annualreport2018.pdf - Bank with the Best Annual Report 2018 From the First Islamic Bank in Pakistan On Meezan Bank was granted the first ever Islamic

annualreport2018.pdf - Bank with the Best Annual Report...

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Unformatted text preview: Bank with the Best Annual Report 2018 From the First Islamic Bank in Pakistan On January 31, 2002, Meezan Bank was granted the first ever Islamic Commercial Banking license by the State Bank of Pakistan. Mr. Irfan Siddiqui, Founding President & CEO, received the license from Dr. Ishrat Hussain, then Governor of State Bank of Pakistan. Meezan Bank became the pioneer of Islamic Banking in the country, adding a new chapter to the history of the financial industry. To the Best Bank in Pakistan Alhamdulillah, on November 9, 2018, Meezan Bank was recognized as the Best Bank in Pakistan by Pakistan Banking Awards - the most prestigious banking recognition in the country. Our journey from Pakistan’s first Islamic Bank and the smallest bank in the country to Pakistan’s Best Bank spanned just 16 years. The guidance of Allah ( ) and the trust and confidence of our shareholders and customers have propelled us on this journey, for which we are grateful. Our foundations have been built on absolute compliance to Shariah and a focus on customer service through which we endeavour to deliver the best banking experience to our customers. We would like to reflect, through these pages, on our strengths, direction and purpose. Today, Meezan Bank stands on the threshold of exciting changes to the way our customers bank with us and we invite you to join us in appreciating our past and looking forward to an exciting future. ABOUT PAKISTAN BANKING AWARDS Pakistan Banking Awards are recognized as the most credible and prestigious awards in the banking industry of Pakistan. The initiative was launched in 2016 by the Institute of Bankers Pakistan, in partnership with The DAWN Media Group and A. F. Ferguson & Co., under the patronage of the State Bank of Pakistan. A prestigious jury reviews the award submissions and decides on the winner for each award category. The jury for 2018 comprised Dr. Ishrat Hussain, Advisor to the Prime Minister on Institutional Reforms & Austerity, Government of Pakistan, Head of Jury; Mr. Atif Bajwa, Former President & CEO, Bank Alfalah; Mr. Atif R. Bukhari, Former President & CEO, UBL Bank; Dr. Farrukh Iqbal, Dean and Director, IBA; Mr. Naveed A. Khan, Former President & CEO, Faysal Bank; Mr. Ehsan Ali Malik, Director & CEO, Pakistan Business Council; Dr. Zeelaf Munir, Managing Director & CEO, English Biscuit Manufacturers Pvt Ltd. Contents Vision Mission Our Culture Quaid’s Concept of Islamic Banking Key Figures at a Glance Six Years’ Horizontal Analysis Six Years’ Vertical Analysis Financial Analysis Cashflow Statement Summary of Cashflow Calendar of Major Events Monthly Market Statistics of Meezan Bank’s Share Our Institution Corporate Profile Credit Rating Shareholders Awards & Recognition History of Meezan Bank Board of Directors Shariah Supervisory Board Corporate Information Board Committees Organization Structure Management Team Management Committees Corporate Governance SWOT Analysis Strategy and Resource Allocation Risk & Opportunity Report Business Continuity Plan Products & Services 04 04 07 09 22 24 25 26 28 29 30 30 34 34 35 36 38 44 47 49 50 52 53 54 56 59 60 61 63 64 The Year in Review Chairman’s Review 74 Directors’ Report to the Members 76 Directors’ Report to the Members (Urdu) 93 Annexure to the Directors’ Report 94 Statement of Value Added and Distributed 95 Allocation of Income and Expenses to Remunerative Depositors’ Pool 96 Statement of Inventory 97 Statement of Financing Portfolio Income 97 Business and Operations Review 98 Marketing & Corporate Communication 120 Corporate Social Responsibility 122 Sustainability Report 125 Report of the Board Audit Committee Shariah Supervisory Board Report Shariah Supervisory Board Report (Urdu) Statement of Sources and Uses of Charity Fund Review