Financial Statements

149 Pages·2008·8.05 MB·English

PICIC Commercial Bank Ltd.
Inside
Board of Directors 4
Management 5
Seven years of Bank’s financial growth 6
Message from the Chairman 8
Chief Executive’s Review 10
Directors’ Report 12
Statement of Value Added 17
Notice of Annual General Meeting 18
Statement of Compliance with
the Code of Corporate Governance 20
Review Report to the Members on
Statement of Compliance with Best Practices
of the Code of Corporate Governance 22
Statement of Internal Controls 23
Branch Network 24
PICIC Commercial Bank’s Financial Statements
for year ended Dec. 31, 2006 30
Consolidated Financial Statements
for year ended Dec. 31, 2006 90
PICIC Commercial Bank Ltd.
Vision
To be
recognized
and
accepted
as
Pakistan's
leading
commercial
bank
PICIC Commercial Bank Ltd.
Mission
PICIC Commercial Bank’s
mission is:
n To have a diversified and
satisfied customer base.
n To serve the market through
innovative banking solutions.
n To offer high rate of return to
shareholders.
n To foster Pakistan's economic
prosperity.
n To create a good work
environment for employees
and foster team work and
career development.
n To operate ethically and
maintain transparency in
operations.
PICIC Commercial Bank Ltd.
Board of
Directors
Chairman
Mr. Muhammad Ali Khoja
Directors
Mr. Waseem Haqqie
Mr. Hasnain Nazim
Mr. Manzoor Ahmed
Mr. Ghulam Haider Choudhry
Mr. Ahmed Salahuddin
Mr. Rahat Saeed Khan
President &
Chief Executive Officer
Mr. Zafar H. Naqvi
Company Secretary
Mr. Rahat Saeed Khan
Chief Financial Officer
Mr. Akbar A. Ladak
Board Audit Committee
Mr. Hasnain Nazim
Chairman
Mr. Muhammad Ali Khoja
Member
Mr. Manzoor Ahmed
Member
Registered Office
2nd & 3rd Floors, Spencer Building
I.I. Chundrigar Road, Karachi.
Tel: [phone]
Share Registrar
THK Associates (Pvt.) Limited
Ground Floor, State Life Building No. 3
Dr. Ziauddin Ahmed Road, Karachi.
Tel: [phone]
Auditors
M/s. KPMG Taseer Hadi & Co.
Chartered Accountants
Legal Advisor
M/s. Mandviwalla & Zafar
Advocates
4
PICIC Commercial Bank Ltd.
Management
Head Office
Mr. Zafar H. Naqvi
President & Chief Executive Officer
Mr. Rahat Saeed Khan
SEVP - Head of HR & Administration /
Company Secretary
Mr. Tauseef Ahmed
SEVP - Head of Information Technology
Mr. Mamoon H. Farooqi
SEVP - Credit Administration & Control
Mr. Akbar A. Ladak
EVP - Head of Finance & Planning
Mr. Hadi Ali Khan
EVP - Head of Financial Institutions
Mr. Tariq Ahsan
EVP - Head of Treasury
Mr. Manzoor Elahi
EVP - Head of Compliance
Mr. Aziz A. Lakhani
EVP - Head of Risk Management
Mr. Sadaqat Khan
SVP - Head of Special Assets Management /
Consumer Banking
Mr. Naveed Elahi Malik
SVP - Head of Audit & Inspection
Mr. Ghazanfar Ali Khan
SVP - Systems & Operations
Mr. Ather Ali Khan
SVP - Corporate Affairs / Shares
Regions
Mr. Akhtar Ali Khan
EVP / Officiating RGM, Southern Region, Karachi.
Mr. Khalid Rashid
EVP / Officiating RGM, Central Region, Lahore.
Mr. Rahmat Ali
EVP / Zonal Head, Lahore South.
Mr. Syed Imtiaz Bokhari
EVP / Zonal Head, Lahore North.
Mr. Zahid Hussain Qureshi
EVP / Zonal Head, Gujranwala.
Mr. Faqir Ejaz Asghar
SEVP / RGM, Northern Region, Islamabad.
Mr. Shah-e-Room Khan
EVP / Zonal Head, NWFP, Peshawar.
Mr. S. Tauqir Haider Rizvi
EVP / Zonal Head, Rawalpindi.
5
PICIC Commercial Bank Ltd.
