Quarterly Report September 2023
Contents
02 | Corporate Information |
04 | Directors' Report to the Members |
15 | Statement of Financial Position |
16 | Profit & Loss Account |
17 | Statement of Comprehensive Income |
18 | Statement of Changes in Equity |
19 | Cash Flow Statement |
20 | Notes to and forming part of the Financial Statements |
50 | Consolidated Financial Statements |
Quarterly Report September 2023
Corporate Information
Board of Directors | |
Mr. Suleman Lalani | Chairman (Non-Executive Director) |
Mr. Rizwan Ata * | President & Chief Executive Officer |
Mr. Akhtar Abbas | Independent Director |
Mr. Ali Hussain | Non-Executive Director |
Ms. Iffat Zehra Mankani | Non-Executive Director |
Mr. Haider Ali Hilaly | Independent Director |
Mr. Sulaiman Sadruddin Mehdi | Independent Director |
Mr. Syed Ali Hasham | Non-Executive Director |
Shariah Supervisory Board | |
Mufti Irshad Ahmad Aijaz | Chairperson |
Mufti Javed Ahmad | Member |
Mufti Muhammad Husain | Member |
Mufti Syed Hussain Ahmed | Member |
Board Audit Committee | |
Mr. Haider Ali Hilaly | Chairperson |
Ms. Iffat Zehra Mankani | Member |
Mr. Sulaiman Sadruddin Mehdi | Member |
Mr. Syed Ali Hasham | Member |
Board Risk Management Committee | |
Ms. Iffat Zehra Mankani | Chairperson |
Mr. Sulaiman Sadruddin Mehdi | Member |
Mr. Syed Ali Hasham | Member |
Chief Executive Officer | Member |
Board Human Resources & Remuneration Committee | |
Mr. Akhtar Abbas | Chairperson |
Ms. Iffat Zehra Mankani | Member |
Mr. Suleman Lalani | Member |
Mr. Syed Ali Hasham | Member |
Board Information Technology Committee | |
Mr. Haider Ali Hilaly | Chairperson |
Mr. Akhtar Abbas | Member |
Mr. Suleman Lalani | Member |
Chief Executive Officer | Member |
* With effect from September 29, 2023. |
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Company Secretary
Mr. Muhammad Shoaib
Auditors
KPMG Taseer Hadi & Co.,
Chartered Accountants
Legal Adviser
1- Haidermota & Co.
2- Mohsin Tayebaly & Co.
Management (in alphabetical order) | |
Rizwan Ata | President & Chief Executive Officer |
Aasim Salim | Group Head Distribution |
Bilal Fiaz | Group Head Consumer Banking |
Burhan Hafeez Khan | General Manager South West |
Kashif Nisar | Head of Product & Shariah Structuring |
Mahmood Rashid | Head of Government Relations & Security |
Masood Muhammad Khan | Head of Compliance |
Mateen Mahmood | Head of Operations |
Mohammad Faisal Dhedhi | General Manager South East |
Muhammad Amin | Group Head Information Technology |
Muhammad Assadullah Chaudhry | Head of Human Resource |
Muhammad Idrees Sheikh | Divisional General Manager Interior Sindh |
Muhammad Irfan Ahmed | Head of Shariah Compliance |
Muhammad Shoaib | Company Secretary |
Muhammad Shoaib Rizwani | Divisional General Manager South Punjab |
Muhammad Uzair Sipra | Head of Legal |
Rizwan Qamar Lari | Group Head Internal Audit |
Faisal Anwer | Group Head Treasury & Financial Institutions |
Sohail Sikandar | Chief Financial Officer |
Tariq Ali Khan | General Manager North |
Usman Shahid | Group Head Risk Management |
Zabih Ullah Usmani | Divisional General Manager Baluchistan |
Zaheer Elahi Babar | Group Head Corporate Banking |
Registered Office | |
11th Floor, Executive Tower, Dolmen City, | |
Marine Drive, Block-4, Clifton, Karachi. | |
Phone (92-21)111-247(BIP)-111 | |
Fax: (92-21) 35378373 | |
Email: info@bankislami.com.pk | |
Share Registrar | |
CDC Share Registrar Services Limited | |
Head Office: CDC House, 99 - B, Block 'B', | |
S.M.C.H.S., Main Shahra-e-Faisal | |
Karachi- 74400. | |
Tel: (92) 0800-23275 Fax: (92-21) 34326053 | |
URL: www.cdcsrsl.com | |
Email: info@cdcsrsl.com |
Public Dealing Timings of Share Registrar
Monday to Thursday: | 9:00 am to 5:00 pm |
Friday | 9:00 am to 12:30 pm and 2:30 pm to 5:00 pm |
Website:
www.bankislami.com.pk
3
Quarterly Report September 2023
Directors' Report to the Members
Dear Members,
On behalf of the Board of Directors, we are pleased to present the Directors' Report of BankIslami Pakistan Limited ('the Bank' or 'BankIslami') on the Condensed Interim Un- audited Financial Statements for the nine months ended September 30, 2023.