Report to the Members Statement of Compliance with Listed Companies Code of Corporate Governance Regulations, 2017 Statement of Internal Controls Notice of Annual General Meeting Unconsolidated Financial Statements Auditors’ Report to the Members Statement of Financial Position Profit and Loss Account Statement of Comprehensive Income Statement of Changes in Equity Cash Flow Statement Notes to and forming part of the Financial Statements Statement showing written-off loans (Annexure 1) 133 134 141 142 143 144 146 147 152 157 158 159 160 161 162 229 Consolidated Financial Statements Auditors’ Report to the Members Statement of Financial Position Profit and Loss Account Statement of Comprehensive Income Statement of Changes in Equity Cash Flow Statement Notes to and forming part of the Financial Statements Statement showing written-off loans (Annexure 1) 232 237 238 239 240 241 242 314 Additional Information Pattern of Shareholding Categories of Shareholders Guidelines and Policies Correspondent Banking Network Branch Network Glossary Dividend Mandate Form Proxy Form 318 319 320 326 332 346 355 357 Vision Establish Islamic banking as banking of first choice... Mission To be a premier Islamic bank, offering a one-stop shop for innovative value-added products and services to our customer within the bounds of Shariah... Our Culture Core Values: Shariah compliance, Integrity, Professionalism, Innovation, Service Excellence, Social Responsibility. Staff: Committed, motivated and professionally trained employees who are empathic to their customers’ needs. Brand Personality: A sober and established, strong, empathic, professional person; who is an extremely loyal and dependable friend and business partner, and is committed to offering comprehensive value-based Shariah-compliant financial solutions. Relationships: Our relationships are long-term. We recognize and value our customers’ needs above all and strive to ensure their fulfillment. All customers are treated with professionalism and in a friendly manner. It is our endeavour to ensure that they receive efficient and timely service. The Meezan Bank experience is a unique one. Quaid’s Concept of Islamic Banking “I shall watch with keenness the work of your Research Organization in evolving banking practices compatible with Islamic ideas of social and economic life. The economic system of the West has created almost insoluble problems for humanity and to many of us it appears that only a miracle can save it from disaster that is now facing the world. It has failed to do justice between man and a man and to eradicate friction from the international field. On the contrary, it was largely responsible for the two world wars in the last half century. The Western world, inspite of its advantages of mechanisation and industrial efficiency is today in a worse mess than ever before in history. The adoption of Western economic theory and practice will not help us in achieving our goal of creating a happy and contended people. We must work our destiny in our own way and present to the world an economic system based on true Islamic concept of equality of manhood and social justice. We will thereby be fulfilling our mission as Muslims and giving to humanity the message of peace which alone can save it and secure the welfare, happiness and prosperity of mankind.” Quaid-e-Azam Mohammad Ali Jinnah Founder of the Islamic Republic of Pakistan On the occasion of the Opening Ceremony of The State Bank of Pakistan on July 1, 1948. HIGHLIGHTS - YEAR 2018 PAKISTAN BANKING AWARDS - 2018 LARGEST DEDICATED ISLAMIC BANKING NETWORK 66O BRANCHES IN MORE THAN 18O CITIES BEST BANK IN PAKISTAN 2,219,500 Years of Meezan Bank in Pakistan CUSTOMERS * 2002 - 2018 * TOTAL NUMBER OF CUSTOMERS AS OF DECEMBER 31, 2018 EMPLOYEES AND + GLOBALLY RECOGNIZED AS 10,000 BEST ISLAMIC BANK FOR TREASURY MANAGEMENT HIGHEST NUMBER OF MASTERCARD AND VISA 2IBFT RECEIVING LARGEST BANK AMBASSADORS OF ISLAMIC BANKING POS TRANSACTIONS AMONG 1LINK MEMBER BANKS BY ISLAMIC FINANCE NEWS (IFN) MALAYSIA nd IN PAKISTAN 