Meezan Bank: Annual Report 2017 (2024)

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Meezan Bank: Annual Report 2017 (1)

By IM Research

6 years ago

Meezan Bank: Annual Report 2017

Amanah, Aqd, Arif, Fatwa, Fiqh, Halal, Infaq, Islam, Islamic banking, Kafalah, Mudarib, Mufti, Murabaha, Musharakah, Riba, Salam, Shariah, Shariah advisor, Shariah compliant, Shirkah, Sukuk, Takaful, Wakalah, Waqf, Zakat, Usufruct, Al-‘aqd, Credit Risk, Mannan, Mudarabah Certificate, Net Assets, Participation, Provision, Receivables, Reserves, Restricted Investment Account, Sales, Specific Provision, Tijarah

Organisation Tags (4)

Gulf International

Capital Investment

Abu Dhabi Investment Company

KPMG

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  1. Balance Balance && Harmony Harmony While our planet Earth continues to move at the same speed, day after day, year after year; our lives move ever faster. The changing pace of technology, of life, of progress and of our professions affords us increasingly little time to reflect on the important aspects of life- one of which is balance. If you choose to look, there is balance in everything – in nature and nurture, in process and progress. The word ‘Meezan’ means Balance and the central element of our logo is also a balanced scale. In fact, balance and moderation in all aspects of life is one of the key teachings of Islam as well. This year, our annual report focuses on the many forms of balance that we see in our world.
  2. Balance & Harmony While our planet Earth continues to move at the same speed, day after day, year after year; our lives move ever faster. The changing pace of technology, of life, of progress and of our professions affords us increasingly little time to reflect on the important aspects of life- one of which is balance. If you choose to look, there is balance in everything – in nature and nurture, in process and progress. The word ‘Meezan’ means Balance and the central element of our logo is also a balanced scale. In fact, balance and moderation in all aspects of life is one of the key teachings of Islam as well. This year, our annual report focuses on the many forms of balance that we see in our world.
  3. Contents Vision Mission Our Values Quaid ’s Concept of Islamic Banking Key Figures at a Glance Six Years’ Horizontal Analysis Six Years’ Vertical Analysis Financial Analysis 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 Risk & Opportunity Report Business Continuity Plan Products & Services 05 05 06 09 20 22 23 24 26 26 30 30 31 32 34 40 43 45 46 48 49 50 52 54 55 56 57 The Year in Review Chairman’s Review 66 Directors’ Report to the Members 68 Directors’ Report to the Members (Urdu) 81 Annexure to the Directors’ Report 82 Statement of Value Added and Distributed 83 Allocation of Income and Expenses to Remunerative Depositors’ Pool 84 Statement of Inventory 85 Statement of Financing Portfolio Income 85 Business and Operations Review 86 Marketing & Corporate Communication 106 Corporate Social Responsibility 107 Sustainability Report 109 Report of the Board Audit Committee 117 Shariah Supervisory Board Report 118 Shariah Supervisory Board Report (Urdu) Statement of Sources and Uses of Charity Fund Review Report to the Members Statement of Compliance with the Code of Corporate Governance 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) 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) Additional Information Pattern of Shareholding Categories of Shareholders Standard of Ethics, Business Practices & Code of Conduct Guidelines on Whistle-blowing Summary of Information Security Policy Guidelines for Safety of Records of the Company Correspondent Banking Network Branch Network Glossary Dividend Mandate Form Proxy Form 123 124 125 126 128 129 134 135 136 137 138 139 140 214 218 219 220 221 222 223 224 302 306 307 308 310 311 311 312 317 330 339 341
  4. 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...
  5. Core Values 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.
  6. 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 man 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, in spite 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.
  7. Balancing Traditional Banking and Technology More often than not , banking is about providing solutions to customers that suit their diverse needs. In today’s technology-driven world, there are many customers who prefer modern ways to bank, opting for internet banking and smartphone applications over conventional channels. In their fast-paced lives, writing cheques to transfer funds or visiting branches to pay bills is not efficient. For them, Meezan Bank provides an extremely comprehensive Internet Banking service, a phone banking service as well as a very popular and easy-to-use smartphone application. However, there are also a large number of customers who feel more comfortable banking in a more traditional manner, with a relationship manager and a cheque book. For these customers and for those who are not quite comfortable with internet or smartphone banking, we continue to invest in our vast branch network, now comprising of over 600 branches nationwide. This balance of traditional banking and technology allows us to ensure that our growing customer base is served and their varying needs are catered to – helping us carve our place as Pakistan’s Premier Islamic Bank.
