Marking a Prosperous Future At Silkbank, our consistency towards providing the best marks our stature as a premium bank. In addition to our core principles of quality and excellence, we commit ourselves to today. Today is when we strive to commit to our aspirations and promises; it is when we invest devotion and sincerity in order to secure the future of our identity, our legacy. Annual Report2012 Contents Vision, Mission, Core Values 03 Products and Services 05 Chairman's Message 09 President's Review 11 Corporate Information 15 Board of Directors 18 Senior Management Committee 22 Corporate Profile 25 Directors' Report to the Members 28 Statement of Compliance with the Code of Corporate Governance 38 and Statement of Internal Control Notice of AGM and Auditors' Review 42 Independent Auditor's Report to the Members 44 Six Years Financial Highlights 48 Value Added Statement 49 Horizontal and Vertical Analysis 50 Graphical Presentation of Financial Progress 52 Statement of Financial Position 58 Profit & Loss Account 59 Statement of Comprehensive Income 60 Statement of Cash Flow 61 Statement of Changes in Equity 63 Notes to the Financial Statements 64 Statement of Written-off Loans 120 Shari’a Advisor’s Report 124 Emaan Islamic Banking Business 125 Achievements at a Glance 130 Serving the Community 134 Additional Shareholders' Information 138 Pattern of Shareholding - CDC and Physical 139 Branch Network 142 Foreign Correspondents 144 Proxy Form 147 Annual Report2012 Vision Benchmark of Excellence in Premier Banking Mission To be the leader in premier banking trusted by customers for accessibility, service and innovation; be an employer of choice creating value for all stakeholders. Core Values Customer Focus At Silkbank the customer remains at the core of all activities… Service Quality is our key differentiator. Integrity At Silkbank we are honest and upfront maintaining the highest levels of personal and corporate integrity. Teamwork Teamwork is our key strength… our success is in unity. Creativity Out-of-the-box thinking is the enabling factor for us to be recognized as an innovative organization. Meritocracy Merit remains our key primary criteria for rewarding performance. Humility Humility remains at the core of all our relationships. Annual Report2012 Marking Innovation Products and Services Credit Cards All in One Ready Line Visa Debit Card Annual Report2012 Products and Services BRANCH BANKING SILKBANK CURRENT ACCOUNTS Caters to the plethora of financial needs of a diverse customer base. ALL IN ONE ACCOUNT: Provides ultimate protection and security to customers with amazing banking and transactional benefits. BUSINESS VALUE ACCOUNT: A unique business Current Account that provides customers with protection and transactional benefits tailored for any business. It is the first account that provides comprehensive business inventory coverage for up to Rs. 1 Crore. ONLINE EXPRESS: Online Express gives the customer complete online solutions under one roof with a variety of tier- based transactional benefits. SALARY PREMIUM ACCOUNT: An exceptional Current Account offering a host of financial convenience, protection and lifestyle benefits with hassle-free salary processing. SAVINGS ACCOUNTS Silkbank's Savings offers attractive features and competitive returns along with flexibility of current accounts. MUNAFA ROZANA: The only Savings Account in Pakistan that pays profit in cash DAILY. Profit on funds is calculated and paid into the customer's account on a daily basis. PLS SAVINGS ACCOUNT: Provides the benefits of a Savings Account with the convenience of a Current Account. SUPER SAVER ACCOUNT: Provides the customer with the highest monthly returns on higher deposits and profit calculation on a daily profit basis with a monthly payout. TERM DEPOSIT ACCOUNTS SALANA MUNAFA ACCOUNT: Offers the highest profit with payout on maturity. It provides customers with an overdraft facility of up to 90% with other transactional benefits. SILKBANK MAHANA MUNAFA ACCOUNT: Offers the highest profit with monthly payout. It provides customers with an overdraft facility of up to 90% with other transactional benefits. BANCASSURANCE One-stop professional financial service for the utmost convenience in protection needs. Services include: Mehfooz Har Pal, Roshan Mustaqbil, Silk Health Plan, Sunehra Kal, Silk Health Line, and Silk Secure Takaful. ALTERNATE DELIVERY CHANNELS DIRECT INTERNET BANKING With the Silkbank Direct Internet Banking service customers can access and manage their accounts anywhere, anytime with amazingly convenient Internet Banking facilities. SILKBANK PHONE BANKING Why should customers walk to the bank when they can talk to the Bank! Silkbank Phone Banking officers ensure that the customer's financial needs are taken care of with ultimate accessibility, convenience and security, 24/7. 