Bank ABC Islamic 2016 Annual Report

102 Pages·2017·2.25 MB·English

Your global Islamic
business partner
Bank ABC Islamic Annual Report 2016

Contents
Vision and Mission 03
Directors’ Report 04
Board of Directors 06
Senior Management 08
Organisational Chart 10
Financial Highlights 12
The Shari’a Supervisory Board 14
Corporate Governance 16
Risk Management 28
Independent Auditors’ Report 62
Consolidated Statement of Financial Position 64
Consolidated Statement of Income 65
Consolidated Statement of Cash Flows 66
Consolidated Statement of Changes in Owners’ Equity 67
Consolidated Statement of Sources and Uses of Zakah 68
and Charity Funds
Notes to the Consolidated Financial Statements 69
Appendix - Code of Conduct 88
Bank ABC Network 96
BANK ABC ISLAMIC 01
ANNUAL REPORT 2016
Our Promise
A team committed
to your success.
Vision and Mission
Our Vision
To be the Islamic Bank of choice in the region and
provide banking solutions for customers’ needs.
Our Mission
Our mission is to uphold our carefully formulated
Islamic principles in the quest for mutual prosperity
for our clients and the Bank. In pursuit of our
mission, we commit the Bank to the purest forms of
Islamic banking products and services from a Shari’a
perspective. We remain demonstrably independent
from the conventional sector and recognise the
importance of Islam’s social objectives in conducting
our business. We are also committed to delivering
a level of service that matches, or exceeds, the
market practice internationally. To do so, we seek
to employ the best available human resources and
technology to apply the highest professional, moral
and ethical standards.
BANK ABC ISLAMIC 03
ANNUAL REPORT 2016
Directors’ Report
16%
Dr. Khaled S. Kawan Increase in net profit for the year.
Chairman
In the name of Allah, the Beneficent, the Merciful. grade rating of BBB-. Liquidity of the Bank continued to
be comfortable, with a capital adequacy ratio of 28%, well
Financial performance for 2016 has built on the good above the regulatory requirement of 12.5%.
results shown in 2015. The de-risking process initiated in
late 2015 for vulnerable sectors in the regional economy The regional market outlook for 2017 remains challenging
allowed us the benefit of reshaping balance sheet with with subdued Government spending and lower loan
higher yielding and lower risk weighted assets. Total demand from the Private Sector. ABC Islamic Bank’s
balance sheet footings grew by 21.6% to $1.6 billion at seasoned relationship management team is well equipped
yearend with an actual decrease of 6.7% in Risk Weighted to handle these challenges. Cross-selling efforts with
Assets. Total operating income increased by almost Treasury Sales & Debt Capital Market activity with the
12% while operating expenses were kept flat, resulting Group’s DCM team contribute to a solid marketing pipeline
in a healthy growth of 16% in Net Profit, despite a very with some transactions already successfully concluded at
challenging year. Most notably asset churn of $752 million, the beginning of the new-year.
combined with lead managing Sukuk issues and Islamic
Syndications, contributed to boosting fee income while We are proud that the achievements of ABC Islamic Bank,
retaining a 20:80 proportion between fee and margin together with its future outlook, have been endorsed by
income. external constituents. ABC Islamic Bank’s rating from the
Islamic International Rating Agency (IIRA) issued on 12
By the Grace of God the credit portfolio retained its December 2016 remained unchanged at A-/A-2 on the
strength with no provisions for the year and the weighted International scale and A+(bh)/A-1(bh) on the National
average risk rating as of yearend reflected an investment scale with a stable outlook.
(All figures stated in US dollars)
04 BANK ABC ISLAMIC
ANNUAL REPORT 2016
I would like to thank the Central Bank of Bahrain for
its regulatory oversight and all relevant Government
ministries for their co-operation. I would also like to thank
our customers for their continued patronage and the
shareholders for their support and to express the Board’s
appreciation to the Shari’a Board for their direction and
wisdom in Shari’a matters.
Last but not least, my gratitude and that of the Board
goes to our staff members who delivered a fantastic year
and exhibited the highest standards of work ethic and
dedication.
Dr. Khaled S. Kawan
Chairman
“The regional market outlook for 2017 remains challenging with
subdued government spending and lower loan demand from
the Private Sector. ABC Islamic Bank’s seasoned relationship
management team is well equipped to handle these challenges.”
