameer Karachiwalla Chief Financial Officer Chief Financial Officer Sima Kamil Sima Kamil President & President Chief Executive & Officer Chief Executive Officer Amar Zafar Khan Arshad Ahmad Mir Amar Zafar Khan Arshad Ahmad Director DirectorMir Director Director Sir Mohammed Anwar Pervez, OBE, HPk Sir Mohammed Anwar Pervez, OBE, HPk Chairman Chairman Annual Report 2017 159
162. Consolidated Statement of Changes in Equity For the yearSTATEMENT ended December 31 , 2017 CONSOLIDATED OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2017 Attributable to equity shareholders of the Bank Share Capital General reserve Statutory reserve Capital reserve - Exchange translation Employee Unappropriated stock option profit reserve Sub total Noncontrolling Interest Total ---------------------------------------------------------------------------------------- (Rupees in '000) -------------------------------------------------------------------------------------Balance as at December 31, 2015 12,241,798 3,000 24,479,375 17,141,392 1,050 59,955,027 113,821,642 5,223,744 119,045,386 Transactions with owners for the year ended December 31, 2016 Final cash dividend - December 31, 2015 declared subsequent to the year end at Rs.4.0 per share - - - - - (4,896,719) (4,896,719) - (4,896,719) Interim cash dividend - March 31, 2016 declared at Rs.3.0 per share - - - - - (3,672,539) (3,672,539) - (3,672,539) Interim cash dividend - June 30, 2016 declared at Rs.3.0 per share - - - - - (3,672,539) (3,672,539) - (3,672,539) Interim cash dividend - September 30, 2016 at Rs.3.0 per share - - - - - (3,672,539) (3,672,539) - (3,672,539) - - - - (1,050) (1,050) (1,050) (15,914,336) (15,915,386) - (1,050) (15,915,386) - - - (1,830,062) - 27,782,758 (114,022) 27,782,758 (1,944,084) 219,544 (1,066,190) 28,002,302 (3,010,274) (1,830,062) - 27,668,736 25,838,674 (846,646) 24,992,028 (149,967) (149,967) 562 51,626 Employee stock option reserve Total comprehensive income for the year ended December 31, 2016 Profit after taxation for the year ended December 31, 2016 Other comprehensive income - net of tax Total comprehensive income for the year ended December 31, 2016 - - - Ordinary dividend relating to Non-controlling shareholders - - - - - Transfer from surplus on revaluation of fixed assets to unappropriated profit - net of tax - - - - Transfer to statutory reserve - - - Balance as at December 31, 2016 12,241,798 3,000 2,821,483 27,300,858 15,311,330 - - - 51,064 51,064 - (2,821,483) - 68,939,008 123,795,994 - 4,227,693 128,023,687 Transactions with owners for the year ended December 31, 2017 Final cash dividend - December 31, 2016 declared subsequent to the year end at Rs.4.0 per share - - - - - (4,896,719) (4,896,719) - (4,896,719) Interim cash dividend - March 31, 2017 declared at Rs.3.0 per share - - - - - (3,672,539) (3,672,539) - (3,672,539) Interim cash dividend - June 30, 2017 declared at Rs.3.0 per share - - - - - (3,672,539) (3,672,539) - (3,672,539) Interim cash dividend - September 30, 2017 declared at Rs.3.0 per share - - - - - (3,672,539) (3,672,539) - (3,672,539) - - - - - (15,914,336) (15,914,336) - (15,914,336) - - - 2,031,733 - 26,190,302 (58,029) 26,190,302 1,973,704 2,031,733 - 26,132,273 28,164,006 Employee stock option reserve Total comprehensive income for the year ended December 31, 2017 Profit after taxation for the year ended December 31, 2017 Other comprehensive income - net of tax Total comprehensive income for the year ended December 31, 2017 - - - Ordinary dividend relating to Non-controlling shareholders - - - - - Transfer from surplus on revaluation of fixed assets to unappropriated profit - net of tax - - - - Transfer to statutory reserve - - 2,556,595 - 3,000 29,857,453 Balance as at December 31, 2017 12,241,798 17,343,063 - - - 51,363 51,363 - (2,556,595) - 76,651,713 136,097,027 6,287 711,380 26,196,589 2,685,084 717,667 28,881,673 (135,493) (135,493) 652 52,015 4,810,519 140,907,546 Appropriations recommended by the Board of Directors subsequent to the year ended December 31, 2017 are disclosed in note 48 to these consolidated financial statements. The annexed notes from 1 to 50 and annexures form an integral part of these consolidated financial statements. Aameer Karachiwalla Aameer Karachiwalla Chief Financial Officer Chief Financial Officer 160 United Bank Limited Sima Kamil Sima Kamil President & President & Chief Executive Officer Chief Executive Officer Amar Zafar Khan Arshad Ahmad Mir Amar Zafar Khan Arshad Ahmad Mir Director Director Director Director Sir Mohammed Anwar Pervez, OBE, HPk Sir Mohammed Anwar Pervez, OBE, HPk Chairman Chairman
163. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 1. STATUS AND NATURE OF BUSINESS The "Group" consists of: - Holding Company United Bank Limited (the Bank) is a banking company incorporated in Pakistan and is engaged in commercial banking and related services. The Bank's registered office and principal office are situated at UBL Building, Jinnah Avenue, Blue Area, Islamabad and at UBL Head Office, I. I. Chundrigar Road, Karachi respectively. The Bank operates 1,361 (2016: 1,341) branches inside Pakistan including 93 (2016: 47) Islamic Banking branches and 2 (2016: 2) branches in Export Processing Zones. The Bank also operates 18 (2016: 18) branches outside Pakistan as at December 31, 2017. The Bank is a subsidiary of Bestway (Holdings) Limited which is incorporated in the United Kingdom. The Bank's ordinary shares are listed on Pakistan Stock Exchange. Its Global Depository Receipts (GDRs) are on the list of the UK Listing Authority and the London Stock Exchange Professional Securities Market. These GDRs are also eligible for trading on the International Order Book System of the London Stock Exchange. Further, the GDRs constitute an offering in the United States only to qualified institutional buyers in reliance on Rule 144A under the US Securities Act of 1933 and an offering outside the United States in reliance on Regulation S. - Subsidiary companies - United National Bank Limited (UBL UK) - 55% holding UBL UK is an authorized banking institution incorporated in the United Kingdom. The Bank was formed in 2001 from the merger of the UK branches of United Bank Limited and National Bank of Pakistan. The principal activities of UBL UK are to provide retail banking services through its branch network in major cities of the UK, wholesale banking and treasury services to financial institutions and trade finance facilities to businesses of all sizes. United National Bank Limited operates under the trade name United Bank UK. - UBL (Switzerland) AG -100% holding UBL (Switzerland) AG is a commercial bank owned by the Bank. Founded in 1967, its main activities are in credit operations and trade financing. UBL (Switzerland) AG previously operated under the name, United Bank AG Zurich. - United Executors and Trustees Company Limited, Pakistan - 100% holding United Executors and Trustees Company Limited ("the Company") was incorporated in Pakistan in 1965 as an unlisted public limited company. The registered office of the Company is situated at State Life Building No. 1, I.I. Chundrigar Road, Karachi. Currently, the Company is engaged in the business of investments. - UBL Fund Managers Limited, Pakistan - 98.87% holding UBL Fund Managers Limited was incorporated as an unlisted public limited company in Pakistan on April 3, 2001. The Company is licensed to carry out Asset Management and Investment Advisory Services under the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 and the Non-Banking Finance Companies and Notified Entities Regulations, 2008. The principal activities of the Company are floating and managing mutual funds and providing investment advisory services. The registered office of the Company is situated at STSM Building, Beaumont Road, Civil Lines, Karachi. - Al Ameen Financial Services (Pvt.) Limited - effective holding 98.87% UBL Fund Managers has incorporated a wholly owned subsidiary Al Ameen Islamic Financial Services (Pvt.) Limited on February 27, 2015. The principal activity of the subsidiary is provision of shariah compliant financial services including distribution of shariah compliant mutual funds. The registered office of the Company is situated at STSM Building, Beaumont Road, Civil Lines, Karachi. - UBL Bank (Tanzania) Limited - 100% holding UBL Bank (Tanzania) Limited was incorporated on March 13, 2012 and has commenced operations in May 2013. It is engaged in providing commercial and retail banking services. 6 Annual Report 2017 161
164. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 2. BASIS OF PRESENTATION 2.1 In accordance with the directives of the Federal Government regarding the shifting of the banking system to Islamic modes, the State Bank of Pakistan (SBP) 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 markup in price on deferred payment basis. The purchases and sales arising under these arrangements are not reflected in these consolidated financial statements as such, but are restricted to the amount of facility actually utilized and the appropriate portion of mark-up thereon. The Islamic Banking branches of the Bank have complied with the requirements set out under the Islamic Financial Accounting Standards issued by the Institute of Chartered Accountants of Pakistan (ICAP) and notified under the provisions of the repealed Companies Ordinance, 1984. 2.2 Key financial figures of the Islamic Banking branches are disclosed in note 46 to these consolidated financial statements. 3. STATEMENT OF COMPLIANCE 3.1 These consolidated financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of: - International Financial Reporting Standards (IFRS) and interpretations issued by the International Accounting Standards Board (IASB) as are notified under the Companies Ordinance, 1984; - Islamic Financial Accounting Standards (IFAS) issued by the Institute of Chartered Accountants of Pakistan as are notified under the Companies Ordinance, 1984; - Provisions of and directives issued by the Banking Companies Ordinance, 1962; - Provisions of and directives issued under the Companies Ordinance, 1984; and - Directives issued by the Securities and Exchange Commission of Pakistan (SECP) and the SBP from time to time. Wherever the requirements of the Companies Ordinance, 1984, the Banking Companies Ordinance, 1962 or the directives issued by the SECP and the SBP differ with the requirements of IFRS or IFAS, the requirements of the Companies Ordinance, 1984, the Banking Companies Ordinance, 1962 or the said directives prevail. The Companies Ordinance, 1984 has been repealed after the enactment of the Companies Act, 2017. However, as allowed by the SECP vide its circular number 23/2017 dated October 4, 2017, these consolidated financial statements have been prepared in accordance with the provisions of the repealed Companies Ordinance, 1984. 3.2 The SBP, vide BSD Circular letter No. 10, dated August 26, 2002 has deferred the applicability of International Accounting Standard 39, Financial Instruments: Recognition and Measurement and International Accounting Standard 40, Investment Property for banking companies till further instructions. Moreover, SBP vide BPRD circular no. 4, dated February 25, 2015 has deferred the applicability of Islamic Financial Accounting Standards (IFAS) 3, Profit and Loss Sharing on Deposits. Further, according to the notification of the SECP issued vide SRO 411(I)/2008 dated April 28, 2008, IFRS 7, Financial Instruments: Disclosures has not been made applicable for banks. Accordingly, the requirements of these standards have not been considered in the preparation of these consolidated financial statements. However, investments have been classified and valued in accordance with the requirements of various circulars issued by the SBP. Further, segment information is being disclosed in accordance with SBP’s prescribed format as per BSD circular 4 dated February 17, 2006 which prevails over the requirements specified in IFRS 8. 3.3 SECP vide its notification SRO 633 (I)/2014 dated July 10, 2014, adopted IFRS 10 effective from the periods starting from June 30, 2014. However, vide its notification SRO 56 (I)/2016 dated January 28, 2016, it has been notified that the requirements of IFRS 10 and section 237 of the Companies Ordinance 1984 will not be applicable with respect to the investment in mutual funds established under trust structure. 3.4 Standards, interpretations and amendments to approved accounting standards that are not yet effective The following revised standards, amendments and interpretations with respect to the approved accounting standards would be effective from the dates mentioned below against the respective standard or interpretation: 162 United Bank Limited 7
165. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 Effective date (annual periods beginning on or after) Standard, Interpretation or Amendment - IFRS 2 - Share-based Payments - (Amendments) IAS 28 - Investments in Associates and Joint Ventures - (Improvement) IFRIC 22 - Foreign Currency Transactions and Advance Consideration IFRIC 23 - Uncertainty over Income Tax Treatments IFRS 3 - Business Consideration - (Amendments) IFRS 11 - Joint Venture - (Amendments) IAS 12 - Income Taxes - (Amendments) IFRS 15 - Revenue from contracts with customers IFRS 9 - Financial Instruments: Classification and Measurement IFRS 9 - Financial Instruments: Classification and Measurement - (Amendments) January 01, 2018 January 01, 2018 January 01, 2018 January 01, 2018 January 01, 2018 January 01, 2018 July 01, 2018 July 01, 2018 July 01, 2018 January 01, 2019 - IFRS 15 - Revenue from contracts with customers - The Bank is currently in the process of assessing the potential impacts of changes required in revenue recognition policies upon adoption of the standard. - IFRS 9 - Financial Instruments - The Bank is currently awaiting instructions from SBP as applicability of IAS 39 was deferred by SBP till further instructions. The Group expects that the adoption of remaining amendments, improvements and interpretations will not affect its financial statements in the period of initial application. In addition to above, the Companies Act 2017 has been enacted on May 31, 2017 and according to the circular referred to in note number 3.1 of these financial statements, the act would be applicable for periods after January 1, 2018. This would result in additional disclosures and certain changes in financial statements presentation. The SBP vide BPRD circular no. 2 dated January 25, 2018 has specified the new reporting format for the financial statements of banking companies. The new format has revised the disclosure requirements and will become applicable for the financial statements of the Bank for the year ending December 31, 2018. 3.5 Standards, interpretations and amendments to approved accounting standards that are effective in the current year There are certain new and amended standards, interpretations and amendments that are mandatory for the Group's accounting periods beginning on or after January 1, 2017 but are considered not to be relevant or do not have any significant effect on the Group's operations and therefore not detailed in these financial statements. 4. BASIS OF MEASUREMENT 4.1 Accounting convention These consolidated financial statements have been prepared under the historical cost convention except that certain operating fixed assets / non-banking assets acquired in satisfaction of claims have been stated at revalued amounts, certain investments and derivative financial instruments have been stated at fair value and net obligations in respect of defined benefit schemes are carried at their present values. 4.2 Critical accounting estimates and judgments The preparation of these consolidated financial statements in conformity with approved accounting standards requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and income and expenses. It also requires management to exercise judgment in the application of its accounting policies. The estimates and 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 recognized 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. 8 Annual Report 2017 163
166. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 Significant accounting estimates and areas where judgments were made by management in the application of accounting policies are as follows: i) ii) classification of investments (notes 5.4 and 9); provision against investments (notes 5.4 and 9.3), lendings to financial institutions (note 8.6) and advances (notes 5.5 and 10.3); iii) income taxes (notes 5.9 and 33); iv) staff retirement benefits (notes 5.11 and 37); v) fair value of derivatives (notes 5.16.2 and 19.3); vi) operating fixed assets, revaluation, depreciation and amortization (notes 5.6 and 11); vii) impairment (note 5.8); and viii) valuation of non-banking assets acquired in satisfaction of claims (note 5.7). 5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies adopted in the preparation of these consolidated financial statements are consistent with those of the previous financial year. 5.1 Basis of consolidation The consolidated financial statements include the financial statements of the Bank and its subsidiary companies. Subsidiary companies are fully consolidated from the date on which more than 50% of voting rights are transferred to the Group or the power to control the company is established and are excluded from consolidation from the date of disposal or when the control is lost. The financial statements of subsidiaries are prepared for the same reporting period as the Holding Company, using accounting policies that are consistent with those of the Holding Company, except for non-banking subsidiaries in Pakistan which follow the requirements of IAS 39 and IAS 40, and overseas subsidiaries which are required to comply with local regulations enforced within the respective jurisdictions. The assets and liabilities of the subsidiaries have been consolidated with those of the Holding Company on a line by line basis and the carrying value of the Bank's investment in the subsidiaries is eliminated against the subsidiaries' share capital and pre-acquisition reserves in these consolidated financial statements. Non-controlling interest represents that part of the net results of operations and of the net assets of the subsidiaries that is not owned by the Group. All material intra-group balances and transactions have been eliminated. 5.2 Cash and cash equivalents Cash and cash equivalents for the purpose of the cash flow statement consist of cash and balances with treasury banks and balances with other banks. 5.3 Lendings to / borrowings from financial institutions The Group enters into transactions of reverse repos and repos at contracted rates for a specified period of time. These are recorded as under: 5.3.1 Purchase under resale agreements Securities purchased under agreement to resell (reverse repo) are included in lendings to financial institutions. The differential between the purchase price and the resale price is amortized over the period of the agreement and recorded as income. Securities held as collateral are not recognized in the consolidated 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. 164 United Bank Limited 9
167. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 5.3.2 Sale under repurchase agreements Securities sold subject to a repurchase agreement (repo) are retained in the consolidated financial statements as investments and the counterparty liability is included in borrowings from financial institutions. The differential between the sale price and the repurchase price is amortized over the period of the agreement and recorded as an expense. 5.3.3 Bai Muajjal The securities sold under Bai Muajjal agreement are derecognised on the date of disposal. Receivable against such sale is recognised at the agreed sale price. The difference between the sale price and the carrying value on the date of disposal is taken to income on straight line basis. 5.4 Investments Investments of the Group, other than investments in associates, are classified as held for trading, held to maturity and available for sale. Held for trading These are securities which are either acquired for generating a profit from short-term fluctuations in market prices, interest rate movements and dealer's margin, or are securities included in a portfolio in which a pattern of short term profit taking exists. Held to maturity These are securities with fixed or determinable payments and fixed maturities, in respect of which the Group has the positive intent and ability to hold to maturity. Available for sale These are investments, other than those in subsidiaries and associates, that do not fall under the held for trading or held to maturity categories. Initial measurement All “regular way” purchases and sales of investments are recognized on the trade date, i.e. the date that the Group commits to purchase or sell the investment. Regular way purchases or sales are purchases or sales of investments that require delivery of investments within the time frame generally established by regulation or convention in the market place. Investments are initially recognized at fair value which, in the case of investments other than held for trading, includes transaction costs associated with the investments. Transaction costs on investments held for trading are expensed as incurred. 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. Held to maturity These are measured at amortized cost using the effective interest rate method, less any impairment loss recognized to reflect irrecoverable amounts. 10 Annual Report 2017 165
168. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 Available for sale Quoted securities classified as available for sale investments are measured at subsequent reporting dates at fair value. Any surplus / deficit arising thereon is kept in a separate account shown in the statement of financial position below 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 company 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. Provisions for diminution in the value of other securities are made for impairment, if any. Associates Associates are entities over which the Group has a significant influence, but control does not exist. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment in the associate is initially recognised at cost and the carrying amount is increased or decreased to recognise the investor's share of the profit or loss of the investee subsequent to the date of acquisition. The increase / decrease in the share of profit or loss of associates is accounted for in the consolidated profit and loss account. The Group applies equity accounting for UBL Insurers Limited, Oman United Exchange Company Limited, Khushhali Bank Limited, DHA Cogen Limited and its investments in mutual funds managed by UBL Fund Managers Limited. 5.5 Advances Advances are stated net of specific and general provisions which are charged to the profit and loss account. Specific provisions against domestic advances and general provision against domestic consumer loans are determined on the basis of the Prudential Regulations and other directives issued by the SBP. General and specific provisions pertaining to overseas advances are made in accordance with the requirements of the regulatory authorities of the respective countries. If circumstances warrant, the Group, from time to time, makes general provisions against weaknesses in its portfolio on the basis of management's estimation. Advances are written off when there is no realistic prospect of recovery. The amount so written off is a book entry and does not necessarily prejudice to the Group's right of recovery against the customer. The Bank determines write-offs in accordance with the criteria prescribed by the SBP vide BPRD Circular No. 06 dated June 05, 2007. 5.5.1 Islamic financings and related assets Receivables under Murabaha financing represent cost price plus an agreed mark-up on deferred sale arrangement. Markup income is recognised on a straight line basis over the period of the instalments. Ijarah financing represents arrangements whereby the Bank (being the owner of assets) transfers its usufruct to its customers for an agreed period at an agreed consideration. Assets leased out under Ijarah are stated at cost less accumulated depreciation and accumulated impairment losses, if any. These are depreciated over the term of the lease. Ijarah income is recognized on an accrual basis. Diminishing Musharaka is partnership agreement between the Bank and its customer for financing vehicle or plant and machinery. The receivable is recorded to the extent of Bank's share in the purchase of asset. Income is recognised on accrual basis. 166 United Bank Limited 11
169. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 5.6 Operating fixed assets and depreciation 5.6.1 Tangible Property and equipment, other than land (which is not depreciated) and capital work-in-progress, are stated at cost or revalued amount less accumulated depreciation and accumulated impairment losses, if any. Land is carried at revalued amount less impairment losses while capital work-in-progress is stated at cost less impairment losses. The cost and the accumulated depreciation of property and equipment of foreign branches include exchange differences arising on currency translation at the year-end rates of exchange. Depreciation is calculated so as to write-off the depreciable amount of the assets over their expected useful lives at the rates specified in note 11.2 to these consolidated financial statements. The depreciation charge for the year is calculated on a straight line basis after taking into account the residual value, if any. The residual values and useful lives are reviewed and adjusted, if appropriate, at each statement of financial position date. Depreciation on additions is charged from the month the asset is available for use. No depreciation is charged in the month of disposal. Land and buildings are revalued by professionally qualified valuers with sufficient regularity to ensure that their net carrying value does not differ materially from their fair value. A surplus arising on revaluation is credited to the surplus on revaluation of fixed assets account. Any deficit arising on subsequent revaluation of fixed assets is adjusted against the balance in the above mentioned surplus account as allowed under the provisions of the repealed Companies Ordinance, 1984. The surplus on revaluation of fixed assets, to the extent of incremental depreciation, is transferred to unappropriated profit. Gains and losses on sale of fixed assets are included in the profit and loss account, except that the related surplus on revaluation of fixed assets (net of deferred tax) is transferred directly to unappropriated profit. Major renewals and improvements are capitalized and the assets so replaced, if any, are retired. Normal repairs and maintenance are charged to the profit and loss account as and when incurred. 5.6.2 Intangible assets Intangible assets are stated at cost less accumulated amortization and accumulated impairment losses, if any. The cost and the accumulated amortization of intangible assets of foreign branches include exchange differences arising on currency translation at the year-end rates of exchange. Amortization is calculated so as to write-off the amortizable amount of the assets over their expected useful lives at the rates specified in note 11.3 to these consolidated financial statements. The amortization charge for the year is calculated on a straight line basis after taking into account the residual value, if any. The residual values and useful lives are reviewed and adjusted, if appropriate, at each statement of financial position date. Amortization on additions is charged from the month the asset is available for use. No amortization is charged in the month of disposal. Gains and losses on sale of intangible assets are included in the profit and loss account. 5.7 Non banking assets acquired in satisfaction of claims Non banking assets acquired in satisfaction of claims are carried at revalued amounts less accumulated depreciation. These assets are revalued by professionally qualified valuers with sufficient regularity to ensure that their net carrying value does not differ materially from their fair value. A surplus arising on revaluation of property is credited to the 'surplus on revaluation of non-banking assets' account and any deficit arising on revaluation is taken to profit and loss account directly. Legal fees, transfer costs and direct costs of acquiring title to property are charged to the profit and loss account and not capitalised. 5.8 Impairment Impairment of available for sale equity investments Available for sale equity investments are impaired when there has been a significant or prolonged decline in their fair value below their cost. The determination of what is significant or prolonged requires judgment. In making this judgment, the Group evaluates, among other factors, the normal volatility in share price. 12 Annual Report 2017 167
170. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 Impairment in investments in associates The Group considers that a decline in the recoverable value of the investment in an associate below its cost may be evidence of impairment. Recoverable value is calculated as the higher of fair value less costs to sell and value in use. An impairment loss is recognized when the recoverable value falls below the carrying value and is charged to the profit and loss account. A subsequent reversal of an impairment loss, upto the cost of the investment in the associate, is credited to the profit and loss account. Impairment in non-financial assets (excluding deferred tax) The carrying amounts of non-financial assets are reviewed at each reporting date for impairment whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be recoverable. If such indication exists, and where the carrying value exceeds the estimated recoverable amount, assets are written down to their recoverable amount. The resulting impairment loss is charged to the profit and loss account except for an impairment loss on revalued assets, which is adjusted against the related revaluation surplus to the extent that the impairment loss does not exceed the revaluation surplus. 5.9 Taxation 5.9.1 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 Group in the respective regions / territories. 5.9.2 Prior years The taxation charge for prior years represents adjustments to the tax charge relating to prior years, arising from assessments and changes in estimates made during the current year. 5.9.3 Deferred Deferred tax is recognized using the balance sheet method on all major temporary differences between the amounts attributed to assets and liabilities for financial reporting purposes and the 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 statement of financial position date. Deferred tax assets are recognized only to the extent that it is probable that future taxable profits will be available against which the assets can be utilized. The carrying amount of deferred tax assets is reviewed at each statement of financial position 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 utilized. The Group also recognizes deferred tax asset / liability on the deficit / surplus on revaluation of fixed assets / non-banking assets acquired in satisfaction of claims and securities which is adjusted against the related deficit / surplus in accordance with the requirements of IAS 12, Income Taxes. 5.10 Provisions Provisions are recognized when the Group has a legal or constructive obligation as a result of past events which makes it probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made. Provision against identified non-funded losses is recognized when intimated and reasonable certainty exists that the Group will be required to settle the obligation. The provision is charged to the profit and loss account net of expected recovery and the obligation is classified under other liabilities. Provisions are reviewed at each statement of financial position date and are adjusted to reflect the current best estimate. 168 United Bank Limited 13
171. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 5.11 Staff retirement and other benefits 5.11.1 The Bank The Bank operates the following staff retirement schemes for its employees: a) For new employees and for those who opted for the below mentioned conversion option introduced in 2001, the Bank operates: - an approved contributory provident fund (defined contribution scheme); and - an approved gratuity scheme (defined benefit scheme). b) For employees who have not opted for the conversion option introduced in 2001, the Bank operates: - an approved non-contributory provident fund in lieu of the contributory provident fund; and - an approved funded pension scheme, introduced in 1986 (defined benefit scheme). In 2001, the Bank modified the pension scheme and introduced a conversion option for employees covered under option (b) above to move to option (a). This conversion option ceased on December 31, 2003. The Bank also operates benevolent fund for all its eligible employees (defined benefit scheme). Annual contributions towards defined benefit schemes are made on the basis of actuarial advice using the Projected Unit Credit Method. For the defined contribution scheme, the Bank pays contributions to the fund on a periodic basis. The Bank has no further payment obligation once the contributions have been paid. The contributions are recognized as an expense when the obligation to make payments to the fund has been established. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is available. Other benefits a) Employees' compensated absences The Bank makes provisions for compensated vested and non-vested absences accumulated by its eligible employees on the basis of actuarial advice under the Projected Unit Credit Method. b) Post retirement medical benefits (defined benefit scheme) The Bank provides post retirement medical benefits to eligible retired employees. Provision is made on the basis of actuarial advice under the Projected Unit Credit Method. c) Employee motivation and retention scheme The Bank has a long term motivation and retention scheme for its employees. The liability of the Bank in respect of the scheme for each year, if any, is fixed, and is accounted for in the year to which the scheme relates. Remeasurement of defined benefit obligations Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in other comprehensive income when they occur with no subsequent recycling through the profit and loss account. Remeasurement gains and losses pertaining to long term compensated absences are recognized in the profit and loss account immediately. 14 Annual Report 2017 169
172. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 5.11.2 United National Bank Limited (UBL UK) Defined benefit scheme UBL UK operates a pension scheme (defined benefit scheme) for certain staff. This scheme is closed for new members and the accrual of benefits has ceased from January 1, 2010. Gains and losses on settlements and curtailments are charged to the profit and loss account. The interest cost and the expected return on assets are included in other liabilities and other assets respectively. Remeasurement gains and losses are recognised immediately in other comprehensive income. The defined benefit scheme is funded, with the assets of the scheme held separately from those of UBL UK, in separate trustee administered funds. Pension scheme assets are measured at fair value and liabilities are measured based on actuarial valuations using the Projected Unit Credit Method. The actuarial valuations are obtained at least triennially and are updated at each statement of financial position date. Defined contribution scheme UBL UK operates a defined contributory pension scheme. The contribution payable in the year in respect of pension costs and other post retirement benefits is charged to the profit and loss account. Differences between the contribution payable in the year and contribution actually paid are shown as either accruals or prepayments in the statement of financial position. 5.11.3 UBL Fund Managers Limited (UFML) Defined benefit plan UFML operates an approved funded gratuity scheme for all employees. Annual contributions to the fund are made on the basis of actuarial advice using the Projected Unit Credit Method. Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in other comprehensive income when they occur with no subsequent recycling through the profit and loss account. Defined contribution plan UFML operates an approved contributory provident fund (defined contribution scheme) for all eligible employees. Employee Stock Option Scheme UBL Fund Managers provides an incentive scheme for its top performing employees in the form of share options under the Employee Stock Option Scheme (ESOS). The scheme has been approved by the SECP. 5.11.4 UBL (Switzerland) AG UBL (Switzerland) AG maintains a contribution-oriented pension scheme for employees who have reached the age of 25. It bears a large share of the costs of the occupational pension plan for all employees as well as their surviving dependents pursuant to legal requirements. The employee benefit obligations and the assets serving as coverage are outsourced to a collective insurance firm. The organization, management and financing of the pension plan comply with legal regulations, the deed of foundation and the applicable regulations of the benefit plan. 5.11.5 UBL Bank (Tanzania) Limited All eligible employees are members of the Public Pension Fund (PPF) or National Social Security Fund (NSSF). The fund is a defined contribution scheme with the Bank having no legal or constructive obligation to pay further top-up contributions. 5.12 Subordinated loans Subordinated loans are initially recorded at the amount of proceeds received. Mark-up accrued on subordinated loans is recognised separately as part of other liabilities and is charged to the profit and loss account over the period on an accrual basis. 170 United Bank Limited 15
173. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 5.13 Borrowings / deposits a) b) 5.14 Borrowings / deposits are recorded at the amount of proceeds received. The cost of borrowings / deposits is recognized on an accrual basis as an expense in the period in which it is incurred. Revenue recognition Revenue is recognized to the extent that the economic benefits associated with a transaction will flow to the Group and the revenue can be reliably measured. The following recognition criteria must be met before revenue is recognized. 5.14.1 Advances and investments Mark-up / return / interest on performing advances and investments is recognized on a time proportionate basis over the term of the advances and investments that takes into account the effective yield of the asset. Where debt securities are purchased at a premium or discount, such premium / discount is amortized through the profit and loss account over the remaining period of maturity of the debt securities. Interest or mark-up recoverable on non-performing or classified advances and investments is recognized on a receipt basis. 5.14.2 Dividend income Dividend income is recognised when the right to receive the dividend is established. 5.14.3 Fee, brokerage and commission Fee, brokerage and commission income is recognized on an accrual basis. 5.14.4 Grants Grants received are recorded as income when the right to receive the grant, based on the related expenditure having been incurred, has been established. 5.15 Foreign currencies 5.15.1 Functional and presentation currency Items included in these consolidated financial statements are measured using the currency of the primary economic environment in which the Holding Company operates. These consolidated financial statements are presented in Pakistani Rupees, which is the Group's functional and presentation currency. 5.15.2 Foreign currency transactions Transactions in foreign currencies are translated to rupees at the foreign exchange rates prevailing on the transaction date. Monetary assets and liabilities in foreign currencies are expressed in rupee terms at the rates of exchange prevailing at the statement of financial position date. Forward foreign exchange contracts and foreign bills purchased are valued in rupees at the forward foreign exchange rates applicable to their respective maturities. Non-monetary assets and liabilities in foreign currencies are expressed in rupee terms at the rates of exchange prevailing at the date of initial recognition of the non-monetary assets / liabilities. 5.15.3 Foreign operations and subsidiaries The assets and liabilities of foreign operations and subsidiaries are translated to rupees at exchange rates prevailing at the statement of financial position date. The results of foreign operations and subsidiaries are translated at the average rate of exchange for the year. 16 Annual Report 2017 171
174. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 5.15.4 Translation gains and losses Translation gains and losses are taken to the profit and loss account, except those arising on translation of the net investment in foreign branches and subsidiaries which are taken to capital reserves (Exchange Translation Reserve) until the disposal of the net investment, at which time these are recognised in the profit and loss account. 5.15.5 Contingencies and commitments Commitments for outstanding forward foreign exchange contracts are disclosed in these consolidated financial statements at contracted rates. Contingent liabilities / commitments denominated in foreign currencies are expressed in rupee terms at the rates of exchange prevailing at the statement of financial position date. 5.16 Financial instruments 5.16.1 Financial assets and liabilities Financial assets and liabilities carried on the statement of financial position include cash and bank balances, lendings to financial institutions, investments, advances, certain receivables, bills payable, borrowings from financial institutions, deposits, subordinated loans and certain payables. The particular recognition methods adopted for significant financial assets and financial liabilities are disclosed in the individual policy notes associated with them. 5.16.2 Derivative financial instruments Derivative financial instruments are initially recognized at fair value on the date on which the derivative contract is entered into and are subsequently re-measured at fair value using appropriate valuation techniques. All derivative financial instruments are carried as assets when their fair value is positive and liabilities when their fair value is negative. Any change in the fair value of derivative financial instruments during the period is taken to the profit and loss account. 5.16.3 Hedge accounting The Group makes use of derivative instruments to manage exposures to interest rate, foreign currency and credit risks. In order to manage particular risks, the Group may undertake a hedge. The Group applies hedge accounting for transactions which meet the specified criteria. At the inception of the hedging relationship, the Group formally documents the relationship between the hedged item and the hedging instrument, including the nature of the risk, the objective and strategy for undertaking the hedge and the method that will be used to assess the effectiveness of the hedging relationship. A formal assessment is also undertaken to ascertain whether the hedging instrument is expected to be highly effective in offsetting the designated risk in the hedged item. A hedge is regarded as highly effective if, during the period for which the hedge is designated, changes in the fair value or cash flows attributable to the hedged item are expected to be offset by between 80% to 125% by corresponding changes in the fair value or cash flows attributable to the hedging instrument. Cash flow hedges For qualifying cash flow hedges, the fair value gain or loss associated with the effective portion of the cash flow hedge is recognised initially in the statement of changes in equity, and recycled through the profit and loss account in the periods when the hedged item will affect profit or loss. Any gain or loss on the ineffective portion of the hedging instrument is recognised in the profit and loss account immediately. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the hedged item is ultimately recognised in the profit and loss account. 5.16.4 Off setting Financial assets and financial liabilities are set off and the net amount is reported in the consolidated financial statements when there is a legally enforceable right to set off and the Group intends to either settle on a net basis, or to realize the assets and to settle the liabilities simultaneously. 172 United Bank Limited 17
175. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 5.17 Segment reporting A segment is a distinguishable component of the Group that is engaged either in providing particular products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), and is subject to risks and rewards that are different from those of other segments. 5.17.1 Business segments (a) Corporate finance Corporate finance includes services provided in connection with mergers and acquisitions, project finance and the underwriting / arrangement of debt and equity instruments through syndications, Initial Public Offerings and private placements. (b) Trading and sales Trading and sales includes fixed income, equity, foreign exchange, credit, funding, own position securities, lendings and borrowings and derivatives for hedging and market making. (c) Retail banking Retail banking includes retail and consumer lending and deposits, banking services, cards and branchless banking. (d) Commercial banking Commercial banking includes project finance, working capital finance, trade finance, import and export, factoring, leasing, lending, deposits and guarantees. (e) Asset management Asset management includes discretionary and non-discretionary fund management activities in the form of pooled, segregated, retail, institutional, private equity, open, close ended funds etc. (f) Others Others includes functions of the Group and subsidiaries which cannot be classified in any of the above segments. 5.17.2 Geographical segments The Group operates in following geographical regions: 5.18 Pakistan Middle East United States of America Export Processing Zones in Karachi and Sialkot Europe Africa Dividends and appropriations to reserves Dividends and appropriations to reserves are recorded in the year in which these are approved, except appropriations required by law which are recorded in the period to which they pertain. 5.19 Earnings per share The Group presents basic and diluted earnings per share (EPS). Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the year. 18 Annual Report 2017 173
176. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED For the year ended December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 Note 6. CASH AND BALANCES WITH TREASURY BANKS In hand Local currency Foreign currency 2017 2016 ------- (Rupees in '000) ------- 9,133,749 4,757,384 13,891,133 13,072,595 5,013,886 18,086,481 With State Bank of Pakistan in Local currency current accounts Foreign currency current accounts Foreign currency deposit account 6.1 6.2 6.3 With other central banks in Foreign currency current accounts Foreign currency deposit accounts 47,566,242 2,603,208 7,374,423 57,543,873 33,315,897 2,307,913 6,841,899 42,465,709 6.4 6.5 34,049,196 7,272,440 41,321,636 48,257,470 105,058 161,119,170 33,616,331 1,775,653 35,391,984 37,422,940 100,388 133,467,502 With National Bank of Pakistan in local currency current accounts National Prize Bonds 6.1 This represents current accounts maintained with the SBP under the Cash Reserve Requirement of section 22 of the Banking Companies Ordinance, 1962. 6.2 This represents a US Dollar settlement account maintained with the SBP and current accounts maintained with the SBP to comply with statutory requirements. 6.3 This represents an account maintained with the SBP to comply with the Special Cash Reserve requirement. The return on this account is declared by the SBP on a monthly basis and as at December 31, 2017, it carries mark-up at the rate of 0.37% (2016: 0.00%) per annum. 6.4 Deposits with other central banks are maintained to meet the minimum cash reserves and capital requirements pertaining to the foreign branches and subsidiaries of the Group. 6.5 These represent placement with overseas central banks and carry mark-up at the rate ranging from 1.22% to 1.50% (2016: 0.75%) per annum. Note 7. BALANCES WITH OTHER BANKS Inside Pakistan In current accounts In deposit accounts 7.1 Outside Pakistan In current accounts In deposit accounts 7.2 2017 2016 ------- (Rupees in '000) ------- 3,674 5,879,308 5,882,982 493 2,842,953 2,843,446 15,014,403 14,651,727 29,666,130 35,549,112 14,148,042 15,275,816 29,423,858 32,267,304 7.1 These carry mark-up at rates ranging from 5.60% to 5.70% (2016: 5.80% to 5.95%) per annum. 7.2 These carry mark-up at rates ranging from 0.13% to 5.25% (2016: 0.10% to 1.84%) per annum and include balances amounting to Rs. 220.834 million (2016: Rs. 1,004.146 million), maintained with an overseas bank against the statutory reserves requirement of a foreign branch. 174 United Bank Limited 19
177. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND OF THE CONSOLIDATED For the yearFORMING endedPART December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 Note 8. 8.1 LENDINGS TO FINANCIAL INSTITUTIONS Call money lending Repurchase agreement lendings Bai Muajjal receivable from State Bank of Pakistan Bai Muajjal receivable from other financial institutions Other lendings to financial institutions 8.2 8.3 8.4 Provision against lendings to financial institutions 8.6 8.5 2017 2016 ------- (Rupees in '000) ------585,000 6,931,953 3,109,215 26,100,227 36,726,395 1,500,000 11,226,452 23,564,197 36,290,649 (832,475) 35,893,920 (806,063) 35,484,586 19,991,458 16,734,937 36,726,395 19,335,529 16,955,120 36,290,649 Particulars of lendings to financial institutions - gross In local currency In foreign currencies 8.2 This represents unsecured lending carrying mark-up at a rate 5.75% per annum (2016: 5.25% per annum) and is due to mature by January 2018. 8.3 Securities held as collateral against repurchase agreement lendings 2017 2016 Further given Further given Held by Held by as collateral / Total as collateral / Total Group Group sold sold ----------------------------------------------- (Rupees in '000) ----------------------------------------------Market Treasury Bills 6,931,953 - 6,931,953 - - - 8.4 This represents Bai Muajjal agreements entered into with State Bank of Pakistan (SBP) whereby the Bank has sold sukuks having carrying value of Rs. 2,948.799 million (2016: Rs. nil) on deferred payment basis. The average return on these transactions is 5.44% per annum (2016: 0.00%). The balances are due to mature latest by June 2018. 8.5 Lendings pertaining to domestic operations carry mark-up at rates ranging from 0.00% to 8.19% per annum (2016: 0.00% to 8.14% per annum) and are due to mature latest by November 2022. Lendings pertaining to overseas operations carry mark-up at rates ranging from 2.61% to 6.02% per annum (2016: 1.20% to 4.13% per annum) and are due to mature latest by February 2022. 8.6 This represents provision made against lendings to financial institutions with movement as follows: 2017 2016 ------- (Rupees in '000) ------Opening balance Exchange adjustments Reversal during the year Amounts written off Closing balance 806,063 37,210 (8,260) (2,538) 832,475 20 822,485 (922) (15,500) 806,063 Annual Report 2017 175
178. Notes to and forming part of the Consolidated Financial Statements NOTES TOyear AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 9. INVESTMENTS 9.1 Investments by type Note Held for trading securities Market Treasury Bills Pakistan Investment Bonds Term Finance Certificates Available for sale securities Market Treasury Bills Pakistan Investment Bonds Government of Pakistan Sukuk Government of Pakistan Eurobonds Ordinary shares of listed companies Preference shares Ordinary shares of unlisted companies Term Finance Certificates Investment in REIT Foreign bonds - sovereign Foreign bonds - others Held to maturity securities Market Treasury Bills Pakistan Investment Bonds Government of Pakistan Eurobonds Government of Pakistan Sukuk Term Finance Certificates Sukuks Participation Term Certificates Debentures Foreign bonds - sovereign Foreign bonds - others Recovery note CDC SAARC Fund Commercial Paper Associates United Growth and Income Fund UBL Liquidity Plus Fund UBL Money Market Fund UBL Retirement Savings Fund UBL Government Securities Fund UBL Gold Fund UBL Asset Allocation Fund UBL Stock Advantage Fund UBL Financial Planning Fund Al Ameen Islamic Cash Fund Al Ameen Islamic Aggressive Income Fund Al Ameen Islamic Sovereign Fund Al Ameen Shariah Stock Fund Al Ameen Islamic Asset Allocation Fund Al Ameen Islamic Financial Planning Fund Al Ameen Islamic Financial Planning Fund II UBL Insurers Limited Khushhali Bank Limited Oman United Exchange Company, Muscat DHA Cogen Limited Provision for diminution in value of investments Investments - net of provision 176 45,383,907 45,383,907 104,501,276 582,376 10,245 105,093,897 8,120,078 263,156 26,608 8,409,842 108,314,347 23,830,510 19,102,273 16,768,510 18,362,340 391,315 258,757 441,406 458,590 38,492,705 18,150,879 244,571,632 194,204,632 205,729,962 399,934,594 302,518,979 229,560,472 19,102,273 16,768,510 18,362,340 391,315 258,757 441,406 458,590 38,492,705 18,150,879 644,506,226 25,117,903 184,088,469 7,233,271 15,378,790 16,007,143 372,636 243,334 556,284 458,590 33,743,383 18,150,994 301,350,797 7,363,088 311,766,517 6,564,140 221,823 6,626,766 10,512,247 437 2,266 15,208,115 6,098,955 340,333 240 227,224 364,932,151 27,735,599 289,522,875 8,366,542 894,199 4,715,333 9,024,950 2,795 2,266 11,877,893 3,393,747 322,399 228 355,858,826 - 47,933,801 96,854,633 144,788,434 - 8,120,078 263,156 26,608 8,409,842 73,051,704 280,943,102 7,233,271 15,378,790 16,007,143 372,636 243,334 556,284 458,590 33,743,383 18,150,994 446,139,231 27,735,599 289,522,875 8,366,542 894,199 4,715,333 9,024,950 2,795 2,266 11,877,893 3,393,747 322,399 228 355,858,826 9.9 9.9 9.9 9.9 9.9 9.9 9.9 9.9 9.9 9.9 9.9 9.9 9.9 9.9 9.9 9.9 9.9 9.9 9.9 9.9.1.6 264,763 93,371 11,455 265,325 210,149 37,036 367 382 320,894 216,916 316,142 45,123 345,097 2,046,922 69,702 4,243,644 673,457,417 445,318,501 264,763 93,371 11,455 265,325 210,149 37,036 367 382 320,894 216,916 316,142 45,123 345,097 2,046,922 69,702 4,243,644 1,118,775,918 615,046 11,738 11,445 30,654 3,092,749 86,734 765,932 186,565 12,862 31,923 59,360 363,868 128,665 611,598 295,604 1,606,377 66,497 7,977,617 673,597,082 144,788,434 615,046 11,738 11,445 30,654 3,092,749 86,734 765,932 186,565 12,862 31,923 59,360 363,868 128,665 611,598 295,604 1,606,377 66,497 7,977,617 818,385,516 9.3 (3,149,523) 670,307,894 445,318,501 (3,149,523) 1,115,626,395 (2,434,908) 671,162,174 144,788,434 (2,434,908) 815,950,608 22.2 Surplus / (deficit) on revaluation of held for trading securities 9.4 United Bank Limited 2016 59,117,369 582,376 10,245 59,709,990 7,363,088 311,766,517 6,564,140 221,823 6,626,766 10,512,247 437 2,266 15,208,115 6,098,955 340,333 240 227,224 364,932,151 Surplus on revaluation of available for sale securities Total investments 2017 Given as Given as Held by Group Total Held by Group Total collateral collateral ---------------------------------------------------------- (Rupees in '000) ---------------------------------------------------------- 3,311,811 5,980,887 9,292,698 34 2,173 2,207 673,619,739 451,301,561 1,124,921,300 21 12,665,549 (1,221) 683,826,502 9,647,338 154,435,772 22,312,887 (1,221) 838,262,274
179. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 9.2 Note Investments by segment Federal Government Securities Market Treasury Bills Pakistan Investment Bonds Government of Pakistan Sukuk Government of Pakistan Eurobonds Foreign securities Market Treasury Bills Sovereign bonds CDC SAARC Fund Recovery note Other bonds Ordinary shares Listed companies Unlisted companies Preference shares Term Finance Certificates Listed Unlisted Sukuks Debentures Participation Term Certificates Investment in REIT Commercial Paper Investment in associates 2017 2016 -------- (Rupees in '000) ------407,020,255 541,909,365 19,324,096 23,332,650 991,586,366 96,090,512 570,729,133 8,127,470 23,745,332 698,692,447 7,363,088 53,700,820 240 340,333 24,249,834 85,654,315 12,816,869 45,621,276 228 322,399 21,544,741 80,305,513 18,362,340 258,757 18,621,097 16,007,143 243,334 16,250,477 391,315 372,636 1,189,615 5,888,802 7,078,417 1,190,052 4,108,173 5,298,225 10,512,247 2,266 437 458,590 227,224 9,024,950 2,266 2,795 458,590 - 4,243,644 7,977,617 Total investments - Gross Provision for diminution in value of investments 9.3 1,118,775,918 (3,149,523) 818,385,516 (2,434,908) Investments - net of provision Surplus on revaluation of available for sale securities Surplus / (deficit) on revaluation of held for trading securities 22.2 9.4 1,115,626,395 9,292,698 2,207 815,950,608 22,312,887 (1,221) 1,124,921,300 838,262,274 Total investments 9.3 Provision for diminution in value of investments 9.3.1 Opening balance Exchange adjustments 2,434,908 51,363 Charge / (reversals) Charge for the year Reversals Reversed on disposal Amounts written off Closing balance 22 2,550,531 (9,329) 750,715 (30,870) 719,845 969,980 (71,871) 898,109 (55,525) (1,068) 3,149,523 (978,855) (25,548) 2,434,908 Annual Report 2017 177
180. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 9.3.2 Provision for diminution in value of investments by type Available for sale securities Ordinary shares of listed companies Ordinary shares of unlisted companies Term Finance Certificates Foreign bonds Preference shares Held to maturity securities Term Finance Certificates Sukuks Foreign bonds Recovery note Participation Term Certificates Debentures 9.3.3 1,824,103 128,758 97,616 2,107 354,688 2,407,272 1,218,693 137,379 104,040 335,934 1,796,046 41,851 117,841 239,487 340,370 436 2,266 742,251 41,851 42,650 226,867 322,433 2,795 2,266 638,862 3,149,523 2,434,908 1,824,103 128,758 354,688 2,307,549 1,218,693 137,379 335,934 1,692,006 139,467 117,841 340,370 241,594 436 2,266 841,974 145,891 42,650 322,433 226,867 2,795 2,266 742,902 3,149,523 2,434,908 Provision for diminution in value of investments by segment Equity securities Listed companies Unlisted companies Preference shares Debt securities Term Finance Certificates Sukuks Recovery note Foreign bonds Participation Term Certificates Debentures 9.4 2017 2016 ------- (Rupees in '000) ------- Unrealized gain / (loss) on revaluation of held for trading securities Market Treasury Bills Pakistan Investment Bonds Term Finance Certificates 1,563 729 (85) 2,207 (1,962) 636 105 (1,221) 9.5 Investments include securities which are held by the Holding Company to comply with the statutory liquidity requirements as set out under Section 29 of the Banking Companies Ordinance, 1962. 9.6 Investments include Rs. 282.000 million (2016: Rs. 282.000 million) held by the SBP and National Bank of Pakistan as pledge against demand loan, TT / DD discounting facilities and foreign exchange exposure limit sanctioned to the Bank and Rs. 5.000 million (2016: Rs. 5.000 million) held by the Controller of Military Accounts (CMA) under Regimental Fund Arrangements. 9.7 Information relating to investments required to be disclosed as part of the consolidated financial statements under the SBP's BSD Circular No. 4 dated February 17, 2006, and details in respect of the quality of available for sale securities are disclosed in Annexure 'A' which form an integral part of these consolidated financial statements. 9.8 Investments include amounts aggregating to Rs. 2,175.182 million which have been classified as loss in accordance with the requirements of Prudential Regulations prescribed by SBP. Provision has however, not been made against them as these investments are secured by way of guarantee from the Government of Pakistan. 178 United Bank Limited 23
181. Notes to and forming part of the Consolidated Financial Statements NOTESthe TO AND FORMING PART December OF THE CONSOLIDATED FINANCIAL STATEMENTS For year ended 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 9.9 Investment in associates 9.9.1 Movement of Investment in associates Note 2017 Investment Investment / Percentage at the (Redemption) Holding beginning during the of the year year Share of profit / (loss) Share of unrealized (loss) / surplus on assets Dividend received Investment at the end of the year -------------------------------- (Rupees in '000) ---------------------------------------------------------United Growth and Income Fund UBL Liquidity Plus Fund UBL Money Market Fund UBL Retirement Savings Fund UBL Government Securities Fund UBL Gold Fund UBL Asset Allocation Fund UBL Stock Advantage Fund UBL Financial Planning Fund UBL Principal Protected Fund - III Al Ameen Islamic Cash Fund Al Ameen Islamic Aggressive Income Fund Al Ameen Islamic Sovereign Fund Al Ameen Shariah Stock Fund Al Ameen Islamic Asset Allocation Fund Al Ameen Islamic Financial Planning Fund Al Ameen Islamic Financial Planning Fund II Al Ameen Islamic Retirement Savings Fund Al Ameen Islamic Principal Preservation Fund – III Al Ameen Islamic Principal Preservation Fund – IV Al Ameen Islamic Principal Preservation Fund – V UBL Insurers Limited Khushhali Bank Limited Oman United Exchange Company, Muscat 9.9.1.1 9.9.1.1 9.9.1.1 9.9.1.1 9.9.1.1 9.9.1.1 9.9.1.1 9.9.1.1 9.9.1.1 9.9.1.1 9.9.1.2 9.9.1.2 9.9.1.2 9.9.1.2 9.9.1.2 9.9.1.2 9.9.1.2 9.9.1.2 9.9.1.2 9.9.1.2 9.9.1.2 9.9.1.3 9.9.1.4 9.9.1.5 8.14% 1.41% 1.62% 9.36% 3.19% 7.18% 0.01% 0.01% 4.33% 2.79% 4.54% 0.36% 30.00% 29.69% 25.00% 615,046 11,738 11,445 30,654 3,092,749 86,734 765,932 186,565 12,862 31,923 59,360 363,868 128,665 611,598 295,604 1,606,377 66,497 7,977,617 (347,046) 78,160 (32,355) (2,852,278) (89,577) (716,196) 64,317 32,668 (12,674) (32,415) (59,376) 25,655 115,159 (259,627) 44,994 7,171 (4,033,420) 33,235 4,165 611 1,701 36,611 2,843 (4,339) (24,370) 4,368 195 492 419 (40,158) (6,422) (35,829) 129 49,493 440,524 (3,966) 459,702 (31,887) (692) (601) (11,757) (45,397) (16,363) (16) (21) (29,320) (20,819) (156,873) (4,585) 849 333 21 (3,382) 264,763 93,371 11,455 265,325 210,149 37,036 367 382 320,894 216,916 316,142 45,123 345,097 2,046,922 69,702 4,243,644 Share of unrealized (loss) / surplus on assets Investment at the end of the year 2016 Note Percentage Holding Investment Investment / at the (Redemption) beginning during the of the year year Share of profit / (loss) Dividend received ----------------------------------------------------- (Rupees (Rupees in '000) in '000) ----------------------------------------------------------------------------------------------United Growth and Income Fund UBL Liquidity Plus Fund UBL Money Market Fund UBL Retirement Savings Fund UBL Principal Protected Fund - III UBL Government Securities Fund UBL Gold Fund UBL Asset Allocation Fund UBL Stock Advantage Fund Al Ameen Islamic Cash Fund Al Ameen Islamic Aggressive Income Fund Al Ameen Islamic Sovereign Fund Al Ameen Islamic Retirement Savings Fund Al Ameen Shariah Stock Fund Al Ameen Islamic Principal Preservation Fund – III Al Ameen Islamic Principal Preservation Fund – IV Al Ameen Islamic Principal Preservation Fund – V Al Ameen Islamic Asset Allocation Fund Al Ameen Islamic Financial Planning Fund UBL Insurers Limited Khushhali Bank Limited Oman United Exchange Company, Muscat 9.9.1.1 9.9.1.1 9.9.1.1 9.9.1.1 9.9.1.1 9.9.1.1 9.9.1.1 9.9.1.1 9.9.1.1 9.9.1.2 9.9.1.2 9.9.1.2 9.9.1.2 9.9.1.2 9.9.1.2 9.9.1.2 9.9.1.2 9.9.1.2 9.9.1.2 9.9.1.3 9.9.1.4 9.9.1.5 13.48% 0.47% 2.13% 3.23% 0.00% 28.95% 69.63% 35.56% 2.56% 0.56% 2.46% 1.84% 0.00% 5.00% 0.00% 0.00% 0.00% 3.42% 4.34% 30.00% 29.69% 25.00% 479,035 11,755 11,474 290,427 245,308 3,033,104 83,247 557,764 220,801 1,012,287 31,569 57,515 241,725 242,645 117,560 112,882 100,454 115,004 201,376 253,662 1,305,528 76,819 8,801,941 118,000 (292,644) (238,146) 78,445 125,904 (73,670) (1,003,500) (70) 800 (271,938) 36,703 (119,948) (119,486) (103,927) (454) 304,690 (1,559,241) 64,164 610 539 32,962 (7,162) 194,508 6,218 113,382 44,064 4,642 2,097 3,283 30,218 90,051 2,388 9,631 3,692 19,118 110,222 41,942 301,001 (10,322) 1,057,248 (33,862) (627) (568) (213,308) (2,731) (31,118) (4,630) (567) (1,641) (2,238) (5,531) (3,027) (219) (5,003) (4,690) (309,760) (12,291) (91) (32) (5) (152) (12,571) 615,046 11,738 11,445 30,654 3,092,749 86,734 765,932 186,565 12,862 31,923 59,360 363,868 128,665 611,598 295,604 1,606,377 66,497 7,977,617 9.9.1.1 These represent open ended mutual funds managed by UBL Fund Managers Limited. These funds are listed on the Pakistan Stock Exchange and offer units for public subscription on a continuous basis. 9.9.1.2 These represent open ended shariah compliant mutual funds managed by UBL Fund Managers Limited. These funds are listed on the Pakistan Stock Exchange and offer units for public subscription on a continuous basis. 9.9.1.3 UBL Insurers Limited is an unquoted public company, whose principal objective is to conduct general insurance business. Annual Report 2017 24 179
182. Notes to and forming part of the Consolidated Financial Statements NOTESthe TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 9.9.1.4 Khushhali Bank Limited is a microfinance bank. The principal objective of the bank is to provide microfinance services and promote social welfare through community building and social mobilization. 2017 2016 ------- (Rupees in '000) ------Group share of Net Assets Government Grant Goodwill Carrying amount of interest in associates 1,912,278 (479) 135,123 2,046,922 1,471,254 135,123 1,606,377 9.9.1.5 Oman United Exchange Company LLC (the Company) is incorporated in the Sultanate of Oman as a limited liability company and is primarily engaged in money changing, issuing of drafts and the purchase and sale of travellers cheques. 9.9.1.6 As a result of exercise of a pledge in 2013, the Bank holds 20.99% of the issued and paid up capital of DHA Cogen Limited without any consideration having been paid. Consequently, DHA Cogen Limited is classified as an associated company. 9.9.2 Summary of financial position and performance 2016 Profit / Assets Liabilities Revenue Profit / (loss) (loss) ---------------------------------------------------------- (Rupees in '000) ---------------------------------------------------------United Growth and Income Fund 3,299,033 45,050 374,614 99,761 4,699,614 138,406 285,572 230,833 UBL Liquidity Plus Fund 6,683,601 75,089 279,725 173,339 2,596,259 96,132 258,831 259,761 UBL Money Market Fund 724,871 17,787 46,997 38,542 552,999 16,484 45,976 33,589 UBL Retirement Savings Fund 2,718,168 63,596 (62,624) 14,955 2,710,586 79,423 515,627 449,137 UBL Government Securities Fund 5,385,942 2,551,190 309,628 (10,097) 10,801,539 116,657 1,111,171 881,667 UBL Gold Fund 126,675 2,109 11,579 7,691 UBL Asset Allocation Fund 1,758,704 29,331 28,110 24,724 2,176,010 22,058 404,246 340,412 UBL Stock Advantage Fund 6,728,463 147,481 (528,583) (683,292) 7,418,566 129,616 1,579,209 1,407,589 UBL Financial Planning Fund 518,173 2,068 10,572 9,798 Al Ameen Islamic Cash Fund 4,167,060 21,509 243,331 82,107 2,322,129 18,254 202,067 165,412 Al Ameen Islamic Aggressive Income Fund 971,430 15,373 64,904 15,756 1,318,142 18,047 92,909 67,925 Al Ameen Islamic Sovereign Fund 6,389,388 331,327 161,947 (2,611) 3,259,568 33,231 226,456 179,164 Al Ameen Shariah Stock Fund 7,570,462 163,601 257,086 208,666 7,599,244 327,929 1,940,494 1,759,903 Al Ameen Islamic Asset Allocation Fund 7,859,580 85,572 (67,124) 263,886 3,840,684 81,558 502,945 454,245 Al Ameen Islamic Financial Planning Fund 9,514,590 100,333 (561,808) (825,416) 14,303,216 101,535 2,682,088 2,654,547 Al Ameen Islamic Financial Planning Fund II 11,674,838 52,017 (651,228) (666,092) UBL Insurers Limited 4,180,839 3,026,792 1,062,464 169,206 3,545,452 2,532,690 866,749 134,733 Khushhali Bank Limited 58,978,610 52,538,695 6,971,272 1,876,462 33,667,570 28,712,879 6,862,796 1,275,802 Oman United Exchange Company, Muscat 371,264 92,455 166,714 (26,307) 336,369 70,382 158,699 (40,791) DHA Cogen Limited 4,603,235 18,110,429 (822,551) 4,660,062 18,170,794 (957,462) Assets 10. ADVANCES Loans, cash credits, running finances, etc. In Pakistan Outside Pakistan Islamic financing and related assets Liabilities Performing Non-performing Total 2017 2016 2017 2016 2017 2016 ---------------------------------------------------------- (Rupees in '000) ---------------------------------------------------------388,577,958 317,697,928 153,189,777 150,678,664 541,767,735 468,376,592 46.3 Advances - gross Advances - net of provision Revenue Note Bills discounted and purchased Payable in Pakistan Payable outside Pakistan Provision against advances - Specific - General 2017 10.3 25,313,698 24,715,132 50,028,830 29,717,889 13,531,495 43,249,384 413,891,656 177,904,909 591,796,565 347,415,817 164,210,159 511,625,976 22,106,385 7,277,360 94,421 94,614 22,200,806 7,371,974 18,330,853 51,126,252 69,457,105 13,976,584 43,483,888 57,460,472 2,784,397 2,784,397 2,700,944 2,700,944 21,115,250 51,126,252 72,241,502 16,677,528 43,483,888 60,161,416 633,331,225 533,114,424 52,907,648 46,044,942 686,238,873 579,159,366 (40,225,684) (3,506,469) (43,732,153) (38,080,944) (3,296,276) (41,377,220) (3,506,469) (3,506,469) (3,296,276) (3,296,276) (40,225,684) (38,080,944) (40,225,684) (38,080,944) 629,824,756 529,818,148 12,681,964 7,963,998 642,506,720 537,782,146 10.1 Particulars of advances - gross 10.1.1 In local currency In foreign currencies 415,892,300 329,236,693 217,438,925 203,877,731 633,331,225 533,114,424 27,820,386 25,087,262 52,907,648 32,166,038 13,878,904 46,044,942 443,712,686 242,526,187 686,238,873 361,402,731 217,756,635 579,159,366 10.1.2 Short term Long term 379,929,030 311,500,514 253,402,195 221,613,910 633,331,225 533,114,424 52,907,648 52,907,648 46,044,942 46,044,942 379,929,030 306,309,843 686,238,873 311,500,514 267,658,852 579,159,366 180 United Bank Limited 25
183. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 10.2 Advances include Rs. 52,907.648 million (2016: Rs. 46,044.942 million) which have been placed under non-performing status as detailed below: 2017 Category of Classification Classified advances Provision required Provision held Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total ----------------------------------------------------------------------- (Rupees in '000) -------------------------------------------------------------------Other assets especially mentioned * Substandard Doubtful Loss 81,653 1,062,286 4,417,061 81,653 2,012 5,479,347 258,707 942,062 2,012 2,012 1,200,769 258,707 942,062 2,012 1,200,769 1,452,224 6,910,333 8,362,557 783,804 2,475,262 3,259,066 783,804 2,475,262 3,259,066 25,596,353 13,387,738 38,984,091 24,512,775 11,251,062 35,763,837 24,512,775 11,251,062 35,763,837 28,192,516 24,715,132 52,907,648 25,557,298 14,668,386 40,225,684 25,557,298 14,668,386 40,225,684 2016 Category of Classification Classified advances Provision required Provision held Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total ----------------------------------------------------------------------- (Rupees in '000) -------------------------------------------------------------------Other assets especially mentioned * Substandard Doubtful Loss 126,711 - 908,055 1,916,117 126,711 3,576 2,824,172 222,697 337,466 - 3,576 3,576 560,163 222,697 337,466 - 3,576 560,163 2,471,496 2,670,087 5,141,583 1,203,332 1,042,384 2,245,716 1,203,332 1,042,384 2,245,716 29,007,185 8,945,291 37,952,476 27,881,140 7,390,349 35,271,489 27,881,140 7,390,349 35,271,489 32,513,447 13,531,495 46,044,942 29,310,745 8,770,199 38,080,944 29,310,745 8,770,199 38,080,944 Total Specific General * The Other Assets Especially Mentioned category pertains to agricultural finance and advances to small enterprises. 10.3 Particulars of provision against advances 2017 Note Specific General 2016 Total ---------------------------------------- (Rupees in '000) ----------------------------------------Opening balance 38,080,944 3,296,276 41,377,220 38,477,438 4,195,716 42,673,154 663,238 (25,487) 637,751 (132,226) (133,765) (265,991) 6,240,241 235,680 Exchange adjustments Charge / (reversals) Charge for the year Reversals 10.3.3 (4,598,664) 1,641,577 Transfers in - net Amounts written off Closing balance 10.5 - 5,757,387 80,549 5,837,936 (4,367,086) (846,224) (5,213,310) (765,675) 624,626 1,877,257 1,390,301 653,818 - 653,818 524,620 - 524,620 (813,893) - (813,893) (2,179,189) - (2,179,189) 43,732,153 38,080,944 40,225,684 235,680 6,475,921 (4,598,664) 3,506,469 3,296,276 41,377,220 10.3.1 General provision represents provision amounting to Rs. 247.323 million (2016: Rs. 218.074 million) against consumer finance portfolio, Rs. 49.088 million (2016: Rs. 39.088 million) against advances to small enterprises as required by the Prudential Regulations issued by the SBP and Rs. 2,881.358 million (2016: Rs. 2,550.117 million) pertaining to overseas advances to meet the requirements of the regulatory authorities of the respective countries in which the overseas branches and subsidiaries operate. General provision also includes Rs. 328.700 million (2016: Rs. 488.997 million) which is based on regulatory instructions. 10.3.2 The Bank has availed the benefit of Forced Sale Value (FSV) of certain mortgaged properties held as collateral against nonperforming advances as allowed under BSD Circular 1 of 2011. Had the benefit under the said circular not been taken by the Bank, the specific provision against non-performing advances would have been higher by Rs. 24.540 million (2016: Rs. 56.375 million). The FSV benefit availed is not available for the distribution of cash or stock dividend to shareholders. 10.3.3 This includes provision reversals amounting to Rs. nil (2016: Rs. 444.034 million) as a result of settlement through debt asset swap arrangements with various customers. 26 Annual Report 2017 181
184. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED For the year ended December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 10.3.4 Particulars of provision against advances 2017 2016 Specific General Total Specific General Total ---------------------------------------- (Rupees in '000) -------------------------------------------In local currency In foreign currencies 25,185,168 15,040,516 40,225,684 296,411 3,210,058 3,506,469 25,481,579 18,250,574 43,732,153 28,963,336 9,117,608 38,080,944 257,162 3,039,114 3,296,276 29,220,498 12,156,722 41,377,220 10.4 Exposure amounting to Rs. 7,283.300 million relating to certain facilities of Power Holding (Pvt.) Limited, which is a government guaranteed loan, has not been classified as non-performing, pursuant to a relaxation given by SBP in this respect. The relaxation is valid upto January 31, 2018. 10.5 Particulars of write-offs 10.5.1 Against provisions Directly charged to profit and loss account 10.3 813,893 187,443 1,001,336 2,179,189 97,781 2,276,970 10.5.2 Write-offs of Rs. 500,000 and above - Bank Write-offs below Rs. 500,000 - Bank Write-offs in subsidiaries 10.6 627,618 278,674 95,044 1,001,336 1,901,454 215,421 160,095 2,276,970 10.6 Note 10.6 2017 2016 ------- (Rupees in '000) ------- Details of loan write-offs of Rs. 500,000 and above 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 by the Bank during the year ended December 31, 2017 is given in Annexure 'B' to the unconsolidated financial statements. This includes amounts charged off without prejudice to the Bank's right to recovery. 10.7 Due to disclosure restrictions in the local regulations of foreign subsidiaries, the names of parties written off cannot be disclosed. Note 2017 2016 Particulars of loans and advances to executives, directors, ------- (Rupees in '000) ------associated companies etc. Balance at the beginning of the year Loans granted during the year Repayments made during the year Balance at the end of the year 11. 11.1 11.2 11.3 66,660,102 (80,990,003) (14,329,901) 57,955,678 (48,730,420) 9,225,258 8,243,541 22,573,442 4,467,036 44,820,475 1,096,566 50,384,077 3,005,182 35,203,552 1,090,193 39,298,927 3,662,319 748,107 56,610 4,467,036 2,454,913 425,419 124,678 172 3,005,182 Capital work-in-progress Civil works Equipment Software Advances to suppliers and contractors 182 13,348,184 OPERATING FIXED ASSETS Capital work-in-progress Property and equipment Intangible assets 11.1 22,573,442 United Bank Limited 27
185. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND OF THE CONSOLIDATED For the yearFORMING endedPART December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 11.2 Property and equipment Owned 2017 Cost / Revaluation Accumulated Depreciation Surplus on Net book Charge for Annual rate revaluation / Exchange / value at At Reversal due Exchange / At of deprecAt January Additions / At January the year / (reversal of Other December to Other December December iation % 1, 2017 (deletions) 1, 2017 (depreciation accumulated adjustments 31, 2017 31, 2017 revaluation adjustments 31, 2017 on deletions) depreciation) ------------------------------------------------------------------------------------------------------ (Rupees in '000) ------------------------------------------------------------------------------------------------------ Freehold land 5,025,317 Leasehold land 16,240,938 1,302,649 (13,413) 4,353,002 - Buildings on freehold land 4,470,087 3,996 - 14,661 (129,273) 576,105 4,935,576 448,235 70,602 (129,273) 52,808 442,372 4,493,204 2-5 Buildings on leasehold land 4,865,948 580,770 - 590,178 (326,854) 672 5,710,714 146,370 184,970 (326,854) 248 4,734 5,705,980 2.5 - 10 Leasehold improvements 3,476,092 645,480 (4,866) - 30,452 4,147,158 2,077,189 357,202 (3,006) - 30,501 2,461,886 1,685,272 10 - 20 Furniture and fixtures 1,796,707 306,757 (65,372) - 37,805 2,075,897 1,170,164 159,174 (64,979) - 26,274 1,290,633 785,264 10 - 25 10,979,816 1,982,527 (1,350,069) - 64,809 11,677,083 8,053,745 1,307,154 (1,346,841) - 43,320 8,057,378 3,619,705 10 - 67 566,997 45,910 (102,360) - 510,385 321,310 72,055 (98,069) - (484) 294,812 215,573 20 - 25 47,421,902 4,868,089 (1,536,080) 709,767 57,373,700 12,218,350 2,151,157 (1,512,895) Electrical, office and computer equipment Vehicles Total Owned - 1,408,308 - 6,366,149 (456,127) - 6,433,625 86 21,883,262 (162) - - - 1,337 - - (456,127) - 73 6,433,625 - 1,410 21,881,852 - 152,740 12,553,225 44,820,475 2016 Cost / Revaluation Accumulated Depreciation Surplus on Charge for Net book Annual rate revaluation / Exchange / the year / Reversal due Exchange / value at At At of deprecAt January Additions / At January (reversal of (deprecOther December to Other December December iation % 1, 2016 (deletions) 1, 2016 accumulated adjustments 31, 2016 iation on 31, 2016 revaluation adjustments 31, 2016 depreciation) deletions) ------------------------------------------------------------------------------------------------------ (Rupees in '000) ------------------------------------------------------------------------------------------------------ Freehold land 5,062,242 (36,925) - - 5,025,317 - - - Leasehold land 15,675,141 565,799 - - 1,339 - (2) 441,606 - 6,580 3,360,721 - - (748,430) 4,470,087 78,557 - (71,928) 448,235 4,021,852 2-5 - (15) 4,865,948 69,121 77,254 - (5) 146,370 4,719,578 2.5 - 10 (2) 16,240,938 - - 5,025,317 - 1,337 16,239,601 - Buildings on freehold land 5,211,937 Buildings on leasehold land 1,505,242 Leasehold improvements 3,024,253 464,143 - - (12,304) 3,476,092 1,790,548 297,379 - (10,738) 2,077,189 1,398,903 10 - 20 Furniture and fixtures 1,556,403 274,495 (9,660) - (24,531) 1,796,707 1,079,450 - (21,935) 1,170,164 626,543 10 - 25 2,119,869 (69,334) - (43,164) 10,979,816 7,077,993 122,054 (9,405) 1,061,401 (68,317) - (17,332) 8,053,745 2,926,071 10 - 67 524,891 122,615 (78,201) - (3,294) 321,310 245,687 20 - 25 41,532,554 6,914,222 (194,120) - Electrical, office and computer equipment Vehicles Total 8,972,445 (2,308) 566,997 316,433 78,347 (70,176) - (830,754) 47,421,902 10,776,490 1,714,992 (147,898) - 28 (125,234) 12,218,350 35,203,552 Annual Report 2017 183
186. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED For the year ended December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 11.3 Intangible assets 2017 Cost Accumulated Amortization Exchange / At other December adjustments 31, 2017 At January Additions / 1, 2017 (deletions) Charge for Exchange / At At January the year / other December 1, 2017 (reversal on adjustments 31, 2017 deletion) Net book value at December 31, 2017 Annual rate of amortization % -------------------------------------------------------------------- (Rupees in '000) -------------------------------------------------------------------Software 4,536,006 435,013 105,676 4,537,089 3,445,813 3,440,523 1,096,566 Charge for Exchange / At At January the year / other December 1, 2016 (reversal on adjustments 31, 2016 deletion) Net book value at December 31, 2016 (539,606) 436,392 97,906 10 - 33.33 (539,588) 2016 Cost At January Additions / 1, 2016 (deletions) Accumulated Amortization Exchange / At other December adjustments 31, 2016 Annual rate of amortization % -------------------------------------------------------------------- (Rupees in '000) -------------------------------------------------------------------Software 4,244,143 381,520 (86,858) 4,536,006 3,147,153 (2,799) 11.4 383,371 (82,783) 3,445,813 1,090,193 10 - 33.33 (1,928) Revaluation of properties The properties of the Bank have been revalued by independent professional valuers as at December 31, 2017. The revaluation was carried out by M/s. Engineering Pakistan Int'l (Pvt) Ltd., M/s. M. J. Surveyors (Pvt) Ltd., M/s Harvestor Services (Pvt) Ltd., and M/s Iqbal A. Nanjee & Co. (Pvt) Ltd. on the basis of professional assessment of present market values which resulted in an increase in surplus by Rs. 6,366.149 million. The total surplus arising against revaluation of fixed assets as at December 31, 2017 amounts to Rs. 26,424.375 million. The properties of UBL UK were last revalued by independent professional valuer, Quantum Valuation LLP, as at December 31, 2015. The total surplus arising against the revaluation of fixed assets as at December 31, 2017 amounts to Rs. 1,334.752 million. Had there been no revaluation, the carrying amount of revalued assets of the group at December 31 would have been as follows: 2017 2016 ------- (Rupees in '000) ------Freehold land Leasehold land Buildings on freehold land Buildings on leasehold land 11.5 Carrying amount of temporarily idle properties of the Group 11.6 The cost of fully depreciated assets still in use Furniture and fixtures Electrical, office and computer equipment Vehicles Leasehold improvements Softwares 11.7 745,657 3,187,670 1,347,946 4,240,426 745,657 1,898,434 1,043,291 3,816,412 62,572 81,790 487,255 5,204,108 84,442 656,845 1,989,239 8,421,889 420,351 4,951,484 137,171 311,214 2,079,282 7,899,502 Details of disposals of operating fixed assets The information relating to operating fixed assets disposed off during the year is given in Annexure 'C' and is an integral part of these consolidated financial statements. 184 United Bank Limited 29
187. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 12. 12.1 Note OTHER ASSETS 2017 2016 ------- (Rupees in '000) ------- Income / mark-up accrued in local currency Income / mark-up accrued in foreign currency 22,925,680 8,637,162 31,562,842 23,810,291 5,881,332 29,691,623 Advance taxation - net of provision for taxation 12.1 Receivable from staff retirement fund Receivable from other banks against telegraphic transfers and demand drafts Unrealized gain on forward foreign exchange contracts Rebate receivable - net Unrealized gain on derivative financial instruments 19.3.1 & 24.2 Suspense accounts Stationery and stamps on hand Non banking assets acquired in satisfaction of claims Advances, deposits, advance rent and other prepayments Others 17,599,231 632,808 270,941 2,798,197 529,870 76,884 567,060 100,836 1,786,011 1,345,180 4,290,996 61,560,856 10,484,223 376,634 758,923 683,803 893,968 204,498 459,240 117,189 2,343,457 1,243,934 2,740,613 49,998,105 Provision held against other assets Other assets - net of provision (6,574,655) 54,986,201 (4,818,584) 45,179,521 12.2 The Income Tax returns of the Bank have been filed up to the tax year 2017 (accounting year ended December 31, 2016) and were deemed to be assessed under section 120 of the Income Tax Ordinance, 2001 (Ordinance) unless amended by the Commissioner of Inland Revenue. The income tax authorities have issued amended assessment orders for the tax years 2003 to 2017, and created additional tax demands (including disallowances of provisions made prior to Seventh Schedule) of Rs.12,928 million (2016: Rs.13,723 million), which have been fully paid as required under the law. The Bank has filed appeals before the various appellate forums against these amendments. Where the appellate authorities have allowed relief on certain issues, the assessing authorities have filed appeals before higher appellate forums. Where the appellate authorities have not allowed relief the Bank has filed appeals before higher appellate forums. The management of the Bank is confident that the appeals will be decided in favour of the Bank. The tax returns for Azad Kashmir (AK) and Gilgit Baltistan (GB) Branches have been filed upto the tax year 2017 (financial year 2016) under the provisions of section 120(1) read with section 114 of the Ordinance and in compliance with the terms of the agreement between banks and the Azad Kashmir Council in May 2005. The returns filed are considered as deemed assessment orders under the law. The tax authorities have also carried out monitoring for Federal Excise Duty, Sales tax and withholding taxes covering period from year ended 2007 to 2016. Consequently, various addbacks and demands were raised creating a total demand of Rs. 919 million (2016: Rs. 1,245 million). The Bank has filed appeals against all such demands and is confident that these would be decided in the favour of the Bank. The tax returns for overseas branches have been filed upto the year ended December 31, 2016 under the provisions of the laws prevailing in the respective countries, and are deemed as assessed unless opened for reassessment. For UBL UK, UBTL, UBL FM and UET income tax returns have been filed up to the accounting year ended December 31, 2016 and for USAG these returns have been filed up to the accounting year ended December 31, 2014 under the provisions of the laws prevailing in the respective countries and are deemed as assessed unless opened for reassessment by the tax authorities. Additionally, tax clearance has been issued for UBL UK, UBTL and USAG till the accounting year 2016, 2015 and 2014 respectively. There are no material tax contingencies in any of the subsidiaries. 30 Annual Report 2017 185
188. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 12.2 Note Provision against other assets Opening balance Exchange adjustments Charge / (reversals) Charge for the year Reversals 30 Transfers in - net Amounts written off Closing balance 13. 2017 2016 ------- (Rupees in '000) ------4,818,584 194,361 4,825,077 (4,888) 110,799 (64,911) 45,888 1,547,266 (31,444) 6,574,655 161,419 (17,511) 143,908 817,630 (963,143) 4,818,584 CONTINGENT ASSETS There were no contingent assets as at the statement of financial position date. 14. BILLS PAYABLE In Pakistan Outside Pakistan 15. 496,743,625 20,338,534 517,082,159 181,622,033 24,243,098 205,865,131 489,038,458 28,043,701 517,082,159 181,321,268 24,543,863 205,865,131 19,375,930 10,250 17,312,481 36,698,661 453,224,580 489,923,241 14,702,567 19,550 11,955,687 26,677,804 154,967,594 181,645,398 10,167,645 577,014 16,414,259 27,158,918 517,082,159 14,381,809 318,275 9,519,649 24,219,733 205,865,131 Particulars of borrowings In local currency In foreign currencies 15.2 11,041,529 717,483 11,759,012 BORROWINGS In Pakistan Outside Pakistan 15.1 12,968,512 424,466 13,392,978 Details of borrowings Secured Borrowings from the State Bank of Pakistan under: Export refinance scheme Refinance facility for modernization of SMEs Long term financing facility 15.3 15.4 15.5 Repurchase agreement borrowings 15.6 Unsecured Call borrowings Overdrawn nostro accounts Other borrowings 15.7 15.8 15.3 The Bank has entered into an agreement with the SBP for extending export finance to customers. As per the terms of the agreement, the Bank has granted the SBP the right to recover the outstanding amounts from the Bank at the date of maturity of the finances by directly debiting the Bank's current account maintained with the SBP. These borrowings are repayable within six months, latest by June 2018. These carry mark-up at rates ranging from 1.00% to 2.00% per annum (2016: 1.00% to 2.00% per annum). 15.4 These borrowings have been obtained from the SBP under a scheme to finance modernization of Small and Medium Enterprises by providing financing facilities for setting up of new units, purchase of new plant and machinery for Balancing, Modernization and Replacement (BMR) of existing units and financing for import / local purchase of new generators upto a maximum capacity of 500 KVA. These borrowings are repayable latest by October 2019 and carry mark-up at a rate of 6.25% per annum (2016: 6.25% per annum). 186 United Bank Limited 31
189. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 15.5 These borrowings have been obtained from the SBP for providing financing facilities to exporters for adoption of new technologies and modernization of their plant and machinery. These borrowings are repayable latest by December 2027. These carry mark-up at rates ranging from 2.00% to 9.70% per annum (2016: 2.00% to 10.90% per annum). 15.6 These repurchase agreement borrowings are secured against Pakistan Investment Bonds and Treasury Bills and carry markup at rates ranging from 5.75% to 5.85% per annum (2016: 5.50% to 5.90% per annum). These borrowings are repayable latest by February 2018. The carrying value of securities given as collateral against these borrowings is given in note 9.1. 15.7 These are unsecured borrowings carrying mark-up at rates ranging from 0.1% to 5.8% per annum (2016: 0.25% to 5.85% per annum), and are repayable latest by March 2018. 15.8 These borrowings carry mark-up at rates ranging from 2.57% to 4.80% per annum (2016: 2.00% to 4.74% per annum), and are repayable latest by January 2018. 16. DEPOSITS AND OTHER ACCOUNTS 2017 2016 ------- (Rupees in '000) ------- Customers Fixed deposits Savings deposits Sundry deposits Margin deposits Current accounts - remunerative Current accounts - non-remunerative Financial Institutions Remunerative deposits Non-remunerative deposits 16.1 329,853,639 373,194,772 22,534,114 4,414,357 10,521,315 431,909,304 1,172,427,501 57,065,974 20,822,097 77,888,071 1,366,157,914 59,218,925 14,145,190 73,364,115 1,245,791,616 982,278,053 383,879,861 1,366,157,914 898,877,162 346,914,454 1,245,791,616 Particulars of deposits and other accounts In local currency In foreign currencies 17. 367,785,188 388,150,655 29,508,244 5,552,140 6,014,299 491,259,317 1,288,269,843 LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE These represent finance leases entered into for the lease of franking machine. At the end of the lease period, the ownership of the leased assets shall be transferred to the Group on payment of the residual values of the leased assets. The cost of operating and maintaining the leased assets is borne by the Group. The liabilities are secured by demand promissory notes, security deposits, and the franking machines which have been obtained under these leasing arrangements. The rate used for discounting future lease payments is 12.39% per annum (2016: 12.39% per annum). The amount of future minimum lease payments, and the periods during which they become due are as follows: 2017 Minimum Finance charges Principal lease for future periods Outstanding payments -------------------- (Rupees in '000) -------------------2,343 2,281 4,624 Not later than one year Later than one year and not later than five years 249 249 2,094 2,281 4,375 2016 Minimum Finance charges Principal lease for future periods Outstanding payments -------------------- (Rupees in '000) -------------------Not later than one year Later than one year and not later than five years 1,966 1,967 3,933 32 158 217 375 1,808 1,750 3,558 Annual Report 2017 187
190. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 Note 18. DEFERRED TAX LIABILITY - NET Deferred tax liability - net 18.1 2017 2016 ------- (Rupees in '000) ------- 18.1 Movement in temporary differences during the year At January 1, 2017 2017 Recognised in profit and loss account 2,980,466 Others 5,230,571 At December 31, 2017 ------------------------------ (Rupees in '000) -----------------------------Deductible temporary differences on - Tax losses recognized by subsidiary - Workers' Welfare Fund - Provision against off-balance sheet items, post retirement employee benefits, advances and others Taxable temporary differences on - Surplus on revaluation of fixed assets / non-banking assets - Surplus on revaluation of investments - Share of profit from Associates - Accelerated tax depreciation and others 316,918 618,785 4,013,939 4,949,642 79,758 283,046 46,713 - 443,389 901,831 (2,569,563) (2,206,759) (140,633) (93,920) 1,303,743 2,648,963 (960,433) (8,152,824) (497,230) (569,726) (10,180,213) 27,228 34,787 (119,981) (57,966) (276,774) 4,479,294 406,230 4,608,750 (1,209,979) (3,673,530) (462,443) (283,477) (5,629,429) (5,230,571) (2,264,725) 4,514,830 (2,980,466) At January 1, 2016 2016 Recognised in profit and loss account Others At December 31, 2016 ------------------------------ (Rupees in '000) -----------------------------Deductible temporary differences on - Tax losses recognized by subsidiary - Workers' Welfare Fund - Provision against off-balance sheet items, post retirement employee benefits, advances and others Taxable temporary differences on - Surplus on revaluation of fixed assets / non-banking assets - Surplus on revaluation of investments - Share of profit from Associates - Accelerated tax depreciation 188 United Bank Limited 638,562 533,741 (236,156) 89,081 (85,488) (4,037) 316,918 618,785 5,106,879 6,279,182 (1,155,733) (1,302,808) 62,793 (26,732) 4,013,939 4,949,642 (1,089,359) (8,951,959) (426,142) (326,887) (10,794,347) 27,126 (71,088) (248,062) (292,024) 101,800 799,135 5,223 906,158 (960,433) (8,152,824) (497,230) (569,726) (10,180,213) (4,515,165) (1,594,832) 879,426 (5,230,571) 33
191. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND OF THE CONSOLIDATED For the yearFORMING endedPART December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 Note 19. 19.1 OTHER LIABILITIES Mark-up / return / interest payable in local currency Mark-up / return / interest payable in foreign currency 12,547,094 1,857,981 14,405,075 11,559,079 1,419,182 12,978,261 Accrued expenses Branch adjustment account Deferred income Unearned commission and income on bills discounted Provision against off-balance sheet obligations Unrealized loss on forward foreign exchange contracts Payable to staff retirement fund Deferred liabilities Unrealized loss on derivative financial instruments Workers' Welfare Fund payable Insurance payable against consumer assets Dividend payable Others 4,612,561 1,021,326 636,710 1,500,844 73,692 864,509 44,538 3,380,920 3,176 2,601,763 331,840 631,030 1,140,862 31,248,846 4,999,679 1,366,415 658,882 799,739 683,866 1,430,432 130,015 3,401,628 2,630 1,787,065 241,621 196,626 686,289 29,363,148 19.1 19.2 19.3.1 & 24.2 Provision against off-balance sheet obligations Opening balance Exchange adjustments (Reversal) / charge during the year 19.2 30 683,866 (11,077) (599,097) 73,692 666,603 (9,818) 27,081 683,866 Deferred liabilities Provision for post retirement medical benefits Provision for compensated absences Deferred liability for outsourced services Deferred liability - overseas 19.3 2017 2016 ------- (Rupees in '000) ------- 37.1.4 1,463,703 1,225,727 169,466 522,024 3,380,920 1,328,199 1,438,941 181,344 453,144 3,401,628 Unrealized gain / (loss) on derivative financial instruments - net Note - Interest rate swaps - Cross currency swaps - FX options - Forward purchase contracts of government securities - Forward sale contracts of government securities 19.3.1 Contract / Notional amount Unrealized gain / (loss) 2017 2016 2017 2016 ------------------------------- (Rupees in '000) -------------------------------4,358,641 166,736 6,986,094 522,051 426,162 74,865 - 7,870,890 4,998,400 (1,155) 1,478 12,397,745 3,553,866 16,486,573 (2) 73,708 34 197,083 5,459 (2,391) 1,717 201,868 Annual Report 2017 189
192. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED For the year ended December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 19.3.1 Unrealized gain / (loss) on derivative financial instruments - net Unrealized gain on derivative financial instruments Unrealized loss on derivative financial instruments 20. SHARE CAPITAL 20.1 Authorized Capital Note 12 19 24.2 2017 2016 ----- Number of shares ----2,000,000,000 20.2 2,000,000,000 76,884 (3,176) 73,708 204,498 (2,630) 201,868 2017 2016 ------- (Rupees in '000) ------Ordinary shares of Rs.10 each 20,000,000 20,000,000 Issued, subscribed and paid-up capital 2017 2016 ----- Number of shares ----518,000,000 706,179,687 1,224,179,687 20.3 2017 2016 --------- (Rupees in '000) --------- 518,000,000 706,179,687 1,224,179,687 Fully paid-up ordinary shares of Rs.10 each Issued for cash Issued as bonus shares 2017 2016 ------- (Rupees in '000) ------5,180,000 7,061,798 12,241,798 5,180,000 7,061,798 12,241,798 In 2007, the Bank was admitted to the official list of the UK Listing Authority and to the London Stock Exchange Professional Securities Market for trading of Global Depository Receipts (GDRs), each representing four ordinary shares issued by the Bank. The GDRs constitute an offering in the United States only to qualified institutional buyers in reliance on Rule 144A under the U.S Securities Act of 1933 and an offering outside the United States in reliance on Regulation S. Holders of GDRs are entitled, subject to the provisions of the depository agreement, to receive dividends, if any, and rank pari passu with other equity shareholders in respect of such entitlement. However, the holders of GDRs have no voting rights or other direct rights of shareholders with respect to the ordinary shares underlying such GDRs. Subject to the terms and restrictions set out in the offering circular dated June 25, 2007, the deposited ordinary shares in respect of which the GDRs were issued may be withdrawn by the GDR holders from the depository facility. Upon withdrawal, the holders will rank pari passu with other ordinary shareholders in respect of voting powers. As at December 31, 2017, 1,318,827 (2016: 1,845,734) GDRs, representing 5,275,310 (2016: 7,382,938) shares were in issue. 20.4 Major shareholders (holding more than 5% of total paid-up capital) Name of shareholders 2017 Number of Percentage of shares held shareholding 2016 Number of Percentage of shares held shareholding Bestway (Holdings) Limited Bestway Cement Limited 631,728,895 93,649,744 631,728,895 93,649,744 51.60% 7.65% 51.60% 7.65% As at December 31, 2017, Bestway Group (Bestway) held 61.46% (2016: 61.46%) shareholding (including GDRs) of the Bank. 20.5 2017 2016 ------- (Number of shares) ------- Shares of the Bank held by its associates UBL Asset Allocation Fund UBL Stock Advantage Fund 190 United Bank Limited 225,900 1,645,800 1,871,700 35 114,200 1,153,000 1,267,200
193. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 21. NON-CONTROLLING INTEREST 21.1 22. 2017 2016 ------- (Rupees in '000) ------4,794,057 16,462 4,810,519 4,214,942 12,751 4,227,693 Assets Liabilities Net Assets 76,936,191 64,779,488 12,156,703 66,522,162 56,297,741 10,224,421 Income (Mark-up & Non Mark-up) Expenses (including provisions) Profit for the year 2,540,816 (2,444,231) 96,585 2,868,660 (1,863,326) 1,005,334 27,007,532 958,856 27,966,388 20,714,664 827,457 21,542,121 5,896,699 (277,531) 5,619,168 660 33,586,216 14,601,472 (441,409) 14,160,063 3,353 35,705,537 22,502,554 22,883,840 United National Bank Limited (UBL UK) UBL Fund Managers Limited 21.1 Note Key financial information before intra group eliminations SURPLUS ON REVALUATION OF ASSETS - NET OF DEFERRED TAX Surplus / (deficit) arising on revaluation of assets - net of tax Fixed assets / non-banking assets - Group's share - Non-controlling interest 22.1 Available for sale securities - Group's share - Non-controlling interest Surplus / (deficit) arising on revaluation of assets of associates 22.1 22.2 Surplus on revaluation of fixed assets / non-banking assets Surplus on revaluation of fixed assets / non-banking assets as at January 1 Revaluation of fixed assets / non-banking assets during the year Exchange adjustments 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 Less: Related deferred tax liability on: Less: Revaluation as on January 1 Less: Revaluation of fixed assets / non-banking assets during the year Less: Exchange adjustments Less: Incremental depreciation charged on related assets 6,399,394 353,662 18.1 18.1 (52,015) (51,626) (27,228) 6,673,813 29,176,367 (27,126) (381,286) 22,502,554 960,433 216,535 60,239 (27,228) 1,209,979 1,089,359 (7,174) (92,660) (29,092) 960,433 27,966,388 22.2 169,861 (472,395) 21,542,121 Surplus / (deficit) on revaluation of available for sale securities Market Treasury Bills Pakistan Investment Bonds Listed shares REIT Scheme Term Finance Certificates, Sukuks, other bonds etc. Foreign bonds Related deferred tax liability 18.1 36 (3,034) 6,285,489 1,780,430 28,475 1,201,338 9,292,698 (9,729) 14,625,102 7,432,242 (5,420) 104,054 166,638 22,312,887 (3,673,530) 5,619,168 (8,152,824) 14,160,063 Annual Report 2017 191
194. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED For the year ended December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 Note 23. CONTINGENCIES AND COMMITMENTS 23.1 Direct credit substitutes 2017 2016 ------- (Rupees in '000) ------- Contingent liabilities in respect of guarantees given favouring: Government Banking companies and other financial institutions Others 23.2 15,500,693 1,064,067 5,425,848 21,990,608 10,418,980 1,320,355 6,209,086 17,948,421 Transaction-related contingent liabilities Contingent liabilities in respect of performance bonds, bid bonds, warranties, etc. given favouring: Government Banking companies and other financial institutions Others 23.3 128,096,424 8,408,147 57,090,192 193,594,763 114,871,452 7,068,771 38,194,938 160,135,161 74,060,985 8,732,484 112,409,643 195,203,112 68,523,943 6,512,864 99,848,165 174,884,972 12,918,162 12,490,082 Trade-related contingent liabilities Contingent liabilities in respect of letters of credit opened favouring: Government Banking companies and other financial institutions Others 23.4 Other contingencies Claims against the Group not acknowledged as debts 23.4.1 23.4.1 These mainly represent counter claims filed by the borrowers for restricting the Group from disposal of assets (such as mortgaged / pledged assets kept as security). Based on legal advice and / or internal assessments, management is confident that the matters will be decided in favour of the Group and the possibility of any outcome against the Group is remote and accordingly no provision has been made in these consolidated financial statements. 23.4.2 On November 10, 2016, a judgement was passed by the Supreme Court (SC) declaring the insertions of amendments in WWF Ordinance through Finance Act 2008 as unlawful. The Board of Directors of UBL FM in their meeting held on May 29, 2013, had resolved that accumulated unrecorded WWF provision from the date of its application till May 29, 2013 on all the funds under management amounting to Rs. 296.124 million will be borne by the Holding Company in case the said accumulated amount is required to be paid to the Government authorities. The tax department has filed review petition against the order of the SC which is currently pending. 23.4.3 Penalties amounting to Rs. 4.058 billion have been levied by the FE Adjudication Court of the State Bank of Pakistan relating to alleged contraventions of the requirements of foreign exchange regulations with respect to issuance and certification of E-Forms by the Bank to certain customers (exporters) who failed to submit the export documents thereagainst. Consequently, foreign exchange on account of export proceeds have not been repatriated. The Bank maintains that it fully discharged its liability, in accordance with the law and has filed a civil suit in the High Court of Sindh challenging the levy of the penalty. The High Court has granted a stay on action being taken against the Bank. The management, based on the advice from legal counsel, is confident that the view of the Bank will prevail and the Bank will not be exposed to any loss on this account. 192 United Bank Limited 37
195. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND OF THE CONSOLIDATED For the yearFORMING endedPART December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 23.4.4 United Bank Limited Yemen (“UBL”) issued two Standby Letters of Credit (SBLCs) for USD 12 million (Rs. 1,325 million) and USD 13 million (Rs. 1,435 million) in favour of Ministry of Oil and Minerals, Yemen (MOM) against the counter SBLCs of a foreign bank. In March 2015, the counter party to the underlying performance agreement notified MOM of suspension of the SBLCs due to force majeure. In September 2015, MOM filed a law suit against UBL at the Preliminary Commercial Court in Sana’a, Yemen claiming payment of both SBLCs for the total sum of USD 25 million (Rs. 2,760 million). During the course of the last year, no major debate was held as all hearings of the commercial case were adjourned to subsequent dates, due to either non-appearance of legal counsel of MOM or non-submission of responses by MOM, as required by legal counsel of UBL. As per provisions of Yemeni procedural law, if 60 days lapse from the last hearing without the case being reinitiated/followed up by the plaintiff, the case shall be considered as if not filed and all procedures have to be re-initiated afresh. In light of the foregoing provision of law, and non-follow up by MOM for over 60 days, UBL counsel submitted a motion to dismiss the case. On September 25, 2017 the Honourable judge presiding over the commercial case filed by MOM against UBL in Yemen, accepted UBL’s motion to drop the case. In light of the foregoing, the case filed by MOM against UBL in Yemen stands dismissed. Although the case against UBL, Yemen has been dismissed by the Honourable judge, the said dismissal is on the basis of a procedural lapse by MOM in pursuing the case, and not on the actual merits. Hence MOM can reinitiate the case against UBL afresh. The ICC Award has also been announced whereby ICC has accepted the request of Reliance to declare Force Mejure as per the terms of the Production Sharing Agreement (PSA) between Reliance and MOM. In terms of the ICC Award, the PSA stands cancelled. Based on the legal advice of the Bank's legal counsel in Yemen and in view of facts surrounding the matter, management is of the view that it is unlikely that there will be any financial impact on the Group. 23.4.5 UBL & its New York Branch have entered into a written Agreement in 2013 with the Federal Reserve Bank of New York (FRBNY) to address certain compliance and risk management matters relating primarily to compliance with Anti Money Laundering Regulations including the Banking Secrecy Act. Management is in the process of addressing the matters highlighted in the Written Agreement and in the subsequent inspections. While the Bank seeks to comply with all possible laws and regulations and at this stage there is no indication of any financial impact, it is not possible to ascertain the eventual outcome of these matters. 23.4.6 Punjab Revenue Authority issued show cause notice to UBL Fund Managers Limited requiring them to pay sales tax under Punjab sales tax on service act 2012 on management fee earned in Punjab from May 22, 2013. The Company has filed a petition on July 8, 2015 in the High Court of Sindh. A favourable outcome of this petition is expected. 23.5 For contingencies relating to taxation, refer note 12.1 and for an update on pension matter, refer note 48.2. 23.6 Commitments to extend credit The Group makes commitments to extend credit in the normal course of its business but these being revocable commitments do not attract any significant penalty or expense if the facility is unilaterally withdrawn. 23.7 23.8 Commitments in respect of forward foreign exchange contracts 2017 2016 ------- (Rupees in '000) ------- Purchase 242,093,757 216,641,748 Sale 213,172,200 193,057,693 4,358,641 83,368 83,368 7,870,890 1,478 6,986,094 522,051 213,081 213,081 4,998,400 3,553,866 Commitments in respect of derivatives Interest rate swaps Cross currency swaps FX options - purchased FX options - sold Forward purchase of government securities Forward sale of government securities 38 Annual Report 2017 193
196. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED For the year ended December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 2017 2016 ------- (Rupees in '000) ------23.9 Commitments in respect of capital expenditure 24. DERIVATIVE INSTRUMENTS 1,987,978 2,755,836 Derivatives are a type of financial contract, the value of which is determined by reference to one or more underlying assets or indices. The major categories of such contracts include forwards, futures, swaps and options. Derivatives also include structured financial products that have one or more of the characteristics of forwards, futures, swaps and options. The Bank, as an Authorized Derivative Dealer (ADD), is an active participant in the Pakistan derivatives market and offers a wide variety of derivatives products covering both hedging and market making to satisfy customers’ needs. Where required, specific approval is sought from the SBP for each transaction. The authority for approving policies lies with the Board of Directors (BoD) and the Board Risk and Compliance Committee (BRCC). The Risk Management Committee (RMC) is responsible for ensuring compliance with these policies. With regard to derivatives, the RMC is authorized to: - Review the derivatives business with reference to market risk exposure and assign various limits in accordance with the risk appetite of the Bank. - Review the Derivatives Business Policy and recommend approval to the BRCC / BoD. - Review and approve derivatives product programs. - Authorize changes in procedures and processes regarding derivatives and structured products. Overall responsibility for derivatives trading activity lies with the Treasury and Capital Markets Group. Measurement and monitoring of market and credit risk exposure and limits and its reporting to senior management and the BoD is done by Treasury Middle Office (TMO), which also coordinates with the business regarding approvals for derivatives risk limits. Treasury Operations records derivatives activity in the Bank’s books, and handles its reporting to the SBP. Derivatives risk management There are a number of risks undertaken by the Group, which need to be monitored and assessed. Credit risk Credit risk refers to the risk of non-performance or default by a party to a derivatives transaction, resulting in an adverse impact on the Group’s profitability. Credit risk associated with derivatives transactions is categorized into settlement risk and pre-settlement risk. Credit proposals for derivatives transactions are approved by the Credit Committee. The credit exposure of each counterparty is estimated and monitored against approved counterparty limits by TMO on a daily basis. Market risk The Group, as a policy, hedges back-to-back all Options transactions. In addition, the Group does not carry any exchange risk on its Cross Currency Swaps portfolio as it hedges the exposure in the interbank market. To manage the interest rate risk of Interest Rate Derivatives, the Group has implemented various limits which are monitored and reported by TMO on a daily basis. 194 United Bank Limited 39
197. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND OF THE CONSOLIDATED For the yearFORMING endedPART December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 Liquidity risk Derivatives transactions, usually being non-funded in nature, do not carry a specific funding liquidity risk. The liquidity risk arises from the fact that in Pakistan, interest rate derivatives generally have a uni-directional demand, and no perfect hedge is available. The Group mitigates its risk by limiting the portfolio in terms of tenor, notional and sensitivity limits, and can also hedge its risk by taking on and off balance sheet positions in the interbank market, where available. Operational risk The staff involved in the trading, settlement and risk management of derivatives are carefully trained to deal with the complexities involved in the process. Adequate systems and controls are in place to carry out derivatives transactions smoothly. Each transaction is processed in accordance with the product program or a transaction memo, which contains detailed guidance on the accounting and operational aspects of the transaction to further mitigate operational risk. In addition, TMO and the Compliance and Control Department are assigned the responsibility of monitoring any deviation from policies and procedures. The Group’s Audit and Inspection group also reviews this function, with a regular review of systems, transactional processes, accounting practices and end-user roles and responsibilities. The Group uses a derivatives system which provides an end-to-end valuation solution, supports the routine transactional process and provides analytical tools to measure various risk exposures, carry out stress tests and sensitivity analysis. TMO produces various reports on a periodic basis which are reviewed by senior management. These reports provide details of the derivatives business profile such as outstanding positions, profitability, risk exposures and the status of compliance with limits. 24.1 Product analysis 2017 Interest rate swaps With Banks for Hedging Market making With other entities Market making Total Hedging Market making Cross currency swaps Number of contracts Notional principal (Rupees in '000) Number of contracts Notional principal (Rupees in '000) 1 1 2 413,071 316,499 729,570 - - 5 3,629,071 - 1 6 7 413,071 3,945,570 4,358,641 - FX options Number of contracts Notional principal (Rupees in '000) 6 - 6 83,368 83,368 - 6 83,368 - - 6 6 12 83,368 83,368 166,736 - - 2016 Interest rate swaps Number of contracts With Banks for Hedging Market making With other entities Market making Total Hedging Market making Notional principal Cross currency swaps Number of contracts (Rupees in '000) Notional principal FX options Number of contracts (Rupees in '000) 2 1 3 669,047 34,866 703,913 - 5 6,282,181 - 2 6 8 669,047 6,317,047 6,986,094 - 1 1 Notional principal 5 5 522,051 522,051 - 5 5 522,051 522,051 40 7,870,890 7,870,890 Forward purchase contracts of government securities Number of Notional contracts principal Forward sale contracts of government securities Number of contracts - 2 2 - 2 2 Number of contracts - 4 4 213,081 - 4 4 8 213,081 213,081 426,162 - 1 1 4,998,400 4,998,400 - 1 1 4,998,400 4,998,400 - 2 2 - (Rupees in '000) 1,478 1,478 496,439 8,188,867 8,685,306 - 3,712,439 1,478 1,478 496,439 11,901,306 12,397,745 Notional principal Total Notional Principal (Rupees in '000) (Rupees in '000) 3,553,866 3,553,866 882,128 9,109,183 9,991,311 - 2 2 Total Notional Principal Notional principal (Rupees in '000) Forward sale contracts of government securities (Rupees in '000) 213,081 213,081 4 7,870,890 7,870,890 - (Rupees in '000) - 1 1 Forward purchase contracts of government securities Number of Notional contracts principal (Rupees in '000) 3,553,866 3,553,866 6,495,262 882,128 15,604,445 16,486,573 Annual Report 2017 195
198. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED For the year ended December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 24.2 Maturity analysis of derivatives Remaining maturity Number of contracts Upto 1 month 1 to 3 months 3 to 6 months 1 to 2 years 2 to 3 years 5 to 10 years Remaining maturity 4 11 3 6 1 1 26 Number of contracts Upto 1 month 1 to 3 months 3 to 6 months 1 to 2 years 2 to 3 years 25. 2017 Unrealized Notional principal (Loss) Gain Net --------------------------------------------- (Rupees in '000) -----------------------------------------90,234 6,760,752 216,000 4,835,194 316,500 179,065 12,397,745 7 5 2 3 3 20 8,765,347 735,133 69,732 648,000 6,268,361 16,486,573 On investments in Held for trading securities Available for sale securities Held to maturity securities On deposits with financial institutions (2,391) (239) (2,630) 1,717 5,459 251 46,347 150,724 204,498 (674) 5,459 12 46,347 150,724 201,868 35,119,920 32,034,440 148,823 472,376 427,359 1,082,399 2,130,957 172,303 138,814 47,028 966,180 1,324,325 1,993,227 39,741,486 31,275,559 73,010,272 318,746 110,579,895 1,087,718 36,041,435 31,026,195 68,155,348 240,931 101,755,044 32,805,964 16,786,983 2,436,719 458,087 52,487,753 30,478,543 10,197,470 1,858,211 399,711 42,933,935 18,585 3,612,720 3,631,305 209,673 956,708 4,797,686 11,461 3,507,471 3,518,932 1,054,440 1,036,209 5,609,581 MARK-UP / RETURN / INTEREST EXPENSED On deposits On securities sold under repurchase agreements On other short term borrowings On long term borrowings GAIN ON SALE OF SECURITIES - NET Federal government securities Market Treasury Bills Pakistan Investment Bonds Ordinary shares of listed companies Other securities 196 (3,173) 6,807 64,158 5,432 484 73,708 2017 2016 ------- (Rupees in '000) ------- MARK-UP / RETURN / INTEREST EARNED On lendings to financial institutions Call money lending Securities purchased under resale agreements Bai Muajjal with SBP / other financial institutions Other lendings to financial institutions 27. 6,807 64,161 5,432 484 76,884 2016 Unrealized Notional principal (Loss) Gain Net --------------------------------------------- (Rupees in '000) ------------------------------------------ On loans and advances to customers 26. (3,173) (3) (3,176) United Bank Limited 41
199. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND OF THE CONSOLIDATED For the yearFORMING endedPART December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 28. Note OTHER INCOME Charges recovered Rent on properties Income from dealing in derivatives Gain on sale of operating fixed assets - net Gain on sale of Ijarah assets Income from sale of non-banking asset Gain on trading liabilities - net 28.1 28.1 - 367,980 249,644 93,351 44,329 44,685 20,574 95,701 916,264 14,199 6,375 20,574 ADMINISTRATIVE EXPENSES Salaries, allowances etc. Charge for compensated absences Medical expenses Contribution to defined contribution plan Charge / (reversal) in respect of defined benefit obligations Rent, taxes, insurance, electricity etc. Depreciation on operating fixed assets Depreciation on Islamic financing against leased assets (Ijarah) Amortization Outsourced service charges including sales commission Communications Banking service charges Cash transportation charges Stationery and printing Legal and professional charges Advertisement and publicity Repairs and maintenance Travelling Office running expense Vehicle expense Entertainment Cartage, freight and conveyance Insurance expense Auditors' remuneration Training and seminars Brokerage expenses Subscriptions Donations Non-executive Directors' fees Zakat paid by overseas branch Miscellaneous expenses 29.1 377,891 245,731 32,793 57,983 96 65,834 780,328 The Group earned income of nil (2016: Rs. 20.574 million) against the sale of following non-banking assets: Commercial open plot situated in Faisalabad Agricultural open land situated in Lahore 29. 2017 2016 ------- (Rupees in '000) ------- 29.1 11.2 46.4 11.3 29.2 29.3 14,377,128 24,687 713,410 395,981 424,134 4,672,149 2,151,157 197,824 436,392 4,631,033 1,373,600 1,302,234 895,500 647,618 706,110 1,141,267 1,725,076 335,884 859,939 203,078 224,402 94,788 137,516 105,495 170,653 25,994 156,029 110,250 48,721 75,828 91,457 38,455,334 13,246,456 315,084 616,182 364,734 (65,929) 4,398,243 1,714,992 205,186 383,371 4,626,193 1,171,152 1,184,850 653,789 688,689 473,431 794,290 1,589,403 297,343 776,902 185,223 252,832 101,271 137,922 102,658 136,363 19,041 161,975 87,252 41,963 283,971 77,408 35,022,240 This includes accrual of employee benefits in the form of awards / bonus to all permanent staff including the Chief Executive Officer and is determined on the basis of employees' evaluation and the entities' performance during the year. The aggregate benefit determined in respect of all permanent staff amounted to Rs. 1,520.435 million (2016: Rs. 1,681.198 million). 42 Annual Report 2017 197
200. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 29.2 Auditors' remuneration 2017 KPMG Taseer A.F. Ferguson Overseas Total Hadi & Co. & Co. Auditors ------------------------------------- (Rupees in '000) ------------------------------------- Audit fee - Bank Audit fee - subsidiaries Audit fee - EPZ branch Fee for tax and other certifications Out of pocket expenses 8,051 69 250 9,925 4,629 22,924 8,051 747 5,724 3,863 18,385 27,007 24,775 11,434 970 64,186 43,109 25,591 250 27,083 9,462 105,495 2016 KPMG Taseer A.F. Ferguson Overseas Total Hadi & Co. & Co. Auditors ------------------------------------- (Rupees in '000) ------------------------------------Audit fee - Bank Audit fee - subsidiaries Audit fee - EPZ branch Fee for tax and other certifications Out of pocket expenses 29.3 7,668 61 250 7,237 3,429 18,645 7,668 874 5,455 2,792 16,789 Details of donations Donations individually not exceeding Rs. 0.1 million 29.3.1 Donations were not made to any donee in which a Director or his spouse had any interest. United Bank Limited 43,289 24,266 250 27,986 6,867 102,658 2017 2016 ------- (Rupees in '000) ------- Donations individually exceeding Rs. 0.1 million Namal Education Foundation Memon Medical Institute Hospital Lahore University of Management Sciences Murshid Hospital & Healthcare Center Forman Christian College Shalamar Hospital Indus Earth Trust Hilal-e-Ahmer Abdul Sattar Edhi Foundation Bahauddin Zakaria University NFC Institute of Engineering & Technology District Hospital, Gwadar Nasra Schools Akhuwat Hisaar Foundation SOS Children's Villages of Pakistan Marie Adelaide Leprosy Centre Patients Aid Foundation Developments in Literacy (Fundraiser) The Citizens Foundation Shaukat Khanum Memorial Hospital The Kidney Center Post Graduate Training Institute Old Associates of Kinnaird Society Karachi Swiss Muslim Society, Switzerland Swiss-Asian Chamber of Commerce Swiss Pakistan Society Rotary Club of Karachi Metropolitan 198 27,953 23,331 15,294 646 67,224 43 50,000 15,000 10,000 7,000 5,000 5,000 4,975 3,840 1,554 1,195 1,260 1,000 1,000 980 850 500 500 250 161 160 - 50,000 10,000 5,000 5,000 4,943 4,600 3,840 980 850 500 500 300 250 160 159 150 25 110,250 20 87,252
201. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 30. Note OTHER PROVISIONS / WRITE OFFS - NET Provision against other assets - net (Reversal of provision) / charge against off balance sheet items Other provisions 31. 12.2 19.1 2017 2016 ------- (Rupees in '000) ------45,888 (599,097) 164,140 (389,069) 143,908 27,081 60,379 231,368 WORKERS' WELFARE FUND Under the Workers' Welfare Ordinance, 1971, the Bank has accrued Workers' Welfare Fund at 2% of profit before tax as per the financial statements or declared income as per the income tax return, whichever is higher. The Bank has made full provision for Workers' Welfare Fund based on profit for the respective years. The Supreme Court of Pakistan vide its order dated November 10, 2016 has held that the amendments made in the law introduced by the Federal Government for the levy of Workers' Welfare Fund were not lawful. The Federal Board of Revenue has filed review petitions against this order which are currently pending. Legal advice obtained on the matter indicates that consequent to filing of these review petitions, the judgment may not currently be treated as conclusive. Accordingly, the Bank maintains its provision in respect of WWF. 32. 2017 2016 ------- (Rupees in '000) ------- OTHER CHARGES Penalties imposed by the SBP Other penalties 33. TAXATION Current Prior years Deferred 59,431 257 59,688 69,082 736 69,818 2017 Domestic Azad Kashmir Overseas Total ----------------------------------------- (Rupees in '000) ----------------------------------------14,189,308 465,216 914,830 15,569,354 446,329 14,374 460,703 65,706 (2,496,881) 1,335,521 (1,095,654) 14,701,343 (2,031,665) 2,264,725 14,934,403 2016 Domestic Azad Kashmir Overseas Total ----------------------------------------- (Rupees in '000) ----------------------------------------Current Prior years Deferred 33.1 13,093,795 1,700,754 1,316,612 16,111,161 Relationship between tax expense and accounting profit 414,484 6,476 420,960 1,797,458 550,658 271,744 2,619,860 15,305,737 2,251,412 1,594,832 19,151,981 2017 2016 ------- (Rupees in '000) ------- Accounting profit for the year 41,130,992 47,154,283 Tax on income @ 35% (2016: 35%) Tax effect of items that are either not included in determining taxable profit or taxed at reduced rates (permanent differences) Tax - prior years (net of deferred tax) Tax on share of profit from associates Others Tax charge 14,395,847 16,503,999 (176,398) 727,266 (34,787) 22,475 14,934,403 (47,369) 2,267,889 70,937 356,525 19,151,981 44 Annual Report 2017 199
202. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 Note 34. EARNINGS PER SHARE 2017 2016 ------- (Rupees in '000) ------- Profit after tax attributable to equity shareholders of the Bank 26,190,302 27,782,758 ----- (Number of shares) ----Weighted average number of ordinary shares 1,224,179,687 1,224,179,687 ------------ (Rupees) -----------21.39 Earnings per share - basic and diluted 34.1 35. Diluted earnings per share has not been presented separately as the Group does not have any convertible instruments in issue as at December 31, 2017 or 2016. 2017 2016 ------- (Rupees in '000) ------- CASH AND CASH EQUIVALENTS Cash and balances with treasury banks Balances with other banks 35.1 22.70 6 7 161,119,170 35,549,112 196,668,282 133,467,502 32,267,304 165,734,806 Reconciliation of movement of liabilities to cash flows arising from financing activities Liabilities Bills payable Equity Deposits and Borrowings other accounts Other liabilities Share capital Unappropriated profit Reserves --------------------------------------------- (Rupees in '000) ------------------------------------------------Balance as at January 1, 2017 11,759,012 205,865,131 1,245,791,616 29,366,706 12,241,798 42,615,188 68,939,008 Changes from financing cash flows Dividend Paid - - - - - - Other Changes - - - - - - (15,479,932) - Liability-related Changes in bills payable 1,633,966 311,217,028 - - - - - - - - - - - - - - 1,449,579 - - 434,404 - - - 2,532 - - - - Changes in borrowings - Changes in deposits and other accounts - - - Cash based - - - - Dividend payable - - - - Non-cash based - - Transfer of profit to reserve - - - - 120,366,298 Changes in other liabilities Transaction cost on issuance of right shares Total Liability related other changes Total Equity related other changes Balance as at December 31, 2017 200 United Bank Limited 1,633,966 311,217,028 - 120,366,298 - - 1,886,515 - 13,392,978 517,082,159 1,366,157,914 31,253,221 45 12,241,798 2,556,595 - (434,404) (2,556,595) - 2,556,595 (2,990,999) 2,031,733 26,183,636 47,203,516 76,651,713
203. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 2017 2016 ------------ (Number) -----------36. STAFF STRENGTH Permanent On contract Group's own staff strength Outsourced Total 37. DEFINED BENEFIT PLANS 37.1 The Bank (Holding Company) 11,628 160 11,788 3,748 15,536 10,196 120 10,316 4,412 14,728 37.1.1 General description The Bank operates a funded pension scheme established in 1975. The Bank also operates a funded gratuity scheme for new employees and for those employees who have not opted for the pension scheme. The Bank also operates a benevolent fund scheme and provides post retirement medical benefits to eligible retired employees. The benevolent fund scheme and the post-retirement medical scheme cover all regular employees of the Bank who joined the Bank preprivatization. The liabilities of the Bank in respect of these schemes are determined based on actuarial valuations carried out using the Projected Unit Credit Method. Actuarial valuations of the defined benefit schemes are carried out every year and the latest valuation was carried out as at December 31, 2017. 37.1.2 Number of Employees under the scheme The number of employees covered under the following defined benefit schemes are: 2017 2016 ------------ (Number) -----------Pension fund Gratuity fund Benevolent fund Post retirement medical benefit scheme 6,798 9,394 4,051 9,804 6,829 7,984 4,386 9,839 The pension fund, benevolent fund and post retirement medical benefit schemes include 5,600 (2016: 5,499), 2,124 (2016: 2,214) and 8,064 (2016: 7,861) members respectively who have retired or whose widows are receiving the benefits. 37.1.3 Principal actuarial assumptions The actuarial valuations were carried out as at December 31, 2017 using the following significant assumptions: 2017 2016 ---------- Per annum ---------Discount rate / expected rate of return on plan assets Expected rate of salary increase Expected rate of increase in pension Expected rate of increase in medical benefit 8.25% 6.25% 2.25% 2.25% 46 8.00% 6.00% 2.00% 2.00% Annual Report 2017 201
204. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED For the year ended December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 37.1.4 Reconciliation of (receivable from) / payable to defined benefit plans Note 2016 PostPostPension Gratuity Benevolent retirement Pension Gratuity Benevolent retirement fund fund fund medical fund fund fund medical benefit benefit ------------------------------------------------------------------------ (Rupees in '000) ------------------------------------------------------------------------ Present value of obligations Fair value of plan assets (Receivable) / payable 37.1.5 429,243 (494,386) (65,143) 1,463,703 1,463,703 2,932,255 (3,077,541) (145,286) 652,457 (711,805) (59,348) 453,193 (501,671) (48,478) 1,328,199 1,328,199 2,932,255 8,196 123,653 (456,036) 98,242 (7,440) 2,698,870 652,457 106,921 52,899 (131,663) 48,208 728,822 453,193 6,630 35,702 (69,152) 2,870 429,243 1,328,199 4,250 111,493 (138,529) 158,290 1,463,703 3,034,259 8,518 130,399 (507,085) 148,998 117,166 2,932,255 625,414 108,203 56,784 (111,140) (26,804) 652,457 466,964 7,691 38,786 (70,819) 10,571 453,193 1,188,710 4,211 107,169 (128,259) 156,368 1,328,199 37.1.8.2 3,077,541 233,079 1,595 (179,066) 42,947 3,176,096 711,805 57,468 103,679 (163,857) 2,476 711,571 501,671 39,434 2,468 2,468 (56,965) 5,310 494,386 2,884,308 266,470 332,855 (522,251) 116,159 3,077,541 652,318 59,104 111,594 (133,843) 22,632 711,805 899,017 77,332 2,814 2,814 (496,542) 16,236 501,671 (145,286) (12,645) (2,988) (1,595) 179,066 (456,036) (59,348) (658) 102,352 (103,679) 163,857 (131,663) (48,478) (1,068) 430 (2,468) 56,965 (69,152) 1,328,199 115,743 (138,529) 149,951 (4,193) 21,445 (332,855) 522,251 (507,085) (26,904) (492) 105,883 (111,594) 133,843 (111,140) (432,053) (475) (33,669) (2,814) 496,542 (70,819) 1,188,710 111,380 (128,259) (37,742) (477,226) 46,390 17,251 (1,372) (65,143) 158,290 1,463,703 5,200 (145,286) (48,944) (59,348) (5,190) (48,478) 156,368 1,328,199 8,196 (109,426) 98,242 (2,988) 106,921 (4,569) 102,352 6,630 (3,732) (2,468) 430 4,250 111,493 115,743 8,518 (136,071) 148,998 21,445 108,203 (2,320) 105,883 4,877 (38,546) (33,669) 4,211 107,169 111,380 - - Movement in (receivable) / payable under defined benefit schemes Opening balance Mark-up receivable on Bank's balance with the fund Charge / (reversal) for the year Contribution by the Bank Amount paid by the Fund to the Bank Benefits paid by the Bank Remeasurement loss / (gain) recognised in OCI during the year Closing balance 37.1.8 728,822 (711,571) 17,251 Movement in fair value of plan assets Fair value at the beginning of the year Interest income on plan assets Contribution by the Bank Contribution by the employees Amount paid by the fund to the Bank Re-measurements gain / (loss) Fair value at the end of the year 37.1.7 2,698,870 (3,176,096) (477,226) Movement in defined benefit obligations Obligations at the beginning of the year Current service cost Interest cost Benefits paid by the Bank Return allocated to other funds Re-measurement loss / (gain) Obligations at the end of the year 37.1.6 2017 Charge for defined benefit plans 37.1.8.1 Cost recognised in profit and loss Current service cost Net interest on defined benefit asset / liability Return allocated to other funds Employees' contribution 37.1.8.2 This represents return allocated to those employees who exercised the conversion option offered in the year 2001, as referred to in note 5.11.1. 2017 37.1.9 Re-measurements recognised in OCI during the year Loss / (gain) on obligation Financial assumptions Experience adjustments Return on plan assets over interest income Adjustment for mark-up Total re-measurements recognised in OCI 202 United Bank Limited 2016 PostPostPension Gratuity Benevolent retirement Pension Gratuity Benevolent retirement fund fund fund medical fund fund fund medical benefit benefit ------------------------------------------------------------------------ (Rupees in '000) ------------------------------------------------------------------------ (1,877) (5,563) (42,947) 12,645 (37,742) 1,099 47,109 (2,476) 658 46,390 47 (2,748) 5,618 (5,310) 1,068 (1,372) (1,704) 159,994 158,290 140,079 (22,913) (116,159) 4,193 5,200 (3,922) (22,882) (22,632) 492 (48,944) 9,445 1,126 (16,236) 475 (5,190) 182,530 (26,162) 156,368
205. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND OF THE CONSOLIDATED For the yearFORMING endedPART December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 37.1.10 Components of plan assets Cash and cash equivalents - net of current liabilities Ordinary shares Term finance certificates Mutual Funds units Pakistan Investment Bonds Special Savings Certificates Others 2017 2016 Benevolent Benevolent Pension fund Gratuity fund fund fund -------------------------------------------------------------- (Rupees in '000) -------------------------------------------------------------Pension fund Gratuity fund 15,421 133,055 72,289 1,414,048 1,541,283 3,176,096 6,018 8,098 143,061 18,275 446,196 89,923 711,571 2,403 20,458 8,178 192,907 270,440 494,386 13,559 169,105 81,013 1,414,882 1,398,982 3,077,541 2,767 10,407 6,239 398,146 281,346 12,900 711,805 1,688 23,704 10,619 192,283 273,377 501,671 ######## (441,759) (856,535) ######## (409,974) (836,962) 37.1.10.1 The funds primarily invest in government securities and accordingly do not carry any significant credit risk. These are subject to interest rate risk based on market movements. Investment in term finance certificates are subject to credit risk and interest rate risks, while equity securities are subject to price risk. These risks are regularly monitored by Trustees of the employee funds. 37.1.11 Sensitivity analysis Sensitivity analysis has been performed by varying one assumption keeping all other assumptions constant and calculating the impact on the present value of the defined benefit obligations under the various employee benefit schemes. The increase / (decrease) in the present value of defined benefit obligations as a result of a change in each assumption is summarized below: 2017 Pension fund Gratuity fund Benevolent fund Post retirement medical benefit ------------------------------- (Rupees in '000) --------------------------Increase in discount rate by 1 % Decrease in discount rate by 1 % Increase in expected future increment in salary by 1% Decrease in expected future increment in salary by 1% Increase in expected future increment in pension by 1% Decrease in expected future increment in pension by 1% Increase in expected future increment in medical benefit by 1% Decrease in expected future increment in medical benefit by 1% (80,665) 91,531 83,295 (73,931) - (47,929) 54,676 58,902 (52,413) - (23,062) 25,955 - (143,511) 172,762 163,227 (138,843) Although the analysis does not take account of the full distribution of expected cash flows, it does provide an approximation of the sensitivity of the assumptions shown. 37.1.12 Expected contributions to be paid to the funds in the next financial year The Bank contributes to the pension and gratuity funds according to the actuary's advice. Contribution to the benevolent fund is made by the Bank as per the rates set out in the benevolent fund scheme. Based on actuarial advice, management estimates that the expected contribution and charge / (reversal) for the year ending December 31, 2017, would be as follows: 2018 Pension fund Gratuity fund Benevolent fund Post retirement medical benefit ----------------------------------------------- (Rupees in '000) ----------------------------------------------Expected contribution Expected (reversal) / charge for the year 37.1.13 - 129,818 - 118,719 (32,009) 129,818 (1,160) 118,719 Maturity profile 2017 The weighted average duration of the obligation (in years) 48 Pension fund Gratuity fund Benevolent fund 6.13 7.01 5.14 Post retirement medical benefit 9.80 Annual Report 2017 203
206. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED For the year ended December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 37.1.14 Funding Policy The Bank endeavours to ensure that liabilities under the various employee benefit schemes are covered by the Fund on any valuation date having regards to the various actuarial assumptions such as projected future salary increase, expected future contributions to the fund, projected increase in liability associated with future service and the projected investment income of the Fund. 37.2 United National Bank Limited Pension and Life Assurance Scheme for U.K Employees. As part of the Shareholders’ Agreement (“the Agreement”) signed on November 9, 2001 between UBL UK and its shareholders, United Bank Limited and National Bank of Pakistan (NBP), it was agreed that UBL UK may participate as an associated employer in the United Bank Limited Pension and Life Assurance Scheme (“the Scheme”) with effect from November 19, 2001, the date of completion of transfer of the businesses from the Bank and NBP into UBL UK (the Completion Date). The Scheme is classified as a defined benefit scheme providing benefits based on final pensionable salary. Under the terms of the Agreement, UBL UK is responsible for the funding requirements of the active members whose employment was transferred to UBL UK on the Completion Date and for any new members admitted to the scheme after the Completion Date. United Bank Limited remains responsible for the funding of the deferred members upto the Completion Date. The scheme is closed for new members and the accrual of benefits has ceased from January 1, 2010. Full actuarial valuations using the Projected Unit Credit Method are obtained triennially and updated at each statement of financial position date. The last full actuarial valuation of the scheme was carried out by a qualified actuary. The major assumptions used by the actuary in the latest update as of December 31, 2017 are as follows: 2017 2016 ---------- Per annum ---------Discount rate Rate of revaluation of pension in deferment Expected rate of pension increase Retail price inflation Consumer price inflation 37.2.1 2.40% 2.40% 3.00% 3.40% 2.60% The assets and liabilities of the scheme noted below relate to those employees for whom UBL UK has a funding liability. Insurance policy Market value of assets Present value of defined benefit obligation Gross pension liability Related deferred tax relief Net pension liability 37.2.2 Return 2017 (Rupees in '000) Return 2016 (Rupees in '000) 2.60% 889,924 2.60% 691,462 889,924 (913,927) (24,003) 4,075 (19,928) 691,462 (816,435) (124,973) 21,240 (103,733) 2017 2016 ------- (Rupees in '000) ---- Movement in surplus / (deficit) during the year Obligation at the beginning of the year Interest expense Remeasurement gain / (loss) Exchange adjustment Deficit in scheme at the end of the year Related deferred tax relief Obligation at the end of the year (124,973) (3,397) 113,584 (9,217) (24,003) 4,075 (19,928) No Directors were members of the defined benefit scheme during the year or as at December 31, 2017. 204 2.60% 2.60% 3.40% 3.40% 2.60% United Bank Limited 49 (34,780) (1,422) (96,970) 8,199 (124,973) 21,240 (103,733)
207. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND OF THE CONSOLIDATED For the yearFORMING endedPART December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 37.2.3 Analysis of the amount credited / (debited) to net interest income Expected return on pension scheme assets Interest on pension scheme liabilities Net expense 37.2.4 2017 2016 ------- (Rupees in '000) ---18,749 (22,146) (3,397) 25,309 (26,731) (1,422) Sensitivity Analysis Sensitivity analysis has been performed by varying one assumption keeping all other assumptions constant and calculating the impact on the present value of the defined benefit obligation under the benefit scheme. The increase / (decrease) in the present value of defined benefit obligation as a result of a change in each assumption is summarized below: 2017 Rupees in '000 Increase in discount rate by 1 % Decrease in discount rate by 1 % Increase in expected inflation rate by 1% Decrease in expected inflation rate by 1% Increase in life expectancy by 1 year Decrease in life expectancy by 1 year (60,829) 134,629 47,560 22,662 41,000 7,156 Although the analysis does not take account of the full distribution of expected cash flows, it does provide an approximation of the sensitivity of the assumptions shown. 37.3 UBL Fund Managers Limited 37.3.1 Principal actuarial assumptions UFML operates a funded gratuity scheme. The liability of UFML in respect of this scheme is determined based on an annual actuarial valuation carried out using the Projected Unit Credit Method. The latest valuation was carried out as at December 31, 2017. The main assumptions used in the actuarial valuation are as follows: 2017 2016 ---------- Per annum ---------Discount rate Expected rate of return on plan assets Expected rate of salary increase 37.3.2 7.75% 8.00% 7.75% Reconciliation of payable to defined benefit plan ------- (Rupees in '000) ---- Present value of defined benefit obligations Fair value of plan assets Payable 37.3.3 9.25% 9.25% 9.25% 48,483 (48,987) (504) 58,634 (56,686) 1,948 58,634 12,515 5,766 (30,045) 1,613 48,483 60,482 11,180 5,872 (21,574) 2,674 58,634 Movement in defined benefit obligation Obligation at the beginning of the year Current service cost Interest cost Benefits paid Remeasurement gain Obligation at the end of the year 50 Annual Report 2017 205
208. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED For the year ended December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 37.3.4 2017 2016 ----- (Rupees in '000) ------ Movement in the fair value of plan assets Fair value of plan assets at the beginning of the year Return on plan assets Contributions to the plan Benefits paid Remeasurement (loss) / gain 37.3.5 Actual return on plan assets 23,178 2,772 12,457 18,279 56,686 12,515 5,766 (5,594) 12,687 11,180 5,872 (5,819) 11,233 1,934 7,435 1,948 12,687 (18,865) 3,726 (504) 595 11,233 (9,964) 84 1,948 Movement in net liability recognised Opening net payable Expense recognised Contribution to the fund made during the year Remeasurement gain - net Closing net (receivable) / payable 37.3.8 12,674 23,566 3,759 8,988 48,987 Charge for defined benefit plan Current service cost Interest cost Return on plan assets 37.3.7 59,887 5,819 9,964 (21,574) 2,590 56,686 Composition of plan assets Debt securities Cash Mutual Funds Equity securities 37.3.6 56,686 5,594 18,865 (30,045) (2,113) 48,987 Maturity profile and expected future contribution Based on actuarial advice, management estimates that the expected contribution and charge for the year ended December 31, 2018, would be Rs. 14.072 million and Rs. 14.072 million, respectively. The weighted average duration of the obligation as of December 31, 2017 is 10 years. 37.3.9 Sensitivity Analysis Sensitivity analysis has been performed by varying one assumption keeping all other assumptions constant and calculating the impact on the present value of the defined benefit obligation under the defined benefit scheme. The increase / (decrease) in the present value of defined benefit obligation as a result of a change in each assumption is summarized below: 2017 Rupees in '000 Increase in discount rate by 1 % Decrease in discount rate by 1 % Increase in salary increment rate by 1% Decrease in salary increment rate by 1% 44,190 (44,190) 53,231 (53,231) Although the analysis does not take account of the full distribution of expected cash flows, it does provide an approximation of the sensitivity of the assumptions shown. 206 United Bank Limited 51
209. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND OF THE CONSOLIDATED For the yearFORMING endedPART December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 38 OTHER EMPLOYEE BENEFITS 38.1 Defined contribution plan The Bank operates a contributory provident fund scheme for 7,394 (2016: 7,981) employees who are not in the pension scheme. The employer and employee each contribute 8.33% of the basic salary to the funded scheme every month. UFML operates a contributory provident fund scheme. The employer and employee each contribute 10% of the basic salary to the funded scheme every month. UBL Bank (Tanzania) Limited operates a contributory provident fund scheme. The employer and employee each contribute 10% of the basic salary to the funded scheme every month. 38.2 Employee Motivation and Retention Scheme The Bank has a long term motivation and retention scheme for its employees. The liability of the Bank in respect of the scheme for each year, if any, is fixed, and is accounted for in the year to which the scheme relates. The scheme is managed by separate Trusts formed in respect of each year. During the year, Rs. nil (2016: Rs. 38.748 million) and Rs. nil (2016: Rs. 1.437 million) were received by the Executives and the Chief Executive respectively from the scheme. No new Trust was set up during the current year. 38.3 Employee Stock Option Scheme UBL Fund Managers has an incentive scheme for its top performing employees in the form of share options under the policy of Employee Stock Option Scheme (ESOS). The options give a right to subscribe ordinary shares of the Company to the extent of the lower of two million shares or five percent of the share Capital of the company as of the grant date. The scheme is divided into three phases and options are exercisable at their respective exercise price determined from time to time according to methodology provided in approved scheme. Each phase give a right to eligible employees to acquire options after a vesting period of two years, in two tranches i.e. 50% of the vested options are exercisable upon completion of vesting period, while remaining 50% can be exercised after one year. The last phase was completed in 2016 in which 18,121 shares were issued pursuant to exercise of the share options. 39. COMPENSATION OF DIRECTORS AND EXECUTIVES President / Chief Executive Officer Directors Executives 2017 2016 2017 2016 2017 2016 ---------------------------------------------------------- (Rupees in '000) ---------------------------------------------------------Fees Managerial remuneration Charge for defined benefit plan Charge for defined contribution plan Rent and house maintenance Utilities Medical Conveyance Others Number of persons 201,483 732 4,167 4,361 1,456 22 4,011 216,233 129,907 1,638 3,630 4,191 1,407 3,394 144,167 48,721 48,721 41,963 41,963 25,218 5,518,461 1,025,765 198,216 816,131 384,992 184,502 469,262 1,441,237 10,063,784 28,263 5,684,800 449,837 159,243 717,026 341,790 168,775 453,535 329,951 8,333,220 2 1 10 8 2,145 1,936 The amount paid to President / Chief Executive Officer of the Bank includes an amount of Rs. 51.364 million paid during the year as severance cost on cessation of employment to the outgoing President / Chief Executive Officer. The Bank's President / Chief Executive Officer and certain Executives are provided with use of Bank maintained cars and household equipment. In addition to the above, all Executives including the Chief Executive Officer of the Bank, are also entitled to certain short and long term employee benefits which are disclosed in note 38.2 to these consolidated financial statements. 52 Annual Report 2017 207
210. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED For the year ended December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 40. FAIR VALUE OF FINANCIAL INSTRUMENTS 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, other than investments in associates, 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. 40.1 The Group 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: 2017 On balance sheet financial instruments Carrying / Notional value Fair value Level 3 Total ----------------------------------(Rupees in '000)--------------------------------- Financial assets measured at fair value - Investments Level 1 Level 2 Government Securities (T-bills, PIBs, GoP Sukuks and Eurobonds) 679,318,633 - 679,318,633 - 679,318,633 Foreign Bonds - others 38,490,598 19,352,217 - 38,490,598 19,352,217 - 38,490,598 19,352,217 Ordinary shares of listed companies 18,318,667 - 18,318,667 - 382,425 Foreign Bonds - sovereign Debt securities (TFCs) 382,425 Investment in REIT 458,590 18,318,667 - - 458,590 4,243,644 - 4,243,644 760,564,774 18,777,257 741,787,517 - 760,564,774 364,356,526 1,124,921,300 18,777,257 741,787,517 - 760,564,774 Investment in Associates 4,243,644 458,590 382,425 - - Financial assets not measured at fair value - Investments (HTM, unlisted ordinary shares, preference shares) Off balance sheet financial instruments Forward purchase and sale of foreign exchange contracts Interest rate swaps Cross currency swaps Forward purchase of government securities Forward sale of government securities United Bank Limited - 1,933,688 - 1,933,688 4,358,641 - 74,865 - 74,865 - - - - - FX options - purchased and sold (net) 208 455,265,957 53 166,736 - - - - 7,870,890 - (1,155) - (1,155) 1,478 - (2) - (2)
211. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND OF THE CONSOLIDATED For the yearFORMING endedPART December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 2016 Carrying / Notional value Fair value Level 1 Level 2 Level 3 Total ----------------------------------(Rupees in '000)--------------------------------- On balance sheet financial instruments Financial assets measured at fair value - Investments Government Securities (T-bills, PIBs, GoP Sukuks and Eurobonds) Foreign Bonds - sovereign Foreign Bonds - others 399,604,148 - 399,604,148 - 399,604,148 33,743,383 - 33,743,383 - 33,743,383 18,317,632 - 18,317,632 - 22,220,692 - 583,011 18,317,632 Ordinary shares of listed companies 22,220,692 Debt securities (TFCs) 583,011 Investment in REIT - 583,011 453,170 7,977,617 - 7,977,617 482,899,653 22,673,862 460,225,791 - 482,899,653 355,362,621 838,262,274 22,673,862 460,225,791 - 482,899,653 7,977,617 453,170 - - 453,170 Investment in Associates 22,220,692 - - Financial assets not measured at fair value - Investments (HTM, unlisted ordinary shares, preference shares) Off balance sheet financial instruments Forward purchase and sale of foreign exchange contracts Interest rate swaps 409,699,441 - (746,629) - (746,629) 6,986,094 - 197,083 - 197,083 Cross currency swaps 522,051 - 5,459 - 5,459 FX options - purchased and sold (net) 426,162 - - - - Forward purchase of government securities 4,998,400 - (2,391) - (2,391) Forward sale of government securities 3,553,866 - 1,717 - 1,717 40.2 Certain categories of operating fixed assets (land and buildings) and non-banking assets acquired in satisfactions of claims are carried at revalued amounts (level 3 measurement) determined by professional valuers based on their assessment of the market values as disclosed in note 11 and note 12 respectively. 40.3 Valuation techniques used in determination of fair values within level 2 and level 3. Debt Securities The fair value of Federal Government securities is determined using the prices / rates available on Mutual Funds Association of Pakistan (MUFAP) and the fair value of other corporate and foreign government securities is determined using the rates from Reuters / Bloomberg. Derivatives The fair valuation techniques include forward pricing and swap models using present value calculations. Operating fixed assets and non-banking assets acquired in satisfaction of claims Land, buildings and non-banking assets acquired in satisfaction of claims 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 certainty, accordingly, a qualitative disclosure of sensitivity has not been presented in these consolidated financial statements. 54 Annual Report 2017 209
212. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED For the year ended December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 41. SEGMENT DETAILS WITH RESPECT TO BUSINESS ACTIVITIES For the year ended December 31, 2017 Corporate finance Trading and sales Retail banking Commercial banking Asset management Others Inter segment elimination ------------------------------------------------------------------ (Rupees in '000) -----------------------------------------------------------------Total income Total expenses Profit before tax Segment return on assets (ROA) Segment cost of funds 728,028 83,459 644,569 94.6% 0.0% 29,624,475 1,385,182 28,239,293 1.7% 4.6% 33,772,871 30,529,217 3,243,654 0.2% 2.6% 14,961,920 7,966,874 6,995,046 0.8% 4.0% 1,274,486 573,892 700,594 37.9% - 2,486,149 1,178,313 1,307,836 - - For the year ended December 31, 2016 Corporate finance Trading and sales Retail banking Commercial banking Asset management Others Inter segment elimination ------------------------------------------------------------------ (Rupees in '000) -----------------------------------------------------------------Total income Total expenses Profit before tax Segment return on assets (ROA) Segment cost of funds 687,888 98,333 589,555 101.1% 0.0% 35,783,872 2,570,479 33,213,393 2.3% 4.6% 30,845,096 27,324,741 3,520,355 0.2% 2.6% 14,539,492 6,824,313 7,715,179 1.1% 4.0% 1,111,336 640,878 470,458 26.8% - 2,045,063 399,720 1,645,343 - - As at December 31, 2017 Corporate finance Trading and sales Retail banking Commercial banking Asset management Others Inter segment elimination ------------------------------------------------------------------ (Rupees in '000) -----------------------------------------------------------------Segment assets (gross of NPLs provisions) Segment non performing loans (NPLs) Segment provision held against NPLs Segment liabilities 1,349,731 674,163 515,863 222,650 1,230,568,302 1,003,160 1,002,844 1,171,670,458 1,244,897,036 10,312,357 8,425,423 1,266,830,240 625,655,607 40,851,377 30,249,465 574,811,057 1,591,685 182,495 135,172,316 66,591 32,089 10,798,332 (1,093,648,494) (1,093,648,494) Others Inter segment elimination As at December 31, 2016 Corporate finance Trading and sales Retail banking Commercial banking Asset management ------------------------------------------------------------------ (Rupees in '000) -----------------------------------------------------------------Segment assets (gross of NPLs provisions) Segment non performing loans (NPLs) Segment provision held against NPLs Segment liabilities 1,121,938 674,671 507,379 233,008 940,381,710 1,603,361 1,584,978 859,587,557 1,092,053,721 11,703,125 9,100,204 1,123,240,517 542,138,463 31,998,971 26,851,681 496,531,403 1,455,741 206,715 110,454,439 64,814 36,702 5,996,644 (987,782,808) (987,782,808) Segment assets and liabilities include inter segment balances. Transactions between reportable segments are based on an appropriate transfer pricing mechanism using agreed rates. 42. TRUST ACTIVITIES The Group is not engaged in any significant trust activities. However, it acts as custodian for some of the Term Finance Certificates it arranges and distributes on behalf of its customers. 43. RELATED PARTY TRANSACTIONS The Group has related party transactions with its associates, employee benefit plans and its Directors and executive officers (including their associates). The Group enters into transactions with related parties in the normal course of business. Contributions to and accruals in respect of staff retirement benefits and other benefit plans are made in accordance with the actuarial valuations / terms of the contribution plan. Remuneration to the executives / officers is determined in accordance with the terms of their appointment. Details of transactions with related parties during the year, other than those which have been disclosed elsewhere in these consolidated financial statements, are as follows: 210 United Bank Limited 55
213. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 43.1 RELATED PARTY TRANSACTIONS Lendings to financial institutions Other lendings to financial institutions 2017 - - Investments Opening balance Investment made during the year Investment redeemed / disposed off during the year Equity method adjustments Closing balance - - Provision for diminution in value of investments - - Advances Opening balance Addition during the year Repaid during the year Transfer in / (out) - net Closing balance 2,339 11,574 (8,610) 5,303 - Other Assets Interest mark-up accrued Receivable from staff retirement funds Prepaid insurance Remuneration receivable from management of funds Sales load receivable Formation cost receivable Other receivables - Provision against other assets - - Borrowings Opening balance Borrowings during the year Settled during the year Closing balance - - Other Liabilities Interest / mark-up payable on deposits and borrowings Payable to staff retirement fund Unearned income Contingencies and Commitments Letter of guarantee Forward foreign exchange contracts purchase Forward foreign exchange contracts sale Cross Currency Swap - 7,977,617 1,365,953 (5,399,374) 299,448 4,243,644 - 367,645 149,324 (296,736) (14,865) 205,368 Provision held against advances Deposits and other accounts Opening balance Received during the year Withdrawn during the year Transfer in / (out) - net Closing balance 2016 Key Other Key Other related Directors management Associates related Directors management Associates parties personnel parties personnel ---------------------------------------------------------------- (Rupees in '000) ---------------------------------------------------------------- - 26 7,714,425 30,436,836 (32,458,694) 7,996 5,700,563 - 2,155,149 8 - - 3,895,328 3,895,328 - - 98,414 - - 16,907,691 65,331,493 (79,612,942) (136) 2,626,106 - - - - - 82,071 632,808 30,164 - - 30,164 - 167,100 512,650 (679,750) - - 474,532 474,532 47 706 18,822 (17,189) 2,339 13,201 85,289 26,527 5,286 46,736 241,070 8,882,657 2,196,112 1,716,576 260,731,569 176,340,118 (1,772,424) (255,237,324) (174,752,255) (118,975) (6,952,995) (708,121) 66,247 7,423,907 3,075,854 40,412 - Directors 2,155,149 2,155,149 - 375,000 8,801,941 1,324,688 (2,883,927) 734,915 7,977,617 - 404,436 126,368 (186,873) 23,714 367,645 - 7 7,934,549 25,536,998 (25,757,122) 7,714,425 3,917,745 (22,417) 3,895,328 114,844 7,907,012 59,472,460 (50,471,781) 16,907,691 2,155,149 67 - 4,144 5,236 86,615 12,267 2,363 10,655 235,602 376,634 30,164 - - 30,164 - - 167,100 167,100 - 134,394 6,658,891 1,822,423 1,563,279 129,962,337 115,760,189 (1,452,113) (127,738,571) (115,386,860) (4,490) 360 241,070 8,882,657 2,196,112 42,810 - 27,740 44,538 11,462 86,513 - - 24,884 - - - - 2017 Key Associates management personnel Other related parties Directors 2,155,149 2,155,149 - 35 29,777 - 4,454 130,015 10,420 23,574 522,051 198,737 203,148 - 2016 Key Associates management personnel Other related parties ---------------------------------------------------------------- (Rupees in '000) ---------------------------------------------------------------Mark-up / return / interest earned Commission / charges recovered Dividend received Net gain on sale of securities Remuneration from management of fund Sales Load Other income Mark-up / return / interest paid Remuneration paid Post employment benefits Non-executive directors' fee Net charge for defined contribution plans Net charge / (reversal) for defined benefit plans Other expenses Insurance premium paid Insurance claims settled - 94 126,120 48,721 - 10,503 367 1,909 11,831 35,460 156,874 339,789 974,183 187,644 18,303 490,962 14,572 480,242 12,716 10 242 - 13,097 533 2,621 28,098 39,948 309,761 532,303 735,053 135,018 6,461 502,333 23,535 791,303 12,514 1,824 1,499,492 63,486 - 541,214 2,552 64,187 395,981 115,878 129,510 218,848 41,963 - 1,675 1,426,869 61,373 - 255,670 55,621 34,176 364,734 (325,739) 120,737 - - 56 443,179 206,675 - - - 239,944 112,467 Annual Report 2017 - 211
214. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED For the year ended December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 44. CAPITAL ADEQUACY 44.1 The State Bank of Pakistan (SBP) through its BPRD Circular No. 6 dated August 15, 2013 has issued Basel III Capital instructions for Banks / DFIs. The revision to the previously applicable Capital Adequacy regulations pertain to components of eligible capital and related deductions. The amendments have been introduced with an aim to further strengthen the existing capital related rules. Basel III instructions have become effective from December 31, 2013; however, there is a transitional phase during which the complete requirements would become applicable with full implementation by December 31, 2019. The Bank’s capital adequacy is reported using the rules and ratios provided by the State Bank of Pakistan. The capital adequacy ratio is a measure of the amount of a Bank's capital expressed as a percentage of its risk weighted assets (RWAs). Banking operations are categorized as either Trading Book or Banking Book and RWAs are determined according to specific treatments as per the requirements of SBP that measure the varying levels of risk attached to on balance sheet and offbalance sheet exposures. Under the current capital adequacy regulations, credit risk and market risk exposures are measured using the Standardized Approach and operational risk is measured using the Basic Indicator Approach. Credit risk mitigants are also applied against the Bank’s exposures based on eligible collateral. The Bank performs its Internal Capital Adequacy Assessment Process (ICAAP) as per the guidelines provided by the SBP. The ICAAP has been approved by the Bank’s Board of Directors and submitted to the SBP. The Bank additionally covers risks not yet included under Pillar I, so as to carry adequate capital to cater for any future business requirements. 44.2 Capital Management The objective of managing capital is to safeguard the Bank's ability to continue as a going concern. It is the policy of the Bank to maintain a strong capital base so as to maintain investor, depositor and market confidence and to sustain future development of the business. The Bank aims to maintain an optimum level of capital along with maximizing shareholders’ return as we consider a sound capital position as more appropriate as opposed to leverage supporting business growth. Statutory minimum capital and capital adequacy requirements The SBP through its BSD Circular No. 07 dated April 15, 2009 has prescribed the minimum paid-up capital (net of accumulated losses) for Banks to be raised to Rs.10,000 million by the year ending December 31, 2015. The paid-up capital of the Bank for the year ended December 31, 2017 stood at Rs.12,241.798 million (2016: Rs.12,241.798 million) and is in compliance with SBP requirements. Banks are also required to maintain a minimum Capital Adequacy Ratio (CAR) of 10.0% plus capital conservation buffer of 1.275% of the risk weighted exposures of the Bank. Further, under Basel III instructions, Banks are also required to maintain a Common Equity Tier 1 (CET 1) ratio and Tier 1 ratio of 6.0% and 7.5%, respectively, as at December 31, 2017. As at December 31, 2017 the Bank is fully compliant with prescribed ratios as the Bank’s CAR is 15.11% whereas CET 1 and Tier 1 ratios both stood at 11.03% and 11.04%. The Bank and its individually regulated operations have complied with all capital requirements throughout the year. Tier 1 capital comprises of Common Equity Tier 1 (CET 1) and Additional Tier 1 (AT 1) capital. CET 1 capital includes fully paid-up capital, balance in share premium account, reserve for issuance of bonus shares, general reserves,minority interest as per the financial statements and net unappropriated profits. AT 1 capital includes instruments meeting the prescribed SBP criteria e.g. perpetual non-cumulative preference shares. The deductions from Tier 1 capital include mainly: i) Book value of goodwill / intangibles; ii) Shortfall in provision; iii) Deficit on revaluation of available for sale investments - AFS & fixed assets; iv) Defined benefit pension fund asset; v) Investment in own shares; vi) Reciprocal cross holdings in equity capital instruments of other banks, financial institutions and insurance companies; vii) Investment in mutual funds above a prescribed ceiling; viii) Threshold deductions applicable from 2014 on deferred tax assets and certain investments; ix) 10% of investments in majority capital instruments or other financial subsidiaries not consolidated in the statement of financial position during transition phase. Tier 2 capital includes general provisions for loan losses, surplus on the revaluation of fixed assets, fixed income financial instruments (AFS) and equity investments (AFS), foreign exchange translation reserves and subordinated debts (meeting the revised eligibility criteria). The deductions from Tier 2 include mainly: i) Reciprocal cross holdings in other capital instruments of other banks, financial institution and insurance companies; ii) 10% of investments in majority capital instruments or other financial subsidiaries not consolidated in the statement of financial position, during transition phase. 212 United Bank Limited 57
215. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 44.3 1 2 3 4 5 6 7 8 9 10 11 Capital Adequacy Ratio (CAR) disclosure template: Common Equity Tier 1 capital (CET1): Instruments and reserves Fully Paid-up Capital/ Capital deposited with SBP Balance in Share Premium Account Reserve for issue of Bonus Shares Discount on Issue of shares General/ Statutory Reserves Gain/(Losses) on derivatives held as Cash Flow Hedge Unappropriated/unremitted profits/ (losses) Minority Interests arising from CET1 capital instruments issued to third parties by consolidated bank subsidiaries (amount allowed in CET1 capital of the consolidation group) CET 1 before Regulatory Adjustments Total regulatory adjustment applied to AT1 capital (Note 44.3.1) Common Equity Tier 1 16 17 18 19 20 Additional Tier 1 (AT 1) Capital Qualifying Additional Tier-1 capital instruments plus any related share premium of which: Classified as equity of which: Classified as liabilities Additional Tier-1 capital instruments issued to third parties by consolidated subsidiaries (amount allowed in group AT 1) of which: instrument issued by subsidiaries subject to phase out AT1 before regulatory adjustments Total regulatory adjustment applied to AT1 capital (Note 44.3.2) Additional Tier 1 capital after regulatory adjustments Additional Tier 1 capital recognized for capital adequacy 21 Tier 1 Capital (CET1 + admissible AT1) (11+20) 12 13 14 15 29 30 31 32 33 34 35 36 37 38 39 40 41 Total Risk Weighted Assets (RWA) {for details refer Note 44.6} 27 28 46 47 48 49 Capital Ratios and buffers (in percentage of risk weighted assets) CET1 to total RWA Tier-1 capital to total RWA Total capital to total RWA Bank specific buffer requirement (minimum CET1 requirement plus capital conservation buffer plus any other buffer requirement) of which: capital conservation buffer requirement of which: countercyclical buffer requirement of which: D-SIB or G-SIB buffer requirement CET1 available to meet buffers (as a percentage of risk weighted assets) 50 51 52 National minimum capital requirements prescribed by SBP CET1 minimum ratio Tier 1 minimum ratio Total capital minimum ratio 42 43 44 45 12,241,798 29,860,453 76,651,713 12,241,798 27,303,858 68,939,008 2,758,604 121,512,568 2,308,149 119,204,419 2,966,274 111,450,938 1,944,067 109,506,871 317,029 (246,172) 70,857 119,275,276 Tier 2 Capital Qualifying Tier 2 capital instruments under Basel III plus any related share premium Tier 2 capital instruments subject to phaseout arrangement issued under pre-Basel 3 rules Tier 2 capital instruments issued to third parties by consolidated subsidiaries (amount allowed in group tier 2) of which: instruments issued by subsidiaries subject to phase out General provisions or general reserves for loan losses-up to maximum of 1.25% of Credit Risk Weighted Assets Revaluation Reserves (net of taxes) of which: Revaluation reserves on fixed assets of which: Unrealized gains/losses on AFS Foreign Exchange Translation Reserves Undisclosed/Other Reserves (if any) T2 before regulatory adjustments Total regulatory adjustment applied to T2 capital (Note 44.3.3) Tier 2 capital (T2) after regulatory adjustments Tier 2 capital recognized for capital adequacy Portion of Additional Tier 1 capital recognized in Tier 2 capital Total Tier 2 capital admissible for capital adequacy TOTAL CAPITAL (T1 + admissible T2) (21+39) 24 25 26 2017 2016 ------------------------ (Rupees in '000) -------------------Amount Amount 58 225,035 (225,035) 109,506,871 - - 292,584 - 375,009 - 3,506,469 29,785,632 24,783,985 5,001,647 17,343,063 50,927,748 246,172 50,681,576 43,928,861 43,928,861 163,204,137 3,296,276 27,723,423 16,675,959 11,047,464 15,311,330 46,706,038 490,803 46,215,235 42,855,367 42,855,367 152,362,238 1,080,404,219 1,023,690,975 11.03% 11.04% 15.11% 10.70% 10.70% 14.88% 7.28% 1.28% 3.76% 6.65% 0.65% 4.19% 6.00% 7.50% 10.00% 6.00% 7.50% 10.00% Annual Report 2017 213
216. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED For the year ended December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 2017 Regulatory Adjustments and Additional Information Amount 2016 Amounts subject to PreBasel III treatment Amount ------------------------ (Rupees in '000) -------------------- 44.3.1 Common Equity Tier 1 capital: Regulatory adjustments 1 Goodwill (net of related deferred tax liability) 2 All other intangibles (net of any associated deferred tax liability) - 3 Shortfall in provisions against classified assets 4 Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability) 5 Defined-benefit pension fund net assets 6 Reciprocal cross holdings in CET1 capital instruments of banking, financial and insurance entities 7 Cash flow hedge reserve 8 Investment in own shares/ CET1 instruments - 1,232,566 1,139,131 248,157 - 248,157 617,241 56,662 361,203 - - 210,185 169,045 9 Securitization gain on sale - - 10 Capital shortfall of regulated subsidiaries - - 11 Deficit on account of revaluation from bank's holdings of fixed assets/ AFS - - 12 Investments in the capital instruments of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold) 13 Significant investments in the common stocks of banking, financial and insurance entities that are outside the scope of regulatory consolidation (amount above 10% threshold) - - 14 Deferred Tax Assets arising from temporary differences (amount above 10% threshold, net of related tax liability) - - 15 Amount exceeding 15% threshold - - 16 of which: significant investments in the common stocks of financial entities - - 17 of which: deferred tax assets arising from temporary differences - - - - 18 National specific regulatory adjustments applied to CET1 capital 19 Investments in TFCs of other banks exceeding the prescribed limit - 20 Any other deduction specified by SBP (mention details) - 21 Adjustment to CET1 due to insufficient AT1 and Tier 2 to cover deductions 22 Total regulatory adjustments applied to CET1 (sum of 1 to 21) - - 218,026 2,308,149 1,944,067 44.3.2 Additional Tier-1 : regulatory adjustments 23 Investment in mutual funds exceeding the prescribed limit [SBP specific adjustment] - 49,611 24 Investment in own AT1 capital instruments - - 25 Reciprocal cross holdings in Additional Tier 1 capital instruments of banking, financial and insurance entities 26 Investments in the capital instruments of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold) - - 27 Significant investments in the capital instruments of banking, financial and insurance entities that are outside the scope of regulatory consolidation - - 28 Adjustments to Additional Tier 1 due to insufficient Tier 2 to cover deductions - - 29 Portion of deduction applied 50:50 to Tier-1 and Tier-2 capital based on preBasel III treatment which, during transitional period, remain subject to deduction from Additional Tier-1 capital 30 Total regulatory adjustment applied to AT1 capital (sum of 23 to 29) 214 United Bank Limited 59 246,172 246,172 246,172 393,696 443,307
217. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND OF THE CONSOLIDATED For the yearFORMING endedPART December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 2017 Regulatory Adjustments and Additional Information Amount 2016 Amounts subject to PreBasel III treatment Amount ------------------------ (Rupees in '000) -------------------- 44.3.3 Tier 2 Capital: regulatory adjustments 31 Portion of deduction applied 50:50 to Tier-1 and Tier-2 capital based on preBasel III treatment which, during transitional period, remain subject to deduction from tier-2 capital 32 Reciprocal cross holdings in Tier 2 instruments of banking, financial and insurance entities 33 Investment in own Tier 2 capital instrument 34 Investments in the capital instruments of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold) 35 Significant investments in the capital instruments issued by banking, financial and insurance entities that are outside the scope of regulatory consolidation 36 Total regulatory adjustment applied to T2 capital (sum of 31 to 35) 246,172 246,172 393,696 - - - - - - 246,172 393,696 2017 2016 ------------------- Rupees in '000 -------------------- 44.3.4 Additional Information Amount Amount - - - - - - - - - - Risk Weighted Assets subject to pre-Basel III treatment 37 Risk weighted assets in respect of deduction items (which during the transitional period will be risk weighted subject to Pre-Basel III Treatment) (i) of which: deferred tax assets (ii) of which: Defined-benefit pension fund net assets (iii) of which: Recognized portion of investment in capital of banking, ----------financial and insurance entities where holding is less than 10% of the ---------------issued common share capital of the entity (iv) of which: Recognized portion of investment in capital of banking, financial ----------and insurance entities where holding is more than 10% of the issued ----------------common share capital of the entity Amounts below the thresholds for deduction (before risk weighting) 38 Non-significant investments in the capital of other financial entities - - 39 Significant investments in the common stock of financial entities - - 40 Deferred tax assets arising from temporary differences (net of related tax liability) - - - - - - - - - - Applicable caps on the inclusion of provisions in Tier 2 41 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to standardized approach (prior to application of cap) 42 Cap on inclusion of provisions in Tier 2 under standardized approach 43 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internal ratings-based approach (prior to application of cap) 44 Cap for inclusion of provisions in Tier 2 under internal ratings-based approach 60 Annual Report 2017 215
218. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 44.4 Capital Structure Reconciliation As at December 31, 2017 Balance Sheet Under as per regulatory published scope of financial consolidation statements --------- (Rupees in '000) --------- Step 1 Assets Cash and balances with treasury banks Balances with other banks Lending to financial institutions Investments Advances Operating fixed assets Deferred tax assets - net Other assets 161,119,170 35,549,112 35,893,920 1,124,921,300 642,506,720 50,384,077 54,986,201 161,119,170 35,549,112 35,893,920 1,124,921,300 642,506,720 50,384,077 54,986,201 Total assets 2,105,360,500 2,105,360,500 Bills payable Borrowings Deposits and other accounts Sub-ordinated loans Liabilities against assets subject to finance lease Deferred tax liability - net Other liabilities 13,392,978 517,082,159 1,366,157,914 4,375 2,980,466 31,248,846 13,392,978 517,082,159 1,366,157,914 4,375 2,980,466 31,248,846 Total liabilities 1,930,866,738 1,930,866,738 12,241,798 47,203,516 76,651,713 12,241,798 47,203,516 76,651,713 136,097,027 4,810,519 140,907,546 136,097,027 4,810,519 140,907,546 33,586,216 33,586,216 2,105,360,500 2,105,360,500 Liabilities & Equity Share capital Reserves Unappropriated profit Total equity attributable to equity holders of the Bank Non-controlling interest Surplus on revaluation of assets - net of deferred tax Total liabilities and equity 216 United Bank Limited 61
219. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 44.4 Capital Structure (Contd.) Step 2 Assets Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments of which: Non-significant capital investments in capital of other financial institutions exceeding 10% threshold of which: significant capital investments in financial sector entities exceeding regulatory threshold of which: Mutual Funds exceeding regulatory threshold of which: reciprocal crossholding of capital instrument of which: Investment in own shares/ CET1 instruments Advances shortfall in provisions/ excess of total EL amount over eligible provisions ------------- under IRB general provisions reflected in Tier 2 capital Fixed Assets of which: Goodwill of which: Intangibles Deferred Tax Assets of which: DTAs excluding those arising from temporary differences of which: DTAs arising from temporary differences exceeding regulatory threshold Other assets of which: Defined-benefit pension fund net assets Total assets As at December 31, 2017 Balance Sheet Under as per regulatory published scope of financial consolidation statements --------- (Rupees in '000) --------161,119,170 35,549,112 35,893,920 1,124,921,300 - 161,119,170 35,549,112 35,893,920 1,124,921,300 - 617,241 210,185 642,506,720 - 617,241 210,185 642,506,720 - 3,506,469 50,384,077 1,232,566 54,986,201 248,157 2,105,360,500 3,506,469 50,384,077 1,232,566 54,986,201 248,157 2,105,360,500 Liabilities & Equity Bills payable Borrowings Deposits and other accounts Sub-ordinated loans of which: eligible for inclusion in AT1 of which: eligible for inclusion in Tier 2 Liabilities against assets subject to finance lease Deferred tax liabilities of which: DTLs related to goodwill of which: DTLs related to intangible assets of which: DTLs related to defined pension fund net assets of which: other deferred tax liabilities Other liabilities Total liabilities 13,392,978 517,082,159 1,366,157,914 4,375 2,980,466 2,980,466 31,248,846 1,930,866,738 13,392,978 517,082,159 1,366,157,914 4,375 2,980,466 2,980,466 31,248,846 1,930,866,738 Share capital of which: amount eligible for CET1 of which: amount eligible for AT1 Reserves of which: portion eligible for inclusion in CET1(provide breakup) of which: portion eligible for inclusion in Tier 2 Unappropriated profit/ (losses) Minority Interest of which: portion eligible for inclusion in CET1 of which: portion eligible for inclusion in AT1 of which: portion eligible for inclusion in Tier 2 Surplus on revaluation of assets of which: Revaluation reserves on Property of which: Unrealized Gains/Losses on AFS In case of Deficit on revaluation (deduction from CET1) Total liabilities and equity 12,241,798 12,241,798 47,203,516 29,860,453 17,343,063 76,651,713 4,810,519 2,758,604 317,029 292,584 33,586,216 27,847,175 5,619,828 2,105,360,500 12,241,798 12,241,798 47,203,516 29,860,453 17,343,063 76,651,713 4,810,519 2,758,604 317,029 292,584 33,586,216 27,847,175 5,619,828 2,105,360,500 62 Reference a b c d e f g j k h i l m n o p q r s t u v w x y z aa ab Annual Report 2017 217
220. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 44.4 Capital Structure (Contd.) Step 3 Common Equity Tier 1 capital (CET1): Instruments and reserves 1 2 3 4 5 6 7 Fully Paid-up Capital/ Capital deposited with SBP Balance in Share Premium Account Reserve for issue of Bonus Shares General/ Statutory Reserves Gain/(Losses) on derivatives held as Cash Flow Hedge Unappropriated/unremitted profits/(losses) Minority Interests arising from CET1 capital instruments issued to third party by consolidated bank subsidiaries (amount allowed in CET1 capital of the consolidation group) 8 CET 1 before Regulatory Adjustments Component of regulatory capital reported by bank (Rupees in '000) 12,241,798 29,860,453 76,651,713 2,758,604 121,512,568 Source based on reference number from step 2 (s) (u) (w) (x) Common Equity Tier 1 capital: Regulatory adjustments 9 10 11 12 13 14 15 16 17 18 19 20 21 Goodwill (net of related deferred tax liability) All other intangibles (net of any associated deferred tax liability) Shortfall of provisions against classified assets Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability) Defined-benefit pension fund net assets Reciprocal cross holdings in CET1 capital instruments Cash flow hedge reserve Investment in own shares/ CET1 instruments Securitization gain on sale Capital shortfall of regulated subsidiaries Deficit on account of revaluation from bank's holdings of property/ AFS Investments in the capital instruments of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold) Significant investments in the capital instruments issued by banking, financial and insurance entities that are outside the scope of regulatory consolidation (amount above 10% threshold) 22 Deferred Tax Assets arising from temporary differences (amount above 10% threshold, net of related tax liability) 23 Amount exceeding 15% threshold 24 of which: significant investments in the common stocks of financial entities 25 of which: deferred tax assets arising from temporary differences 26 National specific regulatory adjustments applied to CET1 capital 27 Investment in TFCs of other banks exceeding the prescribed limit 28 Any other deduction specified by SBP (mention details) 29 Regulatory adjustment applied to CET1 due to insufficient AT1 and Tier 2 to cover deductions 30 Total regulatory adjustments applied to CET1 (sum of 9 to 25) Common Equity Tier 1 1,232,566 248,157 617,241 210,185 - (j) - (o) (k) - (p) (f) {(h) - (r)} * x% {(l) - (q)} * x% (d) (ab) - (a) - (ac) - (ae) - (b) - (ad) - (af) - (i) 2,308,149 119,204,419 Additional Tier 1 (AT 1) Capital 31 Qualifying Additional Tier-1 instruments plus any related share premium 32 of which: Classified as equity 33 of which: Classified as liabilities 34 Additional Tier-1 capital instruments issued by consolidated subsidiaries and held by third parties (amount allowed in group AT 1) 35 of which: instrument issued by subsidiaries subject to phase out 36 AT1 before regulatory adjustments 218 United Bank Limited 63 317,029 317,029 (t) (m) (y)
221. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 Component of regulatory capital reported by bank (Rupees in '000) Additional Tier 1 Capital: regulatory adjustments 37 38 39 40 Investment in mutual funds exceeding the prescribed limit (SBP specific adjustment) Investment in own AT1 capital instruments Reciprocal cross holdings in Additional Tier 1 capital instruments Investments in the capital instruments of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold) 41 Significant investments in the capital instruments issued by banking, financial and insurance entities that are outside the scope of regulatory consolidation 42 Portion of deduction applied 50:50 to core capital and supplementary capital based on pre-Basel III treatment which, during transitional period, remain subject to deduction from tier-1 capital 43 Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover deductions 44 Total of Regulatory Adjustment applied to AT1 capital 45 Additional Tier 1 capital 46 Additional Tier 1 capital recognized for capital adequacy Tier 1 Capital (CET1 + admissible AT1) Source based on reference number from step 2 - - (ac) - (ad) 246,172 246,172 70,857 119,275,276 Tier 2 Capital 47 Qualifying Tier 2 capital instruments under Basel III 48 Capital instruments subject to phase out arrangement from tier 2 (Pre-Basel III instruments) 49 Tier 2 capital instruments issued to third party by consolidated subsidiaries (amount allowed in group tier 2) 50 of which: instruments issued by subsidiaries subject to phase out 51 General Provisions or general reserves for loan losses-up to maximum of 1.25% of Credit Risk Weighted Assets 52 Revaluation Reserves eligible for Tier 2 53 of which: portion pertaining to Property 54 of which: portion pertaining to AFS securities 55 Foreign Exchange Translation Reserves 56 Undisclosed/Other Reserves (if any) 57 T2 before regulatory adjustments Tier 2 Capital: regulatory adjustments 58 Portion of deduction applied 50:50 to core capital and supplementary capital based on pre-Basel III treatment which, during transitional period, remain subject to deduction from tier-2 capital 59 Reciprocal cross holdings in Tier 2 instruments 60 Investment in own Tier 2 capital instrument 61 Investments in the capital instruments of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold) 62 Significant investments in the capital instruments issued by banking, financial and insurance entities that are outside the scope of regulatory consolidation 63 Amount of Regulatory Adjustment applied to T2 capital 64 Tier 2 capital (T2) 65 Tier 2 capital recognized for capital adequacy 66 Excess Additional Tier 1 capital recognized in Tier 2 capital 67 Total Tier 2 capital admissible for capital adequacy TOTAL CAPITAL (T1 + admissible T2) 64 - (n) 292,584 - (z) 3,506,469 24,783,985 5,001,647 17,343,063 50,927,748 (g) portion of (aa) (v) 246,172 - 246,172 50,681,576 43,928,861 43,928,861 163,204,137 (ae) (af) Annual Report 2017 219
222. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 44.5 Main Features Template of Regulatory Capital Instruments Disclosure template for main features of regulatory capital instruments Main Features Issuer Unique identifier (e.g. PSX Symbol or Bloomberg identifier etc.) 3 Governing law(s) of the instrument Regulatory treatment Transitional Basel III rules Post-transitional Basel III rules Eligible at solo/ group/ group&solo Instrument type Amount recognized in regulatory capital (Currency in PKR thousands, as of reporting date) Relevant Capital Market Laws Par value of instrument Accounting classification Original date of issuance Perpetual or dated Original maturity date Issuer call subject to prior supervisory approval Optional call date, contingent call dates and redemption amount Subsequent call dates, if applicable Coupons / dividends Fixed or floating dividend/ coupon coupon rate and any related index/ benchmark Existence of a dividend stopper Fully discretionary, partially discretionary or mandatory Existence of step up or other incentive to redeem Noncumulative or cumulative Convertible or non-convertible If convertible, conversion trigger(s) If convertible, fully or partially If convertible, conversion rate If convertible, mandatory or optional conversion If convertible, specify instrument type convertible into If convertible, specify issuer of instrument it converts into Write-down feature If write-down, write-down trigger(s) If write-down, full or partial If write-down, permanent or temporary If temporary write-down, description of write-up mechanism Position in subordination hierarchy in liquidation (specify instrument type immediately senior to instrument) Rs 10 each Shareholders' equity 1959 Perpetual No maturity Not applicable Not applicable Not applicable 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 220 Common Shares 1 2 Non-compliant transitioned features If yes, specify non-compliant features United Bank Limited United Bank Limited On PSX “UBL” and on Bloomberg “UBLS”. Common Equity Tier 1 Common Equity Tier 1 Group & Standalone Ordinary Shares 12,241,798 Not applicable Not applicable No Fully discretionary No Not applicable Non Convertible Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Common equity (ranks after all creditors including depositors) Not applicable Not applicable 65
223. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 44.6 Capital Adequacy Ratio Risk weighted exposures Credit risk On-Balance sheet Sovereign Public Sector entities Banks Corporate Retail Residential Mortgages Past Due loans Listed equity investments Unlisted equity investments Commercial Entity Operating Fixed Assets Significant investment Other assets Off-Balance sheet Non-market related Market related Market Risk Interest rate risk Equity position risk Foreign Exchange risk Operational Risk Capital requirements * Risk weighted assets 2017 2016 2017 2016 --------------------------------- (Rupees in '000) --------------------------------- 7,304,295 1,714,490 5,611,813 32,853,251 3,140,810 146,777 1,872,665 146,579 16,862 55,872 4,915,151 492,344 2,102,502 60,373,411 6,901,721 978,715 5,409,570 31,385,534 2,128,835 140,495 1,319,284 174,629 12,095 55,872 3,823,609 295,272 1,487,981 54,113,612 73,042,950 17,144,899 56,118,128 328,532,508 31,408,096 1,467,766 18,726,651 1,465,785 168,624 558,720 49,151,512 4,923,442 21,025,017 603,734,098 69,017,213 9,787,149 54,095,702 313,855,343 21,288,345 1,404,945 13,192,843 1,746,290 120,947 558,720 38,236,093 2,952,717 14,879,810 541,136,117 12,130,937 243,045 12,373,982 10,546,716 187,064 10,733,780 121,309,365 2,430,454 123,739,819 105,467,159 1,870,638 107,337,797 12,287,106 3,114,395 1,118,053 16,519,554 13,911,239 4,223,190 927,897 19,062,326 153,588,829 38,929,942 13,975,663 206,494,434 175,248,050 48,560,325 11,957,413 235,765,788 11,714,869 10,054,603 146,435,868 139,451,273 100,981,816 93,964,321 1,080,404,219 1,023,690,975 * Based on minimum capital requirement excluding capital conservation buffer. Capital Adequacy Ratio Total eligible regulatory capital held Total risk weighted assets CET1 to total RWA Tier-1 capital to total RWA Total capital to total RWA 163,204,137 1,080,404,219 11.03% 11.04% 15.11% 66 152,362,238 1,023,690,975 10.70% 10.70% 14.88% Annual Report 2017 221
224. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED For the year ended December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 44.7 Credit risk - General disclosures Types of exposure and ECAIs used Corporates Banks Sovereigns Public sector enterprises Fitch Moody’s S&P PACRA JCR-VIS P P P P P P P P - - - P P ECA scores P - Mapping to SBP Rating Grades For all exposures, the selected ratings are translated to the standard rating grades given by the SBP. The mapping tables used for converting ECAI ratings to SBP rating grades are given below: Long Term Rating Grades mapping Fitch Moody’s S&P PACRA JCR-VIS AAA AA+ AA AAA+ A ABBB+ BBB BBBBB+ BB BBB+ B BCCC+ and below Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 Ba1 Ba2 Ba3 B1 B2 B3 Caa1 and below AAA AA+ AA AAA+ A ABBB+ BBB BBBBB+ BB BBB+ B BCCC+ and below AAA AA+ AA AAA+ A ABBB+ BBB BBBBB+ BB BBB+ B BCCC+ and below AAA AA+ AA AAA+ A ABBB+ BBB BBBBB+ BB BBB+ B BCCC+ and below Fitch Moody’s S&P PACRA JCR-VIS F1 F1 P-1 P-1 F2 F3 Others P-2 P-3 Others A-1+ A-1 A-2 A-3 Others A-1+ A-1 A-2 A-3 Others A-1+ A-1 A-2 A-3 Others SBP Rating grade 1 2 3 4 5 6 Short Term Rating Grades mapping SBP Rating Grade S1 S1 S2 S3 S4 222 United Bank Limited 67 ECA scores 0 1 2 3 4 5 6 7
225. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 44.8 Credit exposures subject to Standardized Approach Exposures Cash and cash equivalents Claims on Federal and Provincial Governments and SBP, denominated in PKR Foreign currency claims on SBP arising out of statutory obligations in Pakistan Claims on other sovereigns and on Government of Pakistan or provincial governments or SBP denominated in currencies other than PKR Corporates Rating category / risk weights 2017 2016 Amount Deduction Net amount outstanding CRM Amount Deduction Net amount outstanding CRM ------------------------------- (Rupees in '000) ----------------------------------- - 13,996,190 - - 848,000,473 452,896,285 13,996,190 395,104,188 18,186,617 - 497,451,486 128,836,359 18,186,617 368,615,127 - 9,861,122 - 9,861,122 9,135,162 - 9,135,162 1 2 3 4,5 6 Unrated 1,575,573 31,589,539 6,611,474 19,248,479 26,336,672 4,665,818 90,027,555 - 1,575,573 31,589,539 6,611,474 19,248,479 26,336,672 4,665,818 90,027,555 3,911,519 27,915,202 3,753,370 15,623,420 30,622,712 81,826,223 - 3,911,519 27,915,202 3,753,370 15,623,420 30,622,712 81,826,223 0 1 2 3,4 5,6 Unrated-1 Unrated-2 81,936,427 42,514,689 6,894,118 257,116,199 125,570,435 514,031,868 81,106,714 42,421,978 5,565,538 233,729,667 119,305,305 482,129,202 57,666,917 24,694,145 1,497,260 251,897,327 116,409,462 452,165,111 1,043,568 1,106 199,683 623,749 1,868,106 857,134 154,216 3,191,629 4,202,979 829,713 92,711 1,328,580 23,386,532 6,265,130 31,902,666 867 19,648 27,370,889 78,875 27,470,279 1,2,3 4,5 6 Unrated 1,043,568 1,106 199,683 623,749 1,868,106 Banks - others 0 1 2,3 4,5 6 Unrated 112,967,688 48,519,845 15,655,831 311,855 46,671,713 224,126,932 50,459,505 4,629 50,464,134 62,508,183 48,519,845 15,655,831 311,855 46,667,084 173,662,798 118,674,349 47,112,599 11,155,865 6,066,960 36,357,516 219,367,289 60,202,146 60,202,146 58,472,203 47,112,599 11,155,865 6,066,960 36,357,516 159,165,143 Public sector enterprises 0 1 2,3 4,5 6 Unrated 37,134,144 14,720,942 15,493,120 5,511,702 116,208,041 93,185,453 168,835,305 113,418,097 22,413,202 9,981,418 23,022,588 55,417,208 23,912,438 10,690,051 90,347,819 124,950,308 12,736,928 5,503,637 73,513,237 91,753,802 11,175,510 5,186,414 16,834,582 33,196,506 43,634,537 4,193,617 47,828,154 33,881,001 4,014,129 37,895,130 3,836,605 3,836,605 30,044,396 4,014,129 34,058,525 1,465,785 112,416 55,872 1,634,073 1,746,290 80,631 55,872 1,882,793 - 1,746,290 80,631 55,872 1,882,793 857,134 154,216 3,191,629 4,202,979 24,786 50,443 75,229 - 24,786 50,443 75,229 75% 35% 50,032,514 4,193,617 54,226,131 Equity investments - Listed - Unlisted - Commercial Entity (Holding greater than 10%) 100% 150% 1000% Past due loans secured against mortgage of residential property: - less than 20% provided - greater than 20% provided 1,465,785 112,416 55,872 1,634,073 100% 50% Past due loans - others - Less than 20% provided - Between 20% to 50% provided - More than 50% provided 150% 100% 50% 8,843,913 4,672,597 1,576,369 15,092,879 - 8,843,913 4,672,597 1,576,369 15,092,879 4,722,399 5,572,258 973,957 11,268,614 - 4,722,399 5,572,258 973,957 11,268,614 Significant investment Fixed assets Others 250% 100% 100% 1,969,377 49,151,513 21,422,613 - 1,969,377 49,151,513 21,422,613 1,181,087 38,236,093 15,430,977 - 1,181,087 38,236,093 15,430,977 - 6,397,977 6,397,977 - 57,666,050 24,674,497 1,497,260 224,526,438 116,330,587 424,694,832 Claims on banks with maturity less than 3 months and denominated in foreign currency Retail portfolio Claims fully secured by Residential mortgage - - - - 2,014,244,137 655,079,159 1,359,164,978 1,513,255,098 312,099,191 1,201,155,907 Credit Risk: Disclosures with respect to Credit Risk Mitigation for Standardized Approach The Group has adopted the Comprehensive Approach of Credit Risk Mitigation for the Banking Book. Under this approach, cash, lien on deposits, government securities and eligible guarantees etc. are considered as eligible collateral. The Group has in place detailed guidelines with respect to the valuation and management of each of these types of collateral. Where the Group's exposure to an obligor is secured by eligible collateral, the Group reduces its exposure for the calculation of capital requirement by the realizable amount of the collateral, adjusted for any applicable haircuts. No credit risk mitigation benefit is taken in the Trading Book. For each asset class, the risk weights as specified by the SBP or corresponding to the SBP rating grades are applied to the net amount for the calculation of Risk Weighted Assets. 68 Annual Report 2017 223
226. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 44.9 Leverage Ratio The State Bank of Pakistan (SBP) through its BPRD Circular No. 06 of 2013 has issued instructions regarding implementation of parallel run of leverage ratio reporting and its components from December 31, 2013 to December 31, 2017. During this period, the final calibration, and any further adjustments to the definition, will be completed, with a view to set the leverage ratio as a separate capital standard on December 31, 2018. Banks are required to disclose the leverage ratio from December 31, 2016. The Basel III leverage ratio is defined as the capital measure (the numerator) divided by the exposure measure (the denominator), with this ratio expressed as a percentage: Leverage Ratio = Tier 1 capital (after related deductions) Total Exposure The Leverage ratio of the Bank for the year ended December 31, 2017 stood at 3.99% (2016: 5.03%) and is in compliance with SBP minimum requirement of 3%. The decrease in leverage ratio by 100 bps is mainly due to balance sheet growth in asset expansion through higher REPO funding. 2017 2016 ------------ (Rupees in '000) ------------ On-Balance Sheet Assets Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances Operating fixed assets Deferred tax assets Financial Derivatives (A.1) Other assets Total Assets (A) Derivatives (On-Balance Sheet) Interest Rate Equity Foreign Exchange & gold Precious Metals (except gold) Commodities Credit Derivatives (protection brought & sold) Any other derivatives Total Derivatives (A.1) Off-Balance Sheet Items excluding derivatives Direct Credit Substitutes (i.e. Acceptances, general guarantees for indebtness etc.) Performance-related Contingent Liabilities (i.e. Guarantees) Trade-related Contingent Liabilities (i.e. Letter of Credits) Lending of securities or posting of securities as collaterals Undrawn committed facilities (which are not cancellable) Unconditionally cancellable commitments Commitments in respect of operating leases Commitments for the acquisition of operating fixed assets Other commitments Total Off-balance sheet items excluding Derivatives (B) Commitments in respect of Derivatives - Off Balance Sheet Items (Derivatives having negative fair value are also included) Interest Rate Equity Foreign Exchange & gold Precious Metals (except gold) Commodities Credit Derivatives (protection sold and bought) Other derivatives Total Derivatives (C) United Bank Limited 133,467,501 32,267,305 35,484,586 837,458,009 537,782,146 38,159,796 1,051,736 44,410,797 1,660,081,876 75,350 2,357,315 2,432,665 283,750 767,986 1,051,736 47,997,736 141,070,063 169,738,033 451,301,561 60,461,972 8,765,075 1,987,978 881,322,418 46,175,376 110,083,787 146,191,503 153,557,471 45,085,158 9,694,433 2,755,836 513,543,564 20,953 2,297,258 2,318,211 34,582 2,044,746 2,079,328 119,275,276 2,986,924,335 3.99% Tier-1 Capital Total Exposures (sum of A,B and C) Leverage Ratio 224 161,119,170 35,549,112 35,893,920 1,124,057,886 642,506,720 49,151,513 2,432,665 52,572,720 2,103,283,706 69 109,506,871 2,175,704,768 5.03%
227. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND OF THE CONSOLIDATED For the yearFORMING endedPART December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 45. RISK MANAGEMENT This section presents information about the Group’s exposure to and its management and control of risks, in particular, the primary risks associated with its use of financial instruments such as credit, market, liquidity and operational risks. The Bank has an integrated risk management structure in place. The Board Risk and Compliance Committee (BRCC) oversees the entire risk management process of the Bank. Furthermore, Risk Management Committee has been formed which looks at all risks collectively at senior management level. The committee is chaired by the President and comprises of Heads of all Risk areas, Finance, Business etc. The Risk and Credit Policy Group is responsible for the development and implementation of all risk policies as approved by the BRCC / BoD. The group is organized into the functions of Market & Treasury Risk, Financial Institution Risk, Credit Policy, Research & Operational Risk, Consumer Credit Policy, Credit Risk Management, Basel II, IT security and International Risk. Each risk function is headed by a senior manager who reports directly to the Group Executive, Risk and Credit Policy. The role of the Risk and Credit Policy Group includes: - Determining guidelines relating to the Bank’s risk appetite. - Recommending risk management policies in accordance with the Prudential Regulations, Basel II / III framework and international best practices. - Reviewing policies / manuals and ensuring that these are in accordance with BRCC / BoD approved risk management policies. - Developing systems and resources to review the key risk exposures of the Bank. - Approving credits and granting approval authority to qualified and experienced individuals. - Reviewing the adequacy of credit training across the Bank. - Organizing portfolio reviews focusing on quality assessment, risk profiles, industry concentrations etc. - Setting systems to identify significant portfolio indicators, problem credits and level of provisioning required. - Establish an extensive Information Security (IS) Program and governance structure to manage the Security of the Information assets. 45.1 Credit risk Credit risk is the risk that a customer or counterparty may not settle an obligation for full value, either when due or at any time thereafter. This risk arises from the potential that a customer's or counterparty’s willingness or ability to meet such an obligation is impaired, resulting in an economic loss to the Group. The credit risk management process is driven by the Bank's Risk Management Policy, Credit Policy for Corporate, Commercial, SME & Agri and Credit Manual, which provides policies and procedures in relation to credit initiation, approval, documentation and disbursement, credit maintenance and remedial management. Individual credit authorities are delegated to credit officers by the Group Executive - Risk & Credit Policy (authorized by BoD), according to their seasoning / maturity. Approvals for Consumer loans are centralized, while approval authorities for International, Corporate, Commercial, SME and Agri exposures are delegated at a Country / Regional level. Further more, credit authorities are also delegated to business teams in various regions for Commercial, SME & Agri lending. All credit policy functions domestic & international are centrally organized. Concentrations of credit risk exist if clients are engaged in similar activities, or are located in the same geographical region, or have comparable economic characteristics such that their ability to meet contractual obligations would be similarly affected by changes in economic, political or other conditions. The Bank manages, limits and controls concentrations of credit risk to individual counterparties and groups, and to industries, where appropriate. Limits are also applied to portfolios or sectors where the Bank considers it appropriate to restrict credit risk concentrations, or to areas of higher risk, or to control the rate of portfolio growth. 70 Annual Report 2017 225
228. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED For the year ended December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 45.2 Segmental information 45.2.1 Segments by class of business Chemical and pharmaceuticals Agri business Textile spinning Textile weaving Textile composite Textile others Cement Sugar Shoes and leather garments Automobile and transportation equipment Financial Insurance Electronics and electrical appliances Production and transmission of energy Paper and allied Surgical and metal Contractors Wholesale traders Fertilizer dealers Sports goods Food industries Airlines Cables Construction Containers and ports Engineering Glass and allied Hotels Infrastructure Media Polyester and fiber Telecommunication Individuals Others 2017 Gross advances (Rupees in '000) 13,804,379 61,821,555 19,632,554 8,064,605 29,260,256 15,508,311 5,420,193 23,037,545 2,774,178 20,054,488 51,732,599 13,407,774 140,056,248 3,364,088 6,497 5,964,159 26,004,633 16,219,433 45,499 26,122,327 9,706,217 1,041,023 29,334,128 16,440,176 499,906 1,981,164 3,982,326 19,791,165 61,531,995 59,629,452 686,238,873 Percent 2.01% 9.01% 2.86% 1.18% 4.26% 2.26% 0.79% 3.36% 0.40% 2.92% 7.54% 0.00% 1.95% 20.41% 0.49% 0.00% 0.87% 3.79% 2.36% 0.01% 3.81% 1.41% 0.15% 4.27% 0.00% 2.40% 0.07% 0.29% 0.00% 0.00% 0.58% 2.88% 8.97% 8.69% 100.00% Contingencies and commitments Deposits (Rupees in '000) 4,087,675 19,396,745 434,937 295,862 1,546,564 323,334 1,323,257 422,621 16,884,948 24,036,633 23,186,513 4,665,750 52,238,109 760,452 4,062,357 13,168,350 29,511,276 5,327,313 89,923 7,390,881 3,485,898 247,769 28,869,881 200,253 6,066,427 128,702 7,982,047 2,696,025 432,939 4,163 3,431,404 848,880,057 254,578,849 1,366,157,914 Percent 0.30% 1.42% 0.03% 0.02% 0.00% 0.11% 0.02% 0.10% 0.03% 1.24% 1.76% 1.70% 0.34% 3.82% 0.06% 0.30% 0.96% 2.16% 0.39% 0.01% 0.54% 0.26% 0.02% 2.11% 0.01% 0.44% 0.01% 0.58% 0.20% 0.03% 0.00% 0.25% 62.14% 18.63% 100.00% 2016 Gross advances (Rupees in '000) Chemical and pharmaceuticals Agri business Textile spinning Textile weaving Textile composite Textile others Cement Sugar Shoes and leather garments Automobile and transportation equipment Financial Insurance Electronics and electrical appliances Production and transmission of energy Paper and allied Surgical and metal Contractors Wholesale traders Fertilizer dealers Sports goods Food industries Airlines Cables Construction Containers and ports Engineering Glass and allied Hotels Infrastructure Media Polyester and fiber Telecommunication Individuals Others 226 United Bank Limited 11,247,768 57,054,693 18,055,669 6,691,939 25,607,196 15,360,036 5,182,402 6,376,894 2,458,083 17,623,146 38,303,236 14,791,263 106,533,155 3,848,787 7,034 8,141,350 20,697,988 18,005,581 41,990 23,920,294 12,739,537 782,524 29,943,339 13,863,026 501,930 1,852,660 308,706 4,527,773 15,659,911 57,262,128 41,769,328 579,159,366 Percent 1.94% 9.85% 3.12% 1.16% 4.42% 2.65% 0.89% 1.10% 0.42% 3.04% 6.61% 0.00% 2.55% 18.39% 0.66% 0.00% 1.41% 3.57% 3.11% 0.01% 4.13% 2.20% 0.14% 5.17% 0.00% 2.39% 0.09% 0.32% 0.05% 0.00% 0.78% 2.70% 9.89% 7.21% 100.00% 71 Deposits (Rupees in '000) 3,338,397 13,134,793 413,205 319,156 2,404,673 2,410,307 2,388,205 787,972 6,933,424 16,487,005 24,925,732 4,734,848 45,995,522 589,635 4,602,057 8,731,584 34,608,114 556,736 80,479 7,865,701 2,550,346 457,963 21,213,565 151,778 3,421,095 160,710 726,332 1,716,401 774,621 6,308 9,817,664 783,360,533 240,126,755 1,245,791,616 Percent 0.27% 1.05% 0.03% 0.03% 0.00% 0.19% 0.19% 0.19% 0.06% 0.56% 1.32% 2.00% 0.38% 3.69% 0.05% 0.37% 0.70% 2.78% 0.04% 0.01% 0.63% 0.20% 0.04% 1.70% 0.01% 0.27% 0.01% 0.06% 0.14% 0.06% 0.00% 0.79% 62.88% 19.28% 100.00% (Rupees in '000) 3,581,890 51,088 4,776,919 5,336,393 4,651,051 2,771,727 4,570,879 320,855 382,135 6,835,452 587,089,173 3,936,529 60,219,220 2,495,350 85,103 23,280,267 4,166,394 2,915,454 1,998,862 217,879 599,911 24,323,202 15,990,043 187,578 131,577 1,089,130 21,812,712 2,735,356 113,920,339 900,472,468 Percent 0.40% 0.01% 0.53% 0.59% 0.52% 0.31% 0.51% 0.04% 0.04% 0.76% 65.20% 0.00% 0.44% 6.69% 0.28% 0.01% 2.59% 0.46% 0.32% 0.00% 0.22% 0.02% 0.07% 2.70% 0.00% 1.78% 0.02% 0.01% 0.00% 0.00% 0.12% 2.42% 0.30% 12.65% 100.00% Contingencies and commitments (Rupees in '000) Percent 2,911,636 52,778 4,255,496 1,933,418 3,365,109 2,205,971 1,890,002 315,140 327,094 7,471,237 515,680,612 675,306 49,314,330 1,706,322 77,526 26,609,262 6,175,513 4,874,513 1,908,394 783,838 626,743 15,062,235 1,282,181 11,760,689 149,988 2,092,784 948,722 21,033,604 3,954,457 105,251,710 794,696,610 0.37% 0.01% 0.54% 0.24% 0.42% 0.28% 0.24% 0.04% 0.04% 0.94% 64.89% 0.00% 0.08% 6.21% 0.21% 0.01% 3.35% 0.78% 0.61% 0.00% 0.24% 0.10% 0.08% 1.90% 0.16% 1.48% 0.02% 0.26% 0.00% 0.00% 0.12% 2.65% 0.50% 13.24% 100.00%
229. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND OF THE CONSOLIDATED For the yearFORMING endedPART December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 45.2.1.1 Advances under Production and transmission of energy category include Rs. 68,334.655 million (2016: Rs. 52,634.931 million) secured by way of guarantee from the Government of Pakistan. 45.2.2 Segment by sector 2017 Gross advances (Rupees in '000) Public / Government Private 201,414,715 484,824,158 686,238,873 Percent 29.35% 70.65% 100.00% Deposits (Rupees in '000) Percent 179,896,292 1,186,261,622 1,366,157,914 13.17% 86.83% 100.00% 2016 Gross advances (Rupees in '000) Public / Government Private 153,653,795 425,505,571 579,159,366 Percent 26.53% 73.47% 100.00% Deposits (Rupees in '000) 146,930,185 1,098,861,431 1,245,791,616 Percent 11.79% 88.21% 100.00% Contingencies and commitments (Rupees in '000) Percent 106,128,242 794,344,226 900,472,468 11.79% 88.21% 100.00% Contingencies and commitments (Rupees in '000) Percent 96,756,329 697,940,281 794,696,610 12.18% 87.82% 100.00% 45.2.3 Details of non performing advances and specific provisions by class of business segment 2016 Classified Specific Specific advances provision provision held held ---------------------------- (Rupees in '000) ---------------------------Classified advances Chemical and pharmaceuticals Agri business Textile spinning Textile weaving Textile composite Textile others Sugar Shoes and leather garments Automobile and transportation equipment Financial Electronics and electrical appliances Production and transmission of energy Paper and allied Wholesale traders Fertilizer dealers Food industries Construction Engineering Hotels Polyester and fiber Individuals Others 2017 148,319 426,525 4,108,702 318,110 3,997,470 2,815,147 80,712 1,958,526 215,997 2,656,533 2,884,904 5,506,846 599,466 4,412,121 65,759 5,816,657 2,338,183 1,134,465 589,060 1,577,051 5,119,250 6,137,845 52,907,648 148,319 321,387 4,108,702 317,384 3,970,378 2,809,019 80,712 1,010,093 215,319 2,656,455 1,557,519 4,823,734 265,191 2,938,015 65,759 3,486,299 2,286,551 67,145 589,060 1,577,051 3,001,350 3,930,242 40,225,684 148,244 380,707 4,156,868 408,409 4,288,595 4,000,574 848,069 689,772 173,155 2,114,153 1,260,205 6,140,951 163,708 3,541,543 67,623 2,441,732 2,662,638 1,203,086 475,494 1,699,294 5,462,826 3,717,296 46,044,942 148,244 256,571 4,156,868 408,409 3,982,674 3,995,053 776,819 689,772 172,705 1,596,722 471,505 5,052,753 163,708 2,538,281 67,623 2,049,338 2,582,150 135,766 475,494 1,699,294 3,433,197 3,227,998 38,080,944 45.2.4 Details of non performing advances and specific provision by sector 2016 Classified Specific Specific advances provision provision held held ---------------------------- (Rupees in '000) ---------------------------Classified advances Public / Government Private 2017 1,089,630 51,818,018 52,907,648 72 22,313 40,203,371 40,225,684 1,089,630 44,955,312 46,044,942 22,313 38,058,631 38,080,944 Annual Report 2017 227
230. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 45.2.5 Geographical segment analysis Pakistan operations Middle East United States of America Export Processing Zones Europe Africa 2017 Profit / (loss) Total assets Net assets Contingencies before taxation employed employed and commitments ---------------------------- (Rupees in '000) ---------------------------41,156,175 (419,001) (18,138) 99,374 588,538 (275,956) (25,183) 41,130,992 1,724,001,243 110,642,996 497,949,337 319,455,085 5,388,061 2,436,770 100,618,324 5,140,725 433,038,965 43,838,832 2,544,829 610,599 16,078,528 777,978 63,850,766 325,427,656 941,817 2,813,236 84,195,614 238,920 413,617,243 2,157,040,208 174,493,762 911,566,580 2016 Profit / (loss) Total assets Net assets Contingencies before taxation employed employed and commitments ---------------------------- (Rupees in '000) ---------------------------Pakistan operations Middle East United States of America Export Processing Zones Europe Africa 41,504,595 4,226,809 37,206 71,955 1,486,169 (172,451) 5,649,688 47,154,283 1,303,920,300 104,778,419 435,466,159 299,091,186 11,573,555 1,534,998 85,769,378 5,487,230 403,456,347 41,366,373 2,462,422 512,510 13,658,646 950,854 58,950,805 288,267,417 16,326 4,171,030 91,241,254 152,506 383,848,533 1,707,376,647 163,729,224 819,314,692 Total assets employed include intra group items of Rs. 51,679.708 million (2016: Rs. 45,634.387 million). Contingencies and commitments include intra group items of Rs. 11,094.112 million (2016: Rs. 24,618.082 million). 45.3 Market risk Market risk is the risk that the fair value of a financial instrument will fluctuate due to movements in market prices. It results from changes in interest rates, exchange rates and equity prices as well as from changes in the correlations between them. Each of these components of market risk consists of a general market risk and a specific market risk that is driven by the nature and composition of the portfolio. Measuring and controlling market risk is usually carried out at a portfolio level. However, certain controls are applied, where necessary, to individual risk types, to particular books and to specific exposures. Controls are also applied to prevent any undue risk concentrations in trading books, taking into account variations in price, volatility, market depth and liquidity. These controls include limits on exposure to individual market risk variables as well as limits on concentrations of tenors and issuers. Trading activities are centered in the Treasury and Capital Markets Group which facilitates clients and also runs proprietary positions. The Group is active in the cash and derivative markets for equity, interest rate and foreign exchange. The Market and Treasury Risk division performs market risk management activities. Within this division, the Market Risk Management unit is responsible for the development and review of market risk policies and processes, and is involved in research, financial modeling and testing / implementation of risk management systems, while Treasury Middle Office is responsible for implementation and monitoring of market risk and other policies, escalation of deviations to senior management, and MIS reporting. The functions of the Market Risk Management unit are as follows: 228 - To keep the market risk exposure within the Group’s risk appetite as assigned by the BoD and the BRCC. - To develop, review and upgrade procedures for the effective implementation of market risk management policies approved by the BoD and BRCC. - To review new product proposals and propose / recommend / approve procedures for the management of their market risk. Various limits are assigned to different businesses on a product / portfolio basis. The products are approved through product programs, where risks are identified and limits and parameters are set. Any transactions / products falling outside these product programs are approved through separate transaction / product memos. - To maintain a comprehensive database for performing risk analysis, stress testing and scenario analysis. Stress testing activities are performed on a quarterly basis on both the Banking and Trading books. United Bank Limited 73
231. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND OF THE CONSOLIDATED For the yearFORMING endedPART December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 45.3.1 Foreign Exchange Risk 2017 Off - balance Net currency sheet items exposure ----------------------------------- (Rupees in '000) ----------------------------------- Assets Pakistan Rupee US Dollar Pound Sterling Japanese Yen Euro UAE Dirham Bahraini Dinar Qatari Riyal Other Currencies 1,660,166,748 251,149,701 35,785,788 22,843 5,278,669 100,489,537 13,708,941 25,724,415 13,033,858 2,105,360,500 Liabilities 1,467,444,023 148,391,760 47,268,963 6,824 12,841,609 190,893,870 22,243,314 29,296,607 12,479,768 1,930,866,738 (30,679,274) (102,455,656) 21,872,240 (11,770) 7,290,575 89,151,353 9,037,609 4,230,555 1,564,368 - 162,043,451 302,285 10,389,065 4,249 (272,365) (1,252,980) 503,236 658,363 2,118,458 174,493,762 2016 Off - balance Net currency sheet items exposure ----------------------------------- (Rupees in '000) ----------------------------------- Assets Pakistan Rupee US Dollar Pound Sterling Japanese Yen Euro UAE Dirham Bahrain Dinar Qatari Riyal Other Currencies 1,250,819,452 218,150,084 32,762,012 26,051 5,000,171 98,810,370 13,468,415 26,785,382 15,920,323 1,661,742,260 Liabilities 1,074,555,586 139,687,442 43,144,872 7,217 11,331,663 160,743,995 20,218,063 31,840,101 16,484,097 1,498,013,036 (23,292,889) (74,146,176) 16,837,838 (11,749) 6,490,327 61,312,602 6,309,942 4,916,279 1,583,826 - 152,970,977 4,316,466 6,454,978 7,085 158,835 (621,023) (439,706) (138,440) 1,020,052 163,729,224 Foreign Exchange Risk is the risk that the fair value of a financial instrument will fluctuate due to changes in foreign exchange rates. Exposures are monitored by currency to ensure that they remain within the established limits for each currency. Exposures are also monitored on an overall basis to ensure compliance with the Bank’s SBP approved Foreign Exchange Exposure Limit. The Group is an active participant in the cash and derivatives markets for currencies and carries currency risk from these trading activities, conducted primarily by the Treasury and Capital Markets Group (TCM). These trading exposures are monitored through prescribed stress tests and sensitivity analyses. The Group's reporting currency is the Pakistan Rupee, but its assets, liabilities, income and expenses are denominated in multiple currencies. From time to time, TCM proactively hedges foreign currency exposures resulting from its market making activities, subject to pre-defined limits. 45.3.2 Equity position risk Equity position risk is the risk that the fair value of a financial instrument will fluctuate due to changes in the prices of individual stocks or the levels of equity indices. The Group’s equity book comprises of held for trading (HFT) and available for sale (AFS) portfolios. The objective of the HFT portfolio is to make short-term capital gains, whilst the AFS portfolio is maintained with a medium term view of earning both capital gains and dividend income. Product program manuals have been developed to provide guidelines on the objectives and policies, risks and mitigants, limits and controls for the equity portfolios of the Group. 45.3.3 Yield / interest rate risk Interest rate risk is the risk that fair value of a financial instrument will fluctuate as a result of changes in interest rates, including changes in the shape of yield curves. Interest rate risk is inherent in many of the Group's businesses and arises from mismatches between the contractual maturities or the re-pricing of on and off balance sheet assets and liabilities. The interest rate sensitivity profile is prepared on a quarterly basis based on the re-pricing or contractual maturities of assets and liabilities. Interest rate risk is monitored and managed by performing periodic gap analysis, sensitivity analysis and stress testing and taking appropriate actions where required. 74 Annual Report 2017 229
232. 230 United Bank Limited Cumulative Yield / Interest Rate Risk Sensitivity Gap Total Yield / Interest Rate Risk Sensitivity Gap Off-balance sheet Gap 110,700,745 2,129,151 153,115,126 (438,364,963) 329,793,369 (438,364,963) (108,571,594) 75 3,413,454 20,173,509 168,000 (3,000,000) 45,266,129 (39,020,675) 11,126,023 36,790,969 4,358,641 (4,358,641) 83,368 45,117 (83,368) (45,117) 7,870,890 7,870,890 (1,478) (1,478) 242,093,757 112,945,973 (213,172,200) (100,641,876) Off-balance sheet financial instruments Interest Rate Derivatives - Long position Interest Rate Derivatives - Short position Cross Currency Swap - Long position Cross Currency Swap - Short Position FX Options - Long position FX Options - Short position Forward Purchase of Government Securities Forward Sale of Government Securities Foreign currency forward purchases Foreign currency forward sales (1,358,641) 38,251 (38,251) 80,219,991 (67,735,327) 107,287,291 58,169,605 116,324,157 (458,538,472) 318,667,346 144,311,102 173,230,982 3,866,128 10,416,355 14,637,397 7,939,440 58,004,251 65,943,691 233,201,863 440,642,819 4,404,142 7,633,400 195,403,414 41,735,972 80,239,501 121,975,473 444,348,792 547,230,264 4,375 991,583,431 196,234,199 533,044,959 629,824,756 12,681,964 36,613,980 2,036,604,202 13,392,978 517,082,159 1,366,157,914 4,375 23,642,619 1,920,280,045 14,646,863 7,404,479 10,987,602 303,771,816 161,119,170 35,549,112 35,893,920 1,124,921,300 174,493,762 5.35% 2.63% 12.39% - - 0.03% 1.87% 5.27% 7.39% 6.20% Total net assets Net non financial assets On-balance sheet gap Liabilities Bills payable Borrowings Deposits and other accounts Liabilities against assets subject to finance lease Other liabilities Assets Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances Performing Non-performing Other assets On-balance sheet financial instruments 46,564,154 44,435,003 (2,112,658) 3,661,664 (5,774,322) 46,547,661 2,674,198 28,556,481 31,230,679 18,350,315 77,778,340 1,500,506 2,783,462 55,144,057 178,881,676 132,317,522 3,874,141 3,874,141 - 128,443,381 19,816,546 17,430,819 37,247,365 11,761,016 165,690,746 2,460,071 151,469,659 267,663,591 88,781,915 316,500 316,500 - 88,465,415 13,908,163 13,908,163 8,120,289 102,373,578 94,253,289 387,249,903 119,586,312 - - 119,586,312 62,023,404 62,023,404 10,628,039 181,609,716 1,544,891 169,436,786 497,236,622 109,986,719 - - 109,986,719 6,445,041 6,445,041 3,916,941 116,431,760 112,514,819 505,439,169 8,202,547 - - 8,202,547 - 3,300,992 8,202,547 4,901,555 153,115,126 (352,324,043) - - (352,324,043) 13,392,978 567,211 552,319,990 23,642,619 589,922,798 12,681,964 36,613,980 237,598,755 146,472,307 18,373,857 68,139 23,388,508 2017 Effective Exposed to yield / interest rate risk Non-interest yield / Over 3 Over 6 bearing Total Over 1 month Over 1 year Over 2 years Over 3 years Over 5 years Over 10 interest Upto 1 month months to 6 months to 1 financial to 3 months to 2 years to 3 years to 5 years to 10 years years rate months year instruments ------------------------------------------------------------------------------------------------------------------------% (Rupees in '000) ------------------------------------------------------------------------------------------------------------------------- 45.3.4 Mismatch of interest rate sensitive assets and liabilities FOR THE YEAR ENDED DECEMBER 31, 2017 NOTESthe TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For year ended December 31, 2017 Notes to and forming part of the Consolidated Financial Statements
233. Annual Report 2017 231 Notes to and forming part of the Consolidated Financial Statements Cumulative Yield / Interest Rate Risk Sensitivity Gap 76 1,657,607 (541,808,204) (224,167,263) (170,796,315) (132,468,454) 648,000 648,000 133,478,061 99,944 12,083,593 12,183,537 7,617,408 145,661,598 4,703,225 133,340,965 134,126,061 53,370,948 144,707,128 (541,808,204) 317,640,941 Total Yield / Interest Rate Risk Sensitivity Gap 12,320,464 (10,975,847) 1,344,617 36,983,244 3,026,274 23,050,231 26,076,505 14,594,457 63,059,749 157,950 628,141 47,679,201 38,327,861 69,732 (5,069,732) 43,763,031 (36,849,566) 1,913,465 634,181 (1,282,181) 522,051 (522,051) 69,833 (69,833) 89,813,685 (72,389,202) 16,776,483 6,986,094 (6,986,094) 522,051 (522,051) 213,081 (213,081) 4,998,400 (3,553,866) 216,641,748 (193,057,693) 25,028,589 Off-balance sheet financial instruments Interest Rate Derivatives - Long position Interest Rate Derivatives - Short position Cross Currency Swap - Long position Cross Currency Swap - Short Position FX Options - Long position FX Options - Short position Forward Purchase of Government Securities Forward Sale of Government Securities Foreign currency forward purchases Foreign currency forward sales Off-balance sheet Gap 143,248 (143,248) 4,998,400 (3,553,866) 70,744,568 (72,843,078) (653,976) 51,457,483 44,050,685 119,678,539 (541,154,228) 300,864,458 78,221,138 111,339,129 6,105,480 3,594,074 23,418,437 8,211,316 51,670,330 59,881,646 300,988,029 395,911,465 4,042,907 19,974,251 70,906,278 29,335,431 65,711,576 95,047,007 163,868,034 525,060,099 3,558 688,931,691 96,189,418 147,777,463 529,818,148 7,963,998 29,050,873 1,606,314,685 11,759,012 205,865,131 1,245,791,616 3,558 23,216,829 1,486,636,146 8,617,552 6,479,240 4,482,293 32,008,960 133,467,502 32,267,304 35,484,586 838,262,274 163,729,224 5.28% 2.69% 12.39% - - 0.01% 1.56% 4.48% 8.29% 6.36% Total net assets Net non financial assets On-balance sheet gap Liabilities Bills payable Borrowings Deposits and other accounts Liabilities against assets subject to finance lease Other liabilities Assets Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances Performing Non-performing Other assets On-balance sheet financial instruments 112,769,072 111,111,465 5,634,181 (634,181) 5,000,000 106,111,465 16,231,546 16,231,546 6,893,431 122,343,011 1,305,313 114,144,267 259,594,448 146,825,376 - 146,825,376 58,183,740 58,183,740 9,941,694 205,009,116 797,289 194,270,133 453,203,071 193,608,623 - 193,608,623 897,089 897,089 6,500,088 194,505,712 188,005,624 464,738,924 11,535,853 - 11,535,853 - 7,781,646 11,535,853 3,754,207 144,707,128 (320,031,796) - (320,031,796) 11,759,012 1,324,132 492,903,412 23,216,829 529,203,385 1,090,839 7,963,998 29,050,873 209,171,589 124,849,950 15,481,727 30,734,202 2016 Effective Exposed to yield / interest rate risk Non-interest yield / Over 3 Over 6 bearing Total Over 1 month Over 1 year Over 2 years Over 3 years Over 5 years Over 10 interest Upto 1 month months to 6 months to 1 financial to 3 months to 2 years to 3 years to 5 years to 10 years years rate months year instruments ------------------------------------------------------------------------------------------------------------------------% (Rupees in '000) ------------------------------------------------------------------------------------------------------------------------- NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS ForTHE theYEAR year ended December 31, 2017 FOR ENDED DECEMBER 31, 2017
234. 45 .4 United Bank Limited Represented by: Share capital Reserves Unappropriated profit Non-controlling interest Surplus on revaluation of assets Net assets Liabilities Bills payable Borrowings Deposits and other accounts Liabilities against assets subject to finance lease Deferred tax liability Other liabilities Assets Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances - Performing Advances - Non-performing Operating fixed assets Other assets 12,241,798 47,203,516 76,651,713 4,810,519 33,586,216 174,493,762 13,392,978 517,082,159 1,366,157,914 4,375 2,980,466 31,248,846 1,930,866,738 174,493,762 161,119,170 35,549,112 35,893,920 1,124,921,300 629,824,756 12,681,964 50,384,077 54,986,201 2,105,360,500 Total 2,974,865 444,871,333 209,294,930 4,375 368,525 13,423,889 670,937,917 (24,821,373) 93,449,859 21,714,772 10,906,848 341,326,637 170,750,144 4,122,597 3,845,687 646,116,544 Upto 1 month 77 2,174,339 39,591,848 131,669,845 3,945,431 177,381,463 86,811,273 2,654,124 4,603,105 1,626,255 149,878,710 93,807,929 1,737,644 9,884,969 264,192,736 2,130,939 10,618,924 93,842,654 3,825,199 110,417,716 (15,260,759) 2,601,148 3,866,128 10,258,087 10,411,870 62,148,850 2,628,476 3,242,398 95,156,957 6,112,835 3,052,380 94,191,914 652,985 1,333,462 105,343,576 60,730,498 3,765,496 5,365,107 2,651,886 73,819,428 59,140,146 319,766 21,012,245 166,074,074 1,594,065 119,346,962 652,985 1,487,242 123,081,254 95,428,416 5,238,298 4,634,979 150,829,999 52,174,096 579,893 5,052,405 218,509,670 2,017,847 88,100,250 652,985 895,629 91,666,711 62,761,381 4,019,487 2,590,888 93,048,128 50,250,895 1,404,375 3,114,319 154,428,092 1,797,851 110,458,440 652,986 982,402 113,891,679 149,424,393 6,373,987 3,224,977 171,508,017 74,560,333 2,206,987 5,441,771 263,316,072 13,276,930 151,733,516 951,644 165,962,090 12,060,669 10,278,978 115,484,962 46,800,251 2,623,194 2,835,374 178,022,759 260,981 367,519,403 4,403,948 372,184,332 (252,640,736) 32,737,793 18,613,549 20,192,112 12,681,964 34,761,145 557,033 119,543,596 2017 Over 1 month Over 3 months Over 6 months Over 1 year to Over 2 years to Over 3 years to Over 5 years to Over 10 years to 3 months to 6 months to 1 year 2 years 3 years 5 years 10 years -------------------------------------------------------------------------------------------------------- (Rupees in '000) -------------------------------------------------------------------------------------------------------- Assets and Liabilities having contractual maturity dates are bucketed as per their respective maturities. The maturity profile of non-contractual deposits and bills payable is estimated using an Exponentially Weighted Moving Average model based on data for the last seven years. The maturity profile of certain non-contractual assets and liabilities which are related to specific assets and liabilities follows the maturity profile of the underlying asset or liability. The maturity profile of other non-contractual assets and liabilities is expected to follow historical patterns of behaviour. The methodology and the assumptions used to derive the maturity profile of non-contractual assets and liabilities have been approved by ALCO. 45.4.1 Maturities of assets and liabilities - based on working prepared by the Assets and Liabilities Management Committee (ALCO) of the Group The Group’s approach to liquidity management is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking sustained damage to business franchises. A centralized approach is adopted, based on an integrated framework incorporating an assessment of all material known and expected cash flows and the availability of collateral which could be used to secure additional funding if required. The framework entails careful monitoring and control of the daily liquidity position, and regular liquidity stress testing under a variety of scenarios. These encompass both normal and stressed market conditions, including general market crises and the possibility that access to markets could be impacted by a stress event affecting some part of the Group’s business. The Assets and Liabilities Management Committee (ALCO) of the Group is responsible for the oversight of liquidity management and meets on a monthly basis or more frequently, if required. Liquidity risk is the risk that the Group may be unable to meet its obligations or to fund increases in assets as they fall due without incurring unacceptable cost or losses. Liquidity Risk NOTES TO year AND FORMING OF THE CONSOLIDATED For the endedPART December 31, 2017 FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 Notes to and forming part of the Consolidated Financial Statements 232
235. Annual Report 2017 233 68 ,939,008 4,227,693 Non-controlling interest 35,705,537 163,729,224 42,615,188 Unappropriated profit Surplus on revaluation of assets 12,241,798 337,839,217 (49,519,379) 1,498,013,036 163,729,224 Reserves 10,757,095 538,877 29,363,148 5,230,571 Share capital Represented by: Net assets Other liabilities Deferred tax liability 3,558 159,067,193 3,558 1,245,791,616 Liabilities against assets subject to finance lease Deposits and other accounts Borrowings 3,013,849 164,458,645 11,759,012 205,865,131 Bills payable Liabilities 6,064,071 288,319,838 45,179,521 1,661,742,260 Other assets 3,822,450 39,298,927 - 117,257,799 58,546,234 3,764,942 20,311,261 78,553,081 Operating fixed assets 7,963,998 529,818,148 Advances - Performing Advances - Non-performing 838,262,274 35,484,586 Lendings to financial institutions Investments 32,267,304 133,467,502 Upto 1 month 78 166,351,130 60,306,529 2,160,321 - - 143,546,009 18,440,413 2,204,387 226,657,659 5,283,509 1,148,514 - 123,406,951 70,434,696 16,650,242 5,692,613 4,041,134 105,883,003 (8,824,796) 464,337 - - 94,667,250 8,591,028 2,160,388 97,058,207 20,959,866 1,755,526 - 51,360,029 9,350,459 3,566,375 6,105,480 3,960,472 122,113,669 (9,624,624) 2,460,228 1,172,886 - 110,838,254 3,261,913 4,380,388 112,489,045 11,466,627 266,389 - 26,143,508 67,793,137 928,141 157,950 5,733,293 96,591,258 66,819,578 1,123,745 1,172,886 - 94,108,459 186,168 - 163,410,836 86,938 559,163 - 18,139,502 134,435,595 5,252,936 - 4,936,702 91,460,858 48,982,115 1,017,112 1,172,886 - 89,076,170 194,690 - 140,442,973 24,686 560,123 - 27,908,578 103,700,582 4,830,387 - 3,418,617 120,302,340 162,193,863 1,114,490 1,173,036 - 117,197,229 817,585 - 282,496,203 24,043 5,477,600 - 72,663,481 198,684,110 225,825 - 5,421,144 270,511,916 (6,170,251) 4,902,255 - - 256,183,661 9,426,000 - 264,341,665 251,497 1,880,420 - 71,963,244 173,990,684 265,738 - 15,990,082 186,959,645 (100,433,811) 5,363,565 - - 181,107,391 488,689 - 86,525,834 1,018,284 23,828,742 7,963,998 20,975,056 21,326,777 - - 11,412,977 2016 Over 1 month Over 3 months Over 6 months Over 1 year to Over 2 years to Over 3 years to Over 5 years to Over 10 years to 3 months to 6 months to 1 year 2 years 3 years 5 years 10 years -------------------------------------------------------------------------------------------------------- (Rupees in '000) -------------------------------------------------------------------------------------------------------Total Balances with other banks Cash and balances with treasury banks Assets FOR THE YEAR ENDED DECEMBER 31, 2017 NOTES TO year AND FORMING OF THE CONSOLIDATED For the endedPART December 31, 2017 FINANCIAL STATEMENTS Notes to and forming part of the Consolidated Financial Statements
236. 234 United Bank Limited Represented by : Share capital Reserves Unappropriated profit Non-controlling interest Surplus on revaluation of assets Net assets Liabilities Bills payable Borrowings Deposits and other accounts Liabilities against assets subject to finance lease Deferred tax liability - net Other liabilities Assets Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances Operating fixed assets Other assets 12,241,798 47,203,516 76,651,713 4,810,519 33,586,216 174,493,762 3,176 130,359,195 160,453,084 4,375 4,375 2,980,466 2,980,466 31,248,846 27,864,749 1,930,866,738 1,595,817,704 174,493,762 (864,452,526) 5,453,105 2,104,355 180,814,367 93,807,929 1,737,644 6,894,879 290,812,279 41,423,435 88,932,584 161,119,170 20,812,124 10,554,600 338,528,067 170,750,142 4,122,595 25,478,480 731,365,178 13,392,978 13,392,978 517,082,159 443,547,077 1,366,157,914 1,108,028,059 161,119,170 35,549,112 35,893,920 1,124,921,300 642,506,720 50,384,077 54,986,201 2,105,360,500 79 60,962,337 26,695,008 9,615,645 51,346,692 3,866,128 9,345,758 6,949,893 62,148,850 2,628,476 2,718,240 87,657,345 35,015,882 104,927,104 2,873,683 32,142,199 1,553,154 3,564,215 56,163,923 59,140,146 319,766 19,201,782 139,942,986 36,357,423 141,131,583 1,456,730 34,900,693 3,864,601 4,860,071 115,890,439 52,174,096 579,893 119,906 177,489,006 23,971,502 161,040,476 1,364,212 22,607,290 2,670,887 130,647,801 50,250,895 1,404,375 38,020 185,011,978 22,438,899 230,809,841 1,432,538 21,006,361 2,794,034 173,647,160 74,560,333 2,206,987 40,226 253,248,740 21,842,434 142,860,372 14,735,325 7,107,109 115,246,874 46,800,251 2,623,194 32,487 164,702,806 3,380,921 4,101,362 71,028,820 633,514 86,927 7,032,776 32,874,078 34,761,147 462,181 75,130,182 2017 Over 3 Over 6 Over 1 month Over 1 year to Over 2 years Over 3 years Over 5 years Total Upto 1 month months to 6 months to 1 Over 10 years to 3 months 2 years to 3 years to 5 years to 10 years months year --------------------------------------------------------------------------------------------------- (Rupees in '000) --------------------------------------------------------------------------------------------------- The maturity profile presented below has been prepared as required by IFRS on the basis of contractual maturities, except for products that do not have a contractual maturity which are shown in the first bucket. 45.4.2 Maturities of assets and liabilities - based on contractual maturity of the assets and liabilities of the Group FOR THE ENDED DECEMBER 31, 2017 For theYEAR year ended December 31, 2017 Notes to and forming of the FINANCIAL Consolidated NOTES TO AND FORMING PART OF THEpart CONSOLIDATED STATEMENTS Financial Statements
237. Annual Report 2017 235 Share capital Reserves Unappropriated profit Non-controlling interest Surplus on revaluation of assets Represented by : Net assets Bills payable Borrowings Deposits and other accounts Liabilities against assets subject to finance lease Deferred tax liability - net Other liabilities Liabilities Assets Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances Operating fixed assets Other assets 12,241,798 42,615,188 68,939,008 4,227,693 35,705,537 163,729,224 281,444 112,630,102 95,543,985 3,558 3,558 5,230,571 5,230,571 29,363,148 25,568,879 1,498,013,036 1,206,566,878 163,729,224 (824,369,165) 5,692,613 16,650,242 56,674,756 123,406,951 1,148,515 4,601,010 208,174,087 18,517,209 93,831,449 133,467,502 20,311,261 4,078,736 77,325,735 118,070,073 3,822,450 25,121,956 382,197,713 11,759,012 11,759,012 205,865,131 162,382,069 1,245,791,616 1,001,622,789 133,467,502 32,267,304 35,484,586 838,262,274 537,782,146 39,298,927 45,179,521 1,661,742,260 80 69,012 63,077,778 21,525,256 9,051,421 53,957,345 6,105,480 3,252,452 19,533,357 51,360,029 1,755,526 2,596,190 84,603,034 9,622 29,123,359 57,906,786 2,762,490 26,351,247 157,950 928,141 48,273,596 25,937,442 266,389 11,466,627 87,030,145 33,647,932 127,162,338 118,277 33,529,655 5,252,937 137,334,485 17,588,451 559,163 75,234 160,810,270 12,257,480 135,355,730 198,880 12,058,600 5,194,313 113,925,510 27,908,578 560,123 24,686 147,613,210 26,524,182 244,564,787 2,703,803 23,820,379 127,765 192,851,237 72,608,324 5,477,600 24,043 271,088,969 10,349,547 252,237,772 9,729,395 620,152 188,492,158 71,963,244 1,880,420 251,497 262,587,319 3,434,191 3,835,778 53,801,735 401,587 - 3,851,440 28,939,054 23,828,741 1,018,278 57,637,513 2016 Over 3 Over 6 Over 1 month Over 1 year to Over 2 years Over 3 years Over 5 years Total Upto 1 month months to 6 months to 1 Over 10 years to 3 months 2 years to 3 years to 5 years to 10 years months year --------------------------------------------------------------------------------------------------- (Rupees in '000) --------------------------------------------------------------------------------------------------- For theYEAR year ended December 31, 2017 FOR THE ENDED DECEMBER 31, 2017 NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS Notes to and forming part of the Consolidated Financial Statements
238. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED For the year ended December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 45.4.3 Liquidity Coverage Ratio Liquidity Risk Management framework is guided by BoD (Board of Directors) and BRCC (Board Risk and Credit Committee). Global ALCO and International ALCO supervise the liquidity risk management as per their TORs. Market & Treasury Risk Division is responsible to propose, recommend and institutionalize liquidity risk management policy which is approved by the Board. Asset & Liability Committee (ALCO) is responsible for reviewing and approving the liquidity risk limits, ensuring the liquidity risk management practices are in line with the defined strategy. ALCO is also responsible to recommend Liquidity Risk policy for approval to BRCC / BOD. Liquidity risk is defined as the risk that a bank does not have sufficient financial resources to meet its obligation and commitments as they fall due and have no other choice to secure funds at a higher cost. The Bank ensures to maintain a diversified portfolio of liquid assets and funding base. Sources of funding comprise of a good mix of core deposits. All liquidity limits including deposit concentration is reviewed in ALCO on a periodic basis. The Bank performs its Liquidity stress test on a periodic basis in order to ensure that sufficient liquidity is always available in order to fulfill Bank’s financial commitment. Stress testing technique is also used to identify the potential impact of extreme yet plausible events or movements on the value of a portfolio. Stress testing scenarios are developed in guidance provided by the regulator. The Bank also has in place approved Liquidity Contingency Plan. Further Liquidity Risk Management is quantified by Liquidity coverage ratio and Net Stable funding ratio as communicated by the Regulator. Liquidity Coverage Ratio (LCR) refers to the highly liquid assets held by the bank to meet its short term obligations. LCR is used as a tool to manage liquidity risk. LCR has two components:High Quality Liquid Asset (HQLA) and total net cash outflows. HQLA comprises of those assets that can be readily sold or employed as collateral for obtaining fund. HQLA structure has been divided into 1) cash and treasury balance, 2) marketable securities, 3) corporate debt securities with credit rating, 4) non-financial equity shares. Total unweighted1 value (average) HIGH QUALITY LIQUID ASSETS Total weighted2 value (average) -----------Rupees in '000----------- 1 Total High Quality Liquid Assets (HQLA) 2 2.1 2.2 3 3.1 3.2 3.3 4 5 5.1 5.2 5.3 6 7 8 Retail deposits and deposits from small business customers of which: stable deposit Less stable deposit Unsecured wholesale funding of which: Operational deposits (all counterparties) Non-operational deposits (all counterparties) Unsecured debt Secured wholesale funding Additional requirements of which: Outflows related to derivative exposures and other collateral requirements Outflows related to loss of funding on debt products Credit and Liquidity facilities Other contractual funding obligations Other contingent funding obligations TOTAL CASH OUTFLOWS 414,579,250 9 10 11 12 CASH INFLOWS Secured lending Inflows from fully performing exposures Other cash inflows TOTAL CASH INLFOWS 820,412,073 82,041,207 263,429 382,106,697 - 65,857 227,845,124 1,108,867 112,817 69,550,397 323,929,880 112,817 6,955,040 16,196,494 334,325,406 133,763,198 14,831,063 76,418,926 2,269,533 78,688,459 Total Adjusted Value 414,579,250 255,636,947 162.18% TOTAL HQLA TOTAL NET CASH OUTFLOWS LIQUIDITY COVERAGE RATIO 1 Unweighted values must be calculated as outstanding balances maturing or callable within 30 days (for inflows and outflows) 2 Weighted values must be calculated after the application of respective haircuts (for HQLA) or inflow and outflow rates (for inflows and outflows) 3 Adjusted values must be calculated after the application of both (i) haircuts and inflow and outflow rates and (ii) any applicable caps i.e. cap on level 2B and level 2 assets for HQLA and cap on inflows. 236 United Bank Limited 81
239. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND OF THE CONSOLIDATED For the yearFORMING endedPART December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 45.4.4 Net Stable Funding Ratio Net Stable Funding Ratio (NSFR) is used to reduce funding risk over a longer time horizon by requiring banks to fund their activities with sufficiently stable sources of funding in order to mitigate the risk of future funding stress. The NSFR limits overreliance on short-term wholesale funding, encourages better assessment of funding risk across all on and off balance sheet items and promotes funding stability. The ratio is defined as the amount of available stable funding (ASF), relative to the amount of required stable funding (RSF). LR IX Unweighted Value By Residual Maturity * No Maturity ASF Item 1 Capital: 2 Regulatory capital 3 Other capital instruments 4 Retail deposits and deposit from small business customers: 5 Stable deposits 6 Less stable deposits 7 Wholesale funding: 8 Operational deposits 9 Other wholesale funding 10 Other liabilities: 11 NSFR derivative liabilities 12 All other liabilities and equity not included in other categories 13 Total ASF 20 110,649,879 40,892,332 Weighted Value With a risk weight of less than or equal to 35% under the Basel II Standardised Approach for credit risk 21 Securities that are not in default and do not qualify as HQLA including exchange-traded equities. 22 Other assets: Physical traded commodities, including gold 23 24 Assets posted as initial margin for derivative contracts 25 NSFR derivative assets 26 NSFR derivative liabilities before deduction of variation margin posted - - - 110,649,879 40,892,332 - 396,139,205 88,860,593 804,247,453 721,963,866 - 491,850,396 - 3,052,380 - 17,747,689 - 253,691,789 - 652,985 1,958,956 1,436,842 1,128,634,708 42,698,667 Performing loans to non-financial corporate clients, loans to retail and small business customers, and loans to sovereigns, central banks and PSEs, of which: All other assets not included in the above categories 27 28 Off-balance sheet items 29 Total RSF 30 Net Stable Funding Ratio (%) 6 months to 1 year and below 1 year above 1 year ----------------------------------- (Rupees in '000) ----------------------------------- RSF Item 14 Total NSFR High Quality Liquid Assets (HQLA) 15 Deposits held at other financial institutions for operational purposes 16 Performing loans and securities: 17 Performing loans to financial institutions secured by Level 1 HQLA Performing loans to financial institutions secured by 18 non-Level 1 HQLA and unsecured performing loans to financial institutions 19 Below 6 months - - - - - - - - - - - - - 693,195 - 3,446,387 - 6,931,953 - 10,098,279 3,863,291 - - - 181,629,479 154,385,057 - - - 47,782,921 31,058,899 - - - 37,530,651 31,901,053 - - - - - - - - - - - - - - - 627,823,150 454,410,776 331,241,881 - 303,655,584 492,767,068 839,284,716 24,638,353 1,086,955,065 103.83% * The unweighted value by residual maturity is based on working prepared by Assets and Liabilities Management Committee (ALCO) of the Bank. 82 Annual Report 2017 237
240. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED For the year ended December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 45.5 Operational risk Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. The Operational Risk Division is primarily responsible for the oversight of operational risk management across the Group. The operational risk management framework of the Group is governed by the Operational Risk Management Policy and Procedures, while the implementation is supported by an operational risk management system and designated operational risk coordinators within different units across the Group. The framework is in line with international best practices, flexible enough to implement in stages and permits the overall approach to evolve in response to organizational learning and future requirements. Loss data, collected through a well defined program, is evaluated and processes are reviewed for improvements in mitigation techniques. Periodic workshops are conducted for Risk & Control Self Assessment and key risk exposures are identified and assessed against existing controls to evaluate improvement opportunities. Key Risk Indicators are also defined for monitoring of risk exposures. New products, systems, activities and processes, are subject to comprehensive operational risk assessments, before implementation. Business Continuity Plans have been implemented across the Group, clearly defining the roles and responsibilities of respective stakeholders, and covering recovery strategy, IT and structural backups, scenario and impact analyses and testing directives. The outsourcing policy has also been augmented to address risks associated with such arrangements. 46. ISLAMIC BANKING BUSINESS The Bank operates 93 (2016: 47) Islamic Banking branches and 156 (2016: 141) Islamic Banking windows. The statement of financial position of the Bank's Islamic Banking branches as at December 31 is as follows: Note ASSETS Cash and balances with treasury banks Balances with other banks Due from financial institutions Investments Islamic financing and related assets Operating fixed assets Due from Head Office Other assets Total Assets 46.2 46.3 LIABILITIES Bills payable Due to financial institutions Deposits and other accounts Current accounts - non remunerative Current accounts - remunerative Saving accounts Term deposits Deposits from financial institutions - remunerative Deposits from financial institutions - non remunerative Due to Head Office Other liabilities NET ASSETS REPRESENTED BY: Islamic Banking Fund Accumulated losses United Bank Limited 5,428,040 6,551,518 3,694,215 25,401,968 22,110,626 299,950 421,843 63,908,160 2,327,107 2,862,278 12,726,452 13,104,677 7,284,386 155,843 9,365,555 143,903 47,970,201 400,973 1,500,000 238,126 - 25,163,438 1,293,692 11,839,659 982,345 20,462,360 34,505 59,775,999 61,035 327,658 62,065,665 1,842,495 9,752,775 2,520,018 2,994,848 1,299,848 28,773,229 45,340,718 721,401 46,300,245 1,669,956 2,181,000 (362,502) 1,818,498 23,997 1,842,495 Surplus on revaluation of assets 238 2017 2016 --------- (Rupees in '000) --------- 83 2,181,000 (609,289) 1,571,711 98,245 1,669,956
241. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND OF THE CONSOLIDATED For the yearFORMING endedPART December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 The profit and loss account of the Bank's Islamic Banking branches for the year ended December 31 is as follows: 2017 2016 --------- (Rupees in '000) --------Return earned Return expensed Net return 2,885,492 1,757,642 1,127,850 Provision against loans and advances - net Reversal of provision for diminution in value of investments - net 2,593 2,593 1,125,257 1,469 (2,182) (713) 641,547 81,376 18,143 (438) 18,067 117,148 1,242,405 67,432 12,683 4,299 47,802 132,216 773,763 984,160 11,458 995,618 246,787 849,931 131 850,062 (76,299) (609,289) (362,502) (532,990) (609,289) Net return after provisions Other Income Fee, commission and brokerage income Income from dealing in foreign currencies (Loss) / Gain on sale of securities - net Other income Total other income Other Expenses Administrative expenses Other provisions - net Total other expenses Profit / (Loss) for the year Accumulated losses brought forward Accumulated losses carried forward Remuneration to Shariah Board and Advisor 46.1 2,053,224 1,412,390 640,834 6,477 6,058 648 793 (1,320) 121 2,342 1,404 (3,098) 648 Charity Fund Opening balance Addition during the year Payments during the year Closing balance 46.2 This includes Bai Muajjal arrangement entered into with SBP and with various financial institutions whereby the Bank sold sukuks having carrying value of Rs 2,948.799 million (2016: Rs. 11,073.312 million) on deferred payment basis. The average return on these transactions is 5.44% per annum (2016: 5.60% per annum). The balances are due to mature latest by June 2018. 46.3 Islamic financing and related assets Note Financings Murabaha Musharaka running finance Ijarah Diminishing Musharaka 46.4 Advances Advances and receivables against Ijarah Advances for Diminishing Musharaka Advances for Murabaha Profit and other receivables against financings and advances Gross Islamic financing and related assets Provision against financings and advances 84 2017 2016 --------- (Rupees in '000) --------- 720,017 15,000,000 490,963 4,358,154 20,569,134 242,391 620,848 6,203,709 7,066,948 53,539 1,255,734 88,165 1,397,438 234,234 22,200,806 (90,180) 22,110,626 120,828 87,892 21,998 230,718 74,308 7,371,974 (87,588) 7,284,386 Annual Report 2017 239
242. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED For the year ended December 31 , 2017FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 46.4 Ijarah 2017 Cost Accumulated Depreciation Charge / Net book value At January 1, Additions / At December At January 1, At December (Depreciation at December 2017 (Deletions) 31, 2017 2017 31, 2017 on deletions) 31, 2017 ---------------------------------------------------------------- (Rupees in '000) ----------------------------------------------------1,039,790 140,103 (254,769) 925,124 418,942 197,824 (182,605) 434,161 490,963 2016 Cost Accumulated Depreciation Charge / Net book value At December (Depreciation at December 31, 2016 on deletions) 31, 2016 ---------------------------------------------------------------- (Rupees in '000) ----------------------------------------------------- At January 1, 2016 1,191,438 46.5 Additions / (Deletions) 258,436 (410,084) At December 31, 2016 At January 1, 2016 1,039,790 476,868 205,186 (263,112) 418,942 620,848 Disclosures for profit and loss distribution and pool management UBL Ameen (the Mudarib) maintains following pools which accept deposits on the basis of Mudaraba from depositors (Rabbulmaal). Pool funds are invested in Islamic modes of financing and investments. The profit earned on the pool is therefore susceptible to the same market and credit risks as discussed in note 45 to the consolidated financial statements. Ameen Daily Munafa Account (ADMA) Pool The ADMA pool consists of deposits for the ADMA product. The net return on the pool is arrived at after deduction of direct costs from the gross return earned on the pool. From the net return, profit is paid to the Mudarib in the ratio of the Mudarib’s equity in the pool to the total pool. The balance represents the distributable profit. Special Pool(s) Separate pool(s) are created where the customers desire to invest in high yield assets. These pool(s) rates are higher than the general pool depending on the assets. In case of loss in special pool, the loss will be borne by the Special pool members. The net return on the pool is arrived at after deduction of direct costs from the gross return earned on the pool. From the net return, profit is paid to the Mudarib in the ratio of the Mudarib’s equity in the pool to the total pool. The balance represents the distributable profit. Treasury Pool(s) Treasury pool(s) are managed on the basis of Musharakah, Mudarabah and Wakalah, wherein UBL Ameen and FI share actual return earned by the pool according to pre-defined profit sharing ratio and Wakalah fee. General Pool The General pool consists of all other remunerative deposits. UBL Ameen (the Mudarib) accept deposits on the basis of Mudaraba from depositors (Rabbulmaal). The net return on the pool is arrived at after deduction of direct costs from the gross return earned on the pool. The entire net return after paying equity share to Mudarib is considered as distributable profit of the pool. For all pools, the Mudarib’s share is deducted from the distributable profit to calculate the profit to be allocated to depositors. The allocation of the profit to various deposit categories is determined by the amount invested in that category relative to the total pool, as well as by the weightage assigned to the various deposit categories. The Mudarib’s share for the year ended December 31, 2017 is Rs. 594.34 million (25.0% of distributable profit). Of this, an amount of Rs. 180.74 million (30.4% of Mudarib share) was distributed back to depositors as Hiba. The rate of profit earned on average earning assets was 6.11% per annum and the rate of profit paid on average deposits was 3.70% per annum. 240 United Bank Limited 85
243. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 46.6 Deployment of Mudaraba based deposits by class of business Chemical and pharmaceuticals Agri business Textile Sugar Financial Food industries Engineering Hotel Plastic Individuals Production and Transmission of energy Government of Pakistan Securities Others 47. 2017 2016 --------- (Rupees in '000) --------- 769,053 1,513,718 65,769 15,173,178 9,765,643 505,996 788,210 151,298 1,220,035 10,598,235 15,969,260 686,414 57,206,809 660,178 1,683,908 1,878,541 15,640,744 511,211 506,268 3,213 33,347 370,273 9,280,999 5,190,245 181,592 35,940,519 YEMEN OPERATIONS As a result of political and economic crisis, liquidity crisis for both local and foreign currency aggravated. During the crisis, in the initial phase of the war the Central Bank of Yemen (CBY) kept the exchange parity unchanged, however in April 2016, the Central Bank devalued Yemeni Riyal and revised the US$ to Riyal parity from YER 214.89 to YER 250.25 (16.45% devaluation). In the middle of August, 2017, Central Bank of Yemen–Aden Headquarter changed exchange rate mechanism from fixed rate to floating rate. Effective August 15, 2017 CBY Aden abolished exchange rate of YER 250.25/US$ and instructed all financial institutions to use market rate published by CBY, Aden. Since then CBY Aden devalued YER to current levels of YER 393/US$ while CBY Sana’a has maintained the earlier exchange rate regime and parity of YER 250.25/US$. Despite devaluation, Yemeni Riyal continued to lose its value in the open market and is currently traded at a further lower parity. The Group has taken multiple steps to cover for the losses emanating from this currency devaluation which will be continued going forward to contain the exchange risk. Out of the 3 branches in Yemen, UBL is currently operating with 2 branches in Sana’a and Hodeida under close supervision of executives at the Business Continuity Plan (BCP) office, Karachi. The Branch in Aden is closed due to restricted access to the premises in which it is located. Customers of Aden branch are being served from the other two branches. To support the team in Yemen branches, the Camp Office situated in Karachi, Pakistan is in continuous coordination with the team in Yemen to ensure that they are provided unstinted support and assistance whenever required. Ever since the crises started, the Group’s risk is being managed very closely with a clear strategy to de-risk the Yemen Book as far as practicable. As a result of this the Group has been able to reduce its clean exposure substantially, however prevailing liquidity crisis and recent devaluation of YER has adversely affected the book. Going forward, the strategy is to continuously reduce Group’s credit exposure without executing any new business and continue maintaining investments in local currency sovereign bonds. The management has taken appropriate measures to support the sustainability of the Group’s business as may be required in the prevalent circumstances and is of the view that as such there is no issue on going concern on UBL Yemen operations in the foreseeable future. 48. NON-ADJUSTING EVENT AFTER THE BALANCE SHEET DATE 48.1 The Board of Directors of the Holding Company in its meeting held on February 19, 2018 has proposed a cash dividend in respect of 2017 of Rs.4 per share (2016: Rs.4 per share). In addition, the Directors have also announced a bonus issue of nil (2016: nil). These appropriations will be approved in the forthcoming Annual General Meeting. The consolidated financial statements for the year ended December 31, 2017 do not include the effect of these appropriations which will be accounted for in the consolidated financial statements for the year ending December 31, 2018. 86 Annual Report 2017 241
244. Notes to and forming part of the Consolidated Financial Statements NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31 , 2017 FOR THE YEAR ENDED DECEMBER 31, 2017 48.2 The Bank is a party to a Suo Moto case No. 20/2016 and Constitution Petition No. 45 of 2016 in the Honourable Supreme Court of Pakistan. Through these cases, the Honourable Supreme Court has taken up the matter relating to pension arrangements of certain banks which were previously under the control of the Federal Government. Various applications had been filed by ex-employees of those banks in Suo Moto case contesting the freezing of their pensions and discontinuation of its indexation. The Bank maintains that being a private employer, it is not under any legal obligation to increase the pension of the employees and that post privatization, the new management gave multiple notices up to December 31, 2003 to allow employees to convert their end of service benefits from Pension Fund to Gratuity Fund. During the course of hearing of the above cases, the Supreme Court of Pakistan indicated that the concerned Banks may, on their own, consider increasing the pension of their ex-employees. The Bank understands that although it is not legally liable to change the benefit plan however, purely on humanitarian basis and for the betterment of its ex-employees from a prospective date and future indexation mechanism, it has prepared and submitted a proposal before the Honourable Supreme Court of Pakistan whereby minimum pension has been fixed to Rs. 5,250/- with 5% increase every year. In response to the proposal submitted by the Bank, the Supreme Court of Pakistan in its hearing held on February 13, 2018 has ordered, at its discretion, fixation of minimum pension of Rs 8,000/- per month with 5 percent indexation on an annual basis and that the said increase would be on a prospective basis. Detailed Judgement has not been received till date. In the meantime, the Bank has also initiated an exercise to assess the impact of the revision which, among other things, includes life verification process of the pensioners. Based on initial actuarial estimates, the impact of increase in pension will range between Rs 3.4 billion to Rs 5.9 billion. The estimated amount can only be finalised after receipt of written court order and completion of life verification exercise. Suitable amendments in the pension plan will be made accordingly. As required under the approved accounting standards, the impact of the revision will be accounted for in the financial statements of the Bank as past service cost in the financial year 2018 once the plan is formally approved. 49. DATE OF AUTHORIZATION These consolidated financial statements were authorized for issue on February 19, 2018 by the Board of Directors of the Holding Company. 50. GENERAL 50.1 Comparatives Comparative information has been reclassified, rearranged or additionally incorporated in these consolidated financial statements for the purposes of better presentation. 50.2 Figures have been rounded off to the nearest thousand rupees unless otherwise stated. AameerKarachiwalla Karachiwalla Aameer ChiefFinancial FinancialOfficer Officer Chief 242 United Bank Limited Sima Kamil Kamil Sima President & & President Chief Executive Executive Officer Officer Chief Amar Ahmad MirMir AmarZafar ZafarKhan Khan Arshad Arshad Ahmad Director Director Director Director 87 SirSir Mohammed Anwar Pervez, OBE, HPk Mohammed Anwar Pervez, OBE, HPk Chairman Chairman
245. Annexure Annexure ‘A’ 'A' as as referred referred to to in in note note 9.7 9.7 of of the the Group’s Group's Consolidated Consolidated Financial Financial Statements Statements 1) Particulars of investments held in listed companies and Modaraba Investee Number of shares / certificates held Available for sale securities Paid up value per share / certificate Total paid up value Cost (Rupees) ---------------------- (Rupees in '000) ---------------------- Investments in ordinary shares Agritech Limited DP World Engro Corporation Limited Engro Fertilizers Limited Fatima Fertilizer Company Limited Fauji Cement Limited Fauji Fertilizer Company Limited Fauji Fertilizer Bin Qasim Limited Ghani Gases Limited Gharibwal Cement Limited Hub Power Company Limited Hum Network Limited Indus Dyeing & Manufacturing Company Limited Kohat Cement Limited Kohinoor Spinning Mills Limited Kot Addu Power Company Limited Lucky Cement Limited Nishat Chunian Power Limited Oil & Gas Development Company Limited Pakistan Telecommunication Company Limited Pakistan Petroleum Limited Pakistan State Oil Limited Saif Power Limited Soneri Bank Limited Pak Oilfields Limited PICIC Growth Fund 1st Fidelity Leasing Modaraba 15,975,876 6,926 1,935,000 6,669,000 22,400,000 16,500,000 17,750,000 46,699,000 15,586,048 5,950,000 38,189,500 3,654,000 484,890 1,895,000 3,580,000 79,422,000 830,000 18,306,500 3,940,000 27,338,000 3,707,600 1,800,000 10,237,000 22,291,500 824,950 600 997 10 2,010 10 10 10 10 10 10 10 10 10 1 10 10 5 10 10 10 10 10 10 10 10 10 10 10 10 159,759 13,919 19,350 66,690 224,000 165,000 177,500 466,990 155,860 59,500 381,895 3,654 4,849 18,950 17,900 794,220 8,300 183,065 39,400 273,380 37,076 18,000 102,370 222,915 8,250 6 10 559,228 19,885 597,627 603,631 569,358 578,292 1,996,503 1,894,542 356,703 281,959 1,819,518 59,243 533,428 390,240 61,892 3,688,420 592,327 349,216 593,890 598,914 596,559 579,373 339,456 337,311 364,789 10 26 18,362,340 Investments in Real Estate Investment Trust Dolmen City REIT 41,690,000 10 416,900 458,590 3,666,668 95,720 10 3,705 36,667 354,648 36,667 354,648 391,315 Investments in preference shares Masood Textile Mills Limited JSC Alliance Bank Annual Report 2017 243
246. Annexure ‘A’ 'A' as as referred referred to in note 9.7 of the Group's Annexure Group’s Consolidated Financial Financial Statements Statements Consolidated 2) Particulars of investments held in unlisted companies Investee Percentage of holding (%) Number of shares / certificates held Break-up value per share Paid up value per share Rupees Rupees Cost (Rupees '000) Based on audited accounts as at Name of Chief Executive Shareholding more than 10% Pakistan Agricultural Storage & Services Corporation Limited Muhammad Khan Khichi 18.3% 5,500 228,378 1,000 5,500 31-Mar-17 10.2% 1,530,000 10 10 15,300 31-Dec-16 World Bridge Connect Inc. 9.9% 1,979,295 First Women Bank Limited 2.2% 7,698,441 10 10 21,100 31-Dec-16 Tahira Raza National Institutional Facilitation Technologies (Pvt.) Limited 9.1% 2,266,607 24.62 10 1,526 30-Jun-17 Haider Wahab National Investment Trust Limited 8.3% 79,200 9,419 100 100 30-Jun-17 Manzoor Ahmed News-VIS Credit Information Services (Pvt.) Limited 4.7% 32,500 1 10 325 30-Jun-17 Faheem Ahmad Techlogix International Limited 4.2% 4,455,829 6.71 5 50,702 31-Dec-16 Salman Akhtar & Kewan Khawaja (Co Chief Executive) Pakistan Mortgage and Refinance Company Limited N.Kokularupon Narayanasamy Shareholding upto 10% Kay Textile Mills Limited Not available 377,800 SME Bank Limited 1.7% 3,975,003 SWIFT 0.0% 25 MasterCard Incorporated 0.0% Cinepax Limited Not available Not available Not available Not available 77,606 Not available Not available 3,778 Not available Not available 10 26,950 31-Dec-16 Ihsan ul Haq Khan 495,821 16,532 2,905 31-Dec-16 Gottfried Leibbrandt 461 580 427 - 31-Dec-16 Ajay Banga 8.4% 5,037,200 33 10 50,372 30-Jun-17 Hashim Raza The Benefit Company B.S.C 1.0% 311 172,024 29,284 2,343 31-Dec-16 Abdul Wahed AlJanahi Tri Star Shipping Company 0.0% 15,000 - - - 250 Not available Not available 258,757 244 United Bank Limited
247. Annexure ‘A’ as referred to in note 9.7 of the Group’s Annexure 'A' as referred to in note 9.7 of the Group's Consolidated Financial Statements Consolidated Financial Statements 3) Particulars of bonds Investee Terms of Redemption Interest / Principal Profit Rate of Interest / Profit Outstanding Amount (Rupees in '000) Available for sale securities Government of Pakistan Sukuk Government of Pakistan XVIII Government of Pakistan XIX Government of Pakistan Ijarah Sukuk - XVI Islamic Republic of Pakistan 2019 - Sukuk Islamic Republic of Pakistan 2021 - Sukuk At Maturity At Maturity At Maturity At Maturity At Maturity Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually 5.59% 5.24% Cut off yield of 6M T-Bills minus 50 bps 6.75% 5.50% 6,040,936 5,904,326 4,000,000 1,104,173 2,052,838 19,102,273 Government of Pakistan - Eurobonds Islamic Republic of Pakistan - 2019 - Eurobond Islamic Republic of Pakistan - 2019 - Eurobond Islamic Republic of Pakistan - 2024 - Eurobond Islamic Republic of Pakistan - 2025 - Eurobond Islamic Republic of Pakistan - 2027 - Eurobond At Maturity At Maturity At Maturity At Maturity At Maturity Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually 7.250% 6.750% 8.250% 8.250% 6.875% 2,203,012 232,086 8,713,659 4,158,324 1,461,429 16,768,510 Foreign bonds - sovereign Angola 2019 Arab Republic of Egypt 2020 Arab Republic of Egypt 2025 Government of Dubai Bond 2020 Government of Dubai Bond 2022 Kingdom of Bahrain Bond 2020 Kingdom of Bahrain Bond 2026 Kingdom of Jordan 2026 Kingdom of Jordan 2027 Republic of Kenya Republic of Nigeria 2023 Kingdom of Oman 2026 Republic of Portugal 2024 Republic of Sri Lanka Bond 2020 Republic of Sri Lanka Bond 2021 Republic of Sri Lanka Bond 2022 Republic of Sri Lanka Bond 2026 Republic of Turkey 2022 Republic of Turkey 2026 Republic of Vietnam State of Qatar Bond 2030 Turkey Sukuks 2021 United Republic of Tanzania UK Government 2018 UK Government 2018 UK Government 2018 UK Government 2018 Abu Dhabi Government 2027 Abu Dhabi Government 2018 Azerbaijan 2032 Counsel of Europe Develepment Bank 2022 State of Qatar Bond 2022 Republic of Zambia2022 Sultanate of Oman 2024 Sultanate of Oman 2027 US Government Bonds 2026 At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity Quarterly Bi-annually Bi-annually Bi-annually Quarterly Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually 7.000% 5.750% 5.880% 7.750% 6.450% 5.500% 7.000% 6.125% 5.750% 5.875% 6.375% 5.255% 5.125% 6.250% 6.250% 5.875% 6.825% 6.250% 4.875% 4.800% 9.750% 4.251% 7.452% 1.250% 1.000% 0.000% 5.000% 3.125% 1.000% 3.500% 0.625% 3.250% 5.375% 4.397% 5.375% 1.500% 316,848 818,000 885,546 1,654,268 1,467,526 1,150,637 2,809,685 1,428,591 441,478 1,587,223 1,091,132 885,139 495,775 1,086,840 864,236 1,420,372 877,207 1,892,918 551,549 330,870 2,770,873 44,167 1,251,809 754,726 747,113 3,130,171 2,903,627 552,656 750,385 473,543 892,596 327,321 738,523 333,889 113,912 651,554 38,492,705 Annual Report 2017 245
248. Annexure ‘A’ as referred to in note 9.7 of the Group’s Annexure 'A' asFinancial referred toStatements in note 9.7 of the Group's Consolidated Consolidated Financial Statements 3) Particulars of bonds (Contd.) Investee Foreign bonds - others AK Bank 2022 AK Bank 2018 Bank of Ceylon Bank of Ceylon 2018 CBQ Finance 2019 Dubai Electricity and Water Authority 2018 Dubai Electricity and Water Authority 2020 EMAAR 2019 Ezdan Sukuk Company Limited Garanti 2022 ICD Sukuk 2027 IPIC GMTN 2022 Jebel Ali Free Zone Authority 2019 PTA Bank 2018 Qatari Diar QSC 2020 Breket Bonds 2019 Bhakti Investment 2018 BTG Pactual Bond 2023 Diamond Bank 2019 Ezdan Sukuk 2022 Halk Bank 2021 Iceland Bondco Plc 2025 Isbank 2021 Isbank 2024 Lippo Karawaci 2022 National Saving 2018 Tskb Bank 2019 Tupras A.S. 2024 Turk Eximbank 2022 Turk Eximbank 2023 Turkiye Vakiflr 2018 Yepi Kredi Bk 2024 Zenith Bank 2022 Terms of Redemption Interest / Principal Profit Rate of Interest / Profit Outstanding Amount (Rupees in '000) At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually 5.000% 5.000% 5.325% 6.875% 7.500% 3.000% 7.375% 8.500% 4.375% 5.250% 5.000% 5.500% 7.000% 6.375% 5.000% 6.250% 5.875% 5.500% 8.750% 4.875% 5.000% 4.625% 5.375% 6.125% 7.000% 8.875% 5.375% 4.500% 4.250% 5.375% 3.750% 5.850% 7.375% 440,924 27,893 529,117 239,867 497,560 3,532,985 1,574,868 89,124 138,030 330,056 1,651,615 214,582 1,014,901 313,102 276,493 217,836 665,821 365,088 888,214 333,129 1,167,803 603,014 57,033 681,495 87,621 593,543 85,345 278,373 110,885 22,931 111,389 556,489 453,753 18,150,879 Held to maturity securities Government of Pakistan - Eurobonds Islamic Republic of Pakistan - 2024 - Eurobond Islamic Republic of Pakistan - 2025 - Eurobond Islamic Republic of Pakistan - 2027 - Eurobond Islamic Republic of Pakistan - 2019 - Eurobond At Maturity At Maturity At Maturity At Maturity Bi-annually Bi-annually Bi-annually Bi-annually 8.250% 8.250% 6.875% 7.250% Government of Pakistan Sukuk Islamic Republic of Pakistan 2019 - Sukuk 2,203,946 2,815,931 554,794 989,469 6,564,140 At Maturity Bi-annually 6.750% Sukuks Al Baraka Bank (Pakistan) Limited Fatima Fertilizer Company Limited K-Electric Limited Neelum Jehlum Hydropower Company (Pvt) Limited Pakistan International Airlines Limited* Sitara Peroxide Limited Sui Northern Gas Pipelines Limited Sui Southern Gas Company Limited WAPDA Bonds - Sukuk III WAPDA Bonds - Dassu 221,823 221,823 Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Monthly Bi-annually Bi-annually At Maturity At Maturity 246 United Bank Limited Bi-annually Bi-annually Quarterly Bi-annually Bi-annually Monthly Bi-annually Bi-annually Bi-annually Bi-annually 6M KIBOR plus 125bps 6M KIBOR plus 110bps 3M KIBOR plus 100 bps 6M KIBOR plus 113bps 6M KIBOR plus 175 bps 1M KIBOR plus 100 bps 6M KIBOR plus 110bps 6M KIBOR plus 110bps 6M KIBOR plus 100bps 6M KIBOR plus 145bps 142,857 681,600 2,250,000 3,575,000 890,000 118,110 943,763 800,000 242,857 868,060 10,512,247
249. Annexure ‘A’as asreferred referred in note of Group's the Group’s Annexure 'A' to to in note 9.7 9.7 of the Consolidated Financial Statements Consolidated Financial Statements 3) Particulars of bonds (Contd.) Investee Terms of Redemption Interest / Principal Profit Rate of Interest / Profit Outstanding Amount (Rupees in '000) Foreign bonds - sovereign Arab Republic of Egypt 2020 Arab Republic of Egypt 2025 Bahrain 2026 Kingdom of Jordan 2026 Kingdom of Jordan 2027 Qatar Government Bonds 2030 Republic of Kenya 2019 Republic of Portugal 2024 Republic of Sri Lanka Bond 2019 Republic of Sri Lanka Bond 2020 Republic of Sri Lanka Bond 2022 Republic of Sri Lanka Bond 2025 Republic of Sri Lanka Bond 2026 Republic of Tanzania Republic of Tanzania Republic of Turkey 2022 Republic of Turkey 2026 Turkey Sukuks 2021 Republic of Kenya 2024 Kingdom of Bahrain Bond 2026 Republic of Nigeria Republic of Ghana 2022 Sultanate of Oman 2027 UK Government 2020 At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually 5.750% 5.875% 7.000% 6.125% 5.750% 9.750% 5.875% 5.125% 5.125% 6.250% 5.875% 6.850% 6.825% 7.452% 7.586% 6.250% 4.875% 4.251% 6.875% 7.000% 6.375% 9.250% 5.375% 2.000% 1,268,224 1,414,339 1,319,611 767,852 441,478 1,065,501 1,217,810 495,775 277,182 274,504 221,160 551,264 876,653 557,414 87,523 377,848 551,659 44,167 218,049 475,847 350,836 350,332 449,598 1,553,489 15,208,115 Foreign securities - others AK Bank 2022 Bank of Ceylon Ezdan Sukuk Company Limited Garanti 2022 JSC Alliance Bank - US $ Discount Bonds Boparan Finance Debenhams Plc House Of Fraser Jaguar Ld Rover Pgh Capital Ltd Pizza Express Premier Foods Talktalk Tg At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity At Maturity Bi-annually Bi-annually Bi-annually Bi-annually Quarterly Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually Bi-annually 5.000% 5.325% 4.375% 5.250% 10.500% 5.500% 5.250% 6.341% 5.000% 5.750% 6.625% 6.500% 5.375% JSC Alliance Bank - US $ Recovery Notes At Maturity N/A N/A 440,924 357,388 138,030 324,653 239,493 599,424 611,531 594,743 305,421 629,204 623,165 766,406 468,573 6,098,955 340,333 6,439,288 *These sukuks are classified, however, no provision has been maintained as these are secured by Government of Pakistan guarantee. 4) Particulars of Debentures Investee Terms of Redemption Principal Interest Rate of Interest Outstanding Amount (Rupees in '000) Private Sector Effef Industries Limited Effef Industries Limited Khyber Textile Mills Limited Morgah Valley Limited Morgah Valley Limited Overdue Overdue Overdue Overdue Overdue Overdue Overdue Overdue Overdue Overdue 11.00% 14.00% 14.00% 11.00% 14.00% 1,017 379 394 316 160 2,266 Annual Report 2017 247
250. Annexure 'A' Group's Annexure ‘A’ as as referred referredto toininnote note9.7 9.7ofofthe the Group’s Consolidated Financial Consolidated FinancialStatements Statements 5) Particulars of investments in term finance certificates Investee Available for sale securities No. of Paid up value Total Paid up Outstanding Certificates per certificate value Amount held (Rupees) ------------- (Rupees in '000) ------------- Name of Chief Executive Unlisted Azgard Nine Limited Pakistan International Airlines Corporation TFC* 12,944 1,700 5,000 5,000 64,720 8,500 60,000 30,000 24,200 5,000 5,000 5,000 300,000 150,000 121,000 Listed Azgard Nine Limited MCB Bank Limited TFC (formerly NIB Bank Ltd) Bank Alfalah Limited TFC 64,720 Ahmed H. Shaikh 8,498 Musharraf Rasool Cyan 73,218 97,615 Ahmed H. Shaikh 149,790 Imran Maqbool 120,783 Nauman Ansari 368,188 441,406 Held to Maturity Unlisted Pakistan International Airlines Corporation TFC* Security Leasing Corporation Limited Al-Azhar Textile Mills Limited Bentonite (Pakistan) Limited Cast-N-Link Products Limited Standard Chartered Bank Pakistan Azgard Nine Limited Askari Commercial Bank Limited WAPDA 408,867 40,000 14 14 16 75,000 12,297 120,000 300,000 5,000 5,000 774,670 268,894 1,064,039 5,000 5,000 5,000 5,000 2,044,335 200,000 10,845 3,765 17,025 375,000 61,485 600,000 1,500,000 48,600 30,000 83,833 5,000 5,000 5,000 243,000 150,000 419,165 Listed Bank Alfalah Limited MCB Bank Limited TFC (formerly NIB Bank Ltd) Soneri Bank Limited 1,276,685 30,807 5,418 3,417 2,549 375,000 61,115 599,280 3,461,313 5,815,584 Musharraf Rasool Cyan Farah Azeem Mirza Aurangzeb Baig Khalid Shakeel Nisar Ahmed Shahzad Dada Ahmed H. Shaikh Syed Majeedullah Husaini Retired Lt- Gen Muzammil Hussain 242,562 Nauman Ansari 149,790 Imran Maqbool 418,830 Muhammad Aftab Manzoor 811,182 6,626,766 *These TFCs are classified, however, no provision has been maintained as these are secured by Government of Pakistan guarantee. 6) Particulars of participation term certificates Investee Morgah Valley Limited 248 United Bank Limited No. of Paid up value Total Paid up Outstanding Certificates per certificate value Amount held (Rupees) ------------- (Rupees in '000) ------------16 29,250 468 Name of Chief Executive 437 Air Marshal (R) A. Rahim Khan
251. Annexure Annexure ‘A’ 'A' as as referred referred to to in in note note 9.7 9.7 of of the the Group’s Group's Consolidated Consolidated Financial Financial Statements Statements 7) Quality of investments classified as available for sale (AFS) Investee Investments in ordinary shares Agritech Limited DP World Engro Corporation Limited Engro Fertilizers Limited Fatima Fertilizer Company Limited Fauji Cement Limited Fauji Fertilizer Company Limited Fauji Fertilizer Bin Qasim Limited Ghani Gases Limited Gharibwal Cement Limited Hub Power Company Limited Hum Network Limited Indus Dyeing & Manufacturing Company Limited Kohat Cement Limited Kohinoor Spinning Mills Limited Kot Addu Power Company Limited Lucky Cement Limited Nishat Chunian Power Limited Oil & Gas Development Company Limited Pakistan Telecommunication Company Limited Pakistan Petroleum Limited Pak Oilfields Pakistan State Oil Limited Saif Power Limited Soneri Bank Limited PICIC Growth Fund 1st Fidelity Leasing Modaraba Investments in Real Estate Investment Trust Dolmen City REIT Investee Investments in preference shares Masood Textile Mills Limited JSC Alliance Bank Market Value (Rupees in '000) 77,803 19,114 531,641 451,625 691,712 412,665 1,659,682 1,404,203 238,467 143,455 3,475,245 29,853 212,823 269,014 11,313 4,280,846 429,450 602,467 641,393 359,749 763,432 490,235 527,598 296,156 298,705 15 3 18,318,664 458,590 Cost (Rupees in '000) Credit Rating Unrated Baa3 AA AAAAUnrated AA Unrated AAAA+ A+ A+ A Unrated AA+ Unrated AAAA Unrated Unrated Unrated AA A+ AAUnrated Unrated AM2 Credit Rating 36,667 354,648 391,315 Unrated Caa2 5,500 15,300 Unrated AA 77,606 21,100 1,526 100 325 50,702 3,778 26,950 2,905 50,372 2,343 250 258,757 Unrated AUnrated AM2+ Unrated Unrated Unrated B Unrated A2 Unrated Unrated Unrated Investments in unlisted shares Shareholding more than 10% Pakistan Agricultural Storage & Services Corporation Limited Pakistan Mortgage and Refinance Company Limited Shareholding upto 10% World Bridge Connect Inc. First Women Bank Limited National Institutional Facilitation Technologies (Pvt.) Limited National Investment Trust Limited News-VIS Credit Information Services (Pvt.) Limited Techlogix International Limited Kay Textile Mills Limited SME Bank Limited SWIFT MasterCard Incorporated Cinepax Limited The Benefit Company B.S.C Tri Star Shipping Company Annual Report 2017 249
252. Annexure Annexure ‘A’ 'A' as as referred referred to to in in note note 9.7 9.7 of of the the Group’s Group's Consolidated Consolidated Financial Financial Statements Statements 7) Quality of investments classified as available for sale (AFS) (Contd.) Particulars Federal Government Securities Market Treasury Bills Pakistan Investment Bonds Market Value (Rupees in '000) Credit Rating 302,515,945 235,845,961 538,361,906 Unrated - Government Securities Unrated - Government Securities 6,044,400 5,896,460 4,028,400 1,145,955 2,044,051 19,159,266 Score7 Score7 Score7 Score7 Score7 2,255,694 230,353 9,190,342 4,182,661 1,466,279 Score7 Score7 Score7 Score7 Score7 Government of Pakistan Ijarah Sukuk Government of Pakistan Ijarah Sukuk - XVIII Government of Pakistan Ijarah Sukuk - XIX Government of Pakistan Ijarah Sukuk - XVI Islamic Republic of Pakistan 2019 - Sukuk Islamic Republic of Pakistan 2021 - Sukuk Government of Pakistan - Euro bond Islamic Republic of Pakistan - 2019 - Euro Bond Islamic Republic of Pakistan - 2019 - Euro Bond Islamic Republic of Pakistan - 2024 - Euro Bond Islamic Republic of Pakistan - 2025 - Euro Bond Islamic Republic of Pakistan - 2027 - Euro Bond 17,325,329 Foreign bonds - sovereign Angola 2019 Arab Republic of Egypt 2020 Arab Republic of Egypt 2025 Government of Dubai Bond 2020 Government of Dubai Bond 2022 Kingdom of Bahrain Bond 2020 Kingdom of Bahrain Bond 2026 Kingdom of Jordan 2026 Kingdom of Jordan 2027 Republic of Kenya Republic of Nigeria 2023 Kingdom of Oman 2026 Republic of Portugal 2024 Republic of Sri Lanka Bond 2020 Republic of Sri Lanka Bond 2021 Republic of Sri Lanka Bond 2022 Republic of Sri Lanka Bond 2026 Republic of Turkey 2022 Republic of Turkey 2026 Republic of Vietnam State of Qatar Bond 2030 Turkey Sukuks 2021 United Republic of Tanzania UK Government 2018 UK Government 2018 UK Government 2018 UK Government 2018 Abu Dhabi Government 2027 Abu Dhabi Government 2018 Azerbaijan 2032 Counsel of Europe Development Bank 2022 State of Qatar Bond 2022 Republic of Zambia 2022 Sultanate of Oman 2024 Sultanate of Oman 2027 US Government Bonds 2026 250 United Bank Limited 323,224 845,917 919,844 1,729,796 1,558,080 1,155,336 2,817,349 1,431,548 442,003 1,636,715 1,137,490 891,562 521,900 1,128,396 893,783 1,507,540 903,386 1,925,895 545,188 354,212 2,893,753 44,639 1,299,595 753,393 749,647 3,130,271 2,901,677 545,066 749,647 488,057 882,459 321,878 712,551 332,586 113,486 619,806 39,207,675 Score5 Score6 Score6 Score2 Score2 Score4 Score4 Score5 Score5 Score6 Score5 Score3 Unrated Score6 Score5 Score6 Score6 Score4 Score4 Score5 Score3 Score4 Score6 AA AA AA AA AA AA BB+ AA+ AAB BBBBBBAAA
253. Annexure Annexure ‘A’ 'A' as as referred referred to to in in note note 9.7 9.7 of of the the Group’s Group's Consolidated Financial Statements Consolidated Financial Statements 7) Quality of investments classified as available for sale (AFS) (Contd.) Particulars Foreign bonds - others AK Bank 2022 AK Bank 2018 Bank of Ceylon Bank of Ceylon 2018 CBQ Finance 2019 Dubai Electricity and Water Authority 2018 Dubai Electricity and Water Authority 2020 EMAAR 2019 Ezdan Sukuk Company Limited Garanti 2022 ICD Sukuk 2027 IPIC GMTN 2022 Jebel Ali Free Zone Authority 2019 PTA Bank 2018 Qatari Diar QSC 2020 Breket Bonds 2019 Bhakti Investment 2018 BTG Pactual Bond 2023 Diamond Bank 2019 Ezdan Sukuk 2022 Halk Bank 2021 Iceland Bondco Plc 2025 Isbank 2021 Isbank 2024 Lippo Karawaci 2022 National Saving 2018 Tskb Bank 2019 Tupras A.S. 2024 Turk Eximbank 2022 Turk Eximbank 2023 Turkiye Vakiflr 2018 Yepi Kredi Bk 2024 Zenith Bank 2022 Market Value (Rupees in '000) 443,467 27,896 528,354 239,565 495,591 3,539,002 1,663,155 93,502 126,717 333,092 1,643,977 212,703 1,041,019 317,800 289,899 213,254 599,724 364,615 854,205 307,470 1,112,026 572,910 56,527 677,544 86,846 590,581 84,867 273,136 108,982 22,603 111,263 554,691 452,839 18,039,822 Credit Rating Ba1 Ba1 B1 B+ A2 BBB+ BBB+ Baa3 Ba1 BBBUnrated aa2 BBBBB Unrated BB CC BBBBBB B BB BB B+ B+ BB+ BB+ BB+ BB+ BB BB B Term finance certificates Listed Azgard Nine Limited MCB Bank Limited TFC (formerly NIB Bank Ltd) Bank Alfalah Limited TFC Unlisted Azgard Nine Limited Pakistan International Airlines Corporation TFC 97,615 152,120 122,931 372,666 Defaulted A+ AA- 64,720 8,498 73,218 Defaulted Defaulted Annual Report 2017 251
254. Annexure 'C' ‘C’as asreferred referredtotoininnote note11.7 11.7ofof Group’s Annexure Group's ConsolidatedFinancial FinancialStatements Statements Consolidated Disposals of operating fixed assets during the year 2017 Cost Items having book value of more than Rs. 250,000 or cost of more than Rs. 1,000,000 Land & Building Freehold Land Plot No 16 Jhelum Accumulated Book value Sale depreciation proceeds --------------(Rupees in '000)-------------- Mode of disposal 13,413 - 13,413 15,000 Auction 9,545 27,961 2,605 6,206 1,084 1,370 1,389 1,389 1,389 1,511 1,502 1,453 1,453 1,453 1,453 1,453 1,460 1,453 1,453 1,453 1,502 1,502 1,510 1,502 1,489 1,502 1,502 1,570 1,581 7,731 25,165 1,993 5,585 650 1,233 1,250 1,250 1,250 1,360 1,352 1,308 1,308 1,308 1,308 1,308 1,314 1,308 1,308 1,308 1,502 1,502 1,510 1,502 1,340 1,352 1,502 1,413 1,423 1,814 2,796 612 621 434 137 139 139 139 151 150 145 145 145 145 145 146 145 145 145 149 150 157 158 3,866 10,000 1,578 2,566 720 994 917 981 979 1,166 1,177 1,135 1,010 1,001 1,090 1,057 1,151 1,114 1,071 1,123 1,101 1,189 1,097 1,089 1,124 1,172 1,140 1,105 1,297 Buy Back Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction Auction 82,695 73,643 9,052 45,010 1,039 1,014 1,014 1,014 1,014 1,782 1,954 8,831 1,039 1,014 1,014 1,014 1,014 1,782 1,954 8,831 - 65 65 65 65 65 850 300 1,475 738 23,203 19,701 81,186 Particulars of Buyers Mr.Naseer Ahmed Vehicles ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### Mercedes Benz E 200 Mercedes Benz S500L Honda Civic VTEC Honda Accord Suzuki Cultus VXRi Suzuki APV Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Electrical, office and computer equipment ATM Machine ATM Machine ATM Machine ATM Machine ATM Machine Generator Generator Items having book value of less than Rs. 250,000 and cost of less than Rs. 1,000,000 Others Total 252 United Bank Limited 1,970,747 2,075,686 1,970,009 2,052,483 Auction Auction Auction Auction Auction Auction Auction Syed Javed - Employee Asim Iqbal Zia Ul Haq Asim Iqbal UBL Insurers Limited Saeed Ur Rehman Nusrat Iqbal Muhammad Atif Essani Muhammad Arif Said Faqir Wasim Mirza Numeri Abrar Muhammad Atif Essani Muhammad Atif Essani Muhammad Atif Essani Isha Enterprises Said Faqir Numeri Abrar Saleem Ahmed Siddiqui Numeri Abrar Isha Enterprises Numeri Abrar Muhammad Imran Younus Saleem Ahmed Siddiqui Numeri Abrar Numeri Abrar Saeed Ur Rehman Syed Zuhaib Ahmed Imad Iqbal Abbasi NCR Corporation NCR Corporation NCR Corporation NCR Corporation NCR Corporation UBL Insurers Limited UBL Insurers Limited
255. Consolidated Statement of Financial Position CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT DECEMBER 31 , 2017 As at December 31, 2017 ASSETS Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments 2017 2016 ------------- (US Dollars in '000) ------------- 1,459,185 321,953 325,075 10,187,917 1,208,756 292,231 321,368 7,591,773 5,704,046 114,855 5,818,901 4,798,330 72,126 4,870,456 456,306 497,986 19,067,323 355,913 409,171 15,049,668 121,294 4,682,986 12,372,691 40 26,993 283,007 17,487,011 106,496 1,864,430 11,282,587 32 47,371 265,929 13,566,845 NET ASSETS 1,580,312 1,482,823 REPRESENTED BY: Share capital Reserves Unappropriated profit Total equity attributable to the equity holders of the Bank 110,869 427,501 694,199 1,232,569 110,869 385,947 624,350 1,121,166 Non-controlling interest 43,567 1,276,136 38,288 1,159,454 Surplus on revaluation of assets - net of deferred tax 304,176 1,580,312 323,369 1,482,823 Advances Performing Non-performing - net of provision Operating fixed assets Deferred tax asset - net Other assets LIABILITIES Bills payable Borrowings Deposits and other accounts Subordinated loans Liabilities against assets subject to finance lease Deferred tax liability - net Other liabilities These figures have been converted at Rs. 110.4172 per US Dollar from the audited financial statements. Annual Report 2017 253
