The will to go beyond Annual Report 2010 The will to go beyond without the fear of getting lost Contents Chairman's Message 07 Statement of Changes in Equity 70 Corporate DNA 08 Notes to the Financial Statements 71 Milestones 10 Annexures 141 Corporate Information 14 Shariah Advisors' Report 2010 154 Management Team Profile 18 Organizational Structure 22 Faysal Bank Consolidated Financials Six Year Financial Summary 25 Statement of Value Added 42 Directors' Report 156 Notice of the Sixteenth Annual Auditors' Report to the Members 159 General Meeting 44 Consolidated Statement of Financial Auditors’ Review Report on Position 160 Compliance with Code of Profit and Loss Account 161 Corporate Governance 48 Statement of Comprehensive Income 162 Statement of Compliance with Cash Flow Statement 163 Code of Corporate Governance 49 Statement of Changes in Equity 164 Notes to the Consolidated Financial Faysal Bank Standalone Financials Statements 165 Annexures 238 Directors' Report 53 Auditors' Report to the Members 64 Other Information Statement of Financial Position 66 Profit and Loss Account 67 Pattern of Shareholding 251 Statement of Comprehensive Income 68 Branch Network 255 Cash Flow Statement 69 Form of Proxy Annual Report 2010 Faysal Bank 04 - 05 The Will to Go Beyond The constant strive for per fection is a never-ending jour ney. Achieving excellence in all that we do is our vision, and means that we are forever moving forward; always striving to push past our limits. Accomplishment is not an end-result for us; it is an everlasting quest, one that will continue to have us reach for new horizons and surpass new milestones. Challenges along the way are inevitable; we must overcome them with the integrity and professionalism that are at the ver y heart of our institution, as we make our way through unfamiliar surroundings. Our foundation is built upon working together in harmony; our endeavours will not hold substance unless we are united in our attempts. Building upon what we have already achieved is vital for progress, not only as individuals but for the institution as a whole as well. Surpassing the realm of the ordinary, we must seize the opportunities that come our way and couple it with the will to go beyond. Going forward, we must capitalise on the various synergies that the acquisition brings to the table. We now stand at further enhancing the available infrastructure, product portfolio, client base and resource pool. Chairman’s Message Assalam o Alaikum In 2008, we formulated a five year strategy for Faysal Bank, Another part of our five year strategy involved the development the main objective of which was to grow, and grow profitably. of a greater Compliance and Risk Management culture. So This could be done either organically or by virtue of acquisition. far, we are on track in the development of these two integral We opted for the latter option, as market values were low; we spheres, through extensive investment in human resources and saw RBS Pakistan as an excellent fit to Faysal Bank's existing technology in these fields. businesses, as well as complementing our ambitious growth plans. It was a buyer's market, and we had the ability to Going forward, we must capitalise on the various synergies acquire RBS Pakistan without placing any burden on our that the acquisition brings to the table. We now stand at further shareholders. enhancing the available infrastructure, product portfolio, client base and resource pool. This is an ideal time to take full This acquisition has taken Faysal Bank amongst the key players advantage of the opportunities available to us to create value in Pakistan's banking industry - aggressive growth was necessary in the merged entity. As challenges will continue to come our in order to compete with bigger financial institutions. At a time way in 2011, I have full faith that the future outlook is brighter when organisation size was crucial for sustainable profitability, for all. we completed the merger of RBS Pakistan in a record time of six months - the Share Purchase Agreement was signed on 16th June, 2010, and the merged entity took life at the close of business, 31st December, 2010. Chairman of the Board Syed Naseem Ahmad Corporate DNA Our Vision Excellence in all that we do. Threshold Values Values at the heart of our brand Integrity: Teamwork: We are recognised by our reliability, credibility and We function as a team. Within functions, we cooperate. character. We believe in ethical, honourable, time- Between functions, we collaborate. proven principles of uprightness. Together, we aim for excellence and leadership in We stand for and abide by honesty , truth and our chosen markets. transparency. Our Team: Our Asset. Our Integrity: Our Identity. Professionalism: Respect: We are proficient and ef ficient in all that we do. We hold our customers, investors and regulators in We provide banking ser vices knowledgeably and high esteem. skillfully. We uphold our customers' rights to demand efficient We uphold regulatory