ANNUAL REPORT 2011-2012
ANNUAL REPORT 2011-2012 sb24.com info@ www.sb24.com SAMAN BANK, THE INTELLIGENT BANK
ANNUAL REPORT 2011-2012
CONTENTS
OVERVIEW 5 FIVE-YEAR SUMMARY 6 FINANCIAL HIGHLIGHTS 7 MESSAGE FROM THE BOARD OF DIRECTORS 8 HISTORY 12 VISION, MISSION AND OBJECTIVE 13 OUR STRATEGY 15 SAMAN FINANCIAL GROUP 18 SHAREHOLDER STRUCTURE AND CAPITAL 20 BUSINESS ENVIRONMENT 23 WORLD ECONOMIC CHANGES 24 IRANIAN ECONOMY AND BANKING INDUSTRY 24 BUSINESS REVIEW 29 OVERVIEW 30 CHANGES IN OPERATIONAL & EXECUTIVE STRUCTURE 32 RETAIL AND ELECTRONIC BANKING 34 INVESTMENT PRODUCTS AND SERVICES 36 INTERNATIONAL BANKING 38 GOVERNANCE 41 CORPORATE GOVERNANCE 42 BOARD OF DIRECTORS 46 BOARD COMMITTEES 48 INTERNAL AUDIT AND CONTROLS 50 INDEPENDENT AUDIT 50 EXECUTIVE MANAGEMENT 52 RISK MANAGEMENT 55 COMPLIANCE 58 HUMAN RESOURCES 60 FINANCIAL STATEMENTS 2011/12 65 SAMAN BANK BRANCH NETWORK 99 OVERVIEW Overview
ANNUAL REPORT 2011-2012
FINANCIAL HIGHLIGHTS FIVE -YEAR SUMMARY For the financial year ending on March 21, 2012
Key items in profit & loss statements Unit 2011/12 2011/10 2009/10 2008/09 2007/08 Figure 1 Figure 2 Figure 3 Deposit per branch ratio IRR billion Deposit per employee ratio IRR billion Total revenue per branch IRR billion Total income IRR billion 4,125 3,348 2,031 1,508 1,474 575 44 29 30 Total expenses IRR billion 3,246 1,833 1,152 1,045 961 482 Net profit- after tax IRR billion 841 1,355 787 439 512 459 35 23 397 395 29 20 Dividend per share (profit divided by shares at the end of year) IRR 210 452 437 488 569 26 27 18 Dividend per share (profit divided by shares during the year) IRR 280 753 750 488 569 Key items in balance sheet Unit 2011/12 2011/10 2009/10 2008/09 2007/08 Total Loans IRR billion 66,985 60,246 34,184 27,341 23,989 Total assets IRR billion 109,803 84,912 49,315 41,733 34,846
Total deposits IRR billion 79,401 55,189 40,072 34,167 29,583 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Total liabilities IRR billion 101,709 80,081 46,393 39,341 33,320 Paid capital IRR billion 4,000 3,000 1,800 900 900 Shareholders’ equity IRR billion 8,093 4,831 2,922 2,392 1,526 Customers’ undertakings for opened L/Cs IRR billion 14,618 2,858 2,632 1,294 2,362 Figure 4 Figure 5 Figure 6 Net profit per branch IRR billion Customers’ undertakings for openedL/Cs IRR billion POS per thousand customers IRR billion Operational growth indicators Unit 2011/12 2011/10 2009/10 2008/09 2007/08 14,618 12 108 Number of customers Thousand 1,045 864 792 646 496 Number of branches Unit 153 123 106 97 75 8 75 Number of ATMs Unit 674 519 390 256 183 8 71 71 71 Unit 6 Number of POSs 113,284 65,064 55,971 46,125 35,445 5 Number of employees Person 1,953 1,618 1,506 1,456 1,160 2,858 Key ratios Unit 2011/12 2011/10 2009/10 2008/09 2007/08 2,362 2,632 1,294 Capital adequacy ratio (Tier 1) % 11.4 9.9 10.6 10 7.4 Capital adequacy ratio (Tier 2) % 24 19.5 18.6 - - 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Loans to deposits ratio % 84 109 85 80 81 Loans to assets ratio % 61 71 69 66 69 Total expenses to income ratio % 79 55 57 69 65 Graph 7 Graph 8 Graph 9 Number of new branches opened during the year Number of new ATMs installed during the year Number of new POSs installed during the year Debt ratio % 93 94 94 94 96 mln $ mln $ mln $ Return on assets ratio % 0.9 2 1.7 1.2 1.7 30 155 48,220 Return on shareholders’ equity ratio % 16 35 30 22 37 134 129 Total deposits to total assets ratio % 72 65 81 82 85 21 22 Average deposit per working day IRR billion 83 52 20 16 25 17 Total income per branch IRR billion 30 29 20 18 23 77 73 Net profit per branch IRR billion 6 12 8 5 8 9 10,680 % 9,846 9,093 Total income growth rate 23.2 64.8 34.7 2.3 114.9 6,951 Deposit per branch ratio IRR billion 575 482 395 397 459
Loan per branch ratio IRR billion 485 526 337 318 372 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Profit per employee ratio IRR million 471 867 531 336 500 Deposit per employee ratio IRR billion 44 35 27 26 29 Loan per employee ratio IRR billion 38 39 23 21 23 Number of new branches Unit 30 17 9 22 21 Number of new ATMs Unit 155 129 134 73 77 Number of new POSs Unit 48,220 9,093 9,846 10,680 6,951 POS per each thousand customers Unit 108 75 71 71 71
*The major cause of reduced joint revenues in 2011-12 is the failed return of resources spent for financing the L/Cs during the second half of the financial year. Increased properties owned by the bank are due to collecting claims which showed over 200 percent growth.
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ANNUAL REPORT 2011-2012
MESSAGE FROM THE BOARD OF DIRECTORS Transforming Threat into Opportunity Over the past year, Saman Bank has made significant leaps forward and achieved the goals We spent the summer tackling the challenges posed by the “Arya Group” case, which involved that we set out to. We approach the New Year with collective determination to keep up this the entire banking system, including Saman Bank. The aftermath of this national banking crisis progress, achieve even greater goals, and see our next phase in the Iranian banking industry continued throughout the autumn. It would have been impossible to manage the crisis without come to fruition. meticulous and well-timed decisions, from preparing expert reports for the relevant authorities to the appointment of a new board of directors for the Bank. These measures were taken to Loyal Customers highlight the transparency and ethical nature of Saman Bank operations, and promote a positive To date our strategic outlook has been founded on innovation and market intelligence. We have image externally. innovated the use of electronic banking tools and identified new opportunities to stay ahead of In the end, these obstacles were overcome. They were no match for the hard work and market trends. Our first decade of trading (1999-2009) was a period of steady progress. We learnt diligence of our staff, as well as support from our customers. In fact, the challenges we faced that the key to a successful bank is to nurture a loyal and supportive customer base. The five-year simply boosted the will and determination of the bank managers to follow their plans through strategic plan designed by the CEO, senior managers and executive colleagues was the first of its and introduce key changes within their teams. In these difficult days, the Bank experienced kind to be put in place at Saman Bank. Throughout this program, we have continued to cement unprecedented achievements not only a testament to the strength of our staff, but also to the our position in the Iranian banking industry. We have gained valuable insight into our customers. strength of the Almighty, God. We have learnt that when we provide services efficiently and without hassle, our customers trust us. A successful banking experience should put the customer at the heart of the business. It Transformation of the Bank should become part of their everyday lives. This insight and progress in the business has given us Saman Bank underwent huge organizational changes over the past year. Special operation units an optimistic outlook for the year ahead. including “Corporate Banking”, “Premium Banking” and “Bancassurance” were established Good News from Spring Season during 2011/12 to research and identify different customer types to which we could offer more tailored services. This laid the groundwork for a new organization that would essentially Spring 2011 ended with the good news that we issued a thousand billion Iranian Rials Sukuk transform Saman Bank. It is notable that only in the second half of financial year 2011/12, more (asset-backed Islamic bonds) and sold the total sum in less than three minutes in the over-the- than one billion dollars L/C was opened in the Corporate Banking division; twice the amount of counter (OTC) market. The marketing and issue of these bonds, which set a precedent in Iranian total L/Cs opened by the bank during 2009/10. banking, can be attributed to the planning, effort and teamwork of the bank managers. Another significant achievement of this year was promoting the bank’s ranking in the top 100 Saman’s Branch Design national companies from 60th in 2010/11 to 36th in 2011/12. In the same year, Saman Bank was We have come to realize the importance of customer experience and how this can affect overall assessed by the Industrial Management Organization and determined to have the highest sale opinion. As a result, the senior management team decided to transform the aesthetic and growth among all state-owned and privately-owned banks in the Country. function of branches to become more customer focused. After extensive planning, consulting and coordinating with mid-level managers and professional contractors, Bagh Ferdows was
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ANNUAL REPORT 2011-2012
the first redesigned branch to be inaugurated under the new plan. To create the ideal Saman branch, the teams carefully considered the colours, lighting and layout to bring optimum 44 percent Growth in Customer Deposits comfort, peace of mind and flexibility to our customers. Public opinion has become increasingly suspicious of the banking system on the whole. The key Facilitating the Banking System factors involved include: the soaring increase in the price of gold, the fluctuations of the capital The focus over the past year has been to improve customer-centred services, enhance internal market alongside bank interest rate restrictions, and the extensive media coverage of banking controls, and revise and facilitate executive procedures. The result of our efforts was the launch scandals. These factors have affected the relationship between banks and customers and have of the new Internet banking system in early 2012 called “Netbank”. Netbank is a user-friendly the potential to discourage customers from entrusting their savings. Saman Bank met these Internet banking tool which provides customers with a simple, fast and secure way to bank. challenges head on and reaped the rewards of a 44 per cent growth in customer savings (more Incredibly, Saman Netbank attracted more than 300,000 new users in a few months. This than double the average growth rate of savings in the national banking industry). was the result of a well-planned and executed strategy from different divisions of the bank. Furthermore, Saman Bank has succeeded in: The fourth Iranian Web Festival recognized our achievement by awarding Saman Bank ‘best Attracting more than IRR 24 thousands billions new deposits (IRR 83 billion deposits per banking website’ and ‘best e-payment service provider’ accolades in the Country. working day) International Relations Opening 30 new branches (one new branch every 10 days) In spite of increasing pressure from international sanctions on the Iranian banking system, Installing 155 new ATMs (one ATM every 48 hours) and unprecedented fluctuations in currency exchange rates, our colleagues succeeded in strengthening the international relations of the bank. They achieved this through transparency, Grace of God perseverance and frequent international trips. Through meticulous planning, the Bank has The achievements over the past year can be attributed to the strategic thinking and unyielding been quick to respond to pressures caused by international sanctions. We witnessed the determination of the Bank to increase its share in a highly competitive market. However, achieving largest amounts of L/Cs and drafts (above 3.5 billion dollars) and the highest non-joint revenues the position that we aspire to will require a long-term strategy and consistent changes will be (about IRR 3,450 billion, i.e. IRR 11.9 billion per working day) since the inception of Saman Bank. crucial in the years to come. We hope that with the grace of God, the support of our shareholders, The Bank is proud to have been able to capitalize on its good standing and solid international the diligence of our staff and the loyalty of our customers, we will continue to build on our relations to gain access to critical food supplies and pharmaceutical products which directly foundations and achieve our vision of Saman Bank. benefited Iranian people in need. Board of Directors
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ANNUAL REPORT 2011-2012
VISION, MISSION AND OBJECTIVES During Iran’s five-year Development Plan (2011-2015) Saman Bank’s vision and mission underpin everything we do and steer the five-year customer- centric strategy implemented in 2010.
Our Vision By putting in place the five-year customer-centric strategy, Saman Bank’s objective is to become: HISTORY The first choice in Iranian banking for its target customers, which include: In-branch customers Saman’s story dates back to September 1999, when it was launched as the first credit institution in Iran, under the name Saman Eghtesad. At this time it had a share capital of IRR 11 billion Branch customers focused on electronic banking services (US$ 1.4 million). Its growth was immediate, with a five per cent return on equity in its first year VIP and Premier customers alone. Large and medium-sized businesses (domestic and international) for their international Less than three years later, in August 2002, Saman Eghtesad had accumulated sufficient capital transactions to apply for a banking license. It was recognized by the Central Bank of the Islamic Republic of The first choice correspondent banking partner for overseas banks Iran as the third privately owned bank in the country. In the present day, with around 36 times the original share capital, Saman Bank has pursued one clear goal throughout the years; to The first choice employer for the best and brightest banking professionals provide individuals and businesses with a range of banking services, unhindered by red tape and The first choice privately-owned Iranian bank for international banking operations and bureaucracy. This has been the driving force of Saman Bank since its inception. transactions Over the years Saman Bank has steadily increased the range and quality of its services. Meanwhile, it has pioneered new solutions to age-old problems, including developing Iran’s first Our Mission Internet and electronic banking services. Saman Bank aims to fulfil this vision by creating real added value for its customers In fact, Saman Bank’s determination to revolutionize the traditional Iranian banking and converting each and every one of them into loyal customers through the delivery of system has set many precedents, including: quality, convenience and honest social values. Iran’s first electronic bank. The first Iranian bank to offer an Internet banking service (2002). This service was upgraded, In order to provide simple We aim to provide a trusted and easy solutions for all platform for responding expanded and re-launched as Netbank in 2012. our customers’ financial We facilitate our customer to our customers’ requirements, we are requirements through the The first bank to provide online transfer services in Iran. services delivery by constantly innovating Saman improving the efficiency of development of technical The first bank to provide online payment services in Iran. Financial Group’s key areas the procedures and social capabilities of operation (banking, delivered by competent, Moving forward, Saman’s future direction is clear-to build on its existing values of convenience, insurance and investment) well-trained employees speed and trust, in order to create outstanding customer relations in all areas of its operation.
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ANNUAL REPORT 2011-2012
In order to fulfil this mission, we have set out the following values: Customer-centric culture Building customer loyalty Improving the efficiency of our customer services Convenient solutions for all of our customers’ financial needs Employees Valuing expert knowledge and commitment Training, education and career development Accurate evaluations based on performance Responsibility Transparency Respecting legal regulations and ethical standards Discipline, precision and transparency Organizational Culture Value placed on teamwork Continuous improvement and evolution of structure
Our Strategic Objectives This vision and mission statement will help Saman pursue its five-year business objectives, which include: Tailoring services based on customer needs OUR STRATEGY Adapting organizational structure and processes to meet customer requirements From “Innovation and Intelligence” to “Convenience, Speed and Trust” Inspiring customer loyalty Saman Bank entered the Iranian banking system in 1999 as the first privately-owned financial and credit institution. We aimed to provide a sustainable growth and profitability for our customers and Improving the operational efficiency shareholders, whilst carving out a distinct market position among competitors. During the past Widening Saman’s investment capabilities few years, Saman has succeeded in introducing a new model of retail banking through innovations Mitigating risk potential through enhanced risk management in technology, and paved the way for progress in Iranian banking, especially in terms of electronic banking. Increasing profitability of branch operations During the early years, this unique advantage played a significant role in the growth and development of Saman. However, as we approached the mid-2000s, new players emerged, including new banks and software providers, and technology became widely accessible to the older, more established banks. Although customers still consider Saman as the founder of electronic banking, we know we cannot rest on our laurels. We are committed to continuous innovation and investment in technology to guarantee our survival and growth in today’s highly competitive market.
A Change in Perspective Alongside this increased competition, the landscape of the banking system is changing. Private banks are working towards their own capital accumulation. State-owned banks are increasingly becoming privatized, meaning they will keep the advantage of operating government accounts while evading the government bureaucracy that held them back. Meanwhile, new competitors are entering the banking industry. In this rapidly changing market, Saman needs to keep innovating and evolving its operations to maintain sustainable and profitable growth.
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ANNUAL REPORT 2011-2012
Customer Satisfaction Saman Bank’s new approach has been to put itself in our customers’ shoes, adopting their perspective to understand and improve our services further. Our basic objective has always been to provide quality services. Our focus so far has been on delivering a range of attractive services quickly and efficiently. Although these qualities are still at the forefront of our mission, they are no longer considered unique or ground-breaking in today’s market. Therefore, we need to work harder to stay ahead of our competitors. We need to ensure that outstanding customer services are being delivered in every single branch all the time; not just in certain branches on special occasions.
Customer-Centric Culture A ‘Customer-Centric Culture’ views the customer as the main priority in the business. In many organizations, a customer-centric culture is an empty promise. At Saman, it is an organizational value. We are not content with general customer satisfaction. We are focused on cultivating customer loyalty. A “loyal customer” is a customer who is not only happy with our services and products but also recommends Saman to friends and family; and word of mouth has proven to be the most efficient means of publicity in the world.
Convenience, Speed and Trust How can we make our customers loyal? Considering this question in depth led to the insight that if our customers receive quality services at a desirable speed, in a convenient and courteous manner, a mutual trust will emerge. If the Bank developed a mutual trust between itself and its customers, then sustainable long-term relationships would follow. With this in mind, we defined “convenience, speed and trust” as our core customer values.
Customer Advice Until recently, staff used to offer transfer services customers in branch. Through technology developments, payment and transfer tools have now been upgraded and made accessible through ATMs, the Internet and POS terminals. Therefore, branches can now devote more time to offering banking, insurance and investment solutions to customers and promote the Bank’s profitable products.
Contemporary Communication Technologies In the current climate, banks cannot survive without reliance on new information tools, especially the Internet. One of the fundamental changes we’ve put in place in our retail branches is the use of modern communication technologies, like self- serving kiosks, offering customers information, consultancy and sale of products.
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ANNUAL REPORT 2011-2012
SAMAN FINANCIAL GROUP In addition to Saman Bank, the Saman Financial Group includes a further eight partly- owned subsidiary companies that it has launched or acquired a substantial stake in between 2003-2012. Today, these entities operate independently to provide specific services to the Bank, its clients and to the wider market place.