Seven years of Bank's financial growth
PROFITABILITY 2000 2001 2002 2003 2004 2005 2006
Funded Income - Net of Provisions 894,025 1,063,062 1,626,291 1,749,466 2,342,002 4,162,104 5,319,095
Non-Funded Income 55,267 70,739 104,730 136,656 136,013 289,155 335,061
INVESTMENTS Advances - Net of Provisions
Capital Gain and Dividend Income 11,017 7,933 177,373 685,809 361,404 564,166 379,694
25,000,000 40,000,000 FX Income and Other Income 104,296 138,592 154,748 145,073 178,242 105,276 142,710
Total Income 1,064,605 1,280,326 2,063,142 2,717,004 3,017,661 5,120,701 6,176,560
35,000,000
20,000,000
30,000,000 Borrowing Expenditure 683,802 749,971 1,227,652 1,327,542 1,067,647 2,061,889 3,530,329
Operating Expenses 264,057 234,518 326,423 564,391 823,629 1,153,192 1,367,016
15,000,000 25,000,000 Total Expenses 947,859 984,489 1,554,075 1,891,933 1,891,276 3,215,081 4,897,345
20,000,000
Profit before Tax 116,746 295,837 509,067 825,071 1,126,385 1,905,620 1,279,215
10,000,000
15,000,000 Taxation 59,595 184,277 189,819 203,659 230,063 401,581 310,374
10,000,000 Profit after Tax 57,151 111,560 319,248 621,412 896,322 1,504,039 968,841
5,000,000
5,000,000
SHAREHOLDER'S FUNDS AND LIABILITIES 9,568,987 13,464,294 27,982,188 40,133,853 52,007,610 65,128,634 70,289,867
0 0
2000 2001 2002 2003 2004 2005 2006 2000 2001 2002 2003 2004 2005 2006 Share Capital 500,000 500,000 825,000 1,072,500 1,823,250 2,734,875 2,734,875
Retained Earnings 192,432 303,992 498,240 711,277 1,659,619 1,451,069 1,736,191
Shareholder's Equity 692,432 803,992 1,323,240 1,783,777 3,482,869 4,185,944 4,471,066
Surplus on Revaluation of Securities (26,284) 145,100 978,713 435,493 46,522 (127,894) (395,476)
Deposits 5,370,580 9,618,599 21,154,925 32,499,771 44,091,795 53,468,021 59,467,497
Refinance borrowings 1,897,750 1,498,323 2,286,006 2,076,110 2,666,568 3,079,545 3,474,714
Deposits Shareholder’s Equity Bills payable and Repo Borrowings 1,455,120 1,206,994 1,118,065 2,851,981 1,217,095 3,267,858 2,298,771
70,000,000 5,000,000 Other Liabilities 179,389 191,286 1,121,239 486,721 502,761 1,255,160 973,295
4,500,000
60,000,000 TOTAL ASSETS 9,568,987 13,464,294 27,982,188 40,133,853 52,007,610 65,128,634 70,289,867
4,000,000
50,000,000 3,500,000 Advances - Net of Provisions 4,745,830 6,329,594 10,876,336 14,316,832 25,828,364 33,162,262 34,883,751
Investments and lendings 3,087,674 3,972,273 14,130,459 21,843,204 19,947,827 22,363,966 24,946,751
40,000,000 3,000,000 Cash and Short Term Funding 1,099,110 2,438,951 2,092,808 2,822,772 4,286,575 6,735,051 7,754,488
2,500,000 Operating Fixed Assets 74,108 114,010 254,228 350,795 781,581 947,558 933,282
30,000,000 2,000,000 Other Assets 562,265 609,466 628,357 800,250 1,163,263 1,919,797 1,771,595
20,000,000 1,500,000 NON FUND BUSINESS
1,000,000
10,000,000 500,000 Imports 6,284,545 7,918,009 14,002,565 17,415,359 23,918,764 27,631,946 30,957,254
Exports 7,276,117 12,046,487 16,841,473 20,698,506 22,456,323 29,356,619 25,787,483
0 0
2000 2001 2002 2003 2004 2005 2006 2000 2001 2002 2003 2004 2005 2006 Total Foreign Business 13,560,662 19,964,496 30,844,038 38,113,865 46,375,087 56,988,565 56,744,737
FINANCIAL RATIO INFORMATION
Total Advances to Deposits (%) 88.37 65.81 51.41 44.05 58.58 62.02 58.66
Total Classified Advances to Total Advances (%) 18.67 7.64 4.28 2.93 1.86 1.77 5.03
Operating Expense Cover Ratio (Times) 0.80 1.34 1.22 0.75 1.55 1.82 1.38
