ANNUAL REPORT 2010/11 2010/11 REPORT ANNUAL The intelligent Bank [email protected] www.sb24.com 1 ANNUAL REPORT 2010/11 CONTENTS OVERVIEW 5 FIVE-YEAR SUMMARY 6 FINANCIAL HIGHLIGHTS 7 CEO MESSAGE 8 CORPORATE PROFILE 10 HISTORY 11 BUSINESS MODEL 12 VISION, MISSION AND OBJECTIVES 13 OUR STRATEGY 14 SAMAN FINANCIAL GROUP 16 SHAREHOLDER STRUCTURE AND CAPITAL 18 BUSINESS REVIEW 19 OVERVIEW 20 RETAIL AND ELECTRONIC BANKING 22 INVESTMENT PRODUCTS AND SERVICES 25 INTERNATIONAL BANKING 26 LENDING 28 GOVERNANCE 37 CORPORATE GOVERNANCE 38 BOARD OF DIRECTORS 42 BOARD COMMITTEES 44 INTERNAL AUDIT AND CONTROL 46 INDEPENDENT AUDIT 47 EXECUTIVE MANAGEMENT 48 RISK MANAGEMENT 51 COMPLIANCE 54 HUMAN RESOURCES 56 CORPORATE SOCIAL RESPONSIBILITY 61 FINANCIAL STATEMENTS 67 SAMAN BANK BRANCH NETWORK 99 3 ANNUAL REPORT 2010/11 OVERVIEW 5 ANNUAL REPORT 2010/11 OVERVIEW FIVE-YEAR SUMMARY for the years ended March 21 US$ m Change in % in IRR billion, except where indicated 2011 2011 2010 11/10 2009 2008 2007 Profit and loss data Total income 894 9,262 7,043 31.5 5,700 4,462 2,880 Total expenses 747 7,747 6,164 25.7 5,237 3,950 2,621 Profit before tax 146 1,515 879 72.4 463 512 259 Tax 15 160 92 73.9 24 0 0 Net profit 131 1,355 787 72.2 439 512 258 Balance sheet data Total loans 5,813 60,246 34,184 76.2 27,341 23,989 15,269 Total assets 8,193 84,912 49,315 72.2 41,733 34,846 26,209 Total deposits 5,325 55,189 40,072 37.7 34,167 29,583 22,370 Total liabilities 7,727 80,081 46,393 72.6 39,341 33,320 24,954 Share capital 289 3,000 1,800 66.7 900 900 900 Total shareholders' equity 466 4,831 2,922 65.3 2,392 1,526 1,255 Capital measures Tier 1 capital 466 4,831 2,922 65.3 - - - Tier 2 capital 67 698 392 78.1 - - - Total capital 533 5,528 3,314 66.8 - - - Risk weighted assets 5,387 55,828 31,398 77.8 - - - Capital adequacy ratio - Basel I (%) - 9.90 10.56 - 9.97 7.36 7.96 Capital adequacy ratio - Basel II (%) - 19.47 18.61 - - - - Change in % Key ratios (%) 2011 2010 11/10 2009 2008 2007 Cost to income ratio 83.64 87.52 - 91.88 88.53 91.01 Return on assets 2.02 1.73 - 1.15 1.68 1.28 Return on shareholders' equity 34.96 29.63 - 22.41 36.82 24.65 Change in % Share information 2011 2010 11/10 2009 2008 2007 Number of shares issued (millions) 3,000 1,800 66.7 900 900 900 Earnings per share (IRR) 452 437 3.4 488 569 287 Dividend per share (IRR) 383 350 9.4 400 400 200 Change in % Other information 2011 2010 11/10 2009 2008 2007 Employees 1,618 1,506 7.4 1,456 1,160 890 Customers 863,504 792,038 9.0 645,566 496,442 360,557 Branches 123 106 16.0 97 75 54 6 FINANCIAL HIGHLIGHTS Figure 1 Figure 2 Figure 3 Total assets (IRR billion) Total income (IRR billion) Total liabilities (IRR billion) 84,912 9,262 80,081 49,315 7,043 5,700 41,733 46,393 34,846 4,462 39,341 26,209 33,320 2,880 24,954 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 Figure 4 Figure 5 Figure 6 Profit before tax (IRR billion) Earnings per share (IRR) Dividend per share (IRR) 400 400 1,515 383 569 350 488 437 452 879 200 287 512 463 259 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 Figure 7 Figure 8 Figure 9 Total shareholders’ equity (IRR billion) Return on shareholders’ equity (%) Return on assets (%) 4,831 36.82 34.96 2.02 29.63 1.68 1.73 2,922 24.65 22.41 1.28 2,392 1.15 1,526 1,255 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 7 ANNUAL REPORT 2010/11 OVERVIEW CEO MESSAGE Placing loyalty at the heart of our enterprise Welcome to the Saman Bank Annual Report 2010/11. This report covers the 12 months to March 20 2011 – a highly successful year that saw us increase our total income by almost 32% and our net profit by 72%. We also grew total loans by 76.2%, and deposits by close to 38%, increasing our return on assets by nearly 17% and return on shareholders’ equity by 18%. We made these achievements despite an ongoing investment programme that saw us expand our branch network from 106 to 123, our ATMs from 390 to 519, and our employee base from 1,506 to 1,618. The year also saw us gain a 25% share of the international market serviced by Iran’s leading six privately-owned banks, as we continued to strengthen our network of correspondent banks in close to 40 countries across the world. A new strategic approach Results aside, this has also been one of