BANK ABC ISLAMIC 05
ANNUAL REPORT 2016
Board of Directors
Dr. Khaled S. Kawan Mr. Ray Ferguson Mr. Paul Jennings Mr. Abdulrahman
Chairman Deputy Chairman Deputy Chairman Abdulla Al-Sayed
RC æ >|< RC æ >|< * RC æ >|< * Director
AC NCCGC §
Ph.D. (Doctorat D’Etat) in MBA from Henley Mr. Jennings is Managing MBA, University Of
Banking Laws, University of Management College an Director and CEO of ABC Dundee, UK
Paris I (Sorbonne), France Associate of the Institute of International Bank plc. Certified Public
Bankers in Scotland Previously, Mr Jennings Accountant (CPA)
Dr. Kawan joined Bank was Deputy CEO of ABC
ABC in June 1991. He is Mr. Ferguson was an International Bank plc and Mr. Al-Sayed has over
the Group Chief Executive Executive Vice President Group Head, Global Trade 16 years of experience
Officer of Bank ABC since and Group Chief Banking Finance of Arab Banking in Islamic banking and
October 2013. Previously, Officer at Bank ABC, and Corporation (B.S.C.). Mr its regulations. He is the
Dr. Kawan was Group an independent Non- Jennings joined ABC co-founder and Deputy
Legal Counsel until Executive Director at International Bank plc in Chairman of Itqan Financial
December 2009, when Halcyon Agri Corporation September 1999 and has Services, an investment
he was appointed Group Ltd. Mr. Ferguson is a over 30 years’ experience in business company
Deputy Chief Executive distinguished fellow by the International Wholesale licensed and regulated
of Bank ABC. Dr. Kawan Institute of Banking and Banking sector. He also by the Central Bank of
represents the Bank ABC Finance Singapore, member represents Bank ABC as Bahrain. Prior to that, he
Group as Chairman of of the Singapore Institute a Director of Banco ABC was the Director of Islamic
ABC Islamic since June of Directors. In his role at Brasil. Financial Institutions
2010 and Chairman of Bank ABC, Mr. Ferguson Supervision Directorate
Bank ABC Egypt S.A.E. He provides overall strategic *Resigned from the Board at the Central Bank of
is also a Director of ABC leadership and delivering in May 2016. Bahrain between 1998 and
International Bank PLC, business repositioning 2008. He represented the
London. and growth through an Central Bank of Bahrain
ambitious change program in several committees,
and managed governance notably, the Corporate
across all of BABC’s global Governance Working Group
banking businesses. and the Capital Adequacy
Mr. Ferguson is a renowned requirements for Sukuk,
international banker and Securitizations and Real
board level leader with Estate Investments
almost twenty years of Working Group of the
Chief Executive experience Islamic Financial Services
across Asia, Middle East, Board, Malaysia. He also
Americas. Served over 5 served as a member and
years as Chairman and an expert in number of
Director of several SC Group boards and committees
subsidiary boards. Formerly within banks in Bahrain in
CEO of Standard Chartered recent years. Mr. Al-Sayed
Bank, Singapore from 2009 has presented papers at
until 2014. various conferences and
seminars and published
*Resigned from the Board articles on various subjects,
on 13 March 2017. particularly, regulations,
Basel and risk management
of Islamic banks.
AC Member of the Audit Committee
RC Member of the Risk Committee
NCCGC Member of the Nominations, Compensation &
Corporate Governance Committee
Non-Executive
æ Executive
>|< Non-independent
§ Independent
06 BANK ABC ISLAMIC
ANNUAL REPORT 2016
Mr. Saleh H A Hussain Mr. Andrew Wilson Mr. Naveed Khan Mr. Abdulkarim
Director Director Managing Director Ismaeel Ahmed
AC NCCGC § RC AC NCCGC æ >|< æ >|< Secretary to the Board
MBA, Brunel University, UK BSc (Hons) degree in MBA (Finance) University of Post Graduate Accounting
Banking and Finance the Punjab, Pakistan Diploma, Gulf Polytechnic,
Mr. Hussain has over from the University of Bahrain
35 years of banking Loughborough, United Mr. Khan is Global Head of
experience. He is the Kingdom and an Associate Islamic Banking at Arab Mr. Ahmed has over 30
President of his own of the Chartered Institute of Banking Corporation (B.S.C.) years of experience in both
Company, Saleh Hussain Bankers and has over 25 years Islamic and conventional
Consultancy. His other of international banking banking activities covering
memberships include Mr. Wilson joined Arab experience in Corporate wide areas such as Fund
Bahrain Development Bank - Banking Corporation Banking, Treasury & Capital managing, administration,
Board Member; Solidarity (“ABC” or the “Bank”) in Markets, Consumer Banking operations, accounting,
Holding Company - Director, January 1989 initially in the and Islamic Finance. He auditing, regulatory and
Bahrain; Saudi Hollandi Accounting, Systems and spent his formative years Shari’a compliance through
Bank, Saudi Arabia – Audit Compliance Department. in banking with Citigroup. various posts held at Banco
Committee member; He joined Group Audit in Over a 15 year period with do Brasil, Banque Nationale