Return on Average Equity (%) 8.61 14.91 30.02 40.00 34.04 39.22 22.38
Total Assets Total Foreign Business Return on Average Assets (%) 0.60 0.97 1.54 1.82 1.95 2.57 1.43
Break Value (Rs.) 13.85 16.08 16.04 16.63 19.10 15.31 16.35
80,000,000 60,000,000 Intermediation Cost (%) 4.92 2.44 1.54 1.74 1.87 2.16 2.30
Capital Adequacy Ratio (Stand Alone) (%) 11.81 11.42 9.89 12.07 10.87 9.42 9.89
70,000,000
50,000,000
60,000,000 SHARE INFORMATION
40,000,000
50,000,000 Earning Per Share 0.27 0.53 1.44 2.69 3.55 5.50 3.54
Distribution
40,000,000 30,000,000
- Cash Dividend (%) - - - 15 15 60 -
30,000,000 - Bonus Shares (%) - 25 30 30 25 20 -
20,000,000
Net Assets Per Share (Rs.) 13.32 18.98 27.90 20.69 19.36 14.84 14.90
20,000,000
Market Value per Share (Rs.) 8.30 7.30 18.70 33.35 43.35 36.10 33.65
10,000,000
10,000,000
OTHER INFORMATION
0 0
2000 2001 2002 2003 2004 2005 2006 2000 2001 2002 2003 2004 2005 2006
No. of Employees 273 309 510 698 939 1,164 1,262
No. of Branches 15 20 42 68 100 122 136
Credit Rating BBB+ / A -2 A- / A -2 A- / A -1 A / A 1 A+ / A 1 A+ / A 1 A+ / A 1
6
PICIC Commercial Bank Ltd.
(Amount in Rupees ‘000)
PROFITABILITY 2000 2001 2002 2003 2004 2005 2006
Funded Income - Net of Provisions 894,025 1,063,062 1,626,291 1,749,466 2,342,002 4,162,104 5,319,095
Non-Funded Income 55,267 70,739 104,730 136,656 136,013 289,155 335,061
Capital Gain and Dividend Income 11,017 7,933 177,373 685,809 361,404 564,166 379,694
FX Income and Other Income 104,296 138,592 154,748 145,073 178,242 105,276 142,710
Total Income 1,064,605 1,280,326 2,063,142 2,717,004 3,017,661 5,120,701 6,176,560
Borrowing Expenditure 683,802 749,971 1,227,652 1,327,542 1,067,647 2,061,889 3,530,329
Operating Expenses 264,057 234,518 326,423 564,391 823,629 1,153,192 1,367,016
Total Expenses 947,859 984,489 1,554,075 1,891,933 1,891,276 3,215,081 4,897,345
Profit before Tax 116,746 295,837 509,067 825,071 1,126,385 1,905,620 1,279,215
Taxation 59,595 184,277 189,819 203,659 230,063 401,581 310,374
Profit after Tax 57,151 111,560 319,248 621,412 896,322 1,504,039 968,841
SHAREHOLDER'S FUNDS AND LIABILITIES 9,568,987 13,464,294 27,982,188 40,133,853 52,007,610 65,128,634 70,289,867
Share Capital 500,000 500,000 825,000 1,072,500 1,823,250 2,734,875 2,734,875
Retained Earnings 192,432 303,992 498,240 711,277 1,659,619 1,451,069 1,736,191
Shareholder's Equity 692,432 803,992 1,323,240 1,783,777 3,482,869 4,185,944 4,471,066
Surplus on Revaluation of Securities (26,284) 145,100 978,713 435,493 46,522 (127,894) (395,476)
Deposits 5,370,580 9,618,599 21,154,925 32,499,771 44,091,795 53,468,021 59,467,497
Refinance borrowings 1,897,750 1,498,323 2,286,006 2,076,110 2,666,568 3,079,545 3,474,714
Bills payable and Repo Borrowings 1,455,120 1,206,994 1,118,065 2,851,981 1,217,095 3,267,858 2,298,771
Other Liabilities 179,389 191,286 1,121,239 486,721 502,761 1,255,160 973,295
TOTAL ASSETS 9,568,987 13,464,294 27,982,188 40,133,853 52,007,610 65,128,634 70,289,867
Advances - Net of Provisions 4,745,830 6,329,594 10,876,336 14,316,832 25,828,364 33,162,262 34,883,751
Investments and lendings 3,087,674 3,972,273 14,130,459 21,843,204 19,947,827 22,363,966 24,946,751
Cash and Short Term Funding 1,099,110 2,438,951 2,092,808 2,822,772 4,286,575 6,735,051 7,754,488
Operating Fixed Assets 74,108 114,010 254,228 350,795 781,581 947,558 933,282
Other Assets 562,265 609,466 628,357 800,250 1,163,263 1,919,797 1,771,595