Economy Snapshot
In Fiscal Year 2023 (FY23), Pakistan's economy experienced a significant deceleration, with an estimated 0.6% contraction in real GDP. The most recent Pakistan Development Update from the World Bank, titled "Restoring Fiscal Sustainability," highlights that this decline in economic activity can be attributed to a combination of factors. These include domestic and external shocks, such as the Year 2022 floods, government-imposed limitations on imports and capital flows, domestic political instability, the rise in global commodity prices, and stricter global financial conditions. Moving forward, the implementation of the economic adjustment program and a smooth general election planned during the Fiscal Year 2024 (FY24) are expected to boost confidence and would be critical in restoring stability and gradual recovery of economy. Easing import controls is likely to support investments; favorable weather conditions and the Government's relief package of free seeds, subsidized credit, and fertilizers are expected to support a recovery in agriculture. This, in turn, will help the industry, which will also benefit from the increased availability of critical imports. The World Bank estimates forecasted GDP growth for the fiscal year 2024 to recover at 1.7%, while International Monetary Fund (IMF) and Asian Development Bank (ADB) have given forecast of 2.5% and 1.9% respectively.
The Monetary Policy Committee (MPC) has analyzed certain developments having positive expected impact on inflationary pressure, which was at its peak in May 2023 at 38% and declined to 31.4% in September 2023, and decided to maintain the policy rate at 22%. Key considerations to this decision include a healthy agricultural outlook driven by a robust cotton crop and improved conditions, rising global oil prices exceeding $90 per barrel, a shift in the current account to a deficit of USD 809 million in July 2023 - partly due to eased import restrictions, and successful administrative and regulatory measures aimed at food commodity availability and exchange company reforms. These changes are also connected to a recent IMF Stand-By Arrangement (SBA) of USD 3 billion, with an initial disbursement of USD 1.2 billion, helped in narrowing the gap between interbank and open market exchange rates. The SBP's and overall country's reserve now stood at USD 7.6 billion and USD 13 billion as at Oct 06, 2023 respectively, which has previously been reported at USD 4.4 billion and USD 9.2 billion respectively at the end of FY23.
Pakistan's new SBA-supported program will provide a policy anchor for addressing domestic and external imbalances and a framework for financial support from multilateral and bilateral partners. The program will focus on (1) implementation of the FY24 budget to facilitate Pakistan's needed fiscal adjustment and ensure debt sustainability, while protecting critical social spending; (2) a return to a market-determined exchange rate and proper FX market functioning to absorb external shocks and eliminate FX shortages; (3) an appropriately tight monetary policy aimed at disinflation; and (4) further progress on structural reforms, particularly with regard to energy sector viability, governance, and climate resilience.