256. Consolidated Profit and Loss Account CONSOLIDATED ANDDecember LOSS ACCOUNT FOR2017 THE YEAR ENDED DECEMBER 31 , 2017 For the yearPROFIT ended 31, 2017 2016 --------- (US Dollars in '000) -------Mark-up / return / interest earned Mark-up / return / interest expensed Net mark-up / return / interest income Provision against loans and advances - net Reversal of provision against lendings to financial institutions - net Provision for diminution in value of investments - net Bad debts written off directly 1,001,473 475,358 526,115 921,551 388,834 532,717 17,001 (75) 6,519 1,698 25,143 500,972 5,657 (140) 8,134 886 14,537 518,180 134,327 15,702 19,473 43,451 20 7,067 220,040 721,012 130,211 20,616 17,713 50,804 (11) 8,298 227,631 745,811 348,273 (3,524) 7,378 541 352,668 4,163 372,507 317,181 2,095 8,423 632 328,331 9,575 427,055 Taxation - Current - Prior - Deferred 133,144 (18,400) 20,511 135,255 138,617 20,390 14,444 173,451 Profit after taxation 237,252 253,604 237,195 57 237,252 251,616 1,988 253,604 Net mark-up / return / interest income after provisions Non mark-up / return / interest income Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Gain on sale of securities - net Unrealized gain / (loss) on revaluation of investments classified as held for trading Other income Total non mark-up / return / interest income Non mark-up / return / interest expenses Administrative expenses Other provisions / write offs - net Workers' Welfare Fund Other charges Total non mark-up / return / interest expenses Share of profit of associates Profit before taxation Attributable to: Equity shareholders of the Bank Non-controlling interest ------------ (US $) -----------Earnings per share - basic and diluted These figures have been converted at Rs. 110.4172 per US Dollar from the audited financial statements. 254 United Bank Limited 0.19 0.21
257. Category of Shareholders : imranfaiz ReportID : SH0935MRG ( 10D09 ) UserID As on December 31, 2017 Particulrs Page : UNITED BANK LIMITED Date : 11/0 Category of Shareholders As On 31/12/2017 No of Folio Balance Share Percentage DIRECTORS, CEO & CHILDREN 14 22324456 1.8236 BANKS, DFI & NBFI 18 25459340 2.0797 INSURANCE COMPANIES 20 29349033 2.3974 MUTUAL FUNDS 45 22566835 1.8434 20072 39695840 3.2426 1146 7798326 0.6370 84 5895729 0.4816 329 930095625 75.9771 3 32295140 2.6381 148 105999022 8.6588 4 1846782 0.1509 18 853088 0.0697 1 471 0.0000 21902 1224179687 100.0000 GENERAL PUBLIC (LOCAL) GENERAL PUBLIC (FOREIGN) OTHERS FOREIGN COMPANIES GOVT. OWNED ENTITIES / BANKS JOINT STOCK COMPANIES PUBLIC SECTOR COMPANIES CHARITABLE TRUSTS MODARABAS Company Total 1 Annual Report 2017 255
258. Details of Mutual Funds & Modarabas Details of Mutual Funds & Modarabas As on 31-12-2017 Folio No. 5371000028 5454000028 5488000025 5645000024 5652000023 5777000029 5959000027 6072000023 6171000021 6197000029 6213000025 6411000021 7252000020 7377000026 9480000021 9506000026 10603000021 10660000025 10728000027 10918000024 11049000029 11056000028 11262000023 11809000026 11924000022 12120000028 12195000021 12310000025 12336000023 12625000027 12989000025 13136000026 13607000028 13714000025 14472000025 14480000024 14514000028 14902000021 15388000025 16022000026 16188000028 16394000023 16485000022 16535000024 16683000027 00000015653 256 Name Code Balance Held CDC - TRUSTEE MCB PAKISTAN STOCK MARKET FUND MCBFSL - TRUSTEE JS VALUE FUND CDC - TRUSTEE PAKISTAN CAPITAL MARKET FUND CDC - TRUSTEE PICIC INVESTMENT FUND CDC - TRUSTEE JS LARGE CAP. FUND CDC - TRUSTEE PICIC GROWTH FUND CDC - TRUSTEE ATLAS STOCK MARKET FUND CDC - TRUSTEE FIRST DAWOOD MUTUAL FUND CDC - TRUSTEE FAYSAL BALANCED GROWTH FUND CDC - TRUSTEE ALFALAH GHP VALUE FUND CDC - TRUSTEE UNIT TRUST OF PAKISTAN CDC - TRUSTEE AKD INDEX TRACKER FUND CDC - TRUSTEE FAYSAL ASSET ALLOCATION FUND CDC - TRUSTEE UBL STOCK ADVANTAGE FUND CDC - TRUSTEE NAFA STOCK FUND CDC - TRUSTEE NAFA MULTI ASSET FUND CDC - TRUSTEE APF-EQUITY SUB FUND CDC - TRUSTEE JS PENSION SAVINGS FUND - EQUITY ACCOUNT CDC - TRUSTEE HBL - STOCK FUND MC FSL TRUSTEE JS - INCOME FUND MC FSL - TRUSTEE JS GROWTH FUND CDC - TRUSTEE HBL MULTI - ASSET FUND CDC - TRUSTEE MCB PAKISTAN ASSET ALLOCATION FUND CDC - TRUSTEE ALFALAH GHP STOCK FUND CDC - TRUSTEE ALFALAH GHP ALPHA FUND CDC - TRUSTEE NIT-EQUITY MARKET OPPORTUNITY FUND CDC - TRUSTEE ABL STOCK FUND CDC - TRUSTEE FIRST HABIB STOCK FUND CDC - TRUSTEE LAKSON EQUITY FUND CDC-TRUSTEE NAFA ASSET ALLOCATION FUND CDC - TRUSTEE PAKISTAN INCOME ENHANCEMENT FUND - MT CDC - TRUSTEE MCB DYNAMIC CASH FUND - MT CDC - TRUSTEE PICIC STOCK FUND CDC - TRUSTEE HBL PF EQUITY SUB FUND CDC - TRUSTEE UBL ASSET ALLOCATION FUND CDC - TRUSTEE PIML STRATEGIC MULTI ASSET FUND CDC - TRUSTEE FIRST CAPITAL MUTUAL FUND CDC - TRUSTEE NATIONAL INVESTMENT (UNIT) TRUST CDC - TRUSTEE ABL PENSION FUND - EQUITY SUB FUND CDC - TRUSTEE NAFA INCOME OPPORTUNITY FUND - MT CDC-TRUSTEE NITPF EQUITY SUB-FUND CDC - TRUSTEE PIML ASSET ALLOCATION FUND CDC - TRUSTEE FAYSAL MTS FUND - MT CDC - TRUSTEE LAKSON TACTICAL FUND CDC - TRUSTEE PAKISTAN INCOME FUND - MT B.R.R. GUARDIAN MODARABA 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 006 17 United Bank Limited 2,096,000 114,100 114,600 876,900 65,000 1,620,300 1,644,400 6,500 5,000 412,200 179,000 109,729 14,600 1,645,800 3,071,740 185,691 127,060 34,000 1,613,700 1,500 255,800 74,300 200,000 540,300 363,300 2,072,602 1,692,200 22,400 788,300 317,003 6,300 32,700 94,000 71,200 225,900 20,900 17,000 991,099 18,800 480,500 27,000 32,000 59,800 154,911 70,700 471 Percentage 0.1712 0.0093 0.0094 0.0716 0.0053 0.1324 0.1343 0.0005 0.0004 0.0337 0.0146 0.0090 0.0012 0.1344 0.2509 0.0152 0.0104 0.0028 0.1318 0.0001 0.0209 0.0061 0.0163 0.0441 0.0297 0.1693 0.1382 0.0018 0.0644 0.0259 0.0005 0.0027 0.0077 0.0058 0.0185 0.0017 0.0014 0.0810 0.0015 0.0393 0.0022 0.0026 0.0049 0.0127 0.0058 0.0000
259. ReportID : SH0930MRG( 10D09 ) UNITED BANK LIMITED Pattern of Shareholding UserID : imranfaiz Pattern of Shareholding As on December 31, 2017 As On 31/12/2017 <---- HAVING SHARES ----> NO. OF SHAREHOLDERS From To SHARES HELD PERCENTAGE 4183 1 100 263083 0.0215 14057 101 500 6157623 0.5030 1086 501 1000 910227 0.0744 1331 1001 5000 3172969 0.2592 329 5001 10000 2483452 0.2029 130 10001 15000 1628918 0.1331 72 15001 20000 1312359 0.1072 63 20001 25000 1436133 0.1173 47 25001 30000 1304342 0.1065 35 30001 35000 1164600 0.0951 31 35001 40000 1178418 0.0963 20 40001 45000 853576 0.0697 20 45001 50000 980338 0.0801 27 50001 55000 1417834 0.1158 19 55001 60000 1095215 0.0895 13 60001 65000 821445 0.0671 17 65001 70000 1160020 0.0948 12 70001 75000 876956 0.0716 10 75001 80000 774993 0.0633 8 80001 85000 672400 0.0549 7 85001 90000 619224 0.0506 5 90001 95000 464900 0.0380 13 95001 100000 1288267 0.1052 7 100001 105000 720514 0.0589 10 105001 110000 1080678 0.0883 7 110001 115000 790762 0.0646 7 115001 120000 823580 0.0673 5 120001 125000 611800 0.0500 5 125001 130000 637479 0.0521 2 130001 135000 263151 0.0215 12 135001 140000 1653800 0.1351 3 140001 145000 430900 0.0352 6 145001 150000 887300 0.0725 Annual Report 2017 257
260. ReportID : SH0930MRG( 10D09 ) UNITED BANK LIMITED Pattern of Shareholding UserID : imranfaiz Pattern of Shareholding As on December 31, 2017 As On 31/12/2017 <---- HAVING SHARES ----> NO. OF SHAREHOLDERS 258 From To SHARES HELD PERCENTAGE 5 150001 155000 765853 0.0626 5 155001 160000 784857 0.0641 4 160001 165000 650754 0.0532 3 165001 170000 499900 0.0408 3 170001 175000 520494 0.0425 2 175001 180000 357300 0.0292 1 180001 185000 182000 0.0149 2 185001 190000 372091 0.0304 5 190001 195000 964841 0.0788 4 195001 200000 798500 0.0652 5 200001 205000 1011396 0.0826 2 205001 210000 418700 0.0342 2 210001 215000 428754 0.0350 1 215001 220000 219110 0.0179 2 220001 225000 442547 0.0362 6 225001 230000 1368700 0.1118 3 230001 235000 700000 0.0572 2 235001 240000 477315 0.0390 1 240001 245000 244400 0.0200 3 245001 250000 742878 0.0607 3 250001 255000 757944 0.0619 3 255001 260000 773560 0.0632 3 265001 270000 804470 0.0657 3 270001 275000 817289 0.0668 2 275001 280000 553100 0.0452 2 280001 285000 569100 0.0465 1 290001 295000 292592 0.0239 5 295001 300000 1495651 0.1222 2 300001 305000 606800 0.0496 2 315001 320000 636403 0.0520 3 320001 325000 972400 0.0794 3 325001 330000 984200 0.0804 1 330001 335000 335000 0.0274 United Bank Limited
261. ReportID : SH0930MRG( 10D09 ) UNITED BANK LIMITED Pattern of Shareholding UserID : imranfaiz Pattern of Shareholding As on December 31, 2017 As On 31/12/2017 <---- HAVING SHARES ----> NO. OF SHAREHOLDERS From To SHARES HELD PERCENTAGE 2 335001 340000 670942 0.0548 1 355001 360000 360000 0.0294 4 360001 365000 1448547 0.1183 1 370001 375000 370300 0.0302 3 375001 380000 1133038 0.0926 1 380001 385000 383500 0.0313 1 395001 400000 397100 0.0324 2 405001 410000 814500 0.0665 1 410001 415000 412200 0.0337 1 415001 420000 418962 0.0342 1 420001 425000 421600 0.0344 2 425001 430000 854177 0.0698 2 430001 435000 866358 0.0708 1 445001 450000 450000 0.0368 3 450001 455000 1358120 0.1109 1 460001 465000 463243 0.0378 2 470001 475000 942200 0.0770 1 475001 480000 478487 0.0391 1 480001 485000 480500 0.0393 1 485001 490000 488300 0.0399 1 490001 495000 494759 0.0404 1 495001 500000 499127 0.0408 2 505001 510000 1015463 0.0830 2 510001 515000 1027343 0.0839 1 520001 525000 524671 0.0429 2 535001 540000 1077600 0.0880 2 540001 545000 1082950 0.0885 2 550001 555000 1107820 0.0905 3 555001 560000 1672779 0.1366 2 575001 580000 1157058 0.0945 4 590001 595000 2369595 0.1936 2 600001 605000 1202100 0.0982 1 605001 610000 610000 0.0498 Annual Report 2017 259
262. ReportID : SH0930MRG( 10D09 ) UNITED BANK LIMITED Pattern of Shareholding UserID : imranfaiz Pattern of Shareholding As on December 31, 2017 As On 31/12/2017 <---- HAVING SHARES ----> NO. OF SHAREHOLDERS 260 From To SHARES HELD PERCENTAGE 2 630001 635000 1264800 0.1033 1 635001 640000 639800 0.0523 1 640001 645000 641936 0.0524 1 650001 655000 652400 0.0533 1 655001 660000 657900 0.0537 2 670001 675000 1347307 0.1101 2 675001 680000 1358350 0.1110 1 690001 695000 694000 0.0567 1 695001 700000 700000 0.0572 2 700001 705000 1407583 0.1150 2 705001 710000 1416450 0.1157 1 710001 715000 710100 0.0580 2 720001 725000 1444270 0.1180 1 725001 730000 728936 0.0595 1 730001 735000 731700 0.0598 2 745001 750000 1496000 0.1222 4 755001 760000 3033937 0.2478 1 775001 780000 776000 0.0634 1 780001 785000 784600 0.0641 2 785001 790000 1576500 0.1288 1 790001 795000 790400 0.0646 3 795001 800000 2395300 0.1957 2 800001 805000 1604693 0.1311 1 810001 815000 811660 0.0663 1 820001 825000 820500 0.0670 2 845001 850000 1699000 0.1388 1 860001 865000 862273 0.0704 2 875001 880000 1754100 0.1433 1 905001 910000 908505 0.0742 1 945001 950000 950000 0.0776 1 965001 970000 967100 0.0790 1 990001 995000 991099 0.0810 1 995001 1000000 1000000 0.0817 United Bank Limited
263. ReportID : SH0930MRG( 10D09 ) UNITED BANK LIMITED Pattern of Shareholding UserID : imranfaiz Pattern of Shareholding As on December 31, 2017 As On 31/12/2017 <---- HAVING SHARES ----> NO. OF SHAREHOLDERS From To SHARES HELD PERCENTAGE 1 1010001 1015000 1012800 0.0827 1 1015001 1020000 1019000 0.0832 1 1025001 1030000 1027800 0.0840 1 1045001 1050000 1047400 0.0856 1 1070001 1075000 1071142 0.0875 1 1105001 1110000 1108400 0.0905 1 1110001 1115000 1110400 0.0907 1 1115001 1120000 1117500 0.0913 1 1120001 1125000 1121400 0.0916 1 1125001 1130000 1130000 0.0923 3 1195001 1200000 3594492 0.2936 1 1205001 1210000 1207607 0.0986 3 1230001 1235000 3697436 0.3020 1 1245001 1250000 1246100 0.1018 1 1250001 1255000 1253200 0.1024 1 1260001 1265000 1262400 0.1031 2 1280001 1285000 2560998 0.2092 1 1315001 1320000 1318600 0.1077 1 1330001 1335000 1332000 0.1088 1 1335001 1340000 1338800 0.1094 1 1400001 1405000 1401400 0.1145 2 1460001 1465000 2925315 0.2390 1 1490001 1495000 1493815 0.1220 1 1510001 1515000 1510800 0.1234 1 1515001 1520000 1520000 0.1242 2 1540001 1545000 3082800 0.2518 1 1595001 1600000 1596199 0.1304 1 1610001 1615000 1613700 0.1318 1 1620001 1625000 1620300 0.1324 1 1635001 1640000 1638052 0.1338 1 1640001 1645000 1644400 0.1343 1 1645001 1650000 1645800 0.1344 1 1650001 1655000 1655000 0.1352 Annual Report 2017 261
264. ReportID : SH0930MRG( 10D09 ) UNITED BANK LIMITED Pattern of Shareholding UserID : imranfaiz Pattern of Shareholding As on December 31, 2017 As On 31/12/2017 <---- HAVING SHARES ----> NO. OF SHAREHOLDERS 262 From To 1 1655001 1660000 1660000 0.1356 1 1690001 1695000 1692200 0.1382 1 1695001 1700000 1698400 0.1387 1 1875001 1880000 1879300 0.1535 1 1885001 1890000 1889475 0.1543 1 1895001 1900000 1899400 0.1552 1 1930001 1935000 1931190 0.1578 1 1935001 1940000 1936000 0.1581 1 1945001 1950000 1945100 0.1589 2 1995001 2000000 4000000 0.3267 1 2070001 2075000 2072602 0.1693 1 2075001 2080000 2075400 0.1695 1 2095001 2100000 2096000 0.1712 1 2100001 2105000 2103458 0.1718 1 2195001 2200000 2200000 0.1797 2 2205001 2210000 4415500 0.3607 1 2245001 2250000 2245200 0.1834 1 2290001 2295000 2292100 0.1872 1 2345001 2350000 2348870 0.1919 1 2390001 2395000 2394492 0.1956 1 2415001 2420000 2420000 0.1977 1 2445001 2450000 2448940 0.2000 1 2495001 2500000 2498906 0.2041 1 2510001 2515000 2512900 0.2053 1 2965001 2970000 2966100 0.2423 1 2995001 3000000 2996800 0.2448 1 3055001 3060000 3055998 0.2496 1 3070001 3075000 3071740 0.2509 1 3290001 3295000 3294900 0.2692 1 3315001 3320000 3316763 0.2709 1 3345001 3350000 3345100 0.2733 1 3410001 3415000 3415000 0.2790 1 3525001 3530000 3528900 0.2883 United Bank Limited SHARES HELD PERCENTAGE
265. ReportID : SH0930MRG( 10D09 ) UNITED BANK LIMITED Pattern of Shareholding UserID : imranfaiz Pattern of Shareholding As on December 31, 2017 As On 31/12/2017 <---- HAVING SHARES ----> NO. OF SHAREHOLDERS From To 1 3825001 3830000 3826200 0.3126 1 3845001 3850000 3847471 0.3143 1 3980001 3985000 3983271 0.3254 1 4235001 4240000 4238000 0.3462 1 4475001 4480000 4476218 0.3656 1 4945001 4950000 4949800 0.4043 1 5005001 5010000 5007100 0.4090 1 5015001 5020000 5018200 0.4099 1 5270001 5275000 5273327 0.4308 1 5590001 5595000 5594900 0.4570 1 6060001 6065000 6064800 0.4954 1 7090001 7095000 7091379 0.5793 1 7445001 7450000 7446661 0.6083 1 7450001 7455000 7453800 0.6089 1 8195001 8200000 8198399 0.6697 1 8560001 8565000 8562295 0.6994 1 8735001 8740000 8735778 0.7136 1 8835001 8840000 8835281 0.7217 1 9150001 9155000 9154435 0.7478 1 11250001 11255000 11252935 0.9192 1 11395001 11400000 11397943 0.9311 1 12440001 12445000 12442568 1.0164 1 13950001 13955000 13954877 1.1399 1 17460001 17465000 17461000 1.4263 1 20640001 20645000 20642501 1.6862 1 31160001 31165000 31163426 2.5457 1 93645001 93650000 93649744 7.6500 1 631725001 631730000 631728895 51.6043 1224179687 100.0000 21902 SHARES HELD Company Total PERCENTAGE Annual Report 2017 263
266. Shares Trading ( Sale(Sale / Purchase ) By Directors, Executives ofExecutives UBL* Shares Trading / Purchase) by Directors, of UBL* and their and Minor and theirSpouses Spouses and Children Minor Children UBL DIRECTOR NAME RIZWAN PERVEZ NO. OF SHARES 85,000 SALE/PURCHASE PURCHASE * No Sale / Purchase transaction was made by CEO, CFO, Company Secretary and Head Internal Audit UBL EXECUTIVES NAME ASAD H. BURNEY FAISAL SULTAN IMRAN KAPADIA M. NADEEM SIDDIQUI MASHKOOR AHMAD BABAR MINHAS WIRASAT ALI MUHAMMAD MUSHTAQ MUHAMMAD NASEEM MUHAMMAD NASEEM MUHAMMAD SALEEM RIZWAN HAMEED CHAPRA SYED ASAD HASAN WAJIH UL HAQ SIDDIQUI 264 United Bank Limited NO. OF SHARES 25,000 4,516 28,000 5,000 24,725 6,375 2,500 16,000 5,000 700 7,000 5,500 519 SALE/PURCHASE SALE SALE SALE PURCHASE SALE SALE SALE PURCHASE SALE SALE SALE SALE SALE
267. Notice of 59th Annual General Meeting of United Bank Limited Notice is hereby given that the 59th Annual General Meeting (“AGM”) of the Shareholders of United Bank Limited (the “Bank” or “UBL”) will be held on Saturday, 31 March 2018 at 09:30 a.m. at Islamabad Marriott Hotel, Islamabad to transact the following business: Ordinary Business: 1. To confirm the minutes of the 58th Annual General Meeting held on 25 March 2017. 2. To receive, consider and, if thought fit, adopt the Annual Audited Financial Statements (consolidated and unconsolidated), Statement of Compliance with the Code of Corporate Governance 2012 of the Bank for the year ended 31 December 2017 together with the Directors’ Report and Auditors’ Report thereon. 3. To consider and, if thought fit, approve as recommended by the Board of Directors, final cash dividend at the rate of Rs. 4/- per share i.e. 40%, in addition to 90% interim dividend already declared/paid for the year ended 31 December 2017. 4. To consider and, if thought fit, appoint two External Auditors to hold office from this AGM till the conclusion of the next AGM of the Bank and to fix their remuneration. The retiring External Auditors namely, M/s. A. F. Ferguson & Company, Chartered Accountants and M/s. KPMG Taseer Hadi & Company, Chartered Accountants have consented to be so appointed and the Board of Directors has recommended their appointment. Special Business: 5. To consider and, if thought fit, approve the amount of remuneration paid to the Non-Executive Directors of the Bank for attending the Board and/or Committees meetings held during the year and in that connection to pass the following resolution, as an ordinary resolution, with or without modification, addition or deletion: “RESOLVED that the remuneration paid to the Non-Executive Directors of UBL including the Chairman during the year 2017, for attending the Board and / or Committees meetings as disclosed in the Note 37 of the Audited Financial Statements of the Bank for the year ended 31 December 2017, be and is hereby confirmed and approved on post facto basis.” 6. To consider, and if thought fit, pass the following Special Resolution (with or without modifications) under Section 83(1)(b) of the Companies Act, 2017 for issuance of a maximum of 59,000,000 ordinary shares of PKR 10 each of the Bank, subject to review and approval by State Bank of Pakistan (“SBP”), by way of otherwise than rights upon conversion of the Term Finance Certificates proposed to be issued by the Bank as Additional Tier 1 Capital on the terms and conditions applicable thereto. “RESOLVED that, subject to the approval of the Securities and Exchange Commission of Pakistan and the State Bank of Pakistan (“SBP”), the issuance by way of otherwise than rights of a maximum of 59,000,000 ordinary shares of PKR 10 each of United Bank Limited (“the Bank”), upon conversion of the Term Finance Certificates (“TFCs”) proposed to be issued by the Bank as Additional Tier 1 Capital under the Basel III framework implemented by the SBP vide BPRD circular # 06 dated August 15, 2013 (“Circular”), be and is hereby approved on the terms/conditions stated in the statement of material facts. FURTHER RESOLVED that, the Chief Executive Officer, Chief Financial Officer and Company Secretary of the Bank be and are hereby authorized jointly (any two of them acting jointly) to complete any/all the necessary corporate and regulatory formalities, sign all documents/agreements in respect of the above, including but not limited to filing of application with the Securities and Exchange Commission of Pakistan for approval under Section 83(1)(b) of the Companies Act, 2017 and/or to do any other acts, deeds, things and matters in respect of the above.” Annual Report 2017 265
268. Notice of 59th Annual General Meeting of United Bank Limited 7 . To transact any other business with the permission of the Chairman. (Attached to this Notice is a Statement of Material Facts covering the abovementioned Special Business, as required under Section 134(3) of the Companies Act, 2017) By order of the Board Aqeel Ahmed Nasir Company Secretary & Chief Legal Counsel Karachi, 09 March 2018 266 United Bank Limited
269. Notice of 59th Annual General Meeting of United Bank Limited Notes : 1. The Share Transfer Books of the Bank shall remain closed from 24 March 2018 to 31 March 2018 (both days inclusive). Transfers received at M/s. THK Associates (Pvt.) Limited, 1st Floor, 40-C, Block-6, P.E.C.H.S, Karachi-75400, the Registrar and Share Transfer Agent of the Bank, by the close of the business on 22 March 2018 will be treated in time for the purpose of the above entitlement. 2. A member entitled to attend and vote at this AGM is entitled to appoint a person as a proxy to attend and vote for and on his/her behalf. A proxy need not be a member. The instrument appointing a proxy and the power of attorney/board resolution or other authority (if any) under which it is signed or a notarized certified copy of the power or authority shall be deposited at the office of M/s. THK Associates (Pvt.) Limited, 1st Floor, 40-C, Block-6, P.E.C.H.S, Karachi-75400, the Registrar and Share Transfer Agent of the Bank, not later than forty eight (48) hours before the time of holding the AGM, and must be duly stamped, signed and witnessed. 3. The CDC Account Holders and Sub-Account Holders, whose registration details are available in the Share Book Details Report, shall be required to produce their respective original Computerized National Identity Card (CNIC) or original Passport at the time of attending the Annual General Meeting to facilitate identification. Such Account Holders and Sub-Account Holders should also bring / know their respective participation I.D. No. and the CDC Account No. and in case of proxy, he/she must enclose an attested copy of his/her CNIC or Passport. Representative(s) of corporate member(s) should bring attested copy of Board Resolution / Power of Attorney and/ or all such documents that are required for such purpose under Circular No.1 dated 26 January 2000 issued by the Securities and Exchange Commission of Pakistan (“SECP”). 4. Members are requested to timely notify any change in their addresses and provide copies of their CNIC /NTN (if not provided earlier) to Bank’s Registrar / Share Transfer Agent, M/s. THK Associates (Pvt.) Limited, 1st Floor, 40-C, Block-6, P.E.C.H.S, Karachi-75400. 5. Deduction of Withholding Tax on the Amount of Dividend: As per the provisions of Section 150 of the Income Tax Ordinance, 2001 (“Ordinance”), different rates are prescribed for deduction of withholding tax on the amount of dividend paid by the companies. The current withholding tax rates are as under: (a) For filers of income tax returns: (b) For non-filers of income tax returns: 15.00% 20.00% To enable the Bank to make tax deduction on the amount of cash dividend @ 15.00% instead of 20.00%, all the shareholders whose names are not entered into the Active Taxpayers List (ATL) provided on the website of the Federal Board of Revenue (“FBR”), despite the fact that they are filers, are advised to make sure that their names are entered into ATL before the date of issuance of Dividend Warrants, otherwise tax on their cash dividend will be deducted @ 20.00%. The corporate shareholders having CDC account are required to have their National Tax Number (NTN) updated with their respective participants, whereas corporate physical shareholders should send a copy of their NTN certificates to the Bank or Bank’s Share Registrar and Share Transfer Agent, M/s. THK Associates (Pvt.) Limited. The shareholders while sending NTN or NTN certificates, as the case may be, must quote company’s name and also their respective Folio numbers. As per FBR’s clarification letters C.No. 1(29)WHT/2006 dated June 30, 2010 and C.No.1(43)DG(WHT)/2008-VolII.664 17-R dated May 12, 2015, a valid Exemption Certificate under Section 159 of the Ordinance is mandatory to claim exemption of withholding tax under Clause 47(B) of Part-IV of Second Schedule to the Ordinance. Those who fall in the category mentioned in above Clause must provide valid Tax Exemption Certificate to our Registrar and Share Transfer Agent, otherwise tax will be deducted on dividend amount as per rates prescribed in Section 150 of the Ordinance. Annual Report 2017 267
270. Notice of 59th Annual General Meeting of United Bank Limited For shareholders holding their shares jointly as per the clarification issued by the FBR , withholding tax will be determined separately on “Filer / Non-Filer” status of principal shareholder as well as joint-holder(s) based on their shareholding proportions. Therefore, all shareholders who hold shares jointly are required to provide shareholding proportions of principal shareholder and Joint-holder(s) in respect of shares held by them to the Registrar and Share Transfer Agent in writing as follows: Folio / CDC Account No. Principal Shareholder Total shares Name and CNIC No. Shareholding Proportion (No. of Shares) Joint Shareholder(s) Name and CNIC No. Shareholding Proportion (No. of Shares) For any query/difficulty/information, the members may contact the Bank’s Share Registrar and Share Transfer Agent, at the following address, phone/fax numbers or e-mail address: THK Associates (Pvt.) Limited Head Office, 1st Floor, 40-C, Block-6, P.E.C.H.S, Karachi-75400. UAN:  021-111-000-322. Direct: 021- 34168270 Fax: 021- 34168271 Email: secretariat@thk.com.pk Web: www.thk.com.pk 6. Urgent Provision of Valid CNIC Copy (Mandatory) In pursuance with the SECP’s Notification No. SRO.831 (I)/2012 of July 05, 2012, SECP has directed all listed companies to mention CNIC numbers of the registered members on the dividend warrants. Corporate entities are requested to provide NTNs. Please note that in case of non-availability of valid copy of CNIC in respect of members having physical shareholding, their dividend warrants could be withheld. You are therefore requested to submit a copy of your valid CNIC/NTN/Passport within ten (10) days from the date of this Notice to the Bank’s Registrar and Share Transfer Agent. In case you have already provided copy of your valid CNIC/NTN/Passport, please ignore this instruction. 7. Submission of Bank Mandate with International Bank Account Number (IBAN) for payment of Cash Dividend Electronically into the Bank Accounts of the Shareholders (Mandatory Requirement) All shareholders of the Bank are hereby informed that under the provisions of Section 242 of the Companies Act, 2017, all listed companies including UBL are required to pay future cash dividends only through electronic mode directly into the designated bank accounts of the entitled shareholders. Therefore, under the new law from now onwards, physical dividend warrants will not be issued to the shareholders. In this regard UBL has already sent letters to the shareholders on 18 December 2017. Besides, the Bank Published a Notice in newspapers on 14 October 2017 and 05 December 2017 requesting the shareholder to provide IBAN. In view of foregoing, all the shareholders are again requested to provide their Bank Mandate details including International Bank Account Number (IBAN) alongwith copy of valid CNIC at the earliest. In case of non- provision of Dividend Mandate, cash dividend(s) could be withheld according to SECP directives. 268 United Bank Limited
271. Notice of 59th Annual General Meeting of United Bank Limited For providing Dividend Mandate details to CDC /Registrar and Share Transfer Agent, the Form placed on Bank’s website and is appended below may be used. The link to get the said Form is as under: http://www.ubldirect.com/corporate/pdf/bankmandateform.pdf In this connection, CDC shareholders may submit their Dividend Mandate 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 Registrar and Share Transfer Agent of the Bank at the following address. THK Associates (Pvt.) Limited, 1st Floor, 40-C, Block-6, P.E.C.H.S, Karachi-75400. UAN # 021-111-000-322, Fax # 021- 34168271 Dividend Mandate Form I , _____________________________________ S/o, D/o, W/o, _____________________________________ hereby authorize United Bank Limited to directly credit cash dividends, declared by it, in my bank account as detailed below: i) Shareholder’s Detail Name of Company Name of Shareholder Folio No. / CDC Participants ID A/c No. CNIC No. Passport No. (in case of foreign shareholder) Land Line Phone Number Cell Number ii) Shareholder’s Bank Detail Title of Bank Account International Bank Account Number (IBAN) – Mandatory P K Bank’s Name Branch Name and Address It is stated that the above-mentioned information is correct and I will intimate any changes in the above-mentioned information to the Registrar and Share Transfer Agent of the Bank and / or Central Depository Company (“CDC”) as soon as any change occurs. ______________________ (Signature of shareholder) KINDLY NOTE: COMPANY COULD WITHHOLD THE PAYMENT OF DIVIDEND OF A MEMBER WHERE THE MEMBER HAS NOT PROVIDED THE COMPLETE INFORMATION OR DOCUMENTS AS SPECIFIED. Annual Report 2017 269
272. Notice of 59th Annual General Meeting of United Bank Limited The shareholders who hold shares in CDC are requested to submit the above mentioned Dividend Mandate Form , duly filled-in, to the relevant Broker/Participants/Investor Account Services of the CDC where member’s CDC account is being dealt. The shareholders who hold shares in physical form are requested to submit the above-mentioned Dividend Mandate Form, duly filled-in, to Company’s Registrar and Share Transfer Agent, as mentioned below: M/s THK Associates (Pvt.) Limited 1st Floor, 40-C, Block-6, P.E.C.H.S., Karachi-75400. For any query, you may please contact on Tel # 021-111-000-322 or email at sfc@thk.com.pk or secretariat@thk.com.pk 8. Consent for Video Link Facility: Members can attend and participate in the AGM through video-link. The Bank will provide the facility of video-link on demand of members residing in a city, collectively holding 10% or more shareholding in the Bank. Members who wish to avail this facility are requested to fill the below Video Link Form and submit it to the Company at its registered office at least seven (7) days prior to date of the AGM. 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. Video-Link Form I/We, __________________________________ of ____________________________, being a member of United Bank Limited, holder of ___________________________ Ordinary Share(s) as per Register Folio No./CDC Account No.__________________ hereby opt for video-link facility at _____________________ (Name of City) ____________________ Signature of the Member 9. Placement of Financial Statements on Website: The financial statements of the Bank for the year ended December 31, 2017 along with reports have been placed on the website of the Bank: http://www.ubldirect.com/Corporate/InvestorRelations/FinancialStatement.aspx. 270 United Bank Limited
273. Statement of Material Facts Under Section 134 (3) of the Companies Act, 2017, concerning to the Special Business: This statement sets out the material facts pertaining to the special business to be transacted at the Annual General Meeting of United Bank Limited (“the Bank”) to be held on March 31, 2018. Item No. 5: Remuneration of the Non-Executive Directors of the Bank As required under SBP Prudential Regulation G-1, total amount of remuneration paid/payable to the non-executive directors including the Chairman for attending the Board meetings and/or Committees meetings during the year 2017 as disclosed in Note 37 of the Audited Financial Statements for the year ended 31 December 2017 is submitted to the shareholders for approval on a post facto basis. Item No. 6: Issuance of shares, without rights issuance, upon conversion of TFCs issued by the Bank as Additional Tier 1 Capital 1. The Bank is proposing to issue fully paid up, rated, listed, perpetual, unsecured, subordinated, non-cumulative and contingent convertible debt instruments in the nature of Term Finance Certificates (“TFCs”) under Section 66 of the Companies Act, 2017 of up to PKR 10,000,000,000/- (Rupees Ten Billion Only) (“Proposed TFC Issuance”) (including an upsize option/ green shoe option of PKR 3,000,000,000/- (Rupees Three Billion Only)) as Additional Tier 1 capital under the Basel III framework implemented by the State Bank of Pakistan (“SBP”) vide BPRD Circular No. 06 dated August 15, 2013 (“Circular”). The Proposed TFC Issuance is subject to the final approval of the SBP, the Securities and Exchange Commission of Pakistan (“SECP”) and the Pakistan Stock Exchange Limited (“PSX”) under the Public Offering Regulations, 2017 and rules of the PSX. 2. The Circular prescribes a mandatory loss absorption feature for Additional Tier I capital instruments pursuant to which the TFCs will, if directed by the SBP, be subject to mandatory conversion into ordinary shares of the Bank, on the occurrence of the following trigger events: (i) the CET-1 Trigger Event (as defined in paragraph A-5-2 of Annexure 5 of the Circular); (ii) the PONV trigger event (as defined in paragraph A-5-3 of Annexure 5 of the Circular); or (iii) Lock-In Event, i.e. failure by the Bank to comply with the lock-in clause (as specified in paragraph (iii)(g) of Annexure 2 of the Circular). Accordingly, at the direction of the SBP, the Bank will be under an obligation to mandatorily convert the TFCs on the occurrence of any of the aforementioned trigger events. Note: The Circular can be accessed from http://www.sbp.org.pk/bprd/2013/Basel_III_instructions.pdf. 3. In accordance with the requirements of the Circular, the Bank has determined, subject to review and approval by the SBP, that a maximum of 59,000,000 ordinary shares will be issued upon conversion of the TFCs on the occurrence of any of the trigger events. To secure the Bank’s obligation to convert the TFCs, the Circular expressly requires that there should be no impediments (legal or other) to the conversion i.e. the Bank should have all prior authorizations (sufficient room in authorized capital etc.) including regulatory approvals to issue the common shares upon conversion. To the extent ordinary shares will be issued to the TFC holders on a without rights basis at the time of conversion of the TFCs, the Bank is required to comply with Section 83(1)(b) of the Companies Act, 2017 and which requires the Bank to obtain the approval of its shareholders and the SECP. Such approvals are, in terms of the Circular and the Public Offering Regulations, 2017, required to be procured before the issuance of the TFCs. Annual Report 2017 271
274. 4 . The shareholders are therefore requested to consider and give their approval by way of special resolution for the issuance otherwise than by way of rights of ordinary shares of the Bank upon conversion of the TFCs. The terms of conversion of the TFCs are set out in more detail herein below: Conversion Trigger Events The TFCs shall, only if directed by the SBP, be permanently converted into ordinary shares upon: (i) the CET-1 Trigger Event (as defined in paragraph A-5-2 of Annexure 5 of the Circular); (ii) the PONV trigger event (as defined in paragraph A-5-3 of Annexure 5 of the Circular); or (iii) Lock-In Event, i.e. failure by the Bank to comply with the lock-in clause (as specified in paragraph (iii)(g) of Annexure 2 of the Circular). Conversion Amount In the case of CET 1 Trigger Event, the Bank will have full discretion to determine the amount of TFCs to be converted into ordinary shares, which amount shall at least be the amount required to immediately return the Bank’s CET 1 ratio to above the CET 1 Trigger Event but will not exceed the amount required to bring the CET 1 ratio to 8.5% of RWA. In the case of a PONV Trigger Event or Lock-In Event, the amount of TFCs to be converted will be determined by the SBP in its sole discretion. Total number of shares to be issued Number of shares to be issued to the TFC holders at the time of conversion will be equal to: No. Shares = Conversion Amount Conversion Price Provided that, at any time, the maximum number of ordinary shares to be issued shall be capped at 59,000,000 ordinary shares, subject to review and approval by the SBP. This number has been calculated on the basis of the conversion ratio of 90 percent of the ordinary share price as at March 01, 2018, and represents the maximum dilution that will be faced by the shareholders of the Bank upon conversion of the TFCs. It may also be noted that the maximum number of shares (i.e. 59,000,000 ordinary shares) will not be adjusted on account of any further issue of capital, stock splits, stock dividends or similar corporate actions. 272 Conversion Price Market price per ordinary share of the Bank on the date of declaration by the SBP of CET1 Trigger Event, PONV Event or Lock-In Event, or, in case market price is not available, the break-up value per ordinary share as duly certified by an independent auditor. To whom the ordinary shares will be issued TFC Holders at the time of conversion. Rate of discount, if applicable. Not Applicable United Bank Limited
275. Type of Ordinary Shares The ordinary shares issued upon conversion of the TFCs will rank pari passu in all respects with existing ordinary shares of the Bank . Authorised Capital The authorised capital of the Bank is currently Rs. 20,000,000,000 (Rupees Twenty Billion Only) divided into 2,000,000,000 ordinary shares of Rs 10 each which is sufficient to allow the conversion of the TFCs as proposed. The Bank is however under a contractual and legal obligation to ensure sufficient room is maintained at all time in its authorized capital to allow for the conversion of the TFCs. Corporate and Regulatory Approvals The conversion of the TFCs into ordinary shares of the Bank is subject to the following corporate and regulatory approvals: (a) Shareholder approval under Section 83(1)(b) of the Companies Act, 2017; (b) Approval of the SECP under Section 83(1)(b) of the Companies Act, 2017; and (c) Approval of the SBP in case of any TFC Holder that, upon conversion, will become shareholder of 5% or more of the issued and paid up share capital of the Bank. Annual Report 2017 273
276. The website link of JamaPunji is available at the website of UBL for the convenience and facilitation of shareholders and invetors .
277. Form Proxy Form ofof Proxy 59th Annual General United Bank Limited General MeetingMeeting of United of Bank Limited 59th Annual I /We, _______________________________________of ______________ being a member of United Bank Limited (“UBL”) and holder of _________________ ordinary shares as per Share Register Folio No. _____________ and / or CDC Participation I.D. No. ________________ and Account No._____________ hereby appoint ________________________________________ of ________________ or failing him ________________________________ of ___________________ as my/our proxy to vote for me/us and on my/our behalf at the 59th Annual General Meeting of UBL scheduled to be held on Saturday, 31 March 2018 at 9:30 a.m. at Islamabad Marriott Hotel, Islamabad and at any adjournment thereof. Signed this _______________ day of ________ 2018. Witness 1: Signature: ___________________________________ Name: _____________________________________ CNIC No. or Passport No: _____________________ Address: ___________________________________ Revenue Stamps of Rs.5/- ___________________________________________ Witness 2: Signature: ___________________________________ Name: _____________________________________ CNIC No. or Passport No: ______________________ _________________________ (Signature should agree with the specimen signature registered with the Registrar) Address: ____________________________________ ___________________________________________ NOTE: A. General: 1. A member entitled to attend and vote at a General Meeting is entitled to appoint a person as proxy to attend and vote instead of him/her. 2. The instrument appointing a proxy should be signed by the member or his/her attorney duly authorized in writing. If the member is a corporation (other than Government of Pakistan), its common seal should be affixed on the instrument. 3. The instrument appointing a proxy, together with Power of Attorney, if any, under which it is signed or a notarially certified copy thereof, should be deposited, with our Registrar/ Share Transfer Agents, M/s. THK Associates (Pvt.) Limited, 1st Floor, 40-C, Block-6, P.E.C.H.S, Karachi, not less than 48 hours before the time of holding the meeting. 4. If a member appoints more than one proxy, and more than one instrument of proxy are deposited by a member with the Registrar, all such instruments of proxy shall be rendered invalid. B. For CDC Account Holders: 1. The proxy form shall be witnessed by two persons whose names, addresses and CNIC / Passport No. shall be mentioned on the form. 2. Attested copies of CNIC or the Passport of the beneficial owners of the proxy shall be furnished with the proxy form. 3. The proxy shall produce his/her original CNIC or original Passport at the time of the meeting. Annual Report 2017 275
278. Affix Correct Postage Registrar M /s. THK Associates (Pvt.) Limited, 1st Floor 40-C, Block-6, P.E.C.H.S, Karachi-75400, Pakistan. 276 United Bank Limited Annual Report 2016 307
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280. � ‫ت‬ ‫اک‬Affix ��‫�د�رس� ڈ‬ Correct ‫اپسچں‬ ‫ٹکٹ‬ Postage ‫رکںی‬ ‫�ررٹسج�ا�ر‬ � Registrar ‫ٹ‬ ‫ز‬ )�‫رسیم�یٹ�اچیےک�اوسییس�اسٹی(رپ�اویئ�ی‬ M/s. THK Associates (Pvt.)،‫ڈٹیمل‬ Limited, � 1st Floor 40-C, Block-6, ،‫اسی‬ P.E.C.H.S, �‫یپ�اییس�اچی‬،6‫�بالک۔‬،40-C،‫پہلیزنمل‬ Karachi-75400, ،۷۴۰۰۰‫رک�ایچ۔‬ Pakistan. ‫ن‬ ‫�پ�ااتسک�۔‬ 278 United Bank Limited Annual Report 2016 307
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