www.askaribank.com.pk Annual Report for the year ended December 31, 2008 www.askaribank.com.pk Annual Report for the year ended December 31, 2008 Consolidating... Consolidating… on the wings of change To live is to change, to change is to onmature; the to mature is to go on creating wings of oneself endlessly. And here at Askari, we are ready for all that and more through – consolidation. We believe that we cannot adopt the way of living that was satisfactory few years ago. The world in which we live has changed, changeand we must change with it. Consolidation isn’t new... it is a major factor which ensures that there is a solid path for everyone who are willing to build on their own terms – be it Consolidating... our customers, our employees, our stakeholders or you. on the wings of In times of change, learners inherit the change future. We are learning to carry on in challenging times through consolidation – by becoming lean, mean and efficient for the benefit of all moving forward with us. Annual Report for the year ended December 31, 2008 Consolidation isn’t new... it is a major factor which ensures that there is a solid path for everyone who is willing to lead the change. At Askari, a palette of resources is realigned to serve you better in every season and for us to explore Consolidating... opportunities even in the ebbs of time. A bunch of paint brushes on the cover of this year’s Annual Report, and a feel on the wings of carried throughout the report with hand- picked colour palette and strategically rendered layout, depicts resources and their application, life, change, people and change businesses… and you with us. for the year ended December 31, 2008 the for Annual Report Annual www.vantagepakistan.com Annual Report for the year ended December 31, 2008 Designed & Printed by Contents 01 Financial Highlights 02 Pakistan’s Economic Profile 04 17 Years of Banking 06 What We Stand For 08 Vision & Mission 10 Corporate Information www.askaribank.com.pk 11 Management 12 Risk Management Framework 13 Entity Ratings 14 Corporate Social Responsibility 16 President’s Message 20 Value Added Statement 21 Askari Bank’s Presence 22 Business and Operations Review 34 Financial Review 37 Financial Calendar 38 Share & Debt Information 40 A Decade of Performance 42 Horizontal & Vertical Analysis 44 Notice of the 17th Annual General Meeting 46 Directors’ Report to the Shareholders Financial Statements of Askari Bank Limited 57 Statement of Compliance 59 Review Report to the Members 60 Auditors’ Report to the Members 62 Balance Sheet 63 Profit and Loss Account 64 Statement of Changes in Equity 65 Cash Flow Statement 66 Notes to the Financial Statements Consolidated Financial Statements of Askari Bank Limited and its Subsidiaries 119 Auditors’ Report to the Members 120 Consolidated Balance Sheet 121 Consolidated Profit and Loss Account 122 Consolidated Statement of Changes in Equity 123 Consolidated Cash Flow Statement 124 Notes to the Consolidated Financial Statements 176 Pattern of Shareholding 177 Correspondent Network 179 Branch Network 186 Balance Sheet in US$ 187 Profit & Loss Account in US$ 189 Form of Proxy 1 Financial Highlights 2008 *Revenues 17%over last year *Operating Profit 10% over last year Total Assets 13% over last year Advances 28% Deposits over last year 17% over last year * excluding one-off gain amounting to Rs. 2.1 billion recognised last year Rupees in million 2008 2007 Change Percent Profits Operating profit 4,534 6,222 – 27.13 Profit before taxation 461 2,300 – 79.96 Profit after taxation 386 2,681 – 85.60 Balance Sheet Shareholders’ funds 12,971 12,266 + 5.75 Customer deposits 167,677 143,037 + 17.23 Advances – net 128,818 100,780 + 27.82 Total assets 206,191 182,172 + 13.18 Information per ordinary shares Earnings (Rs.) 0.95 6.61 – 85.63 Cash dividend (Rs.) – 1.50 – – Stock dividend (%) 25.00 35.00 – 28.57 Net assets value at year end (Rs.) 31.96 40.80 – 21.67 Market value at year end (Rs.) 14.57 99.75 – 85.39 Capital adequacy ratio (%) 9.22 9.35 – 1.39 2 Askari Bank Limited - The Country Pakistan’s Economic Profile GDP–Growth Foreign Trade (Percent) (US$ billion) 39.9 30.5 28.6 8.4 7.0 20.6 6.6 19.1 6.4 16.9 16.5 15.6 5.8 14.4 12.3 12.2 5.1 11.2 2003 2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008 Imports Exports Foreign Exchange Reserves Sectoral Contribution to GDP (US$ billion) (Percent) 15.5 14.0 15.6 13.1 8.7 12.6 8.5 12.4 8.2 8.2 7.6 11.4 6.9 6.5 6.5 10.7 6.3 5.8 5.4 5.2 4.2 3.7 2.4 1.5 2003 