the most important periods in Saman’s history, as we marked the first year of our second decade. During this year we devised and began to implement the new strategy that I and my board colleagues believe to be the right response to the challenges and opportunities we anticipate over the next five years. This strategy builds on our work of the last ten years, when we successfully carved out our own niche as one of the most successful and respected of the new Iranian banks. On this journey, our most productive focus was our pioneering approach to internet and electronic banking, an area in which we established a leadership position as ‘The Intelligent Bank’. 8 Skills, professionalism and commitment Priorities change as markets develop, however, and we have come to recognise that a positioning based exclusively on technology is vulnerable to competitor advancement. Indeed, in a maturing market place, we believe that the only truly unique and non-replicable source of competitive advantage must be based on the superior skills, commitment and professionalism of our people. These combine to deliver a consistently high-quality experience for customers, who are encouraged not only to remain loyal but also to act as advocates among their social and business networks. For us, this means redefining and expanding the meaning of ‘Intelligent’ to include all the positive attributes that our different customer groups are looking for. During the year, we started to develop the genuine customer focus that will enable us to achieve these goals. In doing so, we will fulfil our five-year strategic objective of becoming a bank that consistently delivers quality, speed, convenience and trust to promote customer loyalty and advocacy. Achieving this goal will not be easy. It means embedding a customer-focused attitude into our corporate culture and in every one of our employees, so that it is second nature to us all. This in turn means committing considerable resources to employee training to ensure that our customers receive a personal service that they appreciate and remember. If we can introduce this new focus across today’s 123-branch network in Iran, which is set to grow significantly in years to come, we will have an unbeatable proposition. While our people will be the lynchpin of our customer strategy, they will also be supported by the use of a new loyalty management tool which will enable us to identify and resolve any weaknesses in our dealings with customers. If we are to earn and deserve the trust and loyalty of our customers, we must also respond rapidly and ruthlessly to any instances of wrongdoing that we discover among our staff. This is something that is already underway, and we will continue to make every effort to ensure that our customers benefit from the scrupulous honesty of all our people, both at head office and throughout the branch network. A positive impact We are still in very early days of our new strategic approach, but I believe that our work completed to date has already had a positive impact on our results from 2010/11 (see page 6 for details). These results confirm we are heading in the right direction and presage further progress in the years to come. I would like to thank my Board colleagues for their vision and rigour, and our employees for the enormous efforts they are making to ensure our continued success. Finally, I would like to thank our customers and our shareholders, first for choosing Saman Bank and particularly for staying loyal to us as we enter this new era. Vali Zarrabieh President and CEO 9 ANNUAL REPORT 2010/11 OVERVIEW CORPORATE PROFILE Headquartered in Tehran, Saman Bank is one of Iran’s six leading privately-owned banks. It serves a diverse client-base of private retail customers, high net worth individuals and businesses via its 123-branch network across the country. Even in an increasingly competitive and regulated environment, Saman’s focused approach to becoming first choice for its target customers is successfully driving growth in market share and business volume. It held a 9.5% market share among Iran’s six leading privately-owned banks in 2010/11 (up from 8.6% in 2009/10) and a 2.16% share of the country’s entire banking industry, up from 1.92% in 2009/10.