In the Name of God 2 Annual Report 2016 - 2017
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IN THE NAME OF GOD 2 ANNUAL REPORT 2016 - 2017 KARAFARIN BANK Annual Report 2016 / 2017 Global Knowledge, Local Solution ANNUAL REPORT 2016 - 2017 3 CONTENTS Financial Highlights ...................................................................................................4 Managing Director’s Statement ................................................................................6 Board Of Directors’ Report To The Annual Ordinary General Assembly Meeting For The Financial Year Ended 20.03.2017........................................................................8 ECONOMIC REVIEW 2016-17 1 ISLAMIC BANKING PRINCIPLES IRAN’S BANKING SECTOR ....................................................................... 10 Iran’s Economic Review 2016-17 An Overview .....................................................11 Islamic Banking Principles......................................................................................17 Iran’s Banking Sector...............................................................................................20 2 INTRODUCTION.................................................................................................22 Background..............................................................................................................23 Objectives................................................................................................................24 Corporate Social Responsibilities............................................................................24 Prizes, Accomplishments & Achievements...........................................................25 Shareholders Composition.......................................................................................26 Specialised Committees...........................................................................................26 Regulatory Environment..........................................................................................26 Organisational Chart................................................................................................27 Human Resources....................................................................................................28 Capital......................................................................................................................28 Future Development Plans......................................................................................29 3 PERFORMANCE................................................................................................30 OPERATIONAL PERFORMANCE..........................................................................31 FINANCIAL PERFORMANCE................................................................................ 46 4 INDEPENDENT AUDITOR’S REPORT & FINANCIAL STATEMENTS .......54 4 ANNUAL REPORT 2016 - 2017 Financial Highlights Dues from Banks & Total Assets Cash Other Credit Institutes million IRR million IRR million IRR 144,545,324 15,691,798 916,670 124,063,869 13,662,956 233,392 2015-16 2016-17 2015-16 2016-17 2015-16 2016-17 Global Knowledge, Local Solution ANNUAL REPORT 2016 - 2017 5 According to the statistics released by the Central Bank of Islamic Republic of Iran, the rate of exchange was USD1/IRR32,420 at the end of the reported period. The Bank’s fiscal year ends on March 20. Fixed Tangible Assets Net Investments Profit Other Net Incomes & Expenses million IRR million IRR million IRR 5,879,426 6,100,049 268,103 549,986 178,621 225,374 2015-16 2016-17 2015-16 2016-17 2015-16 2016-17 6 ANNUAL REPORT 2016 - 2017 Managing Director’s Statement I am pleased to once again present Karafarin Bank’s report on its outstanding performance and operations for the past financial period. During the year under review, international sanctions against Iran were lifted; the impact of which has been felt in the current year. Furthermore, the monetary policies of the Central Bank of the Islamic Republic of Iran (CBI) ensured that inflation continued a downward trend to reach a single digit level for the very first time in 26 years. The re- election of the previous government and the implementation of its sensible policies shall undoubtedly be followed by an era of economic stability, which will carry a positive impact on Iran’s business environment and its banking sector in particular. Although Iran’s macroeconomy has overcome the recession, the banking industry is yet to enjoy the benefits of the post-recession era. Indeed, large state- owned and private banks continue to face challenges such as excess assets, non- performing claims, interest rates imposed by the CBI as well as the continuing existence of the unlicensed credit institutes. Thanks to its sound long-term polices and robust structure, Karafarin Bank has overcome the above challenges. According to the statistics released by the Securities & Exchange Organisation, Karafarin Bank was among the few profitable Tehran Stock Exchange (TSE) listed banks in the previous fiscal year. This has been achieved at a time when most small and large rivals were making major losses and their shares were not traded on the stock exchange for months. Indeed, the above organisaiton has declared Karafarin Bank as the most profitable bank during the first nine months of the 1395 Iranian calendar year (2016). Global Knowledge, Local Solution ANNUAL REPORT 2016 - 2017 7 Following the enforcement of the Joint Comprehensive Plan of Action (JCPOA), Iranian banks began to rebuild their previous links with foreign banks and to establish new ones. Fortunately, Karafarin Bank was quick to rebuild its relations with European and Southeast Asian banks located in countries such as Japan, China, India and South Korea. I am pleased to announce that Karafarin Bank’s International Affairs Department is fully equipped and well experienced to render high quality foreign currency services. The remaining obstacles in communications are expected to be overcome upon the implementation of CBI’s new polices, in the near future. Following the enforcement of JCPOA in January 2016, the CBI issued a circular, requiring all Iranian banks to prepare their financial statements based on international accounting standards such as IFRS. This policy aims to promote the banking sector’s international relations. Due to this policy, the banks’ financial statements have become more transparent, as a result of which, their international operations have increased. Our foreign exchange operations during the reporting financial period also increased 2.5 times, making a positive impact on the Bank’s profitability and EPS. Since combating money-laundering has always been of our utmost concern, we have requested some reputable international firms to provide our staff with specialised and vital AML training. Our strategy for becoming a pioneering bank in offering integrated financial solutions became operational during the reporting fiscal period. By focusing on our vision and our mission statement, and by relying on the capabilities of our managers’ and human resources’ skills, we aim to ensure that Karafarin Bank has a bright future. Further improving branch performance is among our main policies for making the Bank more agile. Measures in this regard, began focusing on Tehran branches during the reporting period and this trend shall be continue in the upcoming year and is expected to improve the quality of the services which our branches offer. Continuous training is on the top of our agenda. The idea is to further improve our staff performance on different levels. Hence, we have established a training centre, which is equipped with state-of-the-art equipment and the latest training technologies. The other policy which the Bank follows, is to make its Legal Affairs Department in other cities more agile and capable in order to more effectively and swiftly collect its non-performing (overdue) claims. Our main strategy is to offer such services (backed up by the latest and up to date technology) that meet customer expectations and requirements. Hence, in order to further expand the scope of our services, we are about to launch Phase 4 of Karafarin Mobile Bank System, which is designed to maximise customer satisfaction. During the reporting financial period, Karafarin Bank was granted first ranking among Iran’s top one hundred companies in terms of productivity and sales returns. In addition, due to its exceptional performance in financial management and transparency, Karafarin Bank was granted the crystal award of the Seventh National Financial Management. These honours and distinctions clearly reflect the Bank’s transparency and law abidingness. At Karafarin Bank, we constantly make our best endeavour to safeguard the interest of our beneficiaries, especially our shareholders. In spite of the existing economic challenges, we have been able to bring more profitability than other banks in Iran. To conclude, I have no doubt that by relying on the support and faith of our beneficiaries, we shall continue to flourish in future years. Ataollah Ayatollahi 8 ANNUAL REPORT 2016 - 2017 Board Of Directors’ Report To The Annual Ordinary General Assembly Meeting For The Financial Year Ended 20.03.2017 Global Knowledge, Local Solution ANNUAL REPORT 2016 - 2017 9 Dear Shareholders, We hereby present to you the Board of Directors’ report about Karafarin Bank’s Annual Ordinary General Assembly Meeting. The provision of this report fulfils our compliance with obligations in respect of the requirements set forth in Articles 232 of the Commercial