NON FUND BUSINESS
Imports 6,284,545 7,918,009 14,002,565 17,415,359 23,918,764 27,631,946 30,957,254
Exports 7,276,117 12,046,487 16,841,473 20,698,506 22,456,323 29,356,619 25,787,483
Total Foreign Business 13,560,662 19,964,496 30,844,038 38,113,865 46,375,087 56,988,565 56,744,737
FINANCIAL RATIO INFORMATION
Total Advances to Deposits (%) 88.37 65.81 51.41 44.05 58.58 62.02 58.66
Total Classified Advances to Total Advances (%) 18.67 7.64 4.28 2.93 1.86 1.77 5.03
Operating Expense Cover Ratio (Times) 0.80 1.34 1.22 0.75 1.55 1.82 1.38
Return on Average Equity (%) 8.61 14.91 30.02 40.00 34.04 39.22 22.38
Return on Average Assets (%) 0.60 0.97 1.54 1.82 1.95 2.57 1.43
Break Value (Rs.) 13.85 16.08 16.04 16.63 19.10 15.31 16.35
Intermediation Cost (%) 4.92 2.44 1.54 1.74 1.87 2.16 2.30
Capital Adequacy Ratio (Stand Alone) (%) 11.81 11.42 9.89 12.07 10.87 9.42 9.89
SHARE INFORMATION
Earning Per Share 0.27 0.53 1.44 2.69 3.55 5.50 3.54
Distribution
- Cash Dividend (%) - - - 15 15 60 -
- Bonus Shares (%) - 25 30 30 25 20 -
Net Assets Per Share (Rs.) 13.32 18.98 27.90 20.69 19.36 14.84 14.90
Market Value per Share (Rs.) 8.30 7.30 18.70 33.35 43.35 36.10 33.65
OTHER INFORMATION
No. of Employees 273 309 510 698 939 1,164 1,262
No. of Branches 15 20 42 68 100 122 136
Credit Rating BBB+ / A -2 A- / A -2 A- / A -1 A / A 1 A+ / A 1 A+ / A 1 A+ / A 1
7
PICIC Commercial Bank Ltd.
Message from
the Chairman
Dear Shareholders,
I am extremely pleased to present the 2006
annual report of PICIC Commercial Bank Limited
that continued its successful streak with more
achievements. By the grace of Allah the Almighty,
your Bank achieved new milestones during the
year.
A number of critical financial indicators depicted
impressive performance. Deposits grew by more
than 11% while Investments rose by 14.6% over
2005. Overall asset mix was sustained at thesame level with similar level of earning assetsratio. The equity of the Bank also showedimprovement despite increasing interest ratescenario that led to thinning of spread.
Your Bank was successfully able to cope with
the increasing interest rate scenario. The challengewas met by passing on reasonable increase tothe borrowers while at the same time give
adequate returns to the depositors. Although this
led to a decrease in percentage Net Interest
Margin (spread), still the Bank maintained its
reputation as economical service provider. The
other satisfying aspect of our operations was thecontinuous increase in total income. This showedan improvement of about 21%; up from Rs. 5,120million to Rs. 6,176 million.
This is not only reflective of the expanded branchnetwork throughout the country but also shows
our increased focus on the Bank’s core business.
It is expected that added focus on core operationsand the wide branch network will further boostgrowth in the years to come.
The branch network was expanded to 136including 7 collection booths by the end of the
year and the Bank has applied to SBP for opening
of 20 more branches during 2007. Of these, 60 branches have the facility of ATMs available to our customers while
another 20 ATMs will be installed during 2007. On-line banking has also been introduced in almost all the branches
throughout the country for the benefit of our customers. This extended reach is of great importance in view of ourplans for expanding the consumer finance side of our business.