8.96 785 938 PROFIT AFTER TAX DEPOSITS TOTAL ASSETS Rs. Rs. Rs. BILLION BILLION BILLION DEPOSIT GROWTH 7.67 18 TRILLION 1 EARNINGS PER SHARE Rs. % TRADE BUSINESS VOLUME GROWTH IN DIGITAL PRESENCE Rs. LARGEST FOLLOWING ON IN PAKISTAN’S BANKING INDUSTRY ENTITY CREDIT RATINGS AA+/A1+ BY JCR - VIS 1st DEDICATED ISLAMIC BANKING YOUTUBE CHANNEL IN THE COUNTRY 194 % SINCE 2017 GROWTH What makes us the Best Being a Strong Retail Bank Meezan Bank has always maintained a strong focus on developing its Retail Banking network and services. We realize that to achieve our Vision of establishing ‘Islamic banking as banking of first choice...’ – we must provide access to Islamic banking to the people of Pakistan through a large and geographically diverse branch network and a wide range of Shariah-compliant products and services. This belief and strategy has resulted in exemplary growth in our Retail Banking portfolio and the Bank has grown into a prominent and successful High Street Bank over the years. Meezan Bank’s retail offerings range from deposit products that cater to individual customers, ranging from teenagers to senior citizens, as well as large corporates and small businesses. Our Consumer Finance proposition is the strongest and most diverse in the industry; we provide financing for household durables, motorcycles, private and commercial vehicles, housing and even Hajj and Umrah – all focused on providing ‘a one-stop shop for innovative value-added products and services to our customers within the bounds of Shariah’ - a key element of our Mission statement. Our Alternate Distribution Channels include a very user-friendly Internet banking facility, a top-of-the-line Mobile Banking App, a range of debit cards offering discounts and privileges for all categories of customers and a country-wide network of over 600 ATMs - all geared to give our customers a superior banking experience. What makes us the Best Our Unfailing Service We exist for and because of our customers. The quality of our service is the first indication of how much we care for them. With banking becoming increasingly competitive and all banks offering similar products - the differentiating factor among organizations that excel and those that don’t, lies in how much they care for their customers and this mindset reflects in their service. Meezan Bank has put systems and a service culture in place that ensure consistent delivery of a superior banking experience to its customers across all banking channels. A Service Board, chaired by the Bank’s President & CEO, monitors the quality of service being provided to both internal and external customers across the network. Evaluation techniques such as Mystery Shopping and Customer Satisfaction Surveys provide direct feedback to the Service Board. Customer service isn’t just about being courteous to your customers – it is also about providing them a professional experience of the highest standard. At Meezan Bank, we strongly believe that our customers have every right to expect us to be competent, courteous and thorough and that we should give them an even better experience, something that we would expect if we were standing on the other side of the counter. What makes us the Best Being the Fastest Growing Bank In Pakistan With a Vision to ‘Establish Islamic banking as banking of first choice…’, Meezan Bank started operations in 2002 as the first Islamic Commercial Bank in Pakistan and, at that time, was the smallest among the 36 banks operating in the country. Over the last 16 years, our network has grown from 4 branches to 660 branches in over 180 cities across the country - a CAGR of 38% p.a. and our deposits have grown from Rs 5 Billion to Rs 785 Billion - a CAGR of 37% p.a. This is the fastest any bank has ever grown in the country and Meezan Bank has achieved this while maintaining strong profitability. Meezan Bank is now the 7th largest bank in terms of deposits and the 8th largest in terms of branch network. We also have one of the highest ‘Deposits per branch’ in the banking industry. The