(Source: SBP Monetary Policy Statement, World Bank Pakistan Development Update and News Reports)
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Overview of Financial Performance
Following are the key financial highlights for the nine months ended September 30, 2023:
September | September | |||||||||||
September | December | September | 2023 Vs | |||||||||
Key Balance Sheet Numbers | 2023 Vs Sep- | |||||||||||
2023 | 2022 | 2022 | December | |||||||||
tember 2022 | ||||||||||||
2022 | ||||||||||||
---------------- | Rupees in '000 | ---------------- | --------------- | % --------------- | ||||||||
Net Assets | 32,694,168 | 26,450,401 | 25,610,790 | 23.6% | 27.7% | |||||||
Deposits | 461,908,104 | 415,911,942 | 388,128,524 | 11.1% | 19.0% | |||||||
Financing and related assets - net | 203,699,800 | 201,328,442 | 205,282,924 | 1.2% | -0.8% | |||||||
Investments - net | 276,160,518 | 179,741,488 | 139,363,656 | 53.6% | 98.2% | |||||||
Due to FI | 60,146,046 | 21,052,256 | 20,940,017 | 185.7% | 187.2% |
Key profit and expense numbers | September | September | % | |||
2023 | 2022 | Change | ||||
------------- Rupees in '000 ------------- | ||||||
Profit / return earned | 65,309,237 | 31,591,490 | 106.7% | |||
Profit / return expensed | 36,964,611 | 17,947,864 | 106.0% | |||
Net Spread Earned | 28,344,626 | 13,643,626 | 107.7% | |||
Fee and commission income | 1,274,885 | 1,044,835 | 22.0% | |||
Operating expenses | 11,630,715 | 8,695,391 | 33.8% | |||
Operating Profit before provisions | 18,863,300 | 7,790,448 | 142.1% | |||
Provisions (net) | 3,903,489 | 2,246,379 | 73.8% | |||
Profit before taxation | 14,959,811 | 5,544,069 | 169.8% | |||
Profit after taxation | 8,473,584 | 2,852,229 | 197.1% | |||
Earnings per share (in Rupees) | 7.6428 | 2.5726 | 197.1% |
Alhumdulillah! the Bank's net assets increased by 23.6%, primarily driven by the allocation of excess liquidity in GoP Ijarah Sukuk. As a result, the Bank's investment portfolio surged from Rs. 179.74 billion in Dec 2022 to Rs. 276.16 billion in Sept 2023, marking a substantial growth of 53.6%. Consequently, the investment to deposit ratio (IDR) rose from 43.2% as of Dec 31, 2022, to 59.8% as of Sept 30, 2023.
The Bank's total deposits surged by 11.1% compared to the end of the year 2022, while it achieved a year-on-year growth of 19%. The results demonstrate significant growth of 29.9% in term deposits with a slight decrease of 1.9% in current deposits compared to the end of the year 2022. On a year-on-year basis, there is a growth of 12.9% in the current account of the Bank. The growth in total deposits emerged based on the Bank's strategic product diversification, catering to distinct market segments and effectively addressing specific market needs. In line with this approach, the Bank reintroduced attractive term deposit offerings, leveraging the heightened demand owing to higher policy rates. Moreover, it introduced customized products for women, established priority banking centers, and emphasized cash management and employee banking services. Additionally, the Bank is expanding its branch network, thereby improving accessibility and market presence.
The Bank demonstrated controlled growth in its financing portfolio, recording a modest 1.2% increase as compared to the end of the year 2022. Challenges such as high policy rates, stringent regulatory measures on auto financing, and the absence of subsidized housing finance schemes for new cases led to a notable decline in the Bank's consumer financing portfolio. Consequently, the Bank's gross Advance to Deposit ratio (ADR) decreased to 48.9% from 53% reported as of Dec 31, 2022. Nevertheless, going forward, the Bank intends
5
Quarterly Report September 2023
to increase its funding to large corporate and commercial clients, with the goal of sustaining a robust financing portfolio.