Saman Kish Electronic Payment Company Saman Kish Electronic Payment Company was founded in 2003 with a capital of IRR 100 million. It is responsible for Saman Bank’s key customer-facing electronic systems: including ATMs, self-service kiosks, e-commerce and POS solutions. Another key development has been the expansion of computer and telecommunication infrastructure to offer e-commerce services. As the first provider of online payment services in the country, Saman Kish Electronic Payment Company played a crucial role in establishing Saman Bank as the leaders in electronic banking during its first decade in operation. The capital of the company in 2011/2012 is IRR 300 billion. Saman Bank holds 144,000,000 shares, equal to 48% of the Company. In the current year, it generated revenue of IRR 230,903 million and a net profit of IRR 34,703 million. Saman Brokerage Company Kerishchi Brokerage Company was originally established in 1993 as the first brokerage firm in Iran. It was renamed Saman Brokerage Company in 2003 when Saman Bank purchased 25 per cent of its shares. This company provides a wide range of brokerage, underwriting and consultancy services including: futures trading, portfolio management and investment advisory services. Saman Bank owns 84.5 per cent of this Company. Iranian Credit Bureau and Scoring Company In 2011/12, Saman Brokerage Company had a capital of IRR 10 billion. This is equal to Registered in 2007 with a share capital of IRR 100 million, The Iranian Credit Bureau 10 million shares at IRR 1000 each. During financial year 2011/12, it generated a net profit and Scoring Company provides credit-scoring services under an Experian license. It was of IRR 3,850 million out of IRR 13,515 million of revenue. launched in early 2012 in Saman Bank branch network and currently operates using credit Saman Satellite Communications Group (Saman SCG) reporting as well as individual and corporate credit scoring tools. The current capital of this company stands at IRR 49,420 million. Saman Bank owns 99 per cent of the company, equal Established in 2004 with capital of IRR 500 million, Saman SCG undertook the provision of to 245,000,000,000 shares. data transfer, satellite telecommunications and satellite teleports. Its capital increased in 2005, 2007 and 2011 to IRR 20,000 million, 54,000 million and 81,000 million respectively. Saman Pardazeshgaran Company Currently, Saman Bank owns 38,943,000 shares, which is equal to 48.08 per cent of the Saman Pardazeshgaran Company was created on January 8, 2011 with the aim to design, Company. In 2011/12, it achieved net profits of IRR 22,139 million on revenues of IRR develop and support core banking based products and tools required by the Bank. In 115,836 million. financial year 2011/12, the Company’s registered capital was IRR 20 billion. Saman Saman Exchange Pardazeshgaran Company also designs and develops business comprehensive systems, business procedure re-engineering system (BPR), advisory services in management, as Saman Exchange was founded in 2004 with a share capital of IRR 50 billion in order to well as the operation of modern banking technologies. This is in addition to mechanizing provide a full range of foreign exchange and international payment services. It was the first administration systems and operating these systems. The Company generated IRR 6,030 foreign exchange company to be registered in the country as a subsidiary of a privately- million in revenue during financial year 2011/12, delivering a net profit of IRR 1,576 million. owned bank. Saman Bank owns 84.5 per cent of this Company, which is equal to 4,225,000 shares. Saman Exchange has generated revenues of IRR 17,364,762 million and delivered Saman Aftab Tejarat Servicing Company a net profit of IRR 8,212 million. Saman Afatb Tejarat Servicing Company was established in 2011 with a share capital of IRR Saman Insurance Company 100 million. Their primary purpose was to organize and administer all service personnel working in the Bank. Based on the subsequent approvals of Saman Bank’s Board of Saman Insurance Company obtained its license from Iranian Central Insurance with a Directors, part of the logistic services of the Bank (including technical affairs, repairs, share capital of IRR 200 billion in 2004 to provide a full range of insurance services. In maintenance and branch utilities) also fell under the remit of this company. Currently, 2010/11, its capital increased to IRR 280 billion. Saman Bank owns 280,000,000 shares about 15 per cent of the company, equal to 1500 shares, belongs to Saman Bank. In the (1000 Rials each) and 10.8 per cent of the Company. In 2011/12, Saman Insurance Company reported fiscal year, the Company earned a net profit of IRR 565 million from generated generated revenues of IRR 1,381,552 million and dividends of IRR 300 per share. revenues of IRR 11,118 million.
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ANNUAL REPORT 2011-2012
Share Capital Increase Figure 10 SHAREHOLDER STRUCTURE AND CAPITAL IRR billion 4,000 At the time of registration (2003) the capital of the Bank was IRR 200 billion (divided into 200 million shares; each of IRR 1000 nominal value). It has since increased to IRR 4,000 billion 3,000 (divided into four billion shares; each of IRR 1000 nominal value) due to frequent increases in capital between 2002 and 2012 as detailed in the following table. 1,800
Table 1 Changes in the Capital IRR billion 900 750 600 Date of Capital Previous Amount New Percentage Source of Increase 220 300 Increase Capital Increased Capital of Increase 200
2003 2004 2005 2005 2006 2007 2010 2011 2012 29.08.2002 200 Liquidated claims and cash funds of shareholders 27.11.2003 200 20 220 10 Liquidated claims and cash funds of shareholders In full compliance with the provisions of the Budget Act Bylaw of year 2011/12, (Part T, Clause 15.10.2004 220 80 300 36.36 Liquidated claims and cash funds of shareholders 78), Saman Bank revaluated its tangible and non-tangible assets. The generated surplus, 08.03.2005 300 300 600 100 Cash funds of shareholders amounting to IRR 2,588 billion, will be added to the capital account after due legal processes. 16.11.2005 600 150 750 25 Liquidated claims and cash funds of shareholders Figure 11 08.10.2006 750 150 900 20 Liquidated claims and cash funds of shareholders Shareholder Structure IRR billion 13.01.2010 900 900 1,800 100 Liquidated claims and cash funds of shareholders and denying rights of preference 19.03.2011 1,800 1,200 3,000 66.67 Liquidated claims and cash funds of shareholders
18.03.2012 3,000 1,000 4,000 33.33 Cash funds of shareholders 24%
Individual shareholders
Iranian Copper Industry Workers Pension Fund
Steel Industry Workers Pension Fund 9% 59% Corporate Shareholders owning less than 5% of the total shares
8%
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ANNUAL REPORT 2011-2012
An increase in productivity share to one third of the economic growth An improvement in the Gini Index to a maximum of 0.35 by the end of the Plan They were also inspired by the result of the enforcement of the subsidies reforms (Targeted Subsidies Plan), especially with regards to energy prices when compared to other production inputs. It was clarified that the annual budget 2011/12 was compiled in conditions where the inflation rate would be relatively controlled, the capital market and non-oil exports would experience an adequate growth rate, and the Targeted Subsidies Plan would be implemented.
Budget Bill of Year 2011/12 The official analysis of the impact of the Budget Bill (2011/12) on the Iranian economy indicated an inflation rate of between 13% to 15%, a decrease or unchanged rate of unemployment, an increase in bank lending, a boost in demand through an increased development budget, six per cent increase in salaries of the government employees and a payment of IRR 340 thousand billion in cash subsidies to the people. The government was satisfied with the changes introduced by the Parliament into the budget bill because these changes preserved, even strengthened, the financial climate. The most influential clause on the financial statements of banks was probably Article 28. This clause allowed banks to agree to payment instalments of deferred debts owed by production, industrial, mining and agricultural units that were WORLD ECONOMIC CHANGES IN 2011/12 experiencing difficulty in repaying their debts. This is a one-off with a term up to five years. With sanctions against the Iranian economy limiting all business relations to the oil trade, However, it is conditional on the approval of the board of directors of the bank in question. This the recent major crises in the Eurozone and American economies have not made a serious process results in the reduction of deferred debt. impact on macroeconomic conditions in Iran, apart from fluctuations in global oil prices. Global economy trend variables in financial year 2011/12 did not see any major changes in the standing Capital Market of the world’s major economic powers. Economic crises in many of the Eurozone economies, The market climate of competitor assets and internal changes did more to influence the especially in Greece and Spain, together with the lack of any significant change in the USA’s banking business environment in financial year 2011/12 than previously seen. The policy economic recovery, has steadily decreased the world economic growth rate from 4.1 per cent in making & supervisory package of the Central Bank of Iran instructed banks to reduce interest 2010 to 2.7 per cent in 2011. Forecasts for 2012 indicate a continued decline. rates on both customer savings and bank loans. Considering the inflation forecasts based on Crude oil, which cost about 102 USD per barrel in April 2011, did not experience any significant the official analyses of the government, which were at least 13 to 15 per cent, the competing fluctuations. The global price gradually decreased to around 80 USD by the end of summer markets became more attractive to the public than putting their savings in banks. The capital 2011 and then increased once again. market was the first winner under this scenario. After two lucrative years (2009/10 and 2010/11) culminating in a yield of approximately 57 and 85 IRANIAN ECONOMY AND BANKING INDUSTRY IN 2011/12 per cent respectively for investors, the capital market declined. However, it soon reaccelerated The Year of Economic Jihad and National Production as a consequence of the reduced return rate in the money market. Naming year 2011/12 2011/12 was the first year in the five-year Development Plan of the Islamic Republic of Iran and as the year of “Economic Jihad” boosted the capital market to an unprecedented growth in the first year that the Iran Targeted Subsidies Plan was enforced. It became more significant April, with a return rate of 13.7 per cent. However, the capital market soon dropped by the when the Supreme Leader named it the Year of Economic Jihad in his New Year’s speech. In same amount than it had risen and was replaced by investor interest in gold, coin and foreign the past year, economic activists and financial analysts have focused on the economic aspects currency markets. As we moved further into the year, the capital market became increasingly of political decision making more than ever before. The article on the budget bill of year 2011/12 vulnerable. Unable to grow any further, it even experienced a negative return and was forced emphasized how management were inspired by the Fifth Development Plan, especially the to retrieve a number of the revenues it had paid out to investors. As a result, the financial year realization of macroeconomic goals. ended with an overall annual return rate of less than 11 per cent. These included: An average eight per cent economic growth rate A seven per cent unemployment rate
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Performance of the Banking System in Attracting Savings Withdrawals from the Banks’ Accounts by the Central Bank As public interest in converting assets into gold, coin and foreign currencies grew; we The year 2011/12 drew to a close for the banking system with the withdrawal of money from the witnessed a trend of irrepressible price hikes in these markets. Consequently, the policies banks’ accounts by the Central Bank of Iran. This was the last in an eventful year full of ups and designed to manage, monitor and control these processes could not hold back this rapid price downs. escalation. The fiscal policymakers eventually agreed to an increase in the official exchange The banking system welcomed the New Year with fresh hopes for positive change, growth and rates in favour of foreign currencies. However, this policy failed to be effective and, ultimately, development. previous restrictions imposed on bank savings interest rates had to be lifted. Consequently, The following table provides a five-year comparison of some selected economic variables: the policy-supervisory package of 2012/13 was circulated two months earlier than usual. From early February 2012, banks were allowed to set their own interest rates on savings in an Selected Economic Indexes Table 2 unregulated environment. IRR billion Index Unit 2011/12 2010/11 2009/10 2008/09 2007/08 This enabled them to attract greater savings and dominate the markets. Although it was a Iranian G.D.P. growth rate Per cent - 5.8 3 0.8 5 much-delayed decision, it was ultimately a good one and the positive impact on savings was
immediate. Accordingly, the foreign currency and gold markets stabilized and their growth was Unemployment rate Per cent 12.3 13.5 11.9 10.2 - contained. Despite this good decision-making by fiscal policy makers, it came too late and its positive effects soon wore off towards the end of the Iranian year, a time when people typically Inflation rate Per cent 21.5 12.4 10.8 25.4 18.4 withdraw money from banks for the holidays. Government’s income IRR thousand billion 953 820 625 596 473 When the restrictions on interest rates for bank savings were lifted in the final two months of the Iranian financial year, banks were able to attract greater savings more rapidly. However, Expenses IRR thousand billion 1,127 897 792 806 569 as this decision was adopted very late in the year 2011/12, the overall growth rate of savings Budget deficit IRR thousand billion 174 77 167 210 96 decreased to 17 per cent, compared with 24 per cent in 2009/10 and 26 per cent in 2010/11. As monthly interest paid into existing savings is a significant part of this growth, one can conclude Non-oil exports $ billion 33.7 22.6 18.4 14.7 13.1 that a reduced interest rate on bank savings during the initial ten months of the financial year 2011/12 resulted in banks failing to attract bank deposits in comparison to previous years. Imports $ billion 62 74 69.2 70.2 58.2
The Big Bank Embezzlement Scandal Official exchange rate ($ against IRR) IRR 11,168 10,339 9,920 9,574 9,285 Damage to the banking system in 2011/12 was not limited to a lack of proper funds. Events End-of-year stock exchange price index - 25,905.60 23,294.90 12,536.70 7,966.50 10,081.90 took another undesirable turn, which could be considered the most crucial challenge facing Stock market index growth rate Per cent 11 85.8 57.4 (21) 2.7 the Iranian banking system today. Not to mention the most notorious case of banking fraud in the history of banking in Iran. The case is known as the Aria group embezzlement scandal Cash funds IRR thousand billion 3,391 2,945 2,356 1,901 1,640 and attracted huge media coverage, with extraordinary political and social repercussions. The judicial authorities mainly focused on the criminal aspects of the issue, to the detriment of the Cash funds growth rate Per cent 15.7 25 24 16 28 Non-governmental sector savings with the banking system. The way the media treated the case and the reaction of some of the banks IRR thousand billion 3,178 2,724 2,164 1,744 1,560 banking system to the scandal had major ‘knock on’ effects. These were two-fold: The first aspect resulted in Growth rate of non-governmental sector savings per cent 16.6 26 24 12 28 a serious lack of public trust in the banking system as a whole. The second aspect inflicted with the banking system damage on relationships between banks. The latter was due to the unreasonable behaviour of Debts owed by the non-governmental sector to IRR thousand billion 3,416 2,929 2,137 1,867 1,664 some of the banks involved, especially that of Saderat Bank against their banking obligations the banking system Growth rate of debts owed by the non-governmental and following common banking practice. Per cent sector to the banking system 16.6 37 15 12 36 The ‘Supreme Leader’ warned the media to control press coverage of the event and allow Source: Economic indicators of the Central Bank of Iran; selected monetary and financial statistics, forecasts of Business Monitor the judicial authorities to pursue the case in a regulated environment. This mitigated the first International, capital market operation report from February-March 2012, statistical data of Customs of the Islamic Republic of blow and banks gradually began to rebuild trust with the public. The relations between banks, Iran, statistical reports of Statistics Centre of Iran. however, did not run the same course. This came down to lack of leadership and trust between Remarks: The figures for cash funds, deposits and debts of non-governmental sector in year 2012 belong to (Jan-Feb) of the current year and their respective growth rates have been calculated in comparison with the same period last year (i.e. Jan-Feb banks to fulfil mutual obligations and covenants. This problem escalated both nationally 2011). The foreign exchange rates for the years 2007-2010 are based on the rates mentioned in the Economic Indicators of the and internationally and led to unprecedented damage on inter-banking relations with the Central Bank of Iran and the average sale rates. As for the year 2011/12, a weighted average value was considered between the few foreign banks still co-operating professionally with Iranian banks despite the imposed exchange rate of the first quarter of the year extracted from the latest economic indicator and the end-of-year rate with the weights of eight and four. sanctions. The outcome of these circumstances was evident in terms of goods import, financing and in the increasing costs of importing in the final months of financial year 2011/12.
26 27 BUSINESS REVIEW Business Review
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Customer Satisfaction Index - 2011/12 Figure 12 OVERVIEW IRR billion Although the banking business in the year 2011/12 struggled with many challenges, they did 92 not prevent the bank from following through with its strategic plans. Some of Saman Bank’s 90 90
achievements during 2011/12 are hereby summarized: 88 88
Compiling the strategic plan of the bank and the branches based on BSC (Balanced 86 Scorecard) method and presenting its concepts and objectives to the heads of branches in 84 order to make the five-year strategy as transparent as possible. 82 Changing the organizational structure of the Bank from functional to customer-centric (in this new arrangement, the main business lines were defined and implemented based on the four 80 80 major categories of our target clients including: corporate customers, premier customers, retail 78
customers, and small and medium enterprises (SME)). - 11 - 11 - 11 - 11 - 11 - 11 - 11 - 11 - 11 - 11 - 11 - 11 - 12 - 12 Ma/Apr Jun/Jul Jul/Aug Sep/Oct Oct/Nov Jan/Feb Dec/Jan Mar/Apr Nov/Dec Aug/Sep Apr/May Apr/May May/Jun Changing the overall structure of the organization with the aim of improved internal controls Feb/Mar Developing electronic products to increase revenue Figure 13 Figure 14 Facilitating swifter banking procedures in branches to make retail banking more Deposit Growth Rate Percent Customer Loyalty Index Percent customer-friendly 43/9 63 64 Creating a more conducive environment in branches for customer circulation and access to 37/7 services 32/2 54 Enhancing the Saman internet banking system and introducing a new product called 15/5 17/3 44 Netbank 43 Issuing Sukuk (asset-backed Islamic bonds) for the first time in the Iranian banking system’s history. 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 These changes were introduced with the aim of structurally developing five main categories The growth rate of performance indicators The customer loyalty index which is strategically of the bank’s activity. These include retail and electronic banking, investment products and during year 2011/12 show that as a result of the more important than the customer satisfaction services, international banking, loans and Corporate & private banking (initiated in 2011). aforementioned changes, market share growth index also improved during the second half of the has increased considerably. It is now at its highest year 2011/12. Although it is still too early to judge the final impact that these changes will make, the surveys conducted position on record during the past five years and so far indicate a positive trend in customer satisfaction and loyalty in the second half of the year. twice more than the cash fund growth in 2011/12.
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Training specific premier customer service bankers and stationing them in branches to serve Samanians Opening specific booths for Samanians in seven branches in Tehran Issuing the Samanians Gold Card for eligible customers Serving Gold Card holders in all branches immediately without the need for queuing An increased daily withdrawal limit of IRR ten million by Gold Card holders at all Saman ATMs Samanians Credit Cards offered to eligible customers with up to a limit of IRR 200 million Collecting the views and opinions of Samanians through text message and telephone call and responding to their suggestions Offering safety deposit boxes with separate terms and conditions and priorities as well as a discounted fee to Samanians 1.2. Bancassurance Division The Bancassurance Division is another section supervised by the VP of Retail Banking. The purpose of this Division is to streamline banking and insurance products to cater for the varying needs of different customer groups.
