ANNUAL REPORT 2011/12 Laxmi Bank DESIGN & PRINT PROCESS: TheSquare Design Communication Pvt. Ltd. ANNUAL REPORT 2011/12 Laxmi Bank Cautionary Statement p05 5 Year Financial Highlight p05 Chairman’s Statement p06 Board of Directors p08 Management Team p10 Profile p13 What We Do p15 Directors’ Report FY 2011/12 p24 CEO’s Perspective p33 Financial Review p36 Corporate Governance Report p43 Risk Management p52 Consolidated Financial Statements p60 Audited Financial Statements p68 Corporate Responsibility p126 10 YEARS OF RESPONSIBLE BANKING 5 Cautionary Statement 5 YEAR FINANCIAL HIGHLIGHT Regarding Forward Looking Statements PAID UP CAPITAL TOTAL ASSETS This Annual Report contains certain {In NPR Millions} {In NPR Millions} forward-looking statements with respect to 1,694 26,029 Laxmi Bank’s future financial condition, performance and businesses based on current plans, estimates and projections. 11/12 11/12 10/11 1,694 10/11 21,560 09/10 1,614 09/10 20,952 Forward-looking statements are statements 08/09 1,098 08/09 18,386 that are not historical facts and includes the 07/08 913 07/08 12,695 Bank’s beliefs and expectations. Forward-looking statements use words like such as ‘aim’, ‘expect’, ‘anticipate’, ‘target’, ‘intend’, ‘plan’, ‘believe’, ‘seek’, ‘estimate’, CUSTOMER DEPOSITS TOTAL REVENUE ‘potential’, ‘reasonably possible’ and variations {In NPR Millions} {In NPR Millions} of these words and similar expressions. 22,832 2,604 By their nature, forward-looking Statements 11/12 11/12 involve risk and uncertainty because they relate 10/11 18,300 10/11 2,434 to future events or circumstances and a number 09/10 18,083 09/10 1,942 of factors beyond Laxmi Bank’s control. In view 08/09 16,051 08/09 1,251 of this, readers are cautioned that a number of 07/08 10,917 07/08 804 factors could cause actual results to differ, in some instances materially, from those stated herein due to changes in basic assumed conditions. Forward looking Statements speak LOANS & ADVANCES only as of the date they are made, and it should OPERATING PROFIT {In NPR Millions} {In NPR Millions} not be assumed that they will be revised or 16,697 585 updated in the light of new information or future events. 11/12 11/12 10/11 15,389 10/11 603 09/10 14,736 09/10 542 08/09 13,463 08/09 339 07/08 9,794 07/08 234 EARNING PER SHARE NUMBER OF {In NPR} 21.55 EMPLOYEES 374 11/12 11/12 10/11 23.25 10/11 393 09/10 24.12 09/10 347 08/09 20.70 08/09 299 07/08 16.45 07/08 252 6 CHAIRMAN’S STATEMENT CHAIRMAN’S STATEMENT Laxmi Bank completes ten years of a successful operation. We have achieved sound growth with a wide array of products and services. Our risk management practices remain robust and strong. The bank will continue to expand its services through new services and better market reach, merchant banking, microfinance and add value with modern technology. I thank all the customers and stakeholders for their patronage. Thank You. Rajendra Kumar Khetan Chairman 8 BOARD OF DIRECTORS BOARD OF DIRECTORS MR. RAJENDRA KUMAR KHETAN MR. RISHI RAM GAUTAM Chairman Director (Representing CIT) Honorary Consul of Portugal Executive Director, Citizen Investment Trust Senator, Kathmandu University Ex-Member, Constituent Assembly MR. JIBAN RAJ KANDEL MR. CHANDRA PRAKASH KHETAN Director (Representing the General Public) Director MR. RATAN LAL SHANGAI MR. BHOLA B. ADHIKARY MR. GOPI KRISHNA SIKARIA Director Director (Representing the General Public) Director Chairman, Everest Insurance Co. Ltd. Director, Nepal Petroleum Pvt. Ltd. Engaged in Garment, Textile, Plastic manufacturing Director, Prime Life Insurance Co. Ltd. MR. MADHU SUDAN AGRAWAL MR. SHAMBHU PARSAD ACHARYA MR. SUMAN JOSHI Advisor Professional Director Chief Executive Officer Chairman, SR Drugs Lab Pvt. Ltd. Executive Director, Sunrise Group Director, Everest Insurance Co. Ltd. Ex-Member, Constituent Assembly T H MANISH RAJ KUNWAR G I THE EXECUTIVES R Senior Relationship Manager - Corporate Banking O T T SUDESH KHALING F E L Executive Vice President / Chief Risk Officer M O R AJAYA B SHAH F Head - Retail Financial Services JIWAN LIMBU Chief Technology Officer BHUBAL RAI Chief-Internal Auditor / Head - Compliance & Assurance NIRMAL DAHAL Head-Credit BHARTI PANDE (Sitting) Head - New Road Business Center SUMAN JOSHI (Sitting) Chief Executive Officer MANAGEMENT TEAM 11 T H SANJEEV RAJ JOSHI G I R Chief Operating Officer O T T SUMED BHATTARAI F E L Head - Corporate Banking M O R RAJIV SAPKOTA F Head - Business Development PIYUSH ARYAL Head - Finance & Treasury / Company Secretary AMIT SHARMA Manager, Human Resources DIPESH AMATYA Head - Small Business Financial Services EUDEN KOIRALA (Sitting) Branch Manager - Hattisar / Manager Service Excellence AMIT SINGH KARKI (Sitting) Senior Manager - Corporate Banking 10th Anniversary Celebrations April 1, 2012 PROFILE 13 Laxmi Bank was incorporated in April 2002 as Our balance sheet size of NPR 26,028 million. the 16th commercial