Annual Report 2013
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Amãna BankAmãna Amãna Bank 480, Galle Road, Colombo 3, Sri Lanka. ANNUAL REPORT 2013 REPORT ANNUAL www.amanabank.lk ANNUAL REPORT 2013 Our Vision To provide a differentiated banking experience in Sri Lanka, through an equitable financial system Our Mission To share risks and rewards with all our customers by delivering Sharia compliant financial solutions based on innovation and technology We believe We believe that you have a right to be treated fairly We believe that one should not gain at the expense of another We believe that being responsible and ethical is as important as making profits and gains We believe that entrepreneurship should be encouraged and given a fair opportunity to succeed We believe that the best of actions are the ones which create true happiness in people We believe that you feel the same way we do We have a unique approach to banking which is in sync with our beliefs Our financial solutions are responsible, ethical and fair We are Amãna Bank. It’s Your Bank The Buzz Success and prosperity is hard to come by. It takes hard work and determination to overcome the odds. There is a hive of activity going on at Amãna Bank. Our people are busy as bees, often facing challenges, yet always heading towards success. It is only a matter of time before the ‘honey of prosperity’ will flow for the Bank and its stakeholders alike to taste the flavour of our success. Contents Financial Highlights 04 Chairman’s Message 06 Managing Director/CEO’s Review 12 Board of Directors 20 Independent Sharia Supervisory Council 28 Corporate Management Team 30 Profiles of Strategic Shareholders 32 Business and Operations Review 35 Report on Sharia Supervision 55 Corporate Social Responsibility 59 Risk Management 65 Corporate Governance 96 Bank’s Compliance with Prudential Requirements 110 Directors’ Statement on Internal Control over Financial Reporting 114 Independent Assurance Report on Internal Control 118 Annual Report of the Board of Directors on the Affairs of the Bank 119 Directors’ Interest in Contracts 127 Board Audit Committee Report 130 Board Integrated Risk Management Committee Report 135 Board Human Resources and Remuneration Committee Report 139 Board Nomination Committee Report 141 Statement of Directors’ Responsibility 145 Independent Sharia Supervisory Council Report 148 Financial Reports Independent Auditors’ Report 152 Capital Adequacy Computation 208 Income Statement 153 Shareholder Information 211 Statement of Comprehensive Income 154 Correspondent Banks 213 Statement of Financial Position 155 Branch Network 214 Statement of Changes in Equity 156 Glossary of Terms 215 Statement of Cash Flows 157 Notice of Meeting 217 Notes to the Financial Statements 158 Form of Proxy Enclosed Compliance with Other Disclosure Requirements Corporate Information Inner Back Cover Specified by the Central Bank of Sri Lanka 205 4 Financial Highlights 04 Chairman’s Message 06 Managing Director/CEO’s Review 12 Amãna Bank Annual Report 2013 Board of Directors 20 Financial Highlights Independent Sharia Supervisory Council 28 Corporate Management Team 30 Profiles of Strategic Shareholders 32 Business and Operations Review 35 Report on Sharia Supervision 55 Corporate Social Responsibility 59 Risk Management 65 2013 2012 Change LKR LKR LKR Results for the Year Financing Income 1,768,061,705 1,300,618,090 467,443,615 Financing Expenses 1,050,007,868 732,071,273 317,936,595 Net Financing Income 718,053,837 568,546,817 149,507,020 Profit/(Loss) for the Year (317,033,901) 145,994,652 (463,028,553) Position at the Year End Deposits 17,983,111,581 13,302,501,452 4,680,610,129 Advances 15,015,318,081 7,165,461,019 7,849,857,062 Total Assets 23,397,855,691 16,717,424,084 6,680,431,607 Shareholders' Funds 5,062,033,380 3,071,215,500 1,990,817,880 Information per Share Earnings (0.33) 0.16 (0.49) Net Assets Value 4.99 3.40 1.59 Industry 2013 2012 2013 Ratios Growth in Income 19.3% 35.9% 269.5% Growth in Deposits 15.0% 35.2% 17.1% Growth in Advances 8.8% 109.6% 44.0% Growth in Total Assets 16.6% 40.0% 15.3% Growth in Shareholders' Funds 12.4% 64.8% 2.3% Advances to Deposits 82.2% 83.5% 53.9% 5 Corporate Governance 96 Bank’s Compliance with Prudential Requirements 110 Directors’ Statement on Internal Control over Financial Reporting 114 Amãna Bank Annual Report 2013 Independent Assurance Report on Internal Control 118 Annual Report of the Board of Directors on the Affairs of the Bank 119 Directors’ Interest in Contracts 127 Board Audit Committee Report 130 Board Integrated Risk Management Committee Report 135 Board Human Resources and Remuneration Committee Report 139 Board Nomination Committee Report 141 Statement of Directors’ Responsibility 145 Independent Sharia Supervisory Council Report 148 6 Financial Highlights 04 Chairman’s Message 06 Managing Director/CEO’s Review 12 Amãna Bank