2. VP of Corporate and Private Banking The VP of Corporate and Private Banking was created to meet the needs of a separate group of customers that use a range of services at the Bank. Across all products, we aim to provide CHANGES IN OPERATIONAL AND EXECUTIVE tailor-made services to this specific group of VIP customers. The VP of Corporate and Private STRUCTURE Banking supervises the two divisions of ‘Corporate Banking’ and ‘Private Banking’. Change in the organizational structure (from a functional to a customer-centric system) should 2.1 Corporate Banking Division be considered one of the key changes at Saman Bank during financial year 2011/12. Following This Division was created to provide specific services to customers, either individuals or this structural change, the VP of Executive (formerly functioning in cooperation with the VP corporate entities, with considerable credit interaction with the Bank. The purpose of this of Banking) was divided into two separate VP of ‘Retail Banking’ and ‘Corporate & Private Division was to ensure “convenience, speed and trust” in all services offered to the corporate Banking’. banking customers, identified by the volume of their banking operations and financial turnover, in the area of corporate banking. In the past, the local branch was the only touch point for such 1. VP of Retail Banking customers for all banking operations while the key decision- making took place at the head The VP of ‘Retail Banking’ manages the retail activities in general and directs all retail banking office. The creation of the ‘Corporate Banking Division’ incurred two major changes. The first approaches in the Bank. It supervises the activities of the four divisions of retail banking (i.e. was more accurate decision making in less time. The second was a separate unit to manage all branch banking division, retail credit division, premium banking division and bancassurance queries of corporate customers and give them the undivided attention they deserve. division). The ‘Branch Banking Division’ is responsible for managing the branches that service 2.2 Private Banking Unit the highest number of customers. The ‘Retail Credit Division’ is designed to respond to the Another group of VIP clients are high net worth individuals with a considerable amount of banking needs of smaller and medium-sized enterprises in a specialized manner. deposits. As defined by Saman Bank, customers whose total deposits (in both IRR and foreign In line with the new customer-centric strategy of the Bank, two new divisions, namely the currencies) exceed IRR 10 billion are categorized as VIP and receive their required services ‘Premium Banking Division’ and the ‘Bancassurance Division’ formed in 2011/12 under the through the Private Banking Unit. supervision of the VP of Retail Banking. This Unit carried out some fundamental changes in 2011/12 in accordance with the Bank’s 1.1. Premium Banking Division mission statement to create real added value for our VIP clients. The first step is to identify The Premium Banking service portfolio was created at Saman Bank in autumn 2011 as part the customer as a VIP. We then identify their specific banking, financial and investment needs of the five-year strategic plan to focus on and cater to the specific needs of different types through efficient communication. Then a tailored portfolio of services is put together for this of customers. It became more active in March 2011. This Division oversees the specialized group which include: deposit services, fund management and consultation services using services that meet the particular needs of special customer groups through designated areas professional experts. at Saman branches. In the next step, due to the significance of this group of customers in the Bank’s strategic vision, At present, customers that hold deposits of IRR two to nine billion with Saman Bank are we plan to create a ‘Private Banking Division’ in the near future to provide an extensive range identified and categorized as premier customers and nicknamed “Samanians”. of banking, financial, insurance and investment services to VIP clients. Catering to their needs Some of the measures taken during the reported year to offer specialized services to premier in an efficient and flexible way will increase their satisfaction level and provide more support to customers include: their capitals and assets.
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Figure 19 Debit Cards IRR billion 1,175,425 847,585 606,814 462,154 331,912
2008 2009 2010 2011 2012 Debit card uptake in Iran has grown rapidly over the last five years, and Saman has profited from its share in that growth.
Saman NetBank
RETAIL AND ELECTRONIC BANKING Saman Bank witnessed a brilliant year in electronic banking. One of the most significant During the financial year 2011/12, Saman Bank’s retail banking operations expanded measures taken during 2011/2012 was the launch of a new and upgraded Internet banking significantly. The opening of 30 new branches expanded the network size to 153 branches product called Saman Netbank. This system was developed in line with the Bank’s mission as well as the installation of circa 155 new ATMs (raising the total number to 674 branches) to improve convenience, speed and security for its customers. Another important outcome of demonstrate the Bank’s on-going commitment to ensuring an efficient and convenient service Netbank was a reduced dependence on external suppliers, which allowed the bank to re-invest to its customers. Total deposits, including savings accounts and the bank’s range of one-to-five in more unique developments. year time deposits, rose by more than IRR 24,212 billion to IRR 79,401 billion. Also, the number of A major feature of the Netbank design was to achieve the strategic goal of an in-depth Saman debit cards in circulation increased by over 38.7% to 1,175,425. This now equals to nearly electronic interaction between customers and the Bank. In 2011/12, Saman customers using one active debit card per customer. Also, the bank’s customer number increased from 863,504 internet banking rose by 40% from 85,000 to 303,319. Along with increased number of users, in last year to 1,045,127 during the reporting year. the frequency of use also increased considerably.
Figure 15 Figure 16 Customers IRR billion Branches IRR billion 153 1,045,127 123 863,504 792,038 97 106 645,566 75 496,442
2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Consistent growth in customer numbers The steady growth of the branch network is driven by the expansion of the branch ensures that Saman Bank is achieving its and ATM network, alongside Saman’s expansion strategy. pioneering developments in electronic banking. Figure 17 Figure 18 NetBank Users Figure 20 Telephone Banking Users Figure 21 ATMs IRR billion Total Deposits IRR billion IRR billion IRR billion 674 79,401 303,319 293,947 519 55,189 390 215,670 209,694 40,072 256 29,583 34,167 154,382 149,898 183 103,270 105,452 48,089 53,153
2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 The accelerating growth rate in deposits during Saman’s ATM installation program adds 2010/11 and 2011/12, following the steady Saman’s focus on electronic banking has Over the last five years the number of Saman significant year-on-year growth to the growth from 2007/08 to 2009/10, reflects the driven a near 6.3-fold growth in Netbank telephone banking customers has been number of transactions our customers increasing volume of Saman’s customer base. customer numbers over the last five years. significantly above average for the Iranian market. undertake.
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INVESTMENT PRODUCTS AND SERVICES
Saman Bank Investments Division was founded in 2008 primarily to provide high net worth Figure 23 Saman Bank Investment Portfolio Performance from the Beginning against the TSE* index Percent and VIP clients with a range of investment advisory services. In 2008, the Bank launched its 220/00 investment portfolio, which today includes a total of six mutual and fixed income funds, ranked among the top Iranian investment funds. The total value of Saman Bank investment funds by 170/00 the end of financial year 2011/12 was IRR 2,078 billion. One of the most important investment initiatives of the Bank this year was to publish IRR 120/00 1000 billion Sukuk (Islamic bonds) in the over-the-counter (OTC) market; an action that was enthusiastically welcomed by investors. In the same year, the ‘Subordinate Companies Supervision Unit’ was established in the Bank’s 70/00 Investments Division in order to coordinate and manage the activities of Saman Financial Group companies, which is the executive arm of the Bank in long-term investments. 20/00 The following figures show the composition of the investment portfolio and its performance during the financial year 2011/12. -30/00 Jul-09 Jul-10 Jul-11 Oct-09 Oct-10 Oct-11 Jan-09 Jan-10 Jan-11 Jan-12 Apr-09 Apr-10 Apr-11 Jun-09 Jun-10 Jun-11 Dec-08 Dec-09 Dec-10 Dec-11 Feb-09 Feb-10 Feb-11 Feb-12 Sep-09 Sep-10 Sep-11 Nov-09 Nov-10 Nov-11 Agu-09 Aug-10 Aug-11 Launch Mar-09 Mar-10 Mar-11 Mar-12 Figure 22 May-09 May-10 May-11 Investment Portfolio IRR billion
Risk-free interest rate TSE Index (Tehran Stock Exchange) Saman Bank Investment Portfolio
36% Shares Receivables 52% Fixed income securities Cash and near cash
7%
5%
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Figure 24 Figure 25 Figure 26 Import Letters of Credit IRR billion Export Letters of Credit IRR billion Documentary Collections IRR billion 3,064 1,242 3,104 2,991 2,615 2,721
1,590 1,085 1,174 820 511 167 561 73 120 70 111 289
2010 2011 2012 2010 2011 2012 2010 2011 2012
Volume US$ m Volume US$ m Volume US$ m Number Number Number A 64% increase in the value of Reduced value of export letters A 46% increase in documentary import letters of credit opened with of credit is due to international collections during 2011/12 suggests Saman suggests greater levels of sanctions. Most of the exporters that the customers have faith in the credibility among its customers. use non-banking channels for their bank’s operations in this area. exports.
INTERNATIONAL BANKING Figure 27 Satisfaction Index of International Banking Clients IRR billion One advantage that Saman Bank holds over other Iranian banks is its strength in international 84
banking. Using its financial prowess and high levels of technical knowledge, the Bank provides 82 a complete portfolio of international services that meet the needs of importers and exporters 80 across a growing range of industries and sectors. 78 Equally important is Saman’s international network of correspondent banks (93 banks across 35 countries) giving customers access to a wide range of international banking services. In Iran, 76 101 of the total 153 branches that comprise Saman Bank’s domestic network were equipped 74 with SWIFT system during 2011/12 to begin offering foreign exchange services. 72 During the past year, an unprecedented leap in foreign currency prices in the Iranian free 70 Apr- 11 May- 11 Jun- 11 Jul- 11 Aug- 11 Sep- 11 Oct- 11 Nov- 11 Dec- 11 Jan- 12 Feb- 12 Mar- 12 Apr- 12 May- 12 market has led to wide discrepancy between the currency exchange rate in the free market and 8379777474767575737475767678 the official rate. Providing foreign currency for corporate clients, as well as private clients, such as travellers and students studying overseas, has become crucial. In order to attract as many Satisfaction Index customers as possible and improve customer satisfaction, Saman Bank joined the scheme Comparative Data on Budget and Performance Table 3 in March 2012 and began to distribute foreign currency to students at the official rate through IRR million its network of branches all across the country. This complied with regulations provided by the in Financial Year ending on March 20, 2012 Central Bank of Iran. The public recognized Saman Bank as one of the leaders in supplying Description 2011/12 Performance 2011/12 Budget foreign currency to students. Amount Share (%) Amount Share (%) Loan interest 8,056,212 68 8,276,429 69 However, the huge gap between the free and official market prompted changes in regulations Investments and deposits profit (loss) 418,923 3 356,845 3 to prevent misuse on the sale of foreign currency to travellers. The previous year’s regulations Other loans and investments receivable profit 1,871,820 16 1,847,884 15 only allowed Melli and Mellat banks to sell foreign currency to travellers. Saman Bank also Foreign exchange commission 473,589 4 434,379 4 succeeded in obtaining the license from the Central Bank and became the only non-government Foreign exchange income 1,002,006 8 1,000,000 8 owned bank to offer this service. In the beginning, this service was only offered in the central Others branch and in Imam Khomeini International Airport branches. However, since 6th March 2012, 95,406 1 161,985 1 Saman Bank Exchange Company also started selling foreign currency to those travelling Total income 11,917,956 100 12,077,522 100 abroad. The Bank offered foreign currency at preferred rates (lower rates than offered to Shareholder dividends 7,792,935 71 7,649,080 73 normal customers) to its premier customers (customers with total long-term investment Financial expenses (commission and interest paid) 1,065,122 9 857,632 8 deposits above IRR 500 million). In summary, although the sale levels of foreign currency to General and administrative expenses 1,542,027 14 1,180,810 12 travellers decreased during the reported year, the overall services provided by the bank, such Provision of doubtful debts 639,100 6 750,000 7 as offering the preferred rates to premier customers and obtaining a license for sale to other Total expenses 11,039,183 100 10,437,522 100 customers, boosted overall customer satisfaction rates. Profit (loss) before tax 878,773 1,640,000
38 39 GOVERNANCE Corporate Governance
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Corporate Governance Structure The organizational structure of Saman Bank is meticulously supervised in terms of review checks and controls. The bank is organized in a way that gives the Board full command of corporate governance practices. In addition, the Board supervises key business areas, Risk Management and Internal Audit. To ensure the integrity of this approach is beyond dispute, Board members maintain distance from the Bank’s day-to-day management. The CEO and his team of Executive Vice Presidents take each important operational decision. Regular meetings are held between Internal Audit and Control Director and senior executives to review policies, establish communications channels and monitor progress towards achieving the bank’s strategic objectives. A number of key principles underpin the Board’s position at the apex of the Bank’s corporate governance policies. These include the assurance of understanding its oversight responsibilities, particularly in terms of the bank’s risk position. The Board also takes responsibility for the Bank’s general activities and business strategy, as well as identifying potential conflicts of interest with other organizations with which it may have dealings. CORPORATE GOVERNANCE Further responsibilities include: Ensuring the Board is composed in a way that enhances its efficiency Overview of Corporate Governance at Saman Bank Enabling constructive dialogue and discussion on strategy. Considering the role of banks as financial intermediaries and their vulnerability to problems As part of this process, the Board oversees the appointment and, when necessary, the arising from incompetent corporate governance, the issue of corporate governance is of replacement of key executives, ensuring that proper succession plans are in place. paramount importance in the banking industry. However, responsibilities do not end at Board-level. The need to ensure sound corporate Long before the publication of consultative documents by the Basel Committee on Banking governance trickles down the hierarchy to all levels of staff and management, ensuring a fully Supervision (BCBS), it was unanimously agreed that solid corporate governance is essential in integrated approach. As a result, on-going training and communications initiatives are set out achieving and maintaining public trust in the banking system. to ensure all members of the Bank’s teams, on every level, acknowledge corporate governance Loyalty and trust is a primary commercial concern for any bank, and is of utmost importance principles. Principles include the need for all employees to understand the bank’s risk factors at Saman. In addition, Saman Bank also views sound corporate governance as a key factor in and the potential to affect their roles, and be fully aware of their own individual responsibilities enabling the banking system and economy to perform well as a whole. relating to their customers and colleagues. The Internal Audit & Control Division assesses At its core, a solid system of corporate governance enables the Board and senior team to the risks related to the operations of different units. A copy of their report is provided to manage its business in a responsible and efficient manner. For a bank, the role of a financial the appropriate division so that the relevant staff can be trained in the risks of their remit intermediary is to act on behalf of people and organizations that rely upon its competence and accordingly. honesty. The credit, market and operational risks that banks face make them highly susceptible to problems arising from poor corporate governance, which means the quality of financial intermediaries and corporate governance is absolutely crucial. Shareholders Independent Audit Saman Bank follows five primary objectives for its corporate governance framework, policies and practices. These are all in line with the principles of the Basel Committee: 1. They enable Saman to set out a plan for achieving corporate objectives that are unlikely to expose the bank, its shareholders or depositors to excessive risk arising from unrealistic Board of Directors performance targets. 2. They provide a controlled environment with which to conduct the bank’s day-to-day affairs.
3. They enable banking management to meet their commitments in providing full accountability Strategy Compensation Risk Committee Audit Committee to their shareholders, while protecting the interests of other beneficiaries. Committee Committee 4. They provide clear guidance on best practice to ensure secure and effective operations that comply with national and international banking laws and regulations. Internal Audit & President & CEO Control 5. They enable the interests of depositors to be fully protected at all times.
42 43 Corporate Governance
Corporate governance structure at Saman Bank Annual General Meeting Saman Bank’s Annual General Meeting (AGM) provides the opportunity for shareholders to review the bank’s financial statements, to read other reports issued by the Board of Directors and from Saman’s independent and internal auditors. Board of Directors The Board of Directors is elected for a two-year tenure at every alternate AGM. It comprises of five main non-executive members and two substitute directors. The new Board elects its Chairman and Vice-Chairman during its first meeting. To achieve a quorum, the presence of at least four main directors is required.
Conflicts of Interest It is of fundamental importance to Saman Bank and its Board that practical and effective policies exist to address potential conflicts of interest. For this reason, clear guidelines are put in place to help management deal with various scenarios. These include situations where the Bank carries out a transaction with a company with which a Saman Board member holds shares, or acts as a board member. The Board will review and vote on such cases in line with banking regulations, independently and without the participation of the member in question. In any event, such transactions are fully disclosed in the bank’s financial statements, and examined by independent auditors to comply with the appropriate regulations. The shareholders are then invited to vote on the results. Any loans extended by the bank to Board members, related parties and independent auditors, are regulated by the Central Bank of Iran (CBI). Internal and independent auditors are to review such loans on a case-by-case basis, and full details are always provided to CBI supervisors. The Board oversees any loans made to senior management of the Bank. According to the provisions of the Commercial Act, the Director in question cannot take part in the loan approval voting process.
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BOARD OF DIRECTORS To carry out the duties and responsibilities stipulated in Article 136 of the Commercial Act as amended, the following persons acted as members of the Board of Directors in Saman Bank during the financial year 2011/12.
Allahverdi Rajaei Salmasi Saeed Atashkari Co-founder and Non-Executive Chairman Non-Executive Director Mr Rajaei Salmasi was originally the CEO of Saman Eghtesad Credit Institute Mr Atashkari is the Board representative of the National Iranian Copper and then moved on to Saman Bank. He became the Chairman in late 2007. Industries Pension Fund, a major Saman shareholder. As well as holding Other highlights of his career include periods as Deputy Governor and advisor various executive positions in the Mobarakeh Steel Company, Mr Atashkari to the Governor of the Central Bank of Iran, Secretary General of the Tehran has been VP of Finance in the National Iranian Steel Company, and a Board Stock Exchange and adviser to the Managing Director of the Saderat Bank of member of the Khuzestan Steel Company. He has been a lecturer at the Iran. Mr Rajaei Salmasi holds a Master’s Degree in Accounting from Iran’s Isfahan University of Technology and holds a Master’s Degree in Business Management from the Emporia State University in Kansas, USA. Petroleum Accounting College.
Iraj Niknejad Parviz Moshirzadeh Moayedi Co-founder and Non-Executive Vice-Chairman Co-founder and Substitute Board Member Mr Niknejad’s 40-year career as an independent auditor, accountant, Mr Moshirzadeh Moayedi is Chairman of the Saman Brokerage Company financial controller and adviser has seen him achieve several senior and has had a successful academic career as a professor of accountancy and positions, including Board membership of numerous manufacturing finance. He holds a Masters in Accounting from the University of Wales in the companies listed on the Tehran Stock Exchange. He is a member of the UK. Iranian Association of Certified Public Accountants (IACPA) and the Iranian Institute of Certified Accountants (IICA) and holds a Master’s Degree in Accounting from Iran’s Petroleum Accounting College.