Bank has grown from strength to strength and has now been recognized as the Best Bank in Pakistan. We respect and value the trust of our customers and stakeholders and are constantly striving to meet and exceed their expectations. What makes us the Best Shariah Compliance Meezan Bank maintains the highest levels of Shariah compliance in all its products, processes, services and management practices. We are the first Islamic Bank in Pakistan to establish a dedicated and independent Shariah Audit Department to ensure Shariah compliance in our operations as prescribed by our Shariah Supervisory Board and State Bank of Pakistan. Meezan Bank has developed its own risk based Shariah audit rating models, in-depth audit programs, manuals and checklists – and these have gained global recognition – to the extent that the prestigious standard setting body for Islamic Financial Institutions, AAOIFI, has selected Meezan Bank to establish a regional working group for revamping and redrafting of its global standard on Internal Shariah Review and Audit. At Meezan Bank, Shariah compliance is not a business need, but part of our belief system. We feel, very strongly, that our customers trust us to ensure that we invest their money in a Shariah-compliant manner and give them halal returns. For us, complete adherence to Shariah principles in all that we do is simply a way of life. What makes us the Best Embracing Technology At Meezan Bank, we continuously strive to capitalize on technology to improve the convenience, security and quality of banking experience of our customers. The Bank is continuously working on improving its technology backbone and platforms - not only to secure and streamline our banking operations but also to provide our customers with banking solutions that give them secure and seamless accessibility to the Bank’s products and services across all touchpoints. Meezan Bank has introduced a variety of banking conveniences that have transformed the user experience. We have one of the widest range of debit cards that generate the highest number of transactions of any bank in Pakistan. By focusing on technology to make banking easier, we are able to ensure that from our extremely user-friendly Internet banking service to the class-leading Mobile Banking App and from instant biometric verification on ATM machines to the fastest debit card activation, our customers get the best technology, from the Best Bank in Pakistan. Key Figures at a Glance 2018 2017 2016 Profit and Loss Account Profit and Loss Account Return on financing, investments and placements Profit on financing, investments and placements 48,625 36,427 31,027 and other15,684 dues expensed Profit on deposits and other dues expensedReturn on deposits 20,457 13,239 Net Spread earned Net Spread earned 28,168 20,743 17,788 Fee, commission, forex and other5,622 income Fee, commission, forex and other income 6,887 4,102 gain / (loss)2,002 on securities 1,622 Dividend income and gain / (loss) on securitiesDividend income and575 Total income 35,630 Total income 28,367 23,512 Operating and other expenses Operating and other expenses 19,670 16,832 14,787 Profit before Provisions Profit before Provisions 15,960 11,535 8,725 Provisions and write offs - net1,283 Provisions and write offs - net 1,168 (218) Profit before Taxation Profit before Taxation 14,792 10,252 8,943 Taxation Taxation 5,830 3,939 3,381 Profit after Taxation Profit after Taxation 8,962 6,313 5,562 Statement of Financial Position Statement of Financial Position Islamic Financing and Related Assets Total Assets Total Deposits Share Capital Sub-ordinated sukuk Total Shareholders Equity Market Capitalization Number of Staff Number of Branches Islamic Financing and Related Assets 512,564 420,029 Total Assets 937,915 788,808 Total Deposits 785,477 667,181 Share Capital 11,692 10,629 Sub-ordinated sukuk 14,000 7,000 Total Shareholders Equity 35,077 40,333 Market Capitalization 108,022 71,321 Number of Staff 10,069 9,551 Number of Branches 660 601 Ratios Book Value (Rs) Market Value per