IN THE NAME OF GOD PARSIAN BANK 04 Financial Highlights 06 Statement of the CEO 07 Board of Directors 08 Organisational Chart 10 Islamic Banking Principles 13 Part I - Introduction 14 Background 14 Our Mission 14 Our Objectives 14 Our Vision CONTENTS 14 Our Values 15 Shareholders 16 Capital 17 Part II - Operational Performance 18 Deposits 18 Granted Loans 19 Parsian Bank’s Position among Private Iranian Banks 20 Foreign Currency Transactions 20 Branches 21 Performance of our Branches 21 human resources 22 Compliance & Anti-Money Laundering 23 Part III - Financial Performance 24 financial ratios 25 Income 26 Investment in Subsidiaries 26 Major Events during the Reporting Period 27 Part IV - Financial Statements 2 ANNUAL REPORT | 2018-19 3 PARSIAN BANK FINANCIAL HIGHLIGHTS DUES FROM BANKS TOTAL & OTHER CREDIT INSTITUTES ASSETS Million IRR Million IRR 160,000,000 1,400,000,000 140,000,000 1,200,000,000 120,000,000 1,000,000,000 100,000,000 800,000,000 80,000,000 600,000,000 60,000,000 143,678,043 400,000,000 1,241,325,495 40,000,000 200,000,000 20,000,000 870,954,636 73,779,020 0 2017-18 2018-19 0 2017-18 2018-19 INVESTMENT IN SHARES & OTHER SECURITIES Million IRR 20,000,000 18,000,000 16,000,000 14,000,000 12,000,000 10,000,000 17,851,591 8,000,000 6,000,000 13,957,871 4,000,000 2,000,000 0 2017-18 2018-19 4 ANNUAL REPORT | 2018-19 CLIENTS' TOTAL DEPOSITS REVENUES Million IRR Million IRR 90,000,000 160,000,000 80,000,000 140,000,000 70,000,000 120,000,000 60,000,000 100,000,000 50,000,000 80,000,000 40,000,000 85,341,957 150,320,570 60,000,000 30,000,000 129,650,493 20,000,000 40,000,000 20,000,000 10,000,000 52,523,921 0 2017-18 2018-19 0 2017-18 2018-19 NET PROFIT Million IRR 3,000,000 2,000,000 2,043,539 1,000,000 0 -1,000,000 -2,000,000 -3,000,000 -4,000,000 (5,413,357) -5,000,000 -6,000,000 2017-18 2018-19 * The Bank’s fiscal year ends on March 20th. * The official exchange rate was USD1 / IRR42,000 at the end of the period. 5 PARSIAN BANK STATEMENT OF THE CEO I am pleased to announce that once again, Parsian Bank demonstrated an exceptional performance during the previous fiscal period in spite of the going recession in Iran. Our income increased from approximately IRR130 thousand billion in 2017-18 to over IRR150 thousand billion in the reporting year. We also successfully managed to attract more deposits during the past year. Hence, deposits increased from approximately IRR896 thousand billion in 6 ANNUAL REPORT | 2018-19 2017-18 to reach over IRR1,067 thousand billion in the reporting year. Our assets were also on the rise, reaching over IRR1.24 trillion during the reporting year (IRR087 trillion in the previous year). We are proud to be an essentially a customer oriented bank – putting the customer first. As a result, we have earnt the trust of more Iranians, which in turn has enabled us to capture a larger portion of Iran’s private banking market (15%) during the reported period. As a socially responsible bank, we have also channelled a considerable portion of our resources towards the country’s mega steel, mining and oil projects as well as oil and gas refineries. We have also funded Iran’s transportation industry as well as knowledge-based entities. By doing so, we have made a positive contribution to Iran’s economic development. As a result of our outstanding performance, we have ranked second among Iran’s top one hundred companies and first among domestic banks in terms of sales, by the Industrial Management Organisation. I have no doubt that Parsian Bank shall perform even stronger and create more wealth for its shareholders, once Iran’s current economic challenges have been overcome. To conclude, I would like to take this opportunity to express my gratitude to our shareholders, our valued customers as well as dedicated colleagues. Kourosh Parvizian 7 PARSIAN BANK BOARD OF DIRECTORS Kourosh Parvizian Hashem Yekke Zare CEO (Acting) Chairman (Non-Acting) Aref Norouzi Abbas Khosravani Vice-Chairman (Non-Acting) Board Member (Acting) Javad Shekarkhah Seyed Hesam Shams Alam Board Member (Non-Acting) Board Member (Acting) 8 ANNUAL REPORT | 2018-19 ORGANISATIONAL CHART Board of Directors Employees’ Compensation Audit Committee Committee Risk Management, Compliance & AML High Committee CEO Vice CEO CEO’s Advisors Risk, Compliance & AML Internal Audit Department Department Human Resources & Welfare Coordination Department Affairs Department Islamic Banking Research & Training Public Relations Department Centre Inspection & Monitoring Department Islamic Banking Research & Training & Knowledge Future Studies Department Development Legal Department Executive Board Financial & Projects & Credit & Branches & Financial & Information International Planning Collections Logistics Assemblies Affairs Deputy High-Tech Deputy Deputy Deputy Deputy Deputy Software & Organisations Financial & International Data Systems & Methods Credit Branches Reporting Affairs Infrastructure Marketing & Corporate Logistics Treasury Foreign Currency & Network Business Banking Operations Development Subsidiaries, IT Security Collection Overseas Investment Branches Planning & General Assemblies Financial Affairs High-Tech Performance Development Measurement Assessment 9 PARSIAN BANK 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. Term Deposits Banks are authorized to render various types of investment services, ranging from short-term (6 months) to long-term (5 years) deposits. Although banks can use their capital plus Gharz- al-Hassaneh accounts, priority is given to investment deposits. They can also use a combination of their own and depositors’ resources to grant loans to customers. Iranian banks guarantee the principal and an interim return to the owners of the term deposits. However, should loans provide a return in excess of interim return plus bank’s commission, such an excess return would be shared between the bank and the depositors. On the lending side, Iranian banking laws and regulations separate banking products into two categories: participation contracts and constant profit contracts. Participation Contracts Under these types of contracts, banks provide the whole or a part of the funding required by their customers for a specific economic activity. The profit that results from such economic activity is shared between the bank and the customer in accordance with the terms of the relative contract. These contracts consist of the following: 10 ANNUAL REPORT | 2018-19 a. Mosharekat-e-Madani (Civil Partnership) Under civil partnership contracts the bank funds a customer (legal or natural person) for a specific economic activity. The customer co-invests in cash or in kind and the profit is shared. Civil partnership contracts can be in the field of manufacturing, trade and service industries. Under the same scheme, the issuing of bonds is also permissible. Commercial banks are allowed to act as guarantors for both the government and private sector enterprises, and entities wishing to raise funds for specific activities through issuance of bonds. Profits are paid quarterly. 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. 11 PARSIAN BANK 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.