Mohammad Zarrabieh Vali Zarrabieh Co-founder and Non-Executive Director Co-founder, Substitute Board Member and President and Chief Executive Mr Zarrabieh is Chairman of the Yazdbaf Group of companies. The Group Officer is listed on the Tehran Stock Exchange and is one of the largest industrial Mr Zarrabieh, who is also a Board member of both the Saman Electronic groups which includes: Plastiran, the Yazdbaf Textile Mill, the Hamadan Payment Company and the Saman Brokerage Company, first became Deputy Glass Company, the Bahman Manufacturing Group and the Iranian Pump CEO before becoming the CEO of Saman Bank in June 2010. He holds a Manufacturing Company (Pumpiran). Mr Zarrabieh holds a Bachelor’s Masters in Finance from the CASS Business School in London (specializing Degree in Banking. in corporate finance and valuation) and an MBA from Manchester Business School, UK (specializing in strategy).
Javad Goharzad Reza Krishchi Khiabani Director of Internal Audit and Control Co-founder and Non-Executive Director Mr Goharzad acts as the internal supervisor and auditor of the Bank. A Mr Krishchi Khiabani is the former CEO and current Board member of member of many professional bodies including the Iranian Association the Saman Brokerage Company (Krishchi Brokerage Company renamed of Certified Public Accountants (IACPA), the Iranian Institute of Certified Saman Brokerage Company after its acquisition by Saman Bank). A Accountants (IICA), the Institute of Internal Auditors (IIA), the Iranian founding member of the Tehran Stock Exchange, Mr Krishchi Khiabani Association of Official Experts (IAOE), Mr Goharzad’s 35-year career includes holds a US Bachelor’s Degree in Business Administration and Economics. more than 10 years of experience both as an independent and internal auditor for banks and financial institutions. He also has over 15 years of experience as a director or partner in professional audit practices under the Securities and Exchange Organization of Iran. In addition, he has spent over 15 years as an independent auditor for public limited companies. Mr Goharzad holds a Master’s Degree in Accounting. 46 47 Corporate Governance
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The Risk Committee The Risk Committee is made up of the Chairman and Vice-Chairman of the Board, the CEO, the VP of Research & Development and the Director of Internal Audit and Control. The Risk Committee is responsible for helping the bank’s senior management in their role of identifying, addressing and mitigating the full range of credit, market, liquidity, operational, compliance, reputational and other risks that the organization may be susceptible to. Its responsibilities include: implementing the bank’s risk management policies and processes, ensuring that risk management directives and procedures are all up to date and correctly observed, and that risk management and internal control systems are in place. The Compensation Committee At Saman Bank, the Compensation Committee oversees the financial rewards and benefits received by the CEO and other key members of the management team. For this reason, it is comprised of non-executive members of the Board, reducing the potential for conflicts of interest. The Committee’s main role is to implement the measures adopted by the Board to ensure that executive compensation aligns with the bank’s long-term strategies, objectives and structures BOARD COMMITTEES of governance. All recommendations made by the Committee are passed on to the Board for final approval. The compensation and benefits received by the Bank’s most senior managers are The Strategy Committee performance-related, taking into account their overall successes and contribution to the Bank’s Comprising of the Chairman of the Board, the CEO, one non-executive Board member and the commercial performance. Executive VP of Research and Development, the Strategy Committee defines Saman Bank’s strategy through forecasting and SWOT analysis. The Committee is also responsible for overseeing the internal implementation of the Bank’s strategy, reviewing the organizational structure and ensuring that it is aligned to Saman Bank’s strategic vision and objectives. It also evaluates the proposals it receives regarding new, cutting edge banking products and services. The Audit Committee Saman Bank established its Audit Committee in 2007, in line with the Basel Committee’s recommendations. Today, the Saman Bank Audit Committee is made up of non-executive members of the Board; such as the Vice-chairman of the Board, members of the international auditing and accounting organizations, Iranian Association of Certified Public Accountants and banking professionals. The Audit Committee has a wide range of responsibilities, which include overseeing the annual and interim financial reporting processes. As part of this responsibility, it reviews the bank’s audited financial statements prior to publication, working with the Bank’s executive management and with internal and independent auditors. The committee also oversees the selection and/or amendment of accounting policies implemented by the bank’s executive management team, which must comply with national accounting frameworks governed by monetary and banking laws. Further responsibilities include ensuring the integrity of the bank’s accounting policies, financial reporting and disclosure in partnership with executive management. The Committee also ensures that independent and internal auditors have full access to the information, records and other documentation needed to undertake their professional practices.
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Internal Audit and Controls The Internal Audit and Control Division acts as the executive arm of the Bank’s Audit Committee. It is responsible for bringing about a systematic and effective approach to improving its risk management, control and governance processes. It reports to the Board via the Audit Committee through appropriate channels. The Bank ensures that the Internal Audit and Control Division complies fully with relevant regulations, such as those of the Central Bank of Iran (CBI). It also follows the recommendations of the Basel Committee on internal control and audit, and the international standards on internal control as published by the Institute of Internal Auditors (IIA). The Bank achieves its internal and operational audit objectives by implementing COSO’s Guidance on Monitoring Internal Control Systems, which includes risk assessment as one of five main components of an integrated internal control framework. The COSO approach also places great emphasis on the strategic management and planning of audit activities, which are based on the Bank’s risk management model. Following this approach enables Saman to increase its own efficiency and economic viability. At Saman Bank, the Board and senior management recognize the importance of internal auditing as the key element of its control of risk management. For this reason, they strive to ensure that all units within the organization are fully aware of its role and value. They also ensure that the Bank, and management team, makes proper use of internal audit findings to address any problems that arise. To maximize the value of internal audit reports presented to the Audit Committee and the Board, the Bank pays close attention to increasing the independence of its internal auditors. Independent Audit Saman Bank shareholders always seek the most respected chartered accountants in Iran as independent auditors. Senior management fully appreciates the crucial role that such professionals play in ensuring the credibility of Saman’s reputation and the good standing of its operations. The Bank’s Audit Committee works hard to increase the reach and effectiveness of independent auditors. As such, they make sure the Bank’s financial statements present a fair and accurate picture of its performance in all key areas of activity. Saman Bank’s independent auditor is the Tehran-based chartered accountancy practice Bayat Rayan. Founded in 1978, Bayat Rayan is one of the leading professional firms providing assurance, risk, tax, business and financial advisory services to local and global businesses operating in Iran. Among many other sectors and industries, banking is one of the firm’s specialist areas. Bayat Rayan was a member of the KPMG International network. However, membership was temporarily suspended in March 2010 as a result of US sanctions against Iran.
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EXECUTIVE MANAGEMENT Executive Team
Mostafa Zarghami / Executive VP Domestic Banking Branch Network Division Mr Zarghami joined Saman Bank as the Executive VP in Domestic Banking in November 2010. Retail Retail Credit Division He is also a Board member in Maskan Bank Investment Management Company. Banking Premium Banking Division He formally held Board positions at the Saderat Bank of Iran, Sarmayeh Bank and Sepahan Bancassurance Devision Cement Company. Mr Zarghami holds a Master’s Degree in Economics from Tehran’s Shahid Beheshti University and is a former Deputy Minister of Economic Affairs and Finance. Advisers & Monitors Corporate & Corporate Banking Division Private Ahmad Mojtahed / Executive VP Research and Development Banking Private Banking Division Former Head of the Monetary and Banking Research Institute (MBRA) and advisor to the Legal Governor of the Central Bank of Iran and to the Minister of Economic Affairs and Finance, Dr Division Mojtahed joined Saman Bank in March 2010 as the Executive VP in Research and Development International International Banking Division as well as the Chairman of the Board of Iranian Credit Bureau and Scoring Company. Banking Foreign Investment Department A PhD graduate of Economics from Iowa State University, USA, Dr Mojtahed also enjoys a Specialized Excutive successful academic career as a researcher and professor at Allameh Tabatabaei University. Committee Seyed Mohammad Vahidi Foomani / Executive VP International Investment Official Investment Division President & Subsidiaries Mr Vahidi Foomani joined Saman Bank in September 2010 following a career spent exclusively Board of at the Melli Bank of Iran where he rose to prominence as a member of the Board. He holds a & CEO Directors Master’s Degree in Banking from the Iran Banking Institute.
Senior Information Information Tecnology Division Seyed Bahaeddin Alaeifard / Executive VP Investment and Subsidiary Companies Excutive Technology Committee Mr Alaeifard joined Saman Bank in September 2011. He previously held successful posts as CEO of Maskan Bank Investment Management Company and Ghadir Holdings. He holds a Marketing Master’s Degree in Industrial Engineering from Azad University, Tehran Branch. Finance Division & Customer Finance and Care Division Logistics Logistics Devision Banking Statistics & Information Dept. Anti-money laundering Department Research & Development Division Reasearch & Organization & Procedures Division Development Human Resources Division
Internal Controls & Compliance Devision
Excutive Risk Assessment & Control Dept. and Risk Security Department
Electronic Security Department
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Division Heads
Reza Aghababaei / Corporate Banking Doctorate in Economic Development, University of Tehran
Hassan Jadidi / Bancassurance Masters in Business Administration, Phoenix University, USA
Forougholsadat Hosseini Firoozabadi / Logistics Bachelors in Civil Engineering, Sharif University of Technology
Seyed Morteza Hosseininejad / Research & Development Masters in Economics, Shahid Beheshti University
Reza Heidari / Premium Banking Masters in Economics, University of Tehran
Gholamabbas Khaksar / Branch Network RISK MANAGEMENT Masters in Business Management, Shahid Beheshti University One of the most important changes in the Seyed Mohammad Rajaei Nobari / Legal organizational structure of Saman Bank during President & CEO Masters in Law, Azad University 2011/12 was the creation of the VP of Executive and Risk. The VP of Executive and Risk, which Yousefali Sharifi / Investments monitors and improves internal controls, can Excutive & Risk Post- Doctorate in Financial Mathematics, Connecticut University, USA considerably enhance the control standards and internal processes in place at Saman Bank. Internal Controls & Compliance Jalal Sanatkhani / Retail Credit Considering the risk objectives, measuring risk Bachelors in Industrial Management, University of Tehran indexes and acceptable levels, the VP of Risk Risk Assessment & reviews activities of different divisions and reports Control Department Fereshteh Zarrabieh / Human Resources on any shortcomings. This development not only MBA, with specialization in Marketing Strategy, Industrial Management Institute reassures shareholders, but also supports senior Security management’s strategic decision making. In Department Mehdi Gharahi / Information Technology 2009, Saman Bank formed the Risk Committee. Masters in Industrial Management, University of Tehran It equipped its Risk Assessment and Control Electronic Security Department, as well as the Compliance Office, Department Farideh Geraminejad / International Banking with standard modern banking practices in Masters in General Linguistics, University of Tehran addition to complying with requirements of the Central Bank of Iran. Saman’s long-term strategy is to observe all regulations enforced by the Central Bank of Iran and to implement Pouran Gilasi Saghez / Organization & Procedures the guidelines of the Basel Committee on Banking Supervision (BCBS). Bachelors in Computer, University of Tehran The major activities toward risk evaluation and control can be divided into two categories: Khosro Latifi Ahvaz / Finance Infra-structural activities: Development of a proper risk management system based on Masters in Accounting, Azad University the recommendations of the Basel Committee and Saman Bank’s capacity to facilitate these recommendations. Mansoor Momeni / Marketing and Customer Care Executive activities: The control of operational, credit, liquidity and market risks as well Bachelors in Chemistry, Arak College as calculating capital adequacy ratio in compliance with Basel II Accord.
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As financial risks are among the essential risks emphasized by the Basel Committee, business units. As it stands today, the ‘operational loss event’ database is close to Saman Bank is undertaking initiatives to pass through Basel II Accord into Basel III Accord. completion. It is expected to aid the bank in identifying each and every operational risk Based on Basel II and III documents, banks need to launch their financial risk evaluation involved amongst its activities and to mitigate them through optimized controls. system, which evaluates credit risk, liquidity risk, market risk and operational risk. Furthermore, in order to prevent individual failures or external threats, the Security and During financial year 2011/12, Saman Bank was one of the first Iranian banks to join the Disciplinary Office is now supervised by the VP of Executive and Risk. An Electronic Security Iranian Credit Evaluation Company’s system. Department was also created to prevent any electronic threats. It is expected that these Other important initiatives toward reducing credit risk include: measures will considerably improve the control and supervision standards in the near Launching national credit evaluation system in all branches future. Launching credit scoring system in all branches Capital Adequacy Implementing new model of credit evaluation for lending applications To protect depositors and ensure the integrity of the Country’s financial systems, the Central Implementing study of loan concentration and repayment performance across customer Bank of Iran, in compliance with the Basel I accord, requires that all banks operating under categories its regulation have a minimum capital adequacy ratio of eight per cent. Presenting ranking model for banks and financial institutions Having the appropriate capital adequacy provisions in place theoretically enables a bank to Measuring credit risk components based on Basel II Accord absorb any unexpected losses that may occur. Saman Bank’s Basel I capital adequacy ratio, Assessing risk and return of lending in different economic sectors to improve the bank’s based on the Bank’s total capital, comprising both its Tier One and Tier Two capital and its credit strategy total risk-weighted assets, was calculated as 11.4% for 2011/12. Calculating capital needed to face the credit risk based on Basel II standard approach The Bank also calculates its capital adequacy ratio based on the Basel II accord. For the financial year 2011/12, Saman’s Basel II capital adequacy ratio was calculated as 24%. This Forecasting the impact of macroeconomic scenarios on the bank’s overall credit portfolio was based on the Bank’s total capital, comprising both its Tier One and Tier Two capital, and Major initiatives for liquidity risk management during 2011/12 include the following: its Basel II capital requirements for credit, market and operational risks. Segregating bank deposits by stable and unstable using statistical methods Estimating payment of loans on their due dates Transparency Market based assets and debt management Saman Bank seeks to be open and transparent in its operations at all times. It provides In order to assess exchange rate risk, Saman has always referred to the Central Bank of supervisors at the Central Bank of Iran with required information at predetermined times Iran for currency limits, and monitored these totals throughout the year. and uses its website to provide other important information for customers, depositors and In addition, the levels of profit or loss imposed by exchange rate fluctuations are tracked as stakeholders. key performance indicators (KPIs) for Saman’s currency portfolio. Fluctuations in exchange rate can affect the Bank in two ways:
Currency market risk: With strong international relations and potential for currency exchanges, Saman is able to manage currency market risk effectively. Credit risk: Saman has extensive policies in place to mitigate the credit risk of its customers, especially those applying for large loans. The Bank uses an advanced value at risk (VaR) methodology to manage and mitigate the risks inherent in the Bank’s share portfolio. It regards maintaining the appropriate balance between VaR and the Bank’s share portfolio performance as a top priority. Shortcomings in internal audits and corporate governance are considered one of the most prevalent operational risks. On such occasions, one can normally point the finger on human error, fraud or failure to comply with obligations. Based on Basel II definition, operational risk is “the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events”. These situations can cause serious damage to the Bank’s interests. In view of potential operational risk, Saman introduced an advanced operational risk management software tool to record any operational losses associated with its various
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Aiding the preparation of relevant directives. Identifying, investigating and following up on staff misconduct. Following up suspected customer offences through the appropriate judicial authorities Investigating and dealing with customer complaints or those made through the Central Bank of Iran (CBI) or judicial authorities. Adequately responding to enquiries received from the judicial authorities and the Central Bank of Iran
Anti-money Laundering Saman Bank’s Anti-Money Laundering Unit operates in accordance with the Central Bank of Iran’s regulations. Under the supervision of the CEO, the Unit is ultimately responsible for monitoring customer transactions and investigating suspicious cases. The Unit regularly issues internal advice and guidance on a range of subjects. These include how to prevent money laundering throughout the branch network by applying KYC principles, by reporting on suspicious activities and by investigating the origin of ambiguous funds. During the financial year 2011/12, the Anti-Money Laundering Unit undertook some major initiatives. These include: Investigating suspicious cases and responding to enquiries received from the “Suspicious Transactions Report” (STR) system and the “Currency Transactions Report” (CTR) COMPLIANCE system in the Financial Information Unit (FIU) of Iran. Reporting to the VP of Executive and Risk Department, the Internal Controls and Grouping the Bank’s customers “Due Diligence Check” (DDC) and “Enhanced Due Compliance Division at Saman Bank uses advanced statistical analysis tools and employs Diligence Check” (EDDC) experienced professionals to ensure that all business units (including head office and the Reporting anti-money laundering activities to international correspondent banks complete branch network) are in full compliance with regulations. Controlling and supervising the activities of branches and customers both remotely and As part of this responsibility, it acts as a source of advice and guidance across the entire through regular visits. organization. It also manages Saman’s Anti-Money Laundering Unit, which is in charge of Cooperating with other units in issuing directives on anti-money laundering. the ‘Know Your Customer’ program (See below for details on both). Training employees A year in action Know Your Customer During the financial year 2011/12, the Division undertook some major initiatives including, but not limited to, the following: Statement of The Basel Committee on Banking Supervisions (1998) places particular Strengthening the Fraud Detection Unit by developing relevant software tools to check emphasis on ‘Know Your Customer’ (KYC)- a set of due diligence principles designed to help suspect transactions and investigate any suspicious activities on the part of Saman banks co-operate with law enforcement authorities in the event of fraudulent transactions. employees, its customers or competitors. Saman’s Internal Control and Compliance Division oversees the training of all new and existing employees at the Bank to ensure that everyone is fully up-to-date with the demands Visiting branches, offices and business units to conduct internal inspections that ensure of KYC provisions. Related initiatives include the establishment of a communications forum full compliance to provisions and regulations as described above. that delivers seminars for staff at all levels and develops e-training materials based on real Remote monitoring of branches and business units. fraud and forgery cases. Internal controls and process compliance in a number of head office units. This Division also ensures that KYC guidelines are properly followed through at all levels Monitor information kept on individual and corporate customers, amending incorrect within the bank, continuously monitoring branch operations and identifying gaps in information and identifying customers that have engaged in identity fraud. regulatory control. To this end, it works in close cooperation with supervisory and regulatory Documenting the names of individuals blacklisted by the Central Bank of Iran. bodies. Cooperating with the Human Resources Division in health and safety training, as well with internal control issues.
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Employees by educational level Figure 30 Employees by location Figure 31 HUMAN RESOURCES IRR billion IRR billion
The creation and implementation of Saman Bank’s new customer-centric strategy in the 191 financial year 2011/12 focuses on the bank employees’ responsibility to create customer loyalty 364 and positive word of mouth that will enable the Bank to achieve its five-year business objectives. Saman Bank’s senior management team recognizes that before employees can become true 33% 32% High School Diploma & Lower 111 647 614 ambassadors of the Bank, they first need to display full commitment to the Bank and its new Head offices Higher Diploma Tehran branches strategic direction. Bachelors Other cities The Saman Human Resources Division is focused on four main areas: training and Masters and Higher development, welfare and compensation, executive operations and charity.
