IN THE NAME OF GOD 2 Parsian Bank // Annual Report 2016-17 CONTENTS Key Figures 5 Statement of the CEO 7 Board of Directors 8 Chart of Organisation 9 Islamic Banking Principles 10 Part I - Introducing Parsian Bank 12 Background 14 Our Vision 14 Our Mission 14 Our Values 14 Shareholders 15 Capital 15 Part II - Operational Performance 16 Deposits 18 Granted Loans 18 Our Market Share among Private Banks 19 Foreign Currency Transactions 20 Branches 20 Human Resources 21 Compliance & Anti-Money Laundering 22 Part III - Financial Performance 24 Financial Ratios 26 Income 28 Investment in Subsidiaries 29 Part IV - Financial Statements 30 Parsian Bank // Annual Report 2016-17 3 Iranian fiscal year ends on March 20th. The official exchange rate was USD1/IRR 32,420 at the end of the period. 4 Parsian Bank // Annual Report 2016-17 KEY FIGURES Total Assets Total Joint Income 654,977,732 709,945,307 63,114,741 78,032,002 Million IRR Million IRR 2015-16 2016-17 2015-16 2016-17 Total Other Net Profit on Investments Operating Income 1,987,954 14,164,703 9,383,425 22,838,204 Million IRR Million IRR 2015-16 2016-17 2015-16 2016-17 Parsian Bank // Annual Report 2016-17 5 Thanks to our deep market insight , 6 Parsian Bank // Annual Report 2016-17 STATEMENT OF THE CEO Our total assets increased considerably, from IRR654,977,732 million in 2015- 16 to reach IRR709,945,307 million in the following year. Cash fell from IRR26,509,839 million in 2015-16 to IRR16,867,916 million during the reporting period, demonstrating our ability to dedicate more of our resources towards operational performance. Furthermore, our already large market share among all Iranian private banks increased from 12% in 2015-16 to 13% in the previous year. Although a seemingly small gain, this nevertheless demonstrates our success in capturing a larger portion of an increasingly competitive market. Deposits also grew considerably, to reach IRR638,982 billion (IRR586,144 billion) whilst loans also increased to reach IRR470,909 billion. Furthermore, I am pleased to announce that operating income more than doubled from IRR9,383,425 million in 2015-16 to reach IRR22,838,204 million in the following year. These are all undoubtedly major accomplishments, considering the volatile and the ever more competitive markets as well as the ongoing recession. I have no doubt that Parsian Bank shall perform even stronger and create more wealth for its shareholders once Iran’s current economic challenges are overcome. I therefore, thank our dear shareholders for their ongoing support and faith in our ability and our hardworking and dedicated colleagues. I would also like to express my gratitude to all those who have contributed to the growth of this bank and seek continued patronage of our valued customers. Kourosh Parvizian Parsian Bank // Annual Report 2016-17 7 BOARD OF DIRECTORS Kourosh Parvizian Hashem Yekke Zare Aref Norouzi CEO Chairman Vice-Chairman Abbas Khosravani Javad Shekarkhah Seyed Hesam Shams Alam Board Member Board Member Board Member 8 Parsian Bank // Annual Report 2016-17 CHART OF ORGANISATION Board of Directors Appointment Compliance & Anti-Money High Committee Laundering Committee Internal Audit Controls Risk Committee Committee CEO Risk & Compliance Internal Audit Deputy CEO Islamic Banking Research Human Resources & Training Center & Welfare Coordination Islamic Banking Research Training & Knowledge & Innovation Management Development Public Relations Anti-Money Laundering Inspection & Department Monitoring Credit & Information Projects & Financial & International Legal Deputy Corporate Operations Technology Planning Investment Banking & Collections Banking Deputy Deputy Deputy Deputy Deputy Deputy Organisation Finance & International Software Legal Affairs Credits Branches & Methods Reporting Affairs Research, Foreign Hardware & Corporate Collections Development Logistics Treasury Currency Network Banking & Planning Operations Subsidiaries & Overseas IT Security Help Desk Investment & General Branches Assemblies IT Affairs Development Parsian Bank // Annual Report 2016-17 9 ISLAMIC BANKING PRINCIPLES Since the most basic element defining Islamic finance requires a proper comprehension of and distinguishing between usury and profit, Iranian banks adjusted their operations according to Usury- Free Banking Act of 1983. Thus, Iranian banks raise their resources from the following sources: Gharz-al-Hassaneh Accounts These are current and savings accounts (as in conventional banking system) with the exception that they earn no interest. Account holders typically receive services of those accounts in combination with a cheque book and pass book respectively. Savings accounts offer incentives to depositors (up to 4%), including one or several of the following: prizes and bonuses in cash (usually run using a draw) or as an exception from or a discount on the payments of commissions and fees, and priority in the use of banking loans. Banks consider Gharz-al- Hassaneh accounts “their own resources” and are required