obligations. service. We appreciate and respect our profession and, above Our Professionalism: Our Competence all, our bank. Our Respect: Our Duty. Annual Report 2010 Faysal Bank 08 - 09 Our Mission Achieve leadership in providing financial services in chosen markets through innovation. Differentiator Values Values that set our brand apart Passion Innovation We bring zeal and enthusiasm for banking to work. We pioneer novel and more efficient ways to deliver We are excited to provide customers with the best or solutions. the best-suited. We are dedicated to a culture of improvement and We go the extra mile in legitimate, acceptable ways. modernisation. We stand for originality, in thought, in action and in Our Passion: Our Worth. belief. Responsiveness Our Innovation: Our Strength. We are receptive to the need for change and Compassion improvement. We are proactive and anticipate our customers' needs Our concern for our colleagues, our customers, our and wants. communities, and our countr y sets us apar t. We act quickly to modify, adjust or prepare for new To each other, we are a family. realities. For each other, we are a meaningful source of shared humanity. Our Responsiveness: Our Distinguisher. Our Compassion: Our Gift. Milestones The Acquisition Corporate & Investment Banking In June 2010, Faysal Bank Limited (FBL) entered into During 2010, the Corporate & Investment Banking Group a share purchase agreement for RBS Pakistan. This (CIBG) continued its ongoing commitment to improve the marked a new chapter in both FBL and RBS Pakistan's quality of its assets, enhance the contribution of trade and history, which gave FBL an even stronger presence in the fee based income to augment and diversify the revenue country and supported our growth plans. FBL recognized base and to develop client focused solutions to bring the strength of the customer franchise which RBS had about efficiencies in business. built and with the investment FBL can provide, it shall be better able to realise its full potential. A number of milestone transactions were concluded including the largest ever private debt restructuring in On October 2010, controlling interests of RBS Pakistan Pakistan where FBL acted as restructuring advisor to a were transferred from the RBS Group to FBL. The two denim manufacturer & its fertilizer subsidiary. The quantum banks seamlessly merged into a combined entity on January of debt restructured was PKR 43,000 million - including 01, 2011, which enabled FBL to offer a wider range of both local & foreign currency exposures with over 70 products across all customer segments. creditor institutions involved. Other select milestones include: This acquisition has expanded FBL's footprint to over 225 • FBL jointly arranged a Syndicated Dual Tranche Ship branches, with combined business assets of PKR 250 Financing Facility of PKR 10,300 million for acquisition billion, further strengthening its balance sheet and taking of dry cargo vessels by a large shipping company. FBL amongst the top ten banks in Pakistan. This acquisition This complex and unique transaction was achieved is a significant milestone in FBL's strategy to expand its without recourse to sovereign guarantees. presence and commitment to Pakistan, while of fering a wider range of products across all business segments, • FBL issued 7 Year Privately Placed, Rated, Unsecured with continued focus on improving customer experience. & Subordinated TFC's of PKR 3,000 million to improve This expansion will result in positioning the bank as one its Tier-II capital. The issue was well oversubscribed of the key players in the financial sector, which is undergoing - a mark of confidence in our institutional strength. consolidation. FBL remains committed to all its stakeholders, customers and employees, while continuing to fulfil our • FBL acted as a Co-Arranger for a PKR 8,000 million corporate responsibilities. Long Term Infra-structure Finance Facility to a subsidiary of one of the largest companies in the Ports & Logistics Enhanced Branch Network and Rebranding sector globally. Following the merger of RBS with and into Faysal Bank, • FBL acted as Exclusive Advisor & Arranger to a PKR a complete rebranding exercise was undertaken all across 1,150 million Privately Placed Rated TFC issue for Pakistan to convert RBS branches into Faysal Bank branches. a leading school chain for the acquisition of two In keeping with a strategy of growth, Faysal Bank's footprint power projects of PKR 365 MW each. has now expanded to over 225 branches, out of which 13 are solely dedicated Barkat Islamic Banking branches. • FBL acted as a Lead Advisor and Arranger for the Throughout the acquisition process, extensive lines of country's only integrated Power Company to arrange communication were developed for internal and external PKR equivalent of USD 25 million Syndicated Term use, to assuage employee concerns and queries and to Facility to complete the commercial leg of a European keep customers and stakeholders informed about various ECA facility.