A strong capital foundation is essential for maintaining a robust asset portfolio. As of September 30, 2023, the Bank's Capital Adequacy Ratio (CAR) has reached an impressive 22.42%, marking a significant increase from 17.92% recorded as of December 31, 2022, despite the payment of dividend of Re. 1/- per share during the current year. The strong growth in profitability and investments in zero/low risk weighted assets notably contributed to the improved CAR. This growth highlights the Bank's commitment to sustaining a strong financial position and enhancing shareholder value.
Owing to growth in overall balance sheet along with rise in policy rate, the net spread earned by the Bank during the period of 9M 2023 grew by 107.7% as compared to same period last year. With the country going through a high cycle of inflation, opening of new branches by the Bank and increase in headcount primarily on business side, the overall operating expenses of the Bank has increased by 33.8% as compared to same period last year. Net provision against financings and investments increased by 73.8% during the 9M 2023 due to certain fresh classifications, discounting of FSV benefit considered against previously classified financings and incremental general provision. While the management will continue to make efforts to recover from classified portfolio, at the same time, it will continue to prudently monitor the health of the overall financing portfolio. In response to the current economic conditions, the Bank has proactively allocated an additional general provision of Rs. 1.1 billion during the 9M 2023, leading to an improvement in the coverage ratio to 102.2%.
Alhumdulillah! the Bank has attained an increase of 169.8% in its profit before tax for the nine months ended on September 30, 2023 as compared to same period last year. This achievement is a result of Bank's comprehensive strategy which included a focus on attaining an optimal CASA mix, promoting growth in low-risk weighted financing portfolios, prioritizing fee- based income and consciously expanding the investment portfolio. In the year 2023, the recognition of deferred tax assets was adjusted based on the tax rates amended vide Finance Bill 2023-24, leading to a reversal in the tax charge by approx. Rs. 1 billion. Consequently, the profit after tax reached to Rs. 8.47 billion, an increase of 197.1% which underscores the Bank's unwavering commitment to financial excellence and its ability to navigate challenging circumstances, yielding exceptional results.
Group Results
Throughout the initial nine months of the year 2023, the Group witnessed a substantial 20.2% increase in its total assets. This notable enhancement in the Group's financial position was primarily propelled by investments in Sukuks. Demonstrating exceptional performance, the Group attained a post-tax profit of Rs. 8.46 billion, showcasing an impressive 195.4% surge compared to the same period last year. This outstanding accomplishment is attributed to the augmentation of earning assets, the growth of profit-bearing liabilities, and the increase in policy rates.
Dividend
The Board of Directors, in their meeting held on October 24, 2024 declared an interim cash dividend of Rs. 1.75 (17.5%) for the nine months ended September 30, 2023
6
Composition of the Board
In line with the requirements of the Code of Corporate Governance (CCG) and best practices, the Board of the Bank comprises of both non-executive and independent directors, including representation of a female director on the Board.
The current composition of the Board is as follows:
Total number of Directors | 8 | |
Composition: | ||
(i) | Independent Directors: | 3 |
(ii) | Non-executive Directors: | 4 |
(iii) | Executive Director: | 1 |
(a) | Female Director: | 1 |
(b) | Male Directors: | 7 |
Acknowledgements
The Board wishes to formally express its profound gratitude to the State Bank of Pakistan for their invaluable assistance and guidance. Additionally, we extend our appreciation to the Securities and Exchange Commission of Pakistan and other regulatory bodies for their unwavering support towards the Bank's endeavors. Our sincere gratitude goes out to our esteemed customers, valued business partners, and shareholders for their continuous loyalty and trust.
Furthermore, we would like to recognize the exceptional dedication, commitment, and tireless efforts exhibited by our management team and employees. Their contributions have been instrumental in propelling BankIslami to a prominent position within the broader banking sector and particularly in the Islamic Banking industry.
On behalf of the Board,
-Sd- | -Sd- |
Rizwan Ata | Suleman Lalani |
President & Chief Executive Officer | Chairman of the Board of Directors |
October 24, 2023 |
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Quarterly Report September 2023
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Bank Islami Pakistan Ltd. published this content on 27 October 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 October 2023 11:14:37 UTC.