Annual Report
Total Page：16
File Type：pdf, Size：1020Kb
In the Name of God Annual Report For the Year Ended March 20, 2017 Financial Highlights IRR million 20171 20162 20153 20144 20135 Outstanding Loans 53,625,316 28,097,787 21,474,088 13,057,539 2,575,223 Deposits 62,781,801 34,416,163 24,914,454 14,422,913 1,141,668 Total Assets 74,544,249 41,377,823 30,717,191 21,252,583 5,590,608 Net Profit 2,023,812 1,355,526 848,516 820,029 408,081 Basic EPS 506 339 212 205 102 Guarantees 21,543,141 16,750,179 11,779,733 3,892,820 510,868 Letters of Credit 2,975,041 2,507,746 670,033 756,603 - Capital Adequacy Ratio, Basel-III Foundation-IRB (Percent) 12.6 12.8 13.8 - - Capital Adequacy Ratio, Basel-III Standardized Approach (Percent) 11.7 12.5 13.5 26.1 - 1. Year ended March 20, 2017 2. Year ended March 19, 2016 3. Year ended March 20, 2015 4. Year ended March 20, 2014 5. Year ended March 20, 2013. Middle East Bank had only five months of operation in that year The Exchange Rate of the Iranian Rial On March 20, 2017, the official exchange rate of the US dollar was: USD1 = IRR32,420. A Note on the Iranian Calendar Iran’s official calendar is a solar calendar that starts on the first day of spring and ends on the last day of winter. The government of Iran as well as Iranian banks have adopted the calendar year as their fiscal year. This Annual Report is for the fiscal year 1395, coinciding with the calendar year 1395, that started on March 20, 2016 and ended on March 20, 2017. Message from the Chairman of the Board of Directors The conclusion of nuclear negotiations in 2015 and the gradual implementation of the terms of the agreement heralded a new era in the Iranian economy. In the Iranian year that followed, the highest rate of economic growth and the lowest rate of inflation for the past 25 years were attained. The oil production picked up very rapidly and was the predominant factor behind the 12.5 percent increase in GDP while inflation fell to 9 percent. Nevertheless, the stock exchange that had performed exceptionally well in the preceding year, presumably in anticipation of a high growth, witnessed a decline of 3.7 percentage points in its overall index and 12.1 percentage points in its price index. Meanwhile, contrary to expectations, little success was achieved in attracting foreign investments as investors remained cautious and seemingly skeptical. Concurrently, the banking system, as the main source of funding the economy, remained hungry for funds. Their efforts to attract more private savings through higher interest rates in defiance of the Central Bank regulations exacerbated the unhealthy competition among banks and other financial institutions and naturally failed to produce the desired outcome. In fact, the Central Bank had to step in to fill the liquidity gap and so the banking system’s indebtedness to the Central Bank increased by 19.2 percent while the monetary base registered a jump of 17.3 percent. Middle East Bank, however, relatively a newcomer to the loanable funds market, managed to avoid getting entangled in speculations; it followed its own projects without deviating from its strategy and was accordingly remunerated. As a matter of fact, we remained committed to the policy of high- quality services and adopted a state-of-the-art mechanism of risk management, thereby succeeded to attract low-risk and high-performance clients, which certainly contributed to our success in achieving the lowest ratio of problematic assets in the entire Iranian banking system, with our year-end profits amounting to a handsome 40 percent of our share capital, surpassing our own budgetary projection. There was also a special emphasis on the expansion of the Bank’s international activities. From the very beginning, we were focused on building up an efficient and solid infrastructure for future development, both in terms of size and diversity of services. So far, our progress has been quite satisfactory. Another source of our attention, an indispensable corollary to our predilection for the expansion of our international activities, has been keeping abreast of international standards and latest progress, particularly in matters of corporate governance, compliance, anti-money laundering, prevention financing of terrorism, transparency, internal audit, and risk management. We are proud of having been the first bank in Iran to adopt these standards extensively and comprehensively, as is reflected in our financial statements. As a matter of fact, in collaboration with the advisory services of KPMG, henceforth we are committed to present our financial statements in strict conformity with International Financial Reporting Standards (IFRS). Needless to say, none of our achievements would have been possible without extremely careful investment in our human capital, which was behind the dedication and creativity of our back-room heroes, highest quality managers, and first and foremost, our tireless CEO, Dr. Parviz Aghili-Kermani. I find it also necessary to express my sincere gratitude to the members of our Management Board and the Board