Figure 28 Figure 29 1287 Employees IRR billion Employees by job category IRR billion 35% 692 1,953 Over 81% of the Bank’s employees hold Over 69% of Saman’s workforce resides 228 1,618 a university qualification, the majority of in the branch network. The rest are 1,456 1,506 which are bachelor’s degrees. based at Head Office. This proportion will 587 grow further in years to come with the planned increase in branch numbers.
Managerial Figure 32 Specialized Recruits by job category 2011/ 12 IRR billion Banking-Administrative Services
870 86 2009 2010 2011 2012 268 The largest proportion of new recruits Saman’s steady growth in clients, Services in 2011/12 belongs to banking accounts, branches and transactions is 268 Banking-administrative administrative employees who are reflected in the continuing increase in its 26 heavily relied upon to add value and employee headcount, up by 17.1% from Specialized Managerial credibility to the Bank as a whole. 1,618 in 2010/11 to 1,953 in 2011/12. 13
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Training and Development A summary of training activities during the financial year 2011/12 are as follows: Training of branch managers, assistant branch managers, foreign exchange, credit and IT, In order for Saman Bank’s employees to deliver the exceptional standards of customer service e-banking staff and new recruits set out in the new strategy, they must first be given every opportunity for their own career development. Electronic test on bank directives This is why in the financial year 2011/12 Saman developed an analytical approach to appraisals Improving the quality of the bank’s training programs in each division and rewards. It undertook an in-depth study to ensure that the best possible structure exists E-learning programs on Islamic contracts topics to provide a rewarding career path and emotionally satisfying work environment for its Delivery of a total of 235 training courses of which 107 took place within the organization and employees. 128 others in external facilities To this end, a Human Resources Development Office was created within the Human Resources Testing the managers, department and division heads on the Organization’s strategies Division in February 2012. One of the most important activities of this Office is to prepare the vision and mission statements according to the new strategies of Saman Bank. The following activities were planned and/or initiated in the financial year 2011/12: Organizing the international accounting course (ACCA) Organizing the international audit course (IIA) Vision of Human Resources Development Improving the educational needs-assessment process Office To achieve a sustainable productivity level Mission of Human Resources Development through: Figure 33 Office Comparison of Training Man-hour in Different Departments during 2011/12 IRR billion Job satisfaction To create loyalty amongst employees 58,667 who, in turn, create loyalty amongst Performance customers. Employee loyalty and shared belief in its strategic vision 1,894 1,700 1,085/5 911 1,026 737 841 737/5 538 666 332 425 263 213/5 Another key stage in its strategic development was to ensure the continuous improvement 128 130 73/5 of the Bank’s training activities. Much effort was spent organizing new training initiatives in 50 partnership with reputable training academies, universities and other organizations including: Central Bank of Iran (CBI), the Industrial Management Institute, the Business Training Centre, Internal Audit & Control of Directors Officiaol Boards Corporate Banking Division Tellers Branches Managers Human Resources Division Finance Devision Technology Division Information Branch Network Division Investment Division Procedures Division Organization & Customer Care Division Marketing & Legal Division Development Division Research & Logestics Division Banking Division International & Compliance Internal Control Retail Credit Division & Control Dept. Risk Assessment the Monetary and Banking Research Academy, Atieh Roshan Company, Euromoney, the Iranian Institute of Certified Accountants, the Sharif University of Technology and Shahid Beheshti University.
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Executive Measures Recognizing the value of bank employees, especially as the key communication channel with its customers, Saman Bank greatly improved its recruiting process during the financial year 2011/12. The new recruitment program includes structured interviews, written tests, assessment of communicative skills and mental capacities to ensure the right people are recruited across the organization.
The most important operational/executive activities of Saman Bank in the area of human resources during 2011/12 include: Recruiting the talent across the head office and branch network based on human resources needs Issuing employment and confidentiality contracts, examining of work history outside the bank and completion of personnel files Regular performance reviews and disciplinary meetings An open and thorough employee appointment and promotions scheme Streamlining the personnel files and identifying qualified contractors Payment of salary, remunerations and bonuses
Welfare and Compensation Saman Bank is committed to promoting the living standards of its employees and aims to enhance staff motivation and loyalty as much as possible. In addition to the payment of a monthly salary and benefits, the Bank initiated some additional payment plans during 2011/12 which include: Productivity and performance bonus (paid quarterly) Balance bonus based on number of shares owned by staff (on account and final payments) FINANCIAL Bonus payments on special occasions such as the Ramadan, Women’s Day, Men’s Day, STATEMENTS Saman Welfare Day and Victory Day
During the financial year 2011/12, the bank improved its portfolio of welfare services and 2011-2012 expanded the range of sports and leisure activities available to employees. In addition, it organized new membership schemes for Saman employees with a number of sporting and cultural centres. It also improved the complementary insurance services already available to employees and increased the shares held by staff in line with the bank’s growing capital value. During 2012/13, the Bank plans to expand the leisure and recreational centres and extend the employee holiday network throughout Iran. It is committed to improving the range of pension, life and health insurance services available to employees and their families. In the coming year, Saman Bank plans to form sport teams and launch a health clinic to continue its commitment to improving the quality of life of its employees.
64 ANNUAL REPORT 2011-2012 Saman Bank (Public Joint Stock Company) for the financial year ended March 2012 ,20
CONTENTS
Independent auditor’s report 68 Consolidated balance sheet 70 Consolidated profit and loss account 71 Consolidated statement of retained profit and loss 71 Consolidated statement of comprehensive income 72 Consolidated statement of cash flows 72 Balance sheet 73 Profit and loss account 74 Statement of retained profit and loss 74 Statement of comprehensive income 75 Statement of cash flows 75 Notes to the financial statements 76
66 ANNUAL REPORT 2011-2012 Saman Bank (Public Joint Stock Company) for the financial year ended March 2012 ,20
Independent Auditor's Report to the Members of Saman Bank (Public Joint Stock Company)
We have audited the accompanying consolidated financial statements of Saman Bank ("the Bank") and its 1-2 The income tax provision for 2011 and 2012 have been made on a similar basis as previous years. subsidiaries (“the Group”) which comprise the balance sheet as at March 20, 2012, the income and cash flow Considering the Bank’s tax history, it is likely that the Tax Authorities will raise tax assessments in excess of statements for the year then ended and a summary of significant accounting policies and other explanatory amounts provided by the Bank. The amount of additional tax liability, if any, cannot be determined at present. notes, for both the Bank and the Group (the consolidated entity).The consolidated entity comprises the Bank and the entities it controlled at the year’s end or from time to time during the financial year. 2- Loan As explained in Note 7-4 of the financial statements, the balance of loans includes Rls 5,040 billion discounted Director’s responsibility for the financial statements letters of credit for other banks.
The directors of the Bank are responsible for the preparation and fair presentation of these financial The Bank has taken legal action against Industrial and Mining Bank for letters of credit issued by that bank statements in accordance with accounting principles generally accepted in Iran. This responsibility amounting to Rls 499 billion. The results of preliminary and secondary hearings have been in favour of the includes: designing, implementing and maintaining internal control relevant to the preparation and fair Bank. In relation to the discounted letters of credit issued by Saderat Bank amounting to Rls 4,541 billion, legal presentation of financial statements that are free from material misstatement, whether due to fraud or action has been taken by the Public Prosecutor which is presently in progress. error; selecting and applying appropriate accounting policies; and making accounting estimates that are Under the above circumstances, we are unable to ascertain the extent of any provisions needed, if any, for the reasonable in the circumstances. above amounts.
Auditor's responsibility Auditor’s opinion
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our In our opinion, except for the effects of such adjustments, if any, as might have been determined to be audit in accordance with International Standards on Auditing. Those standards require that we comply with necessary had we been able to satisfy ourselves as to the result of the matters discussed in the preceding ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial paragraphs, the accompanying financial statements present fairly, in all material respects, the financial statements are free from material misstatement. position of Saman Bank and the consolidated entity as of March 20, 2012 and of their performance and cash An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the flows for the year then ended in conformity with the Iranian Accounting Standards. financial statements. The procedures selected depend on the auditor's judgment, including the assessment 3- Emphasis of matter of the risks of material misstatement of the financial statements, whether due to fraud or error. In making Before the end of the financial year under review, the Central Bank of Iran (“CBI”) withdrew Rls 2,833 billion those risk assessments, the auditor considers internal control relevant to the entity's preparation and from the Bank’s accounts held with the CBI, being allegedly, the difference between the official and market fair presentation of the financial statements in order to design audit procedures that are appropriate in exchange rates on the Bank’s currency dealings during that year. Other banks with foreign currency dealings the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's received a similar treatment. A claim for penalty amounting to Rls 53.4 billion was also received by the Bank internal control. An audit also includes evaluating the appropriateness of accounting policies used and the after the year end. The review of the Bank’s foreign currency transactions records by the CBI’s inspectors and reasonableness of accounting estimates made by management, as well as evaluating the overall presentation their report dated 04 March 2012 revealed no adverse finding in relation to the above exchange difference. of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Bayat Rayan - Chartered Accountants Tehran: July 07, 2012 1- Income tax In relation to the Bank’s tax position it was noted that: 1-1- As stated in Note 19 to the financial statements, The difference between income tax payable as per the tax assessments raised by the Tax Authorities for the financial years ended March 2006 and 2008 to 2010 and the corresponding provisions made by the Bank for these years is Rls 451billion. The tax assessments have been protested by the Bank and the matter is being reviewed by the relevant Tax Authorities. No provision has been made by the Bank for the above shortfall which would be payable if the assessments are not amended.
68 69 ANNUAL REPORT 2011-2012 Saman Bank (Public Joint Stock Company) for the financial year ended March 2012 ,20
Consolidated profit and loss account
for the financial year ended March 20, 2012 (Restated) Note 2012 2011 Rls (m) Rls (m) Income: Loan interest 23 8,024,783 6,186,584 Investments and deposits income 24 2,283,514 2,109,024 Consolidated balance sheet as at March 20, 2012 (Restated) Forex 25 18,599,145 6,468,968 Note 2012 2011 Others 26 601,752 530,250 Rls (m) Rls (m) Total income 29,509,194 15,294,826 Assets: Expenses: Cash 4 1,512,163 998,924 Deposit interest 7,791,218 5,912,686 Due from Central Bank of Iran 5 13,120,751 6,050,942 Other interest 27 809,828 302,651 Due from other financial institutions 6 15,259,559 8,229,516 Forex 25 17,428,347 5,997,387 Loans 7 66,854,706 60,069,738 Administration and general expenses 28 1,591,529 912,714 Participation bonds 8 255,400 3,337,627 Financial expenses 5,394 1,937 Investments 9 264,506 214,656 Commission 29 247,359 173,216 Tangible fixed assets 10 2,440,269 1,609,646 Provision for doubtful debts 3-8 664,813 467,570 Intangible assets 11 3,472,669 1,219,052 Total expenses 28,538,488 13,768,161 Goodwill 12 13,592 2,307 Profit before tax 970,706 1,526,665 Other assets 13 7,142,702 3,369,780 Income tax Total assets 110,336,317 85,102,188 19 (56,228) (167,773) Net profit for the year 914,478 1,358,892 Liabilities and equity: Attributable to: Due to Central Bank of Iran 14 6,618,160 4,154,660 Parent's shareholders 880,064 1,350,223 Due to other financial institutions 15 8,922,383 10,608,356 Minority interest 34,414 8,669 Customers deposits 16 70,871,767 53,091,266 Net profit for the year 914,478 1,358,892 Other deposits 17 8,430,178 1,985,349 Other liabilities 18 7,127,687 10,200,729 Provision for income tax 19 57,498 175,711 Consolidated statement of retained profit & loss Staff termination benefits 20 98,866 61,734 for the financial year ended March 20, 2012 (Restated) Total liabilities 102,126,539 80,277,805 Note 2012 2011 Net profit for the year 880,064 1,350,223 Share capital 21 4,000,000 3,000,000 Balance at beginning of the year 1,120,312 637,774 Assets revaluation reserve 37 2,588,675 - Prior years adjustments (12,543) (6,827) Shares held by subsidiaries (14,498) (12,746) Dividends paid (1,148,133) (628,893) Legal reserve 22 752,091 617,792 Retained earnings 687,284 1,107,769 Directors’ bonuses (18,118) (16,089) Parent entity total equity 8,013,552 4,712,815 821,582 1,336,188 Minority interest 21-3 196,226 111,568 Transfer to legal reserve 22 (134,298) (228,419)
Total shareholders equity 8,209,778 4,824,383 Net profit available for distribution 687,284 1,107,769
Total liabilities and shareholders equity 110,336,317 85,102,188 Minority's share of accumulated profits 8,071 (15,420) The accompanying notes on pages 8 to 29 are integral part of these financial statements. The accompanying notes on pages 8 to 29 are integral part of these financial statements.
70 71 ANNUAL REPORT 2011-2012 Saman Bank (Public Joint Stock Company) for the financial year ended March 2012 ,20
Consolidated statement of comprehensive income Balance sheet as at March 20, 2012 (Restated) for the financial year ended March 20, 2012 Note 2012 2011 (Restated) Rls (m) Rls (m) Note 2012 2011 Assets: Rls (m) Rls (m) Cash 4 1,426,336 995,669 Net profit for the year 880,064 1,350,223 Balances with Central Bank of Iran 5 13,120,751 6,050,942 Asset revaluation reserve 37 2,588,675 - Due from other financial institutions 6 15,167,557 8,181,750 3,468,739 1,350,223 Loans 7 66,984,843 60,245,950 Prior year’s adjustments (12,543) (6,827) Participation bonds 8 255,400 3,337,627 Comprehensive income 3,456,196 1,343,396 Investments 9 604,664 428,189 Tangible fixed assets 10 1,881,366 1,220,623 Consolidated statement of cash flows Intangible assets 11 3,389,265 1,131,280 for the financial year ended March 20, 2012 Other assets 13 6,972,404 3,320,117 (Restated) Total assets 109,802,586 84,912,147 Note 2012 2011 Liabilities and equity: Rls (m) Rls (m) Due to Central Bank of Iran 14 6,618,160 4,154,660 Operating Activities: Due to other financial institutions 15 8,823,319 10,598,762 Cash flow from operating activities 31 9,832,232 4,603,369 Deposits 16 70,964,423 53,196,178 Dividends paid (1,148,133) (628,893) Other deposits 17 8,436,904 1,992,939 Income tax paid (172,496) (180,725) Other liabilities 18 6,737,821 9,923,794 8,511,603 3,793,751 Provision for income tax 19 37,422 160,302 Investing activities: Staff termination benefits 20 91,129 54,880 Net increase in tangible fixed assets (542,983) (1,391) Total liabilities 101,709,178 80,081,515 Purchase of non-current assets 22,180 20,036 Share capital 21 4,000,000 3,000,000 Dividends received 53,772 130,813 Legal reserve 22 746,347 614,531 Net cash flow from investing activities (467,031) 149,458 Assets revaluation reserve 37 2,588,675 - Financing activities: Retained earnings 758,386 1,216,101 Shareholders’ funds for capital increase 1,000,000 1,200,000 Total shareholders equity 8,093,408 4,830,632 Net cash flow (used in) from financing activities 1,000,000 1,200,000 Total liabilities and shareholders equity 109,802,586 84,912,147 Off balance sheet items: Net increase (decrease) in cash 32 9,044,572 5,143,209 L/C commitments 30 14,618,033 2,857,797 Realized exchange loss (247,746) (113,718) Guarantee commitments 30 3,853,318 2,173,999 Cash at beginning of the year 32 8,682,387 3,652,896 Other commitments 30 2,077,208 2,643,254 Cash at end of the year 32 17,479,213 8,682,387 20,548,559 7,675,050 The accompanying notes on pages 8 to 29 are integral part of these financial statements. The accompanying notes on pages 8 to 29 are integral part of these financial statements.
72 73 ANNUAL REPORT 2011-2012 Saman Bank (Public Joint Stock Company) for the financial year ended March 2012 ,20
Profit and loss account for the financial year ended March 20, 2012 (Restated) Statement of comprehensive income Note 2012 2011 for the financial year ended March 20, 2012 Rls (m) Rls (m) (Restated) Income: 2012 2011 Loans Interest 23 8,056,212 6,239,538 Rls (m) Rls (m) Investments and deposits income 24 2,290,743 2,116,475 Net profit for the year 841,351 1,354,644 Forex 25 1,002,006 388,965 Assets revaluation reserve 2,588,675 - Others 26 568,995 517,128 Prior year’s adjustments - 980 Total Income 11,917,956 9,262,106 Comprehensive income 3,430,026 1,355,624 Expenses: Deposit interest 7,792,935 5,913,897 Statement of cash flows Other interest 27 810,028 302,651 for the financial year ended March 20, 2012 Administration and general expenses 28 1,542,027 895,428 (Restated) Commission 29 255,093 178,487 Note 2012 2011 Provision for doubtful debts 3-8 639,100 456,697 Rls (m) Rls (m) Total expenses 11,039,183 7,747,160 Operating Activities: Profit before tax 878,773 1,514,946 Cash flow from operating activities 31 9,523,527 4,728,232 Income tax 19 (37,422) (160,302) Dividends paid (1,150,000) (630,000) Net profit for the year 841,351 1,354,644 Income tax paid (157,088) (185,917) 8,216,439 3,912,315 Statement of retained profit & loss Investing activities: for the financial year ended March 20, 2012 Dividends received 63,606 136,586 (Restated) Net increase in tangible fixed assets (312,405) (223,926) Note 2012 2011 Purchase of non-current assets 26,267 (10,290) Rls (m) Rls (m) Net cash flow from investing activities (222,532) (97,630) Net profit for the year 841,351 1,354,644 Financing activities: Balance at beginning of the year 1,216,101 733,469 Shareholders’ funds for capital increase 1,000,000 1,200,000 Prior years adjustments - 980 Net cash flow (used in) from financing activities 1,000,000 1,200,000 Dividends paid (1,150,000) (630,000) Increase in cash 8,993,907 5,014,685 Directors’ bonuses (17,250) (15,750) Exchange losses (247,745) (113,717) 890,202 1,443,343 Net increase (decrease) in cash 32 8,746,162 4,900,968 Transfer to legal reserve 22 (131,816) (227,242) Cash at beginning of the year 32 8,553,864 3,652,896 Net profit available for distribution 758,386 1,216,101 Cash at end of the year 32 17,300,026 8,553,864 The accompanying notes on pages 8 to 29 are integral part of these financial statements. The accompanying notes on pages 8 to 29 are integral part of these financial statements.