06 Products and Services VISA DEBIT CARD Silkbank VISA Debit Card offers international acceptance and provides protection against fraudulent transactions after the customer's report of loss. UTILITY BILLS PAYMENT SERVICE With its launch customers can now use their Silkbank VISA Debit Card (VDC) at any Silkbank ATM to pay their utility bills or top up their mobile phones, round the clock, free of charge! CORPORATE AND INVESTMENT BANKING CORPORATE BANKING From arranging capital for day-to-day operations to offering pertinent financial advice for a major business acquisition, Silkbank has the expertise and experience for it all. INVESTMENT BANKING Silkbank offers a vast array of Debt and Equity advisory and arrangement services along with advisory services for restructurings, mergers & acquisitions and buy/sell-side advisory. MIDDLE MARKETS Upholding the motto of “Yes We Can”, Silkbank stretches to a nationwide network fully equipped to equally cater to the vast and extensive middle market customers. Structured working capital lines are provided along with Current/Savings Accounts in order to enhance trade volumes of medium enterprises allowing them growth. CONSUMER BANKING PERSONAL LOAN With Silkbank Personal Loan of up to Rs. 2 million, customers can live up their dreams and enjoy life to the fullest. SILKBANK READY LINE Provides customers with a fast processing running finance facility to meet their day-to-day emergency needs. CREDIT CARDS The most innovative cards of the country, Silkbank Credit Cards provide customers with 0% markup for an entire year upon transfer with Card Design Personalization and Customization. SMALL AND MEDIUM ENTERPRISES M'POWER A running finance facility structured according to customer preferences. It helps business customers to leverage every business opportunity that comes their way and gives them greater freedom to focus on every important aspect of their business growth. SME CASH EASE SME Cash Ease is a liquidity solution for SME level businesses to maintain a profitable working relationship with their clients. EMAAN ISLAMIC BANKING Emaan Islamic Banking was inaugurated by conversion of seven conventional banking branches into dedicated Islamic Banking branches in 2012 and is geared towards providing Shariah-compliant banking products along with high level of customer satisfaction. 07 Annual Report2012 Chairman’s Message In line with the strategic direction of the Board, the Silkbank team enhanced its revenue momentum in 2012, both on the asset and the liability side of the business, rationalized expenses by exploring synergies, re-engineering processes and used existing resources to fuel growth. With a clear focus on current account products and incentives, the Bank's deposit mix showed a healthy growth during the year. The Bank crossed an important milestone in 2012, with the commercial launch of Silkbank's VISA Credit Card and conversion of its seven conventional branches into “Emaan Islamic Banking branches”, which received an overwhelming response from the market. True to our core values, Silkbank staff maintained an unwavering customer service excellence, and mystery shopping conducted by a leading independent marketing research consultant has shown 86% customer satisfaction for the Bank, the highest amongst peer banks. The Bank also continued registering a significant reduction in non-performing loans (NPLs), despite a rising trend in the banking industry generally. However, an adverse effect on margins of the lowering discount rates, the necessity to continue making strategic investments for future growth and the generally fragile economic situation kept the Bank from making a profit in the year. Going forward in 2013, the Bank has set significant goals to improve earnings. These are based on becoming capital compliant through a scheme for issuing preference shares of the Bank currently nearing a successful closure, increased cost efficiencies, and enhanced revenue streams from its business portfolio, including the new very promising businesses added in 2012 i.e. Islamic Banking & the Credit Card business. I join the Board in wishing the management every success in 2013, in making the Bank a top service provider in the industry and a profitable one for its shareholders. Munnawar Hamid, OBE Chairman Annual Report2012 President’s Review The Silkbank team endeavoured to continue its growth momentum in 2012, with a clear focus on enhanced margins and new business introductions. Our strategy outlined a greater emphasis on the high margin products, both on the asset and the liability side of the business, while leveraging our existing infrastructure to launch our Emaan Islamic Banking initiative and Credit Cards.