Share (Rs) Price to Book Value Ratio Cash Dividend (%) Stock Dividend (%) Right Shares at par (%) Price Earning Ratio Ratios Break up Value (Rs) 34.50 Market Value per 92.39 Share (Rs) Price to Book Value2.68 Ratio Cash Dividend (%) 35.00 Stock Dividend (%) 10.00 Right Shares at par (%)Price Earning Ratio 12.05 Earning per Share (Rs) Net Spread to Gross Return (%) Profit Before Tax to Gross Income (%) Profit After Tax to Gross Income (%) Operating & Other Expenses to Income before provisions (%) Earning per Share 7.67 (Rs) 5.56 Net Spread to Gross Return (%) 57.93 56.94 Net Profit Before Tax to Gross23.27 Income (%) 26.37 Net Profit After Tax to Gross Income 15.98 14.33 (%) Operating & Other Expenses to Income before provisions (%) 55.21 59.34 311,530 662,055 559,398 10,027 7,000 30,474 67,422 9,168 571 2015 2018 2014 2017 2013 2016 2015 2014 48,625 32,893 20,457 15,181 28,168 17,712 6,887 3,617 971 575 35,630 22,300 19,670 13,313 15,960 8,987 1,168 535 14,792 8,452 5,830 3,429 8,962 5,023 36,427 28,487 15,684 15,539 20,743 12,948 5,622 3,387 2,002 1,432 28,367 17,767 16,832 10,402 11,535 7,365 1,283 467 10,252 6,898 3,939 2,328 6,313 4,570 31,027 23,016 13,239 12,658 17,788 10,358 1,971 4,102 1,539 1,622 23,512 13,868 14,787 8,128 5,7408,725 93 (218) 5,6478,943 1,6903,381 3,9575,562 32,893 15,181 17,712 3,617 971 22,300 13,313 8,987 535 8,452 3,429 5,023 28,487 15,539 12,948 3,387 1,432 17,767 10,402 7,365 467 6,898 2,328 4,570 512,564 175,712 420,029127,623 311,530 207,569 937,915 440,149 788,808332,095 662,055 535,864 785,477 378,744 667,181288,433 559,398 468,281 11,692 10,027 10,629 10,027 10,027 10,027 14,000 7,000 - 7,000 40,333 23,890 35,077 18,913 30,474 26,347 108,022 47,129 71,321 39,488 67,422 45,875 10,069 7,429 9,551 6,2489,168 8,581 551 660 428601 351 571 207,569 535,864 468,281 10,027 26,347 45,875 8,581 551 175,712 440,149 378,744 10,027 23,890 47,129 7,429 428 28.07 67.24 2.40 30.00 12.34 34.54 25.49 92.39 45.75 1.792.67 35.00 30.00 -10.00 12.05 9.13 32.31 17.8628.07 23.21 67.10 39.3867.24 47.00 2.08 2.20 2.40 2.02 30.00 20.0030.00 27.50 - -6.00 12.07 9.9712.34 10.31 25.49 45.75 1.79 30.00 9.13 23.21 47.00 2.02 27.50 10.31 5.45 57.33 24.33 15.13 5.017.67 57.93 53.85 26.37 22.55 15.98 13.40 5.56 3.95 5.45 4.56 56.94 45.0057.33 45.45 23.27 21.2924.33 20.71 14.33 14.9215.13 13.72 5.01 53.85 22.55 13.40 4.56 45.45 20.71 13.72 62.89 55.21 59.70 59.34 58.6162.89 58.55 59.70 58.55 / Advances Ratio-ADR 55.7 (%) Financing / Advances to Deposit Ratio-ADRFinancing (%) 65.3to Deposit 63.0 Investment to Deposit IDR (%) Investment to Deposit Ratio - IDR (%) 15.75Ratio - 17.87 23.27 Capital Adequacy14.55 Ratio (%) 12.89 Capital Adequacy Ratio (%) 12.91 Return on Average1.04 Assets (%) 0.87 Return on Average Assets (%) 0.93 Return on Average Equity (%)19.26 Return on Average Equity (%) 23.77 19.58 44.365.3 15.75 31.24 14.55 10.98 1.031.04 23.77 20.00 63.0 44.2 55.7 46.4 17.87 52.5623.27 30.12 12.89 12.4812.91 11.88 0.87 1.30 0.93 1.18 19.26 22.3119.58 21.35 44.3 31.24 10.98 1.03 20.00 46.4 30.12 11.88 1.18 21.35 32.31 67.10 2.08 30.00 6.00 12.07 (Comparitive information has been reclassified / rearranged for better presentation) 22 ANNUAL REPORT 2018 2011 17,809 8,666 9,143 1,347 1,158 11,648 5,903 5,745 1,389 4,356 965 3,391 2010 12,094 6,606 5,488 2,056 419 7,963 4,340 3,623 1,497 2,126 477 1,649 2009 2012 9,911 21,592 4,970 11,385 4,941 10,207 1,332 1,413 266 986 6,539 12,606 3,267 6,925 3,272 5,681 1,532 451 1,740 5,230 715 1,722 1,025 3,508 20082011 6,605 17,809 3,088 8,666 3,517 9,143 8021,347 (95) 1,158 4,224 11,648 2,515 5,903 1,709 5,745 717 1,389 992 4,356 371 965 621 3,391 2010 12,094 6,606 5,488 2,056 419 7,963 4,340 3,623 1,497 2,126 477 1,649 Rupees in Million 2009 9,911 4,970 4,941 1,332 266 6,539 3,267 3,272 1,532 1,740 715 1,025 2008 6,605 3,088 3,517 802 (95) 4,224 2,515 1,709 717 992 371 621 Profit After Taxation Rupees in Million 8,962 9,100 8,400 7,700 7,000 6,313 6,300 5,600 4,570 4,900 5,023 5,562 3,957 4,200 3,500 ...
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