Alkhabeer Capital, Saudi 1991 and served as a Senior Citigroup, Mr. Khan moved De Paris and the ABC
Arabia - Head of Audit Team Leader responsible from Karachi, where he was Group. His long years of
Committee; and AlMajdouie for assessing the credit Citi’s Corporate Banking audit experience with the
Group, Saudi Arabia – Head quality of risk assets and Head to Citibank London, Group Audit Department
of Audit Committee. reviewing the operations Budapest, New York and of ABC at various Arab
of ABC Group branches finally back to London and international branches
and subsidiaries in various where his last role was as and subsidiaries further
locations worldwide. Mr. East European Treasurer. exposed him to a wider
Wilson was appointed as In 1999, Mr. Khan moved to range of conventional
Head of Operations for Riyadh to become Head and Islamic retail/
ABC Bahrain in March 2005 of Islamic Banking at a Citi wholesale products and
and as Head of Group affiliate, Saudi American enhanced his awareness
Operations in June 2014. Bank. In 2004 Mr. Khan of the requirements and
He also served as ABC’s moved to ABC Islamic Bank responsibilities of the
Group Money Laundering as Managing Director. Mr. positions he currently holds
Reporting Officer for 3 Khan was appointed as
years and as a Director of the Global Head for Islamic
ABC Securities (the Bank’s Banking for the ABC Group
brokerage company) for 2 of companies in 2009 and
years. Prior to joining the was also appointed as
Bank, Mr. Wilson, worked for a member of the Head
Standard Chartered Bank, Office Credit Committee of
first in London and then in ABC BSC in 2011. Mr. Khan
Qatar and Bahrain. was also appointed as a
member of the Head Office
Asset & Liability Committee
(ALCO) of ABC BSC in 2013
in addition to being voted
as the Deputy Chairman
of IIFM & Chairman of the
Executive Committee of
IIFM.
BANK ABC ISLAMIC 07
ANNUAL REPORT 2016
Senior Management
Mr. Naveed Khan Mr. Hammad Hassan Mr. Iikhar Ali
Managing Director* Head of Marketing* Head of Structuring &
Capital Markets
MBA (Finance) University of MBA, Lahore University MBA, Institute of Business
the Punjab, Pakistan of Management Sciences, Administration, Karachi;
Pakistan; B.Sc. Electrical Chartered Financial Analyst
Mr. Khan is Global Head of Engineering, University of (CFA) from CFA Institute,
Islamic Banking at Arab Engineering & Technology, USA
Banking Corporation (B.S.C.) Lahore, Pakistan
and has over 25 years Mr. Ali has 20 years of
of international banking Mr. Hassan has over Islamic & Investment
experience in Corporate twenty years of banking banking experience. He is
Banking, Treasury & Capital experience, and has been responsible for originating
Markets, Consumer Banking with ABC Islamic Bank (E.C.) and executing Islamic
and Islamic Finance. He since March 2005. Prior capital markets business
spent his formative years to joining ABC, Mr. Hassan for the bank. He joined ABC
in banking with Citigroup. worked for over eleven Islamic Bank in 2013 from
Over a 15 year period with years with Citigroup and Gulf International Bank
Citigroup, Mr. Khan moved its affiliate in Saudi Arabia, where he was heading
from Karachi, where he was Samba Financial Group. Mr. the Debt Capital Markets
Citi’s Corporate Banking Hassan joined Citigroup and Islamic Banking units.
Head to Citibank London, in Pakistan in 1994 and Previously, Mr. Ali headed
Budapest, New York and moved to Samba Financial the Corporate Finance team
finally back to London Group in 1997. Over these for Credit Agricole Indosuez
where his last role was as years at Citi and Samba, Mr. for Pakistan before moving
East European Treasurer. Hassan worked in different to Abu Dhabi Islamic Bank
In 1999, Mr. Khan moved to product areas including as part of their Structured
Riyadh to become Head Global Transaction Services, and Project Finance team.
of Islamic Banking at a Citi Corporate Banking and He also has been an elected
affiliate, Saudi American Islamic Finance. In his last board member of the local
Bank. In 2004 Mr. Khan assignment at Samba CFA society.
moved to ABC Islamic Bank before moving to ABC
as Managing Director. Mr. Islamic Bank, Mr. Hassan
Khan was appointed as was the Product and
the Global Head for Islamic Business Development
Banking for the ABC Group Head of Samba’s Islamic
of companies in 2009 and Banking Group. In 2005, Mr.
was also appointed as Hassan joined ABC Islamic
a member of the Head Bank and in his current
Office Credit Committee of role as Head of Marketing
ABC BSC in 2011. Mr. Khan has the responsibility for
was also appointed as a managing the corporate/
member of the Head Office wholesale and financial
Asset & Liability Committee institutions (FIs) businesses
(ALCO) of ABC BSC in 2013 for ABC Islamic Bank.
in addition to being voted
as the Deputy Chairman
of IIFM & Chairman of the
Executive Committee of
IIFM.
* Mr. Naveed Khan retired from Bank ABC Islamic as
Managing Director on 1 April 2017, and this post was filled
by Mr. Hammad Hassan.
08 BANK ABC ISLAMIC
ANNUAL REPORT 2016