The shareholders’ equity stood at over Rs. 4.5 billion at the end of 2006 as compared to Rs 4.2 billion at the end
of the previous year. With the regular ploughing back of profits, your Bank is now in a better position to initiate and
sustain complex and large transactions. The Bank was also successful in increasing its Capital Adequacy Ratio (CAR)
from 9.42% in 2005 to 9.89% in 2006 thereby improving the cushion to safeguard against various risk exposures.
8
PICIC Commercial Bank Ltd.
Your Bank has shown progress over the last few years, and has consistently been amongst good performers in its
peer group. On the Human Resource side, the number of employees went up from 273 in the year 2000 to 1,270
at the end of 2006.
I hope that the process of acquisition of PICIC by NIB Bank, which was initiated at the end of last year, will soon
be concluded. Your Board is convinced of the synergies this will bring and the vibrant and powerful organization
that will emerge.
During the year a number of directors left the Board to be replaced by new directors. I would like to thank theoutgoing directors for their valuable contributions to the working of the Bank during their tenure and wish themsuccess in their future endeavors. I also welcome aboard new directors and expect that their presence will further
strengthen the Board. All the members of the Board have made excellent contributions and given generously their
time throughout their tenure. I would like to thank them for their involvement.
I would also like to appreciate the services rendered by our Ex President/CEO Mr. Muhammad Bilal Sheikh. The
Bank reflected tremendous growth during his tenure and achieved new milestones. I, on behalf of the Board,acknowledge his excellent services that led to the current status of the Bank. My heartiest welcome to the new
President/CEO, Mr. Zafar H. Naqvi who is ably performing his duties since appointment. Mr. Naqvi is a seasoned
banker with decades of experience in banking. My Board joins me in wishing him all the best for his future endeavorsand assure him of our continued support.
I would like to express my appreciation on behalf of the Board for the hard work, dedication and team workdemonstrated by all employees of the Bank and especially the Management team so ably led by Mr. Zafar H. Naqvi.
I would also like to thank the regulatory authorities for providing useful guidance.
I am also thankful to our valued customers for banking relationship with us. It is only because of their trust reposed
in us that we continue to achieve milestones. We will try to consistently anticipate and surpass their expectations
of our services and offer them need based products.
Muhammad Ali Khoja
Chairman
9
PICIC Commercial Bank Ltd.
Chief
Executive’s
Review
I feel privileged in presenting the performanceof the Bank for the year ended 31stDecember2006. This is due to the healthy growth attainedby the Bank in a number of areas of its operations.Astute governance, backed up by shareholderstrust, supported by customer confidence andteam effort of the employees led the bank to thepresent stage of success.
On the regulatory front State Bank of Pakistantightened its monetary policy to curb theinflationary tendencies and mopped up liquidityfrom the market besides gradually raising thebenchmark rates during auctions. The regulatorymeasure of increase in liquidity requirement alsoput some strain on the inter bank rates andovernight rates remained quite volatile during
the year. The Central Bank continued with its
policy of consolidating, strengthening and
reforming the financial sector by way of mergers,
acquisitions, effective supervision and regulation.
The banking sector continued its growth in termsof profitability and capital base with key financialsoundness indicators showing improving trend.Despite growth the banking sector appeared tobe coping with the credit, liquidity and market
risks. Return on Assets (ROA) increased while
Return on Equity (ROE) declined due to enhancedcapital base. Expanding business volume, better
asset mix and improved Net Interest Margin
contributed towards better performance. CapitalAdequacy Ratio (CAR) of the banking sectorincreased despite increase in Risk weighted assetsand exposures.
The banking system managed the credit riskwithin acceptable parameters despite expandingcredit portfolio and rising interest rates. Credit growth slowed down as compared to the preceding year. Credit to
agricultural and SME sector maintained the rising trend, however, financing to commodity operations reduced
significantly. On the resources side, the issue of lower return on deposits and higher banking spread assumed more
significance with the SBP emphasizing on the banks to suitably remunerate the depositors. The regulatory measure
of introducing separate cash reserve requirement (CRR) for demand and fixed deposits led to certain shift in depositstructure resulting in increase in share of fixed deposits. Future outlook of the banking sector remains bright subject
to sustenance of asset quality.
10