to guarantee their full nominal value. Participation Contracts Term Deposits Under these types of contracts, banks provide the whole or a part of the funding required by their Banks are authorized to render various types customers for a specific economic activity. The of investment services, ranging from short- profit that results from such economic activity is term (6 months) to long-term (5 years) shared between the bank and the customer in deposits. Although banks can use their capital accordance with the terms of the relative contract. plus Gharz-al-Hassaneh accounts, priority is These contracts consist of the following: given to investment deposits. They can also use a combination of their own and depositors’ a. Mosharekat-e-Madani (Civil Partnership) resources to grant loans to customers. Iranian Under civil partnership contracts the bank funds a banks guarantee the principal and an interim customer (legal or natural person) for a specific return to the owners of the term deposits. economic activity. The customer co-invests in cash However, should loans provide a return in or in kind and the profit is shared. Civil partnership excess of interim return plus bank’s contracts can be in the field of manufacturing, trade commission, such an excess return would be and service industries. Under the same scheme, shared between the bank and the depositors. the issuing of bonds is also permissible. Commercial banks are allowed to act as guarantors for both the On the lending side, Iranian banking laws government and private sector enterprises, and and regulations separate banking products entities wishing to raise funds for specific activities into two categories: participation contracts through issuance of bonds. Profits are paid and constant profit contracts. quarterly. 10 Parsian Bank // Annual Report 2016-17 b. Mosharekat-e-Hoghoughi (Legal Partnership) In legal partnership, the banks provide a part of the capital for a new company or buy shares of such company. These contracts are feasible in the fields of manufacturing, trade and service industries. c. Mozarebeh Under Mozarebeh contracts, one party (the bank) provides funds and the other party (the customer) uses the funds for trading. Customers can be both legal entities or natural persons. Usage of funds is limited to the field of trade. d. Mozare’eh Under Mozare’eh contracts, one party (the bank) hands over to the other party (the customer) a farmland for a specific duration of time. The customer works on the land and the relative proceeds are shared. e. Mosaghat Under Mosaghat contracts, the owner of trees in a garden (the bank) maintains an irrigation contract with an agent (the customer) and relative proceeds are shared. Constant Profit Contracts Under these types of contracts, the bank provides the whole or a part of the financing required by its customers for a specific venture. Unlike the participation contracts, the bank’s profit is already fixed at the signing of the contract and before the commencement of the activity. As such, the bank’s profit has to be paid by the customer irrespective of whether any profit is materialized or not from the funded economic activity. a. Foroush-e-Aghsati (Instalment-Sale) An Instalment-Sale is a contract whereby one party (the bank) delivers goods to the other party (the customer) at pre-set price. The price is amortized, totally and/ or partially, on predicted maturity dates through equal or unequal instalments. b. Ejareh-Besharte-Tamlik (Lease-to-Own) In this particular type of leasing contract, it is agreed that the lessee, if complying with the terms of the contract will obtain the ownership of the leased property upon the completion of the contract. c. Salaf (Forward Sale) A Forward Sale is a contract whereby the bank purchases goods produced by the customer, paying the price in cash, and receives the goods in future. d. Joaleh This refers to the obligation of a person (the customer) to pay a certain sum or fee in return for a certain favour according to the contract. Acting as an agent or as a contracting party if needed, a bank may arrange a Jo’aleh for the purpose of providing the loans required to develop a business. e. Tanzeel (Discounting) In this case, banks can discount drafts and /or various types of commercial notes. Finally, banks are also allowed to allocate some of their own resources (including Gharz-al- Hassaneh funds from the customer) to make direct investments. Direct investment is not considered a facility but a participation contract in principle. f. Morabehe Under the terms of Morabehe a bank or a credit institution fulfills the role of a supplier and informs the applicant of the finished cost or of any given assets or services. Then having added a percentage to the finished cost as profit, the bank sells the assets or services to the applicant. Payment may be in the form of cash or by instalments. g. Estesna’ This kind of contract is designed to serve the manufacturing sector, where a product is manufactured, converted or transformed.