74 75 ANNUAL REPORT 2011-2012 Saman Bank (Public Joint Stock Company) for the financial year ended March 2012 ,20
2 Principles of consolidation a. The consolidated financial statements incorporate the assets, liabilities and results of all subsidiaries controlled by the Bank. Subsidiaries are fully consolidated from the date on which control commences and are de-consolidated from the date control ceases.
b. The purchase method of accounting is used to account for the acquisition of the subsidiaries.
c. Goodwill on the acquisition of businesses being the excess of purchase consideration over the fair value of the Group's share of identifiable net assets of the acquired business; is amortized over 10 years on a straight line basis.
d. The Bank's shares acquired by the subsidiaries are recorded at cost in the subsidiary's accounts. These shares are deducted from the Bank's equity in the consolidated financial statements.
e. The subsidiaries subject to consolidation are:
Shareholding Notes to the financial statements Saman Exchange Co. 71% for the financial year ended March 20, 2012 Saman Satellite Communication Group 63% Iranian Credit Rating Co. 99% 1 Background Saman Electronic Payments Co. 48% Saman Brokerage Co. 49% Saman Pardazeshgaran Co. 100% 1-1- Saman Bank (Public Private Joint Stock Company – the Bank) was registered with Tehran Registrar of Companies under registration number 154444 in August 1999. The Bank commenced operation initially as a credit institution but later was issued with a full banking license by the Central Bank of 3 Summary of significant accounting policies Iran ("CBI") under the provisions of the "Law for Establishment of Non-state Banks" in August 2002. The principal accounting policies adopted in the preparation of the financial statements are set out below: The Bank initial share capital was Rls 200,000m. 3-1- Accounting convention 1-2- The Bank's activities are governed under the provisions of the "Monetary and Banking Law of Iran" of The consolidated financial statements of the Group and the Bank have been prepared under the July 1972 and the Non-Usury Banking Law. The Bank undertakes all the banking activities historical cost convention and in accordance with Iranian Accounting Standards and the CBI's recognized under the above laws and other CBI monetary and banking regulations. monetary and banking regulations.
3-2- Foreign currencies 1-3- The financial statements comprise the consolidated financial statements of the Group together with the financial statements of the parent entity, the Bank. Monetary assets and liabilities are converted at the official exchange rates, advised by the CBI, on a daily basis and exchange differences, if any, are provided in the accounts.
1-4- The number of staff employed at the year end was as follows: Non-monetary assets and liabilities are recorded at the historical exchange rates prevailing at the Consolidated Parent entity time of recording transactions in the accounts. 2012 2011 2012 2011 Staff 2,440 2,013 1,953 1,618 3-3- Investment Long-term investments are valued at cost less provision made for any permanent reduction in their 1-5- The number of branches at the year end was as follows: values.
Parent entity Short-term liquid investments are valued at the lower of cost and market value at the portfolio 2012 2011 level and non liquid short-term investments are valued at the lower of cost and market value of each Branches 153 123 investment.
76 77 ANNUAL REPORT 2011-2012 Saman Bank (Public Joint Stock Company) for the financial year ended March 2012 ,20
3-4- Tangible fixed assets
Tangible fixed assets (Except for Land and Buildings) are stated at cost and depreciated at the rates and bases in accordance with the Iranian Direct Taxation Act of 1988 as amended (the Tax Act) as follows: a. General provision- amounting to 1.5% of the total loan portfolio.
Asset Depreciation rate Basis b. Specific provision- depending on the severity of the non-performing loans including the period Buildings 7 % and 12% Redionucing balance of irregularity, the Bank provides specific provision ranging from 10% to 100% of the shortfall in the Fixture and fittings (including computer hardware) 3,5 and 10 years Straight line balance of each loan after allowing for the value of collaterals and general provision in (a) above. Motor vehicles 25% Reducing balance ATM's and POS's 5 years Straight line 3-9- Termination benefits Satellite installations 4,5 and 10 years Straight line Staff termination benefits are provided at the rate of one month salary for each year of service. Major repairs and improvements which extend the useful life of assets are capitalized whereas 4 minor repairs are charged to the profit and loss account as incurred. Cash The details of cash balances are as follows: Consolidated Parent entity In accordance with the provisions of the Iranian Direct Taxation Act, depreciation is charged from the 2012 2011 2012 2011 month following the date when an asset is brought into use. When assets are not used during the Rls (m) Rls (m) Rls (m) Rls (m) year, depreciation is charged at the rate of 30% of normal depreciation. Rials 653,400 815,914 653,187 815,717 Foreign currencies 849,840 180,816 773,149 179,952 In compliance with the provision of 1390 Budget Act the bank has revalued it’s Land Buildings and Others 8,923 2,194 - - Key moneys for the first time. The surplus in Land and Key moneys were utilized for share capital increase and impairment in the valuation of building, if any, is charged to profit and loss account. Total 1,512,163 998,924 1,426,336 995,669
3-5- Intangible fixed assets Intangible fixed assets are recorded in the accounts at cost at the time of acquisition. Key money 5 Due from Central Bank of Iran (CBI) is not depreciated and revalued at the year end (as explained in previous paragraph). Computer software is depreciated in a straight line basis over 3 years. The balance due by CBI comprises: Consolidated Parent entity 2012 2011 2012 2011 3-6- Revenue recognition Rls (m) Rls (m) Rls (m) Rls (m) Statutory deposit 6,507,070 5,003,550 6,507,070 5,003,550 a. Interest Income- Loan interest income is recognized on accrual basis and after taking in to Short term deposits - forex 3,713,617 712,932 3,713,617 712,932 account the likelihood of future cash inflows from such loans. Short term deposits – Rials - 325,887 - 325,887 Funds taken by CBI 2,832,706 - 2,832,706 - b. Investment Income- Dividends from subsidiaries not consolidated are recognized as income in Public sector deposits 37,409 739 37,409 739 the year in which payments of dividends are approved in the subsidiaries’ annual general meetings Others 29,949 7,834 29,949 7,834 (AGM's). Whilst in case of other investments, income is only recognized when approved by the Total 13,120,751 6,050,942 13,120,751 6,050,942 investee’s AGM prior to the Bank’s year end.
3-7- Depositors share of profit 5-1- Statutory deposits are calculated at the rates of 10% to 17% of customers’ deposits with long term deposits attracting lower statutory deposit rates. Under the CBI's regulations, in addition to interest payable to the Bank’s depositors, they are also entitled to a share of profit of the Bank's net interest and investment income. The Bank receives a 5-2- Before the year end, CBI withdrew funds from the Bank’s accounts held with the CBI amounting to commission from depositors based on total interest paid to them. Rls 3,832 billion. According to the CBI, this represented the differences between the market and the official exchange rates on the foreign currency dealings by the Bank during the year under review. 3-8- Provisions for doubtful debts Subsequent review of the Bank’s foreign currency records by the CBI inspectors revealed no adverse Provisions for bad and doubtful debts are provided in accordance with the CBI's regulations as follows: finding. This matter is being presently followed up by the Bank with the CBI.
78 79 ANNUAL REPORT 2011-2012 Saman Bank (Public Joint Stock Company) for the financial year ended March 2012 ,20
7 Loans 7-1- The details of loans net of provision for bad and doubtful debts are as follows: 6 Due from other financial institutions Consolidated Parent entity 2012 2011 2012 2011 The details of deposits held with other financial institutions are as follows: Rls (m) Rls (m) Rls (m) Rls (m) Consolidated Parent entity Credit sales 773,949 822,616 773,949 822,616 Note 2012 2011 2012 2011 Jealeh (service) contracts 479,619 415,310 479,619 415,310 Rls (m) Rls (m) Rls (m) Rls (m) Hire purchase 152,981 207,818 152,981 207,818 Salaf (future) contracts 25,723 23,036 25,723 23,036 In foreign currency Foreign Banks Interest free loans 419,261 599,632 419,261 599,632 Foreign banks- Current accounts 8,048,406 2,656,675 8,048,406 2,656,675 Mozarebeh (commercial transactions) contracts 13,624,573 13,684,819 13,711,467 13,728,772 Foreign banks – Term deposits 3,111,350 1,307,766 3,111,350 1,307,766 Mosharekat Madani (civil partnership) contracts 28,862,157 24,553,659 28,905,402 24,685,918 Local Banks Factoring 13,653,035 9,372,837 13,653,035 9,372,837 Local banks- Current accounts 796,551 632,345 796,551 632,345 Foreign currency loans 194,338 215,662 194,338 215,662 Local banks- Term deposits 1,050,030 1,395,930 1,049,880 1,395,930 Paid letters of credit 375,202 94,064 375,201 94,064 Total 6-1 13,006,337 5,992,716 13,006,187 5,992,716 Doubtful paid letters of credit 3,865,898 970,568 3,865,898 970,568 In Rials Local Banks Paid guarantees 12,313 7,270 12,313 7,270 Local banks -Term deposits 262,997 984,812 207,126 926,988 Doubtful guarantees 32,880 80,188 32,879 80,188 Local banks- Current accounts 72,336 64,537 34,998 41,519 Long term letters of credit and notes 4,382,777 9,022,259 4,382,777 9,022,259 Interbanks Payment System(SHETAB) 456,562 63,904 456,562 63,904 Total 66,854,706 60,069,738 66,984,843 60,245,950 Cheques in transit (1,357) (33,076) - - Others 1,462,684 1,156,623 1,462,684 1,156,623 7-2- The analysis of loan portfolio based on the CBI’s regulations is as follows:
2,253,222 2,236,800 2,161,370 2,189,034 Loan type Current Past due Outstanding Doubtful Total Total 15,259,559 8,229,516 15,167,557 8,181,750 Credit sales 1,018,643 4,178 5,997 295,150 1,323,968 Jealeh 419,524 1,418 3,126 176,179 600,247 Hire Purchase 143,684 1,965 5,143 58,078 208,870 6-1- The details of foreign currency balances deposits with local and foreign banks are as follows: Salaf 2,130 - - 31,400 33,530 2012 2011 Interest free loan 425,530 20 87 520 426,157 currency Rls (m) currency Rls (m) Mozarebeh 9,233,004 865,876 2,556,157 2,745,242 15,400,279 Foreign banks Mosharekat Madani 21,254,905 2,277,475 5,213,174 3,293,688 32,039,242 Euro 627,487,897 10,135,184 338,340,375 4,971,574 Factoring 9,116,924 5,688,981 500,000 7,542 15,313,447 Japanese Yen 4,969,087,398 730,009 2,233,264,295 287,131 Foreign currency loans - short and long term 160,748 21,950 21,336 - 204,034 UAE Dirham 200,610,315 669,637 85,384,105 240,954 Paid letters of credit 391,970 - 4,063,791 4,455,761 Pound Sterling 10,498,448 203,943 13,319,522 224,141 Paid guarantees 15,215 - 178,216 193,431 US Dollar 20,373,019 249,773 15,258,198 158,135 42,182,277 8,861,863 8,305,020 10,849,806 70,198,966 Australian Dollar 12,748 166 12,748 132 Future interest and commission (1,334,743) Swiss Francs 8,486,063 113,637 605,015 6,958 Interest due (3,368,688) Korean Won 60,024,637,070 653,668 8,707,276,318 80,107 Muzarebeh receipts (621,299) Turkish Lira 15,945,796 108,926 2,032,369 13,342 General provision (918,073) Chinese Yuan 72,843,989 141,244 4,408,850 6,957 Specific provision (1,480,920) Russian Roubles - - 9,000,000 3,285 Term L/C’s and drafts 4,509,600 Total 13,006,187 5,992,716 Total 66,984,843
80 81 ANNUAL REPORT 2011-2012 Saman Bank (Public Joint Stock Company) for the financial year ended March 2012 ,20
7-3- The analysis of loans by interest rate and maturity is as follows:
Interest 12% or 12% to 15% to 18% to 21% to 24% or Total maturity less 15% 18% 21% 24% more
Past-due 1,419,091 806 81,796 5,242,972 3,852,767 17,419,257 28,016,689 2 months to Y/e 20.03.2012 82,218 61,008 503,229 1,626,411 2,521,784 5,992,716 10,787,366 8-1- The tax free interest rate for Rial bonds is 20% pa and for foreign currency bonds is 8% pa. Y/e 20.03.2013 8,651,420 156,420 7,127,538 3,931,626 3,006,435 2,194,757 25,068,196 Y/e 20.03.2014 16,830 6,258 182,994 7,859 262,172 240,716 716,829 8-2- The maturity dates for Rial bonds are between December 2012 to January 2015. Y/e 20.03.2015 14,039 2,305 102,540 5,168 845,585 1,227,052 2,196,689 Y/e 20.03.2016 14,681 32,489 1,781 33 74,884 229,413 353,281 9 Investments Y/e 20.03.2017 244,738 24,137 154,267 1,414 697,763 561,954 1,684,273 After 2017 987,833 12,558 15,219 844 297,201 61,988 1,375,643 The details of investments are as follows: Total 11,430,850 295,981 8,169,364 10,816,327 11,558,591 27,927,853 70,198,966 Consolidated Parent entity 2012 2011 2012 2011 Rls (m) Rls (m) Rls (m) Rls (m) Long Term 7-4- The balance of factoring includes Rls 5,040 b. discounted letters of credit issued by other local banks. Unlisted shares 105,296 57,170 446,461 270,741 The details of banks involved and balances due at the year end are as follows: Short Term Rls (b) Listed shares 111,660 142,466 111,653 142,448 Saderat Bank 4,541 Fixed income units 47,550 15,020 46,550 15,000 Mining and Industry Bank 499 Total 264,506 214,656 604,664 428,189 5,040 Fixed income investments represent units held in Unit Trusts bearing a guaranteed interest of 20% pa payable quarterly. The beneficiaries of discounted letters of credit are suppliers / entities in a group which is currently being investigated by the Legal Authorities. The balance due by Pasargad has been settled since the year end and the result of the first hearing, held a result of legal action taken against Mining and 10 Tangible fixed assets Industry Bank, has been in favour of the Bank. In relation to the Letters of credit issued by Saderat The details of tangible fixed assets are given in Appendix A. Bank, action has been taken by the Public Prosecutor against the group involved and the legal process is currently in progress. 11 Intangible assets 8 Participation bonds The details of intangible assets are as follows: Consolidated Parent entity The analysis of participation bonds by currency are as follows: 2012 2011 2012 2011 Consolidated Parent entity Rls (m) Rls (m) Rls (m) Rls (m) 2012 2011 2012 2011 Key money 3,359,997 1,109,967 3,359,997 1,109,966 Rls (m) Rls (m) Rls (m) Rls (m) Software 42,705 40,537 20,989 14,137 Rials 255,400 1,383,325 255,400 1,383,325 Utility deposits 65,492 65,907 8,279 7,177 Foreign currencies - 1,954,302 - 1,954,302 Others 4,475 2,641 - - Total 255,400 3,337,627 255,400 3,337,627 Total 3,472,669 1,219,052 3,389,265 1,131,280
82 83 ANNUAL REPORT 2011-2012 Saman Bank (Public Joint Stock Company) for the financial year ended March 2012 ,20
13-2- The details of other receivables are as follows: Consolidated Parent entity 2012 2011 2012 2011 Rls (m) Rls (m) Rls (m) Rls (m) Dividends 10,361 7,827 23,315 17,275 Participation bonds income 9,912 89,263 9,912 89,263 Due from associated entities - - 79,632 58,429 Debt collection costs 281,049 116,518 281,049 116,518 Deposit interest receivable 3,158 18,482 3,158 18,482 Others 12 Goodwill 70,992 118,285 27,678 78,154 375,472 350,375 424,744 378,121 The details of goodwill on consolidation are as follows: Provision for doubtful debts (35,606) (20,552) (35,566) (20,512) Consolidated Parent entity Total 339,866 329,823 389,178 357,609 2012 2011 2012 2011 Rls (m) Rls (m) Rls (m) Rls (m) 13-3- The details of inventory are as follows: Cost Consolidated Parent entity Opening balance 3,797 3,797 - - 2012 2011 2012 2011 Additions during the year 12,693 - - - Rls (m) Rls (m) Rls (m) Rls (m) Closing balance 16,490 3,797 - - Inventory 21,951 12,243 - - Amortization Work in progress 3,430 881 - - Opening balance 1,490 1,449 - - Total 25,381 13,124 - - Depreciation for the year 1,408 41 - - Closing balance 2,898 1,490 - - Total net book value 13,592 2,307 - - 13-4- The details of other assets are as follows:
Consolidated Parent entity 2012 2011 2012 2011 13 Other assets Rls (m) Rls (m) Rls (m) Rls (m) Rent prepayments 68,003 128,703 68,003 128,703 The details of other assets are as follows: Income tax prepayments 265,792 258,284 265,613 258,168 Consolidated Parent entity Foreclosed collaterals 5,698,945 2,352,360 5,698,945 2,391,738 Note 2012 2011 2012 2011 Contracts advances 25,876 14,044 24,456 98,849 Rls (m) Rls (m) Rls (m) Rls (m) Rent deposits 65,539 56,539 65,539 56,539 Trade receivables 13-1 125,923 136,137 - - Others 473,852 31,192 460,670 28,511 Other receivables 13-2 339,866 329,823 389,178 357,609 Total 6,598,007 2,841,122 6,583,226 2,962,508 Inventory 13-3 25,381 13,124 - - Prepayments 53,525 49,574 - - Others 13-4 6,598,007 2,841,122 6,583,226 2,962,508 14 Due to Central Bank of Iran Total 7,142,702 3,369,780 6,972,404 3,320,117 The details of balance due to the CBI are as follows:
Consolidated Parent entity 13-1- The details of trade receivables are as follows: 2012 2011 2012 2011 Consolidated Parent entity Rls (m) Rls (m) Rls (m) Rls (m) 2012 2011 2012 2011 Forex transactions 830,324 291,260 830,324 291,260 Rls (m) Rls (m) Rls (m) Rls (m) CBI's long term deposits 4,038,000 3,644,300 4,038,000 3,644,300 Rials receivables 187,870 136,137 - - Forex loans 155,633 219,100 155,633 219,100 Provision for doubtful debts (61,947) - - - Current account 1,594,203 - 1,594,203 - Total 125,923 136,137 - - Total 6,618,160 4,154,660 6,618,160 4,154,660
84 85 ANNUAL REPORT 2011-2012 Saman Bank (Public Joint Stock Company) for the financial year ended March 2012 ,20
17 Other deposits The details of other deposits are as follows: Consolidated Parent entity 2012 2011 2012 2011 Rls (m) Rls (m) Rls (m) Rls (m) Guarantees issuing deposits 336,454 210,520 342,654 218,110 L/C cash advances 7,983,414 1,731,006 7,983,940 1,731,006 15 Due to the other financial institutions Drafts cash advances 98,924 26,920 98,924 26,920 The details of amounts due to other financial institutions are as follows: Others 11,386 16,903 11,386 16,903 Consolidated Parent entity Total 8,430,178 1,985,349 8,436,904 1,992,939 2012 2011 2012 2011 Rls (m) Rls (m) Rls (m) Rls (m) 18 Other liabilities In foreign currency Foreign Banks Call deposits 8,558 147,521 8,558 147,521 The balance comprises: Consolidated Parent entity Term deposits 718,217 180,608 718,217 180,608 2012 2011 2012 2011 Local Banks Rls (m) Rls (m) Rls (m) Rls (m) Term deposits 3,566,991 2,788,744 3,566,991 2,788,744 L/C’s and drafts acceptance 4,509,600 9,159,653 4,509,600 9,159,653 Call deposits 740,527 712,503 740,527 712,503 Lease payables 998,500 - 1,000,000 - 5,034,293 3,829,376 5,034,293 3,829,376 Accrued interest - local depositors 666,008 558,127 666,252 558,233 In Rials Local Banks Dividends 17,910 728 16,097 347 Call and term deposits 2,789,026 4,769,386 2,789,026 4,769,386 Others 935,669 482,221 545,872 205,561 Loans 99,064 9,594 - - 7,127,687 10,200,729 6,737,821 9,923,794 Inetrbank deposits 1,000,000 2,000,000 1,000,000 2,000,000 3,888,090 6,778,980 3,789,026 6,769,386 Total 8,922,383 10,608,356 8,823,319 10,598,762 19 Taxation The Bank’s tax position is as follows: 16 Customers deposits a. Financial years 2007, 2005 and prior years The Bank’s tax liability for these years have been finalized and settled. The details of customers’ deposits are as follows: Consolidated Parent entity b. Financial year 2006(*) Note 2012 2011 2012 2011 Rls (m) Rls (m) Rls (m) Rls (m) The Bank’s 2006 income tax, based on the declared profit, was Rls 10,197m. whilst the final tax Call deposits 5,586,181 3,600,652 5,612,559 3,620,265 assessment issued by the Tax authorities was Rls 63,433m. The Bank has paid the tax but protested the Non-interest bearing deposits 775,572 1,347,777 775,572 1,347,777 assessment and the matter is yet to be decided by the High Council Taxation (HCT). The amount paid Term deposits 16-1 64,510,014 48,142,837 64,576,292 48,228,136 has been treated as prepayment hence no provision has been made for any potential tax liability as the Total 70,871,767 53,091,266 70,964,423 53,196,178 outcome of the Bank’s protest has not yet determined.
