Contents Saman Bank In 2016/17 Statement of the Board and the CEO ................................................................................................................................ 4 Key Figures .......................................................................................................................................................................................... 7 About Saman Bank ......................................................................................................................................................................... 8 Strategy Statement ....................................................................................................................................................................... 10 Saman’s position in the Securities and Exchange Organization .............................................................. 12 The Bank’s Legal Environment ............................................................................................................................................ 12 An Overview of Saman’s Operational and Financial Performance ......................................................... 14 Resource and Expense Analysis .......................................................................................................................................... 19 Major Achievements of Bank in Different Areas .................................................................................................... 22 Saman Bank Corporate Governance 30 ................................................................................................................................................................ In 2016/17 Risk Analysis ....................................................................................................................................................................................... 40 Major Accolades and Achievements of Saman Bank and Saman Financial Group in 2016/17 42 Saman Financial Group ............................................................................................................................................................... 43 Plans and Projects for 2017/18 ............................................................................................................................................. 44 Financial Report Independent Auditor’s and Legal Inspector’s Report ....................................................................................... 46 Group Consolidate Financial Statements .................................................................................................................... 50 Saman Bank (Public Joint Stock Company) Financial Statements ........................................................ 56 Explanatory Notes ......................................................................................................................................................................... 63 Statement of the Board and the CEO Yesterday investments in other markets such as capital and housing markets. No improvement was recorded in fees and The financial year 2016/17 was undoubtedly a challenging year for the Iranian banking system. Years of charges revenue, in spite of increased operational costs and infrastructural developments during the past five years. negotiations between Iran and the five world economic leaders (P5+1) finally reached a conclusion, and the signature of the JCPOA in winter 2016 heralded new hope for the Iranian economy. Although the gradual In 2015, the CBI issued a circular stipulating that banks were to pay the costs of using POS systems in retail outlets, removal of sanctions re-established contact with the international banking system, it also brought to light the despite the major investment in e-commerce and e-payment development. This in itself was responsible for a high fact that it would be necessary to develop the technical, operational and infrastructural capacities required in increase (IRR 1.064 billion) in our expenses. order to comply with complex, strict standards and to be able to interact productively with international banks and institutions. The new conditions prompted us to pursue even more extensively and diligently our plans to Despite all of the above-mentioned challenges, the fact that we had planned with diligent foresight meant that achieve our key goal: “To become the first-choice banking partner for overseas banks.” Saman Bank was prepared and equipped to face the new conditions, to effectively manage the restrictions and utilize opportunities in the best possible manner. Our excellent management of resources and expenses, and our focus Domestically, the Central Bank of Iran (CBI) continued its policy of money supply control and inflation control on our international capabilities enabled us to increase our foreign currency operations from $3.9 billion in 2015/16 throughout the year, which reduced interest rates more than once during the year. Although the reduced interest to $5.8 billion in 2016/17. The role of the JCPOA in opening up the Iranian banking market and making it more rates promised a positive impact on banks’ profitability, it coincided with the issuance of two separate circulars competitive should not be ignored. In such a competitive market, we managed to improve our import market share of by the CBI, which adversely affected profits and severely reduced major parts of joint revenue sources. The first 13 percent to 15 percent. circular called for all government, government company and municipality accounts to be centralized within the CBI, and the second circular reduced the gap between interest paid on deposits and interest received from loans. It also As indicated above, we have invested heavily in our three key areas of business, based on our rigorous forecasts stipulated that banks were to avoid paying interest on long-term deposits, simultaneously offering short-term loans of future developments during the JPA and the start of JCPOA, and taking into account the need to expand our to the same clients. international banking capacities. These actions will continue well into 2017/18. We should bear in mind that approximately 80 percent of the Iranian economy is controlled by the state, and the In order to improve productivity and efficiency, we implemented Enterprise Resource Planning (ERP) systems, centralization of government accounts within the CBI means a smaller and more competitive money market for purchased from a reputable developer, which facilitate the control and utilization of information in all sectors of the commercial banks, especially privately owned institutions. On the other hand, operational costs were borne by bank including financial, accounting, human resources, supply chain and customer services. ERP will enable us the banks under the existing inflation conditions, and the reduced gap between interest paid and interest gained to develop and implement the infrastructure needed to prepare and manage our financial statements in line with represents a loss to the banks, which were also responsible for legal deposit costs. Banks experienced similar IFRS standards, which we will certainly need in our interactions with domestic supervisory bodies as well as our conditions in the non-joint-revenues section. The economic stagnation had reduced profit and blocked banks’ international dealings. 4 Annual Report 5 Our next step toward joining the global banking network was to optimize e-banking equipment. In this regard, we have procured the latest software solutions and tailored these to suit our requirements. The collective efforts of our colleagues across all departments have resulted in numerous awards and accolades for the Bank. Saman’s position improved five steps among the 100 superior companies in Iran, and it now stands in 24th place. Saman’s Customer Complaint system obtained ISO certification, and its Capital Intelligence credit rating improved. Saman was voted first-choice bank for retail banking by more than 50 thousand voters in the context of the “My Favorite Bank” annual festival, and was awarded the prestigious title of “My Favorite Bank.” Today Our goals for the current year include the launch of our innovative new corporate banking and personal banking systems. Thanks to our past investments, we can now develop our Internet banking systems independently. In 2016/17, we invested heavily in developing our mobile banking systems, launching our Mobile Virtual Network Operator (MVNO). The first series of SIM cards under the manufacturer’s brand, SamanTel, will soon enter the market. We intend to offer payment, insurance and value-added services (VAS) on these SIM cards. Under our current policy, our programs focus on three major goals: cost management, expansion of international banking, and continued optimization of infrastructures. While working hard to increase the bank’s revenues, we strive to maintain our brilliant record with the CBI as a very active bank in the interbank market. Another major goal that we strongly pursue is that of reducing the bank’s outstanding claims to the lowest possible level. Our previous investments, including the creation of Hafez Saman Iranian Credit Scoring Company, and the concentration of debt-collection activities have brought us closer to this goal. Key Figures In 2017/18, we will establish Saman Holding to create synergy in companies in which Saman Bank is a shareholder. We expect this to improve strategic management and increase