Annual Report 2013 Board of Directors 20 Chairman’s Message Independent Sharia Supervisory Council 28 Corporate Management Team 30 Profiles of Strategic Shareholders 32 Business and Operations Review 35 Report on Sharia Supervision 55 Corporate Social Responsibility 59 Risk Management 65 7 Corporate Governance 96 Bank’s Compliance with Prudential Requirements 110 Directors’ Statement on Internal Control over Financial Reporting 114 Amãna Bank Annual Report 2013 Independent Assurance Report on Internal Control 118 Annual Report of the Board of Directors on the Affairs of the Bank 119 Directors’ Interest in Contracts 127 Board Audit Committee Report 130 Board Integrated Risk Management Committee Report 135 Board Human Resources and Remuneration Committee Report 139 Board Nomination Committee Report 141 Statement of Directors’ Responsibility 145 Independent Sharia Supervisory Council Report 148 10 NEW BRANCHES | TRIPLE DIGIT GROWTH IN FINANCING ASSETS | OVER 100,000 CUSTOMERS | A SUCCESSFUL IPO | LISTED ON THE BOURSE | In the Name of Allah the Most Gracious the Most Merciful ! It is after achieving those key milestones that I welcome you to the Fifth Annual General Meeting of the Bank. As the first and only fully Sharia compliant bank in the country we have strongly made our presence felt after making a meaningful contribution to the overall growth of the banking industry in the year 2013. This is an encouraging sign for a new bank and places us in good stead to further penetrate the industry as we take giant strides in our journey to become a premier banking institution in Sri Lanka. GLOBAL AND LOCAL ECONOMIC OVERVIEW The global economy showed positive signs of bouncing back as it grew by 3% during the year under review. Global activity and world trade gathered momentum particularly in the second half of the year. Emerging and developing economies benefited from strong external demand in the advanced economies and are expected to progressively grow in 2014 and 2015. The projected growth rates of advanced economies have also been favourable but risks such as inflation and financial instability remain a concern for policy makers. On the other hand, the local economy with a sustainable growth model and sound macroeconomic policies performed to expectations amidst mounting challenges, recording a growth rate of 7.3% in 2013. In a bid to stimulate economic growth in the country, the Central Bank of Sri Lanka reduced policy rates on two occasions during 2013 which led to a decline in market rates. It was a mixed year in terms of the exchange rate with the Rupee gaining ground 8 Financial Highlights 04 Chairman’s Message 06 Managing Director/CEO’s Review 12 Amãna Bank Annual Report 2013 Board of Directors 20 Independent Sharia Supervisory Council 28 Corporate Management Team 30 Profiles of Strategic Shareholders 32 Business and Operations Review 35 Report on Sharia Supervision 55 Corporate Social Responsibility 59 Risk Management 65 YOUR BANK, IN LINE WITH ITS during the first half of 2013 but on average the Rupee depreciated against the US Dollar by STRATEGIC BUSINESS PLAN, 2.7% during the year. Inflation continued its downward trend with another year of single digit OPENED 10 NEW BRANCHES IN inflation to end 2013 at 4.7%. KEY LOCATIONS ATTRACTING NEW CUSTOMERS YOUR BANK SETS THE PACE IN 2013 Your Bank, in line with its Strategic Business Plan, opened 10 new branches in key locations attracting new customers by taking the concept of Islamic finance to the untapped regions in our country. The expansion in reach was much welcomed and the response so far has been promising with Consumer and SME being the revenue generating segments. The 18% credit growth ceiling that was imposed on the banking sector in the previous year was removed in 2013. As a result, the Bank embarked on an aggressive strategy to ensure that a substantial level of growth is achieved in the medium term. The targets set for the year under review were ambitious but the results in terms of balance sheet growth epitomises that a focused approach can yield tremendous results. In this backdrop, the Bank recorded remarkable growth in customer financing and a substantial increase in customer deposits with the former achieving triple digit growth. The balance sheet further strengthened as the total assets of your Bank increased to LKR 23 billion taking a leap towards achieving the status of a mid-sized bank in the years to come. With the growth in assets and the resultant impact on revenue, core banking income has increased significantly. However, the inauguration of 10 new branches coupled with investments in key areas such as people, processes, systems and infrastructure meant that increased costs had to be incurred for expansion purposes. The performance of the stock market did not help the Bank as the equity portfolio recorded losses after the share prices declined during the year.