  8. Profit & Responsibility - A Delicate Balance As an Islamic Bank, Meezan Bank carries a significant responsibility: to fulfil all the expectations that our customers have, especially with regard to their faith and our compliance with Shariah. At the same time, customers also have a reasonable expectation from the Bank to operate profitably, giving them good returns on their investments. To maintain this balance of profit and responsibility, we not only have incredibly talented teams of banking professionals but also a peerless Shariah Board that oversees all the operations of the Bank from a Shariah perspective. With this winning combination, we are able to achieve success on both sides of the balance – turn over an excellent profit, year after year, without compromising on our responsibilities as a Bank that is 100% Shariah-compliant. Determining and maintaining this balance between profit and responsibility – and managing to excel in both areas – is a major factor in our success as Pakistan’s Premier Islamic Bank.
  9. Striking the Ideal Work Life Balance In today ’s everyday race to win against all competition and in continuously pushing ourselves to our limits, it is all too easy to forget that one of the most important balances in life is that between one’s personal and professional life. As the stereotype goes, this applies more to the banking industry than most others. At Meezan Bank, we strive to ensure that our teams are able to achieve this important work-life balance – be it through facilities and perks such as a swimming pool and a fully featured gymnasium at our Head Office as well as farmhouses and beach huts at convenient locations, or by ensuring that people adhere to their working hours and regularly take dedicated time off for their families and loved ones. We understand and appreciate that in order to be properly motivated and efficient, Meezan Bankers need to have time for themselves. To this end, the Bank provides the teams with other facilities such as access to discounts and privileges with various brand partners, ensuring that they have ample opportunities to make the most of life. This strategy, in place since the inception of the Bank, has resulted in a healthy team that is dedicated to their work and their customers and has been a key element in ensuring our success as Pakistan’s Premier Islamic Bank.
  10. The Perfect Balance of Relationships A bank caters to all types of customers – from individuals to entrepreneurs, from small businesses to large corporations. It is, however, the bank’s responsibility to ensure that all relationships are given equal importance. In the real world, with variances in business and transactions, it is quite possible that one relationship may be more profitable for the bank than another. This imbalance in the profitability of relationships, however, must not reflect in the bank’s handling of these relationships – and this is the service value that we instill in our people at Meezan Bank. From the junior-most branch staff right up to the Bank’s senior management, we understand that each and every customer is equally important to the Bank – more so because the Bank is equally important to every customer. Striking this perfect balance between different relationships is what makes Meezan Bank special for our customers – and contributes to our success as Pakistan’s Premier Islamic Bank.
  11. HIGHLIGHTS - YEAR 2017 IBP Knowledge Partner A .F.FERGUSON&CO. ‘BEST ISLAMIC RETAIL BANK’ IN THE WORLD PROFIT AFTER TAX Rs 6.3 BILLION TOTAL ASSETS Rs 782 BILLION DEPOSIT GROWTH 19% STRONG SOCIAL MEDIA PRESENCE RETAINED TOP POSITION AS ‘BEST ISLAMIC BANK’ AT THE 2nd PAKISTAN BANKING AWARDS DEPOSITS Rs A member from of the PwC network 673 BILLION 1.9 MILLION CUSTOMERS LARGEST DEDICATED ISLAMIC BANKING NETWORK OF OVER 600 BRANCHES IN MORE THAN 150 CITIES OF THE COUNTRY EARNINGS PER SHARE Rs 6.13 OVER 1.5 MILLION FACEBOOK FANS (81% GROWTH VS. 2016) 2nd LARGEST FOLLOWING IN PAKISTAN’S BANKING INDUSTRY EMPLOYEES AND AMBASSADORS OF ISLAMIC BANKING 10,000+ JOINT FINANCIAL ADVISORS TO THE MINISTRY OF FINANCE FOR ISSUANCE OF GOVERNMENT OF PAKISTAN IJARAH SUKUK MOST CSAA QUALIFIED PROFESSIONALS AT ANY BANK IN PAKISTAN LEADING THE BANKING INDUSTRY OF PAKISTAN WITH LARGEST FOLLOWING ON LINKEDIN & INSTAGRAM!
  12. Key Figures at a Glance 2017 2016 2015 Profit and Loss Account Profit and Loss Account Return on financing , investments and placements Return on financing, investments and placements 36,087 30,761 32,628 