bank in Nepal. The Bank We are today one of the best managed banks in is registered as a Category “A” financial the country and a top 10 bank in terms of institution under the “Banks and Financial market share, size of operations and quality of Institutions Act”. Our shares are listed and profits. actively traded in the Nepal Stock Exchange. Laxmi Bank aspires to be a fully sustainable In 2004 the Bank merged with HISEF Finance business and has embraced environment as the Limited, a first generation finance company a primary area for our corporate social landmark in the Nepalese corporate history as responsibility investments and initiatives. the first ever merger in Nepal. Laxmi Bank’s merchant banking subsidiary – We take pride in having established a Laxmi Capital Market Limited has been in responsible bank that has set the standards for operation since February 2009. A second the industry especially in the areas of corporate subsidiary – Laxmi Microfinance Financial governance, risk management and Institution commenced business in June 2012. technologically driven products and services. Apart from these subsidiaries, Laxmi Bank owns 15% shares in Prime Life Insurance Today we serve a wide range of customers Company Limited. OWNERSHIP across the country with 400 employees through 31 branches. Laxmi Bank’s ownership structure LAXMI BANK BRAND comprises of 3 broad categories of We work with more than 700 business In a relatively short history of 10 years we are shareholders: correspondents across the country who help us proud to have established a brand that is The Promoter Group representing distribute remittances and support our mobile recognized as a young, forward looking and some the leading corporate wallet business. We have leveraged on our responsible Bank. We understand that banking houses - 55.45% technological capabilities to complement this is a long term proposition and brand Citizen Investment Trust, a ‘bricks and mortar’ network with pioneering management is as important as balance sheet Government of Nepal electronic banking services such as internet and risk management in our business. undertaking - 9.02% banking in 2002 and mobile banking in 2009. 11,285 Public The “Laxmi Bank” brand has been managed Shareholders - 35.53% and nurtured carefully through the years and that has helped us achieve sustainable 9.02 % business growth despite adverse business Citizen conditions of the last decade. Investment Trust In pursuit of balance sheet growth we recognize the need to expand our reach and services to newer customer segments and move into semi- urban areas which in turn will require us to make appropriate revisions to our branding and % communication strategy. In this context we % 55.45 3Gen5era.l53 Promoter continue to make the brand transition from an Public Group elitist, hi-tech bank to a bank that provides hi- tech user friendly modern banking services that empowers all hard working, god loving Nepali citizens. Diversity Day in Laxmi Bank WHAT WE DO 15 OUR BUSINESS We are in the business of empowering our customers in order for them to meet their financial goals and aspirations through innovative and progressive financial solutions delivered efficiently and professionally. In a competitive and crowded market we understand the need to give our customers clear and real reasons to trust their finances to us and over the past 10 years we have invested in creating a responsible and responsive customer service culture within the Bank. We have adopted new technologies and ideas with the aim of making banking convenient, cost effective and simple for our customers. We take pride in having established thousands of relationships with customers who choose to patronize us due to our sustainable relationship approach making Laxmi Bank a partner in growth and progress. Over the past 10 years we have opened branches key REACHING OUT urban centres as well as emerging semi-urban areas THROUGH BRICKS that meet our medium and long term strategic goals - AND CLICKS balance sheet growth, network completion and As thought leaders of electronic banking in Nepal since improving access to finance across the country. 2002, we rely on ‘bricks & clicks’ approach to reach While we promote adaptation and usage of electronic out to new customers and new markets. Our customers service channels for standardized transactions, our are able to touch us through 31 branches, 40 customers use our branches for specialized services ATMs,700 business correspondents as well as the such as investments, mortgages and small internet and mobile phones. business services. 16 ANNUAL REPORT 2011/12 We operate through 11 branches inside Kathmandu relationships with their own customer base as facilitators valley that are strategically located and designed to cater of financial solutions that include – savings, payments to the upwardly mobile urban population of the and micro-credit.