c. Financial year 2008(*) 16-1- The details of customers term deposits, maturity and interest rates are as follows: The Bank made no tax provision for the year as there was no taxable income after allowing for tax
Type Interest rate% 2012 Interest rate% 2011 exempt income. However, the Tax authorities raised a tax assessment amounting to Rls 128,439m. The Short term 6-12 26,842,574 6.0 to 10.0 20,507,731 Bank has protested the assessment but paid Rls 50,000m. as tax advance, however the matter is yet to One year 12.5-17 1,367,382 14.0 3,115,499 be decided by the HCT. No provision has been made for any potential tax liability as the final amount of 2 years 13-18 3,265,133 14.5 419,051 tax cannot be determined. 3 years 14-19 223,188 15.0 473,733 d. Financial year 2009 and 2010(*) 4 years 14.5-19.5 119,216 16.0 166,101 5 years 15-20 32,758,799 17.0 23,546,021 The 2009 and 2010 income tax based on the declared profits were Rls 23,700m. and Rls 91,972m. Total 64,576,292 48,228,136 respectively whilst the tax assessment issued by the Tax authorities for these years were Rls 167,293m.
86 87 ANNUAL REPORT 2011-2012 Saman Bank (Public Joint Stock Company) for the financial year ended March 2012 ,20
and Rls 264,172m. The Bank has protested these assessments and the matter is yet to be decided by the Tax authorities. No provision has been made for any potential tax liability as the amount of tax cannot be determined.
e. Financial years 2011 and 2012
The 2011 and 2012 income taxes have been provided on the basis of declared profit amounting to Rls160,303 m. and Rls 37,422m. respectively, however the tax assessments for these years are yet to be raised by the Tax authorities. (*)The tax difference for these years are mainly due to the Tax authorities not allowing provisions for bad and doubtful debts for tax purposes and different interpretation of tax treatment of exempt income by the them and the Banking sector. 22 Legal reserve 20 Staff termination benefits Movements in staff termination benefits during the year were as follows: In accordance with the provisions of the “Monetary and Banking Law”, banks are required to set a side 15% of net profit as legal reserve. The movements in the legal reserve during the year were as follows: Consolidated Parent entity Consolidated Parent entity 2012 2011 2012 2011 2012 2011 2012 2011 Rls (m) Rls (m) Rls (m) Rls (m) Rls (m) Rls (m) Rls (m) Rls (m) Balance at beginning of the year 617,792 389,373 614,531 387,289 Balance brought forward 61,734 39,369 54,880 34,749 Transfer during the year 134,299 228,419 131,816 227,242 Paid during the year (5,526) (4,038) (2,819) (3,036) Balance at end of the year 752,091 617,792 746,347 614,531 Provision of the year 42,658 26,403 39,068 23,167 Total 98,866 61,734 91,129 54,880 23 Loan interest 21 Share capital The balance of loan interest income comprises: Consolidated Parent entity 21-1- The Bank's share capital was increased during the year from Rls 3,000,000m. to Rls 4,000,000m. Note 2012 2011 2012 2011 consisting 4,000m. share of Rls 1,000 fully paid. Rls (m) Rls (m) Rls (m) Rls (m) Loan interest 23-1 7,897,872 6,141,423 7,927,934 6,193,562 21-2-The composition of shareholders at the year end was as follows: Late payment penalties 126,911 45,161 128,278 45,976 Total 8,024,783 6,186,584 8,056,212 6,239,538 2012 2011 No. Share capital No. Share capital Rls (m) Rls (m) 23-1- The analysis of loan interest by loan type is as follows: Individuals 3,019 2,350,237 3,002 1,766,416 Consolidated Parent entity Legal entities 54 1,649,763 54 1,233,584 2012 2011 2012 2011 3,073 4,000,000 3,056 3,000,000 Rls (m) Rls (m) Rls (m) Rls (m) Credit sales contracts 98,072 91,895 98,072 91,895 21-3- The details of minority shareholders interest is as follows: Mosharekat Madani contracts 4,251,302 3,893,302 4,270,675 3,934,106 2012 2011 Muzarabah contracts 2,186,351 2,076,180 2,197,040 2,087,515 Rls (m) Rls (m) Factoring 1,299,433 - 1,299,433 - Share capital 185,470 125,620 Salaf contracts 1,797 611 1,797 611 Legal reserve 2,685 1,368 Je'aleh contracts 46,560 37,339 46,560 37,339 Accumulated profit (loss) 8,071 (15,420) Lease contracts 14,357 42,096 14,357 42,096 196,226 111,568 Total 7,897,872 6,141,423 7,927,934 6,193,562
88 89 ANNUAL REPORT 2011-2012 Saman Bank (Public Joint Stock Company) for the financial year ended March 2012 ,20
24 Investments and deposits income The details of investments and deposits income are as follows: Consolidated Parent entity 2012 2011 2012 2011 Rls (m) Rls (m) Rls (m) Rls (m) Participation bonds 190,964 363,840 190,964 363,840 Statutory deposit 59,526 45,991 59,526 45,991 Deposits with local banks 111,605 207,931 109,000 206,563 Dividends and partnership income 53,772 130,813 63,607 136,586 Interest on other facilities 594,403 403,626 594,402 404,342 Interest of foreign currency loans 1,240,963 641,561 1,240,963 643,890 Interest of foreign currency deposits with local banks - 54,978 - 54,978 Interest of term deposit with foreign banks 11,670 1,814 11,670 1,814 Profit on sale of foreign currency notes 20,611 128,530 20,611 128,531 Factoring - 129,940 - 129,940 Total 2,283,514 2,109,024 2,290,743 2,116,475
25 Forex income The analysis of forex income and expenses are as follows: 27 Other interest Consolidated Parent entity 2012 2011 2012 2011 The details of other income are as follows: Consolidated Parent entity Forex income Rls (m) Rls (m) Rls (m) Rls (m) 2012 2011 2012 2011 Subsidiary (*) 17,599,352 6,085,319 - - Rls (m) Rls (m) Rls (m) Rls (m) Bank 999,793 383,649 1,002,006 388,965 Foreign currency term deposits 809,828 302,651 810,028 302,651 18,599,145 6,468,968 1,002,006 388,965 Total 809,828 302,651 810,028 302,651 Forex expenses Subsidiary (*) 17,428,347 5,997,387 - - Bank - - - - 28 Administration and general expenses 17,428,347 5,997,387 - - The details of these expenses are as follows: (*) Saman Exchange Co Consolidated Parent entity 26 Other income 2012 2011 2012 2011 Rls (m) Rls (m) Rls (m) Rls (m) The details of other income are as follows: Consolidated Parent entity Personnel 513,966 344,479 488,261 329,042 2012 2011 2012 2011 Administration 1,077,563 568,235 1,053,766 566,386 Rls (m) Rls (m) Rls (m) Rls (m) Total 1,591,529 912,714 1,542,027 895,428 Letters of credit and drafts 145,323 225,480 145,343 225,486 Guarantees 29,473 27,251 39,090 28,223 29 Inter-bank ATMs (SHETAB) 168,294 104,362 168,294 104,362 Commission expenses Forex commission 5,740 5,102 5,740 5,102 The details of commission paid are as follows: Cards issuing fees 2,813 1,987 2,813 1,987 Consolidated Parent entity Managed funds 65 107 65 107 2012 2011 2012 2011 Collaterals valuation fees 6,168 5,876 6,168 5,876 Rls (m) Rls (m) Rls (m) Rls (m) Insurance and loan monitoring fees 63 100 63 100 Brokers 8,793 9,570 8,793 9,570 Loan professional fees 17,821 19,274 17,821 19,331 Banks 2,932 3,232 2,932 3,232 Telecommunications 654 957 654 957 Individuals 114,576 79,949 130,311 85,220 Profit on sale of fixed assets 83,921 20,152 44,505 - ATM Operator (Shetab) 112,336 80,236 112,336 80,236 Others 141,417 119,602 138,439 125,597 Others 8,722 229 721 229 601,752 530,250 568,995 517,128 247,359 173,216 255,093 178,487
90 91 ANNUAL REPORT 2011-2012 Saman Bank (Public Joint Stock Company) for the financial year ended March 2012 ,20
35 Related party transactions The details of related party transactions are as follows: 30 Off balance sheet items Facilities: Company name Relationship Facilities Rls (m) The details of off balance sheet commitments are as follows: Saman Insurance Co. CBM Commitments 1,246 Saman Brokerage Co. Parent entity CBM Commitments 1,416 2012 2011 Saman Electronic payment Co. CBM Commitments 33,234 L/C commitments: Rls (m) Rls (m) Pelastiran Co. CBM Loans 4,219 Commitments for L/Cs opened 14,540,628 2,586,775 Yazdbaf Co. CBM Commitments 39,420 Commitments for drafts 77,405 271,022 Hamedan Glass Co. CBM Commitments 2,964 14,618,033 2,857,797 Saman Exchange CBM Loans 55,585 Guarantee commitments: Pompiran Co. Shareholder Loans 50,000 Guarantees issued 3,853,318 2,173,999 Saman Investment Shareholder Loans 43,400
CBM= Common Board Member Other Commitments: BM = Board Member Other Commitments 2,077,208 2,643,254 36 Capital adequacy 31 Cash flow from operating activities The Bank’s capital adequacy ratios are as follows: Parent entity The details of cash flow from operating activities are given in Appendix B. 2012 2011 Rls (m) Rls (m) The CBI requires a minimum capital adequacy ratio of 8%. 32 Cash balance at the year end Tire I The details of cash balance at the year are as follows: Paid up capital 4,000,000 3,000,000 Consolidated Parent entity Legal reserve 746,347 614,531 2012 2011 2012 2011 Retained earnings 758,386 1,216,101 Rls (m) Rls (m) Rls (m) Rls (m) Total tier I capital 5,504,733 4,830,632 Cash 1,422,790 937,174 1,336,963 933,919
Foreign currency deposits with foreign banks 10,360,938 3,591,659 10,360,938 3,591,659 Tier II Current account with other banks 72,336 64,537 34,997 41,519 General provisions 918,072 701,106 Foreign currency account with local banks 1,646,535 2,065,386 1,646,385 2,020,960 Less: adjustments for 1.25% of Risk weighted assets - (3,257) Current account with CBI - 325,887 325,887 Fixed asset revaluation reserve 2,588,675 - Foreign currency deposits with CBI 3,713,617 712,932 3,713,617 712,932 Total tier II capital 3,506,747 697,849 Foreign currency account with foreign banks 262,997 984,812 207,126 926,988 Base capital before adjustments 9,011,480 5,528,481 Balance at the year end 17,479,213 8,682,387 17,300,026 8,553,864 Less: Investment in other banks (18,172) (5,392) Base capital 8,993,308 5,523,089 33 Contingent liabilities and capital commitments Risk weighted assets 78,896,700 55,827,917 33-1- Except for tax liabilities and off balance sheet commitments stated in notes 20 and 31 respectively, Capital adequacy ratio 11.40% 9.89% there are no other known material contingencies at the balance sheet date. The CBI requires a minimum capital adequacy ratio of 8%.
33-2-The Bank’s capital commitments at the year end were in relation to renovation and repair of newly purchased branches in Tehran and other cities. 37 Assets revaluation reserve In the compliance with the provision of the 1390 Budget Act, the bank has revalued all its Land, Buildings 34 Post balance sheet events and Key moneys. The surplus in Land and Key moneys amounting to Rls 2,588,675m. have been utilized for share capital increase and impairment in the valuation of buildings amounting to Rls 222,590m. have been There was no event after balance sheet date which would require adjustment to the financial statements. written off in the profit and loss account.
92 93 ANNUAL REPORT 2011-2012 Saman Bank (Public Joint Stock Company) for the financial year ended March 2012 ,20 190 (38) (4,757) (4,520) 389,816 222,914 649,779 389,816 418,899 162,217 644,651 577,064 Total 470,024 476,849 Total (155,517) (136,629) (136,627) Rls (m) (155,354) Rls (m) 1,609,646 2,440,269 3,084,920 2,186,711 2,358,215 1,690,647 1,881,366 1,220,623 ------(614) 99,567 94,410 40,526 40,526 94,410 100,111 (10,854) 183,667 183,667 139,479 139,479
Capex Rls (m) Capex Rls (m) prepayments prepayments 190 (38) (4,757) 389,816 389,816 Total Total (125,775) -
- - 9
10 (136,013) 907 319,332 907 549,668 (607) (4,520) (476) (155,354) 1,218 162,217 9,923 2,218,736 4,879 470,024 9,613 1,650,121 5,6214,302 476,849 1,741,887 4,734 1,180,097 (736) (565) (155,517) 1,485 222,914 5,819 1,515,237 5,079 2,256,602 6,433 644,651 5,513 577,064 11,512 2,901,253 11,332 2,092,301 Motor
Motor Rls (m) Rls (m) Rls (m) Rls (m) vehicles vehicles - - (38) 190 10,622 95,251 (3,913) (2,694) 20,729 (4,021) (2,769) 145,050 150,840 374,458 770,407 282,513 618,648 375,032 395,375 336,135 509,510 752,415 529,343 381,082 890,592 1,281,758 furniture Parent entity furniture Consolidated
equipment Rls (m) equipment Rls (m)
and and Office Office - - - - 70,589 65,748 96,196 108,875 190,469 182,632 (152,183) (146,513) (146,645) (152,184) Buildings Buildings ------
49,960 124,343 49,960 123,415 Land Land 473,829 (84,013) 473,830 (84,014) 336,499 663,409 860,288 638,820 860,288 747,695 336,499 853,878 768,862 669,544 245,072 776,788 768,862 573,348 Rls (m) Rls (m) Rls (m) Rls (m) 245,072 594,156 Net book value at 20.03.2011 Net book value at 20.03.2012 Balance at 20.03.2012 Balance at 20.03.2012 Disposals Disposals Revaluation Adjustments Adjustments Depreciation for the year Additions Balance at 20.03.2011 Balance at 20.03.2011 Disposals Balance at 20.03.2012 Balance at 20.03.2011 Asset revaluation surplus Balance at 20.03.2011 Depreciation for the year Additions Adjustments Adjustments Disposals Balance at 20.03.2012 Net book value at 20.03.2012 Cost: Depreciation: Cost: Depreciation: Net book value at 20.03.2011 Fixed assets are fully insured against fire and earthquake. Fixed assets are fully insured against fire and earthquake.