of Directors. Many thanks are of course due to our shareholders and to the customers of the Bank who, through their trust and support, brought good name and offered encouragement to the Bank. Khosrow Nayebi-Ahranjani Chairman of the Board of Directors Table of Contents Chapter 1 Management Report 5 1. Middle East Bank’s Strategy 7 2. Shares and Shareholders 8 3. Corporate Governance 8 4. Operational Reports 13 Chapter 2 Review of Risks and Disclosure 21 1. Risk Management 23 2. Compliance 46 3. Internal Audit 48 4. Analysis of Financial Statements 50 5. Investments 55 Chapter 3 Survey of the Iranian Economy 57 1. Real Sector 60 2. Labor Market 64 3. Government Budget 65 4. Balance of Payments 71 5. Foreign Exchange Market 73 6. Monetary and Credit Policies 74 7. Prices and Inflation 80 8. Capital Market 81 9. Business Environment 85 Chapter 4 Report of Independent Auditor and Financial Statements 89 Chapter 1 Management Report MANAGEMENT REPORT 7 Management Report Review of Risks and Disclosure 1. Middle East Bank’s Strategy Middle East Bank (MEB) aims to be the most trusted and solutions to professional individuals and businesses, while value-creating Iranian bank in the domestic and international contributing to the national economy and creating value for banking sector. It defines its mission as becoming a leading and its customers, employees and shareholders. MEB intends to most reliable financial institution, providing efficient financial achieve its goals while strictly adhering to financial ethics. 1.1 - Middle East Bank’s Business Strategy MEB operates primarily as a wholesale bank, providing • Putting into effect the projected development of human financing and investment solutions to its corporate clients, high resources in both quantitative and qualitative terms; net-worth individuals and high income earners. Accordingly, • Calibrating the Bank structure and resources to customers’ rather than focusing on proliferation of branches, MEB has been requirements; Survey of the Iranian Economy leveraging on its preeminent position in technology to deliver • Achieving sustainable and growing profitability and acceptable services to clients. These delivery channels are quite unique organic growth in all areas; in Iran, taking banking services to the offices and homes of its • Leading effective implementation of risk management, internal clients through distance banking as well as e-banking tools. audit, and compliance with domestic and international rules Following this approach, while satisfying the customers’ needs, and regulations; MEB has experienced significant economy in operating costs and • Achieving a significant growth in trade finance and international a corresponding increase in profitability. banking; Since the commencement of operations in 2012, MEB has • Developing investment banking and project financing services pioneered new standards of transparency, quality of services, through National Development Fund of Iran and Islamic and focusing on IT. In line with its mission and vision, financial instruments; MEB has adopted coherent strategies at both the business • Creating a sustainable competitive advantage in information level and operational level. MEB’s senior management is technology and e-banking tools and technologies; and confident that it will achieve all the goals set forth in its • Focusing on innovative products and services, and customized five-year business plan. solutions tailored to the needs of clients. MEB’s business strategies for the next five years are as follows: and Financial Statements Report of Independent Auditor 8 MIDDLE EAST BANK ANNUAL REPORT 2. Shares and Shareholders As of March 20, 2017, MEB has a total of 2,458 shareholders. traded shares at year ends and performance of MEB shares are The composition of shareholders, share prices and number of as follows: Composition of Shareholders Classification of Shareholders No. of Shareholders No. of Shares Percentage of Shares Individual investors with more than 1 percent share 14 982,880,727 24.5 Corporate investors with more than 1 percent share 10 606,078,960 15.2 Other individual investors 2,225 2,026,486,230 50.7 Other corporate investors 209 384,554,083 9.6 Total 2,458 4,000,000,000 100.0 24.5% Individual investors with more than 1 percent Corporate investors with more than 1 percent 60.3% 15.2% Other individual investors 2.1. Share Prices and Transactions No. of Share Price Value of Shares Traded Market Value Capital Year End No. of Shares Traded Trading at Year End (IRR million) (IRR million) (IRR million) Days (IRR) March 20, 2013 2,658,515,451* 2,715,241 55 4,156,000 1,039 4,000,000 March 20, 2014 825,040,266 1,126,627 221 10,272,000 2,568 4,000,000 March 20, 2015 409,085,657 842,589 229 7,776,000 1,944 4,000,000 March 19, 2016 843,689,780 2,415,505 229 12,328,000 3,082 4,000,000 March 20, 2017 717,378,577 1,814,375 228 12,215,000 2,443** 4,000,000 * Of the total transaction value in year that ended March 20, 2013, 1,934,509,000 shares with a value of IRR1,934,509 million were for the subscription of initial offering.