2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008 Agriculture Manufacturing Services 2003–04* 2004–05* 2005–06* 2006–07* 2007–08* Economic indicators GDP Growth (%) 6.4 8.4 6.6 7.02 5.8 GDP at current factor cost (Pak Rs. in billion) 5,251 6,123 7,159 8,259 9,906 GDP – at market prices (Pak Rs. in billion) 5,640 6,500 7,623 8,723 10,478 Inflation (%) 4.6 9.3 7.9 7.8 12.0 Trade balance deficit (USD million) (3,279) (6,207) (12,130) (13,564) (20,914) Current account balance – ex. official transfers surplus / (deficit) (USD million) 1,811 (1,534) (4,999) (7,403) (14,463) Foreign currency reserves – at year end (USD million) 12,389 12,598 13,122 15,647 11,369 Exchange rate (USD) 58.15 59.67 60.18 60.37 68.40 Exchange rate (Euro) 70.90 72.14 76.47 81.70 108.20 Banking system –at fiscal year end CY04 CY05 CY06 CY07 CY08 Networth of banking system (Pak Rs. in billion) 131 191 315 484 548 Total assets of banking system (Pak Rs. in billion) 3,003 3,624 3,884 4,785 5,074 Capital adequacy ratio (%) 10.5 11.3 12.7 13.2 12.1 Advances deposits ratio (%) 65.8 70.2 74.6 69.8 69.8 Return on Assets (%) 1.2 1.9 2.1 1.5 1.7 Stock market – at fiscal year end KSE 100 index points 5,279 7,450 9,989 13,772 12,289 Market capitalization (Pak Rs. in billion) 1,403 2,037 2,766 3,981 3,744 *Pakistan’s fiscal year starts on July 1 and ends on June 30 Annual Report for the year ended December 31, 2008 3 Country statistics Land area (sq. km) 796,100 Population (Million) 163.42 Population growth (%) 1.80 Population density (people/sq. km.) 205 Life expectancy (years) 64 Literacy (%) 53 4 Askari Bank Limited - History 17 Years of Banking Askari Bank was incorporated in Pakistan on October 9, 1991, as a public limited company. It commenced operations on April 1, 1992, and is principally engaged in the business of banking, as defined in the Banking Companies Ordinance, 1962. The Bank is listed on Karachi, Lahore and Islamabad Stock Exchanges. Askari Bank has expanded into a network of 200 branches / sub- branches, including 20 dedicated Islamic banking branches, and a wholesale bank branch in Bahrain. A shared network of 2,991 online ATMs covering all major cities in Pakistan supports the delivery channels for customer service. As at December 31, 2008, the Bank had equity of Rs. 12.97 billion and total assets of Rs. 206.19 billion, with 816,629 banking customers, serviced by our 6,496 employees. Askari Investment Management Limited and Askari Securities Limited are subsidiaries of Askari Bank engaged in managing mutual funds and shares brokerage, respectively. Annual Report for the year ended December 31, 2008 5 ‘ability to offer value’ and ‘service excellence’ propels our quest to lead. 6 Askari Bank Limited - Corporate What we stand for Our vision To be the bank of first choice in the region Our thinking Consolidation and creating opportunities with innovation Our values Commitment Integrity Fairness Teamwork Service Our commitment Customers Investors Regulators Employees Communities to stakeholders Passionate about our A distinctive Exemplary Caring for our people Dedication towards customers’ success, investment, delivering compliance, and helping them social development delighting them with outstanding governance and to grow and improvement in the quality of our performance, business ethics quality of life service superior returns and value Our vision to be the bank of first choice We have fully automated transaction– Our values in the region demands continuous strive processing systems for back–office support. for creation of business opportunities with Our branch network is connected on–line Integrity is the most valued standard in innovation while maintaining our core real–time and our customers have access to whatever we do. We understand that our values to meet our commitment to all our off–site as well as on–site ATMs, all over commitment to satisfy customers’ needs stakeholders. Pakistan. Our phone banking service, Askari must be fulfilled within a professional and TeleCare, and internet banking facility ethical framework. We subscribe to a culture The range of our products aims to serve allows customers to enjoy routine banking of high ethical standards, based on the our diverse customer base that comprises service from anywhere, anytime in the world. development of right attitudes. The intrinsic of corporates, SMEs, individual savers, We also pioneered an e–commerce venture values, which are the corner stones of our households, farmers.