Appendix A Fixed as sets: The details of fixed assets are as follows: Appendix A Fixed as sets: The details of fixed assets are as follows:
94 95 ANNUAL REPORT 2011-2012
Appendix B
Cash flow from operating activities Consolidated Parent entity 2012 2011 2012 2011 Rls (m) Rls (m) Rls (m) Rls (m) Profit before tax 970,706 1,526,665 878,773 1,514,946 Adjusted for: Profit on sale of fixed assets (83,921) (20,152) (44,505) - Depreciation 239,528 169,840 169,570 159,627 Provision for termination benefits 37,133 26,231 36,249 20,131 Provision for bad and doubtful debts 664,813 467,570 639,100 456,698 Fixed assets impairments 222,590 - 222,590 - Dividend income (53,772) (130,813) (63,607) (136,587) Loss on share valuation 91 - 91 - Net cash from operating activities 1,997,168 2,039,341 1,838,261 2,014,815 Net Increase (decrease) in operating liabilities Due to CBI 2,526,967 3,594,982 2,526,967 3,594,982 Due to other financial institutions (2,084,619) 8,037,310 (2,174,089) 8,030,410 Deposits 17,780,500 14,198,412 17,768,245 14,284,879 Other deposits 6,444,829 827,004 6,443,965 833,094 Other liabilities (3,665,208) 6,594,362 (3,799,600) 6,567,249 21,002,469 33,252,070 20,765,488 33,310,614 Net (increase) decrease in operating assets Due by CBI (1,503,520) (718,631) (1,503,520) (717,892) Loans (11,092,666) (26,376,940) (11,016,615) (26,429,616) Participation bonds 3,082,227 (1,798,827) 3,082,227 (1,798,827) Investments (49,941) (72,067) (176,566) (169,137) Other assets (3,603,505) (1,721,577) (3,465,748) (1,481,725) (13,167,405) (30,688,042) (13,080,222) (30,597,197) Cash inflow from operating activities 9,832,232 4,603,369 9,523,527 4,728,232
96 Saman Bank Branch Network Saman Bank Branch Network\ Tehran Branch Network Tehran Branch Network
Tehran Branch Network
# Branch Branch Code Telephone Fax SWIFT Code # Branch Branch Code Telephone Fax SWIFT Code 1 Ajoodanieh 871 +98 21 2614 1197 +98 21 2612 4185 SABCIRTH8AY 16 Darya Blvd. 883 +98 21 8807 1537 +98 21 8836 6769 ******** 2 Aasef 858 +98 21 2218 2986 +98 21 2243 2692 SABCIRTH8AS 17 Ferdows Blvd. 845 +98 21 4400 0286 +98 21 4400 6826 ******** 3 Africa 801 +98 21 8866 5506 +98 21 8877 3773 SABCIRTH8AF 18 Keshavarz Blvd. 882 +98 21 8898 3156 +98 21 8898 3157 ******** 4 North Africa 820 +98 21 8888 8311 +98 21 8877 3151 SABCIRTH8NA 19 Marzdaran Blvd. 881 +98 21 4421 2629 +98 21 4421 1841 ******** 5 Aghabozorgi- Elahieh 876 +98 21 2269 6450 +98 21 2269 6453 ******** 20 Bours-e-Kala (Branch) 864 +98 21 8838 3496 +98 21 8838 3498 ******** 6 Ekhtiarieh 860 +98 21 2257 5185 +98 21 2277 6571 SABCIRTH8ET 21 Pasdaran 805 +98 21 2259 5657 +98 21 2256 7540 SABCIRTH8PA 7 Arikay-e-Iranian 816 +98 21 2235 9275 +98 21 2235 3516 SABCIRTH8AI 22 Pol-e-Rumi 819 +98 21 2221 3194 +98 21 3331 3195 SABCIRTH8PR 8 Evin 861 +98 21 2243 2419 +98 21 2243 2426 SABCIRTH8EV 23 Poonak 870 +98 21 4446 2510 +98 21 4446 2815 ******** 9 Iran Zameen 815 +98 21 8857 7605 +98 21 8857 1215 SABCIRTH8IZ 24 Piroozi 822 +98 21 3332 3141 +98 21 3332 3143 SABCIRTH8PI 10 Mahan Airline Counter 851 +98 21 4838 1491 +98 21 4838 1495 SABCIRTH8MN 25 Tehransar 856 +98 21 4451 7556 +98 21 4451 6662 ******** 11 Bazaar 806 +98 21 5557 5773 +98 21 5557 6495 SABCIRTH8BZ 26 Jaam-e-Jam 821 +98 21 2621 0912 +98 21 2621 0917 SABCIRTH8JJ 12 Bazaar Kaffashha 837 +98 21 5515 1805 +98 21 5561 6073 ******** 27 Jannatabad 812 +98 21 4449 5201 +98 21 4449 5228 SABCIRTH8JA 13 Bagh-e-Ferdows 804 +98 21 2274 0486 +98 21 2274 0715 SABCIRTH8BA 28 Khadamat-e-Vijeh 895 +98 21 2620 1113 +98 21 2621 0933 ******** 14 Fath Exp’way 877 +98 21 6681 5965 +98 21 6681 6008 ******** 29 Azarbaijan St. 824 +98 21 6606 7884 +98 21 6606 7880 SABCIRT8AZ 15 24-metri Saadatabad Blvd. 875 +98 21 2237 8860 +98 21 2235 7605 ******** 30 Jomhuri –Azerbaijan St. 865 +98 21 6647 7666 +98 21 6647 7655 SABCIRTH8JN
100 101 Saman Bank Branch Network\ Tehran Branch Network Tehran Branch Network
# Branch Branch Code Telephone Fax SWIFT Code 31 Dezashib, Ammar 863 +98 21 2275 3914 +98 21 2275 3913 SABCIRTH8DS # Branch Branch Code Telephone Fax SWIFT Code 32 Lavasani 855 +98 21 2281 6691 +98 21 2281 6689 SABCIRTH8LA 58 Tehranpars- 3rd Sq. 834 +98 21 7737 0113 +98 21 7737 0441 SABCIRTH8TP 33 Dr.Beheshti 832 +98 21 8851 2603 +98 21 8874 6699 SABCIRTH8BH 59 Gholhak 868 +98 21 2660 1505 +98 21 2660 1509 SABCIRTH8GL 34 Dr.Fatemi 810 +98 21 8892 2177 +98 21 8898 2194 SABCIRTH8FA 60 Ghaytarieh 828 +98 21 2223 4199 +98 21 2223 4258 SABCIRTH8QE 35 Delavaran 842 +98 21 7718 9391 +98 21 7721 3777 ******** 61 North Kargar 833 +98 21 8899 1345 +98 21 8899 1350 SABCIRTH8NK 36 Dehkadaye Olympic 867 +98 21 4471 5055 +98 21 4471 1782 SABCIRTH8OL 62 Karim Khan Zand 873 +98 21 8884 5942 +98 21 8884 6190 ******** 37 Dowlat 813 +98 21 2276 4291 +98 21 2276 0338 SABCIRTH8DT 63 Gisha 884 +98 21 8848 5784 +98 21 8848 5787 ******** 38 Resalat; Majidieh 879 +98 21 2231 7194 +98 21 2351 9927 ******** 64 Central 802 +98 21 6695 9050 +98 21 6696 4998 SABCIRTH8AL 39 Sattar Khan 869 +98 21 6656 2488 +98 21 6657 2865 ******** 65 MullaSadra 829 +98 21 8806 9258 +98 21 8806 9254 SABCIRTH8ML 40 Sarv 866 +98 21 2214 5762 +98 21 2214 5832 ******** 66 Mellat, Ekbatan 827 +98 21 3399 8004 +98 21 3399 8009 SABCIRTH8ME 41 Saadat Abad 811 +98 21 2208 6191 +98 21 2208 7708 SABCIRTH8SD 67 Monirieh 839 +98 21 6649 1085 +98 21 6649 1073 SABCIRTH8MO 42 Aghdasieh 808 +98 21 2282 1919 +98 21 2282 2223 SABCIRTH8AG 68 Mowlavi 854 +98 21 5515 9347 +98 21 5515 4729 SABCIRTH8MV 43 Siy-e-tir 849 +98 21 6675 0412 +98 21 6675 0236 SABCIRTH8ST 69 Argentine Sq. 826 +98 21 8851 6906 +98 21 8851 7381 SABCIRTH8AJ 44 Seyed Jamaleddin Asad Abadi 830 +98 21 8805 5461 +98 21 8861 0295 SABCIRTH8JM 70 Tajrish Sq. 847 +98 21 2273 2145 +98 21 2273 2448 ******** 45 Shamsabad, Mellat Sq. 872 +98 21 2231 7967 +98 21 2253 0146 ******** 71 Hossein Abad Sq. 859 +98 21 2295 9979 +98 21 2295 9909 SABCIRTH8HA 46 Shahr-e-Ghods 878 +98 21 4683 2230 +98 21 4683 2241 ******** 72 Qazvin Sq. 831 +98 21 5548 1172 +98 21 5548 1179 ******** 47 Shahran 844 +98 21 4431 2955 +98 21 4430 3691 ******** 73 Nobovat Sq. 841 +98 21 7794 0428 +98 21 7794 0418 SABCIRTH8NB 48 Shahr-e-Rey 818 +98 21 5597 0732 +98 21 5597 0730 SABCIRTH8SR 74 Vanak Sq. 814 +98 21 8820 5455 +98 21 8820 5448 SABCIRTH8VN 49 Shahrak-e- Ekbatan 825 +98 21 4463 6309 +98 21 4465 6896 SABCIRTH8EK 75 Mirdamad 809 +98 21 2292 4451 +98 21 2292 4463 SABCIRTH8MD 50 Shahrak –e- Rah Ahan 840 +98 21 4473 8959 +98 21 4473 7888 SABCIRTH8RH 76 Naziabad 848 +98 21 5533 1006 +98 21 5535 6051 ******** 51 Shahryar 904 +98 21 6526 9021 +98 21 6526 8962 SABCIRTH9SR 77 Niavaran 874 +98 21 2611 7192 +98 21 2611 7195 SABCIRTH8NI 52 Sadeghieh 807 +98 21 4425 4518 +98 21 4425 4517 SABCIRTH8SA 78 Hyper star 857 +98 21 4416 7182 +98 21 4416 7199 SABCIRTH8HS 53 Farjam 853 +98 21 7723 0744 +98 21 7722 8362 SABCIRTH8FJ 79 Elahieh 838 +98 21 2620 3470 +98 21 2202 7930 SABCIRTH8EL 54 Imam Khomeini Airport 846 +98 21 5567 8411 +98 21 5567 8410 ******** 80 Velenjak 823 +98 21 2242 1227 +98 21 2217 2591 SABCIRTH8VJ 55 Mehrabad Airport- Terminal 2 852 +98 21 4465 9103 +98 21 4466 2252 SABCIRTH8FM 81 Valiasr, Zartosht 862 +98 21 8890 6178 +98 21 8880 7592 SABCIRTH8ZV 56 Mehrabad Airport- Terminal 4 843 +98 21 4469 0119 +98 21 4469 0118 ******** 82 Valiasr, Saee Park 835 +98 21 8870 9481 +98 21 8855 6966 SABCIRTH8PS 57 Tehranpars- 1st Sq. 836 +98 21 7772 3250 +98 21 7772 3255 SABCIRTH8FT 83 Yaftabad 817 +98 21 6621 1012 +98 21 6623 7110 SABCIRTH8YF
102 103 Saman Bank Branch Network\ Regional Branch Network Regional Branch Network
Regional Branch Network
Province Branch Branch Code Telephone Fax SWIFT Code
East Azerbaijan Tabriz 9601 +98 411 3373800 +98 411 336 5160 SABCIRTH9TA Province Branch Branch Code Telephone Fax SWIFT Code
Tabriz, Valiasr 9602 +98 411 3322409 +98 411 331 9864 SABCIRTH9VT Alborz Karaj, Jahanshahr 901 +98 26 3446 6116 +98 26 3448 1445 SABCIRTH9JK
Tabriz, 17 Shahrivar 9603 +98 411 5573671 +98 411 557 3673 ******** Karaj, Tohid Sq. 902 +98 26 3220 6470 +98 26 3225 4862 SABCIRTH9KJ
Tabriz, Ostad Shahryar 9604 +98 411 3293263 +98 411 329 3260 SABCIRTH9TS Karaj, Bourse 903 +98 26 3277 0195 +98 26 3277 0196 ********
Tabriz, Bazaar 9605 +98 411 5244656 +98 411 524 2623 SABCIRTH9BT Karaj, Mehrshahr 904 +98 26 3341 7907 +98 26 3341 7908 ********
Tabriz, Moallem Sq. 9606 +98 411 3297401 +98 411 331 0712 ******** Ilam Ilam 9261 +98 841 333 3173 +98 841 333 3152 ********
West Azerbaijan Orumieh 9621 +98 441 2243669 +98 441 224 0392 SABCIRTH9OR Bushehr Bushehr 9141 +98 771 556 2319 +98 771 556 2325 SABCIRTH9BR
Orumien, Sardaran St. 9622 +98 441 2250522 +98 441 222 7846 SABCIRTH9SO North Khorasan Bojnourd 9321 +98 584 224 4320 +98 584 224 7348 ********
Ardebil Ardebil 9641 +98 451 2252601 +98 451 225 3501 SABCIRTH9AR Razavi Khorasan Mashhad 9301 +98 511 844 4460 +98 511 844 3914 SABCIRTH9MA
Ardebil, Shariati 9642 +98 451 2254091 +98 451 225 4099 ******** Mashhad, Modaress 9302 +98 511 228 3802 +98 511 224 1046 SABCIRTH9MM
Isfahan Isfahan 803 +98 311 2230424 +98 311 223 0428 SABCIRTH9ES Mashhad, Sajjad 9303 +98 511 764 8208 +98 511 767 4046 SABCIRTH9SM
Isfahan, Zayandeh Rood 9521 +98 311 6282572 +98 311 626 9409 SABCIRTH9ZE Mashhad, FaramarzAbbasi 9304 +98 511 609 7892 +98 511 609 7895 ******** Blvd. Isfahan, Chahar Bagh Bala 9522 +98 311 6291325 +98 311 629 1329 SABCIRTH9CH Mashhad, Hashemieh 9305 +98 511 883 4844 +98 511 884 1529 ******** Blvd. Isfahan, Hafez St. 9523 +98 311 2209476 +98 311 223 7426 ******** Neishabour 9316 +98 551 334 9413 +98 551 334 9416 ********
Isfahan, Khaneh 9524 +98 311 4412271 +98 311 441 3688 ******** South Khorasan Birjand 9341 +98 561 444 5065 +98 561 444 6707 ********
104 105 Saman Bank Branch Network\ Regional Branch Network Regional Branch Network
Province Branch Branch Code Telephone Fax SWIFT Code Province Branch Branch Code Telephone Fax SWIFT Code
Khuzestan Ahvaz 9701 +98 611 392 0523 +98 611 392 0745 SABCIRTH9AH Kerman, Kowsar Sq. 9502 +98 341 247 6761 +98 341 247 6765 ********
Ahvaz, Amanieh 9703 +98 611 333 2416 +98 611 333 2381 ******** Rafsanjan 9511 +98 391 322 2106 +98 391 322 2101 ********
Arvand Free Zone 9851 +98 631 223 2650 +98 631 223 2653 ******** Kermanshah Kermanshah 9241 +98 831 725 9959 +98 831 725 9971 SABCIRTH9KM
CheharMahal- Kohkiluyeh va Yasuj 9251 +98 741 223 5348 +98 741 223 5375 ******** Bakhtiari Shahr-e-Kurd 9571 +98 381 227 7583 +98 381 227 7580 SABCIRTH9SK Boyrahmad
Zanjan Zanjan 9681 +98 241 322 0654 +98 241 322 7733 SABCIRTH9ZA Golestan Gorgan 9441 +98 171 236 9001 +98 171 226 9012 SABCIRTH9GO
Zanjan, North Sa’di 9682 +98 241 526 8665 +98 241 526 8681 ******** Gonbad-e-Kavoos 9442 +98 172 224 0612 +98 172 224 0624 ********
Semnan Semnan 9451 +98 231 332 0289 +98 231 332 0476 ******** Gilan Rasht 9401 +98 131 722 4710 +98 131 722 4713 SABCIRTH9RA
Sistan va Lorestan Khorramabad 9281 +98 661 223 5590 +98 661 223 5591 ******** Baluchistan Zahedan 9131 +98 541 326 0178 +98 541 326 3282 SABCIRTH9ZN Mazandaran Sari 9402 +98 151 325 9762 +98 151 325 9761 SABCIRTH9SY
Chahbahar Free Zone 9841 +98 545 444 2518 +98 545 444 2517 ******** Babol 9421 +98 111 219 7141 +98 111 219 7148 SABCIRTH9BL
Fars Shiraz 9101 +98 711 231 9521 +98 711 231 9513 SABCIRTH9SH Tonekabon 9422 +98 192 421 0261 +98 192 421 0274 ********
Shiraz,Gas Jam-e-Jam sq. 9102 +98 711 226 2852 +98 711 227 4834 SABCIRTH9FS Amol 9431 +98 121 229 6421 +98 121 229 6435 SABCIRTH9AM
Shiraz, Ghasroldasht 9103 +98 711 627 9180 +98 711 627 9216 SABCIRTH9GS Markazi Arak 9561 +98 861 221 4404 +98 861 222 5957 SABCIRTH9AK Shiraz, Mirzaye Shirazi 9104 +98 711 625 4046 +98 711 623 9093 SABCIRTH9MI Blvd. Hormozgan Bandar Abbas 9121 +98 761 223 5302 +98 761 223 5330 SABCIRTH9BS Shiraz, Bazaar-e-Vakil 9105 +98 711 223 3835 +98 711 223 3834 SABCIRTH9VS Bandar Abbas, Imam 9122 +98 761 461 7734 +98 761 668 4932 ******** Khomeini Blvd Shiraz, Sattarkhan 9106 +98 711 626 3165 +98 711 626 3329 ******** Kish Free Zone 9801 +98 764 445 2493 +98 764 445 2259 SABCIRTH9KI
Qazvin Qazvim 9201 +98 281 335 7305 +98 281 335 8095 SABCITH9GH Qeshm Free Zone 9821 +98 763 524 2640 +98 763 524 2650 SABCIRTH9QM
Qom Qom 9001 +98 251 294 0601 +98 251 291 6616 SABCIRTH9QO Hamedan Hamedan 9221 +98 811 821 3290 +98 811 821 3289 SABCIRTH9HA
Qom – Jihad sq. 9002 +98 251 770 8841 +98 251 770 5949 ******** Hamedan, Khajeh Rashid 9222 +98 811 252 7318 +98 811 252 7338 ********
Kurdistan Sanandaj 9271 +98 871 324 5431 +98 871 324 5426 SABCIRTH9SN Yazd Yazd 9541 +98 351 622 1691 +98 351 626 9525 SABCIRTH9YZ
Kerman Kerman 9501 +98 341 223 3386 +98 341 226 7960 SABCIRTH9KE Yazd, JomhouriEslami Blvd. 9542 +98 351 524 8203 +98 351 524 8206 SABCIRTH9JY
106 107
ANNUAL REPORT 2011-2012
ANNUAL REPORT 2011-2012 [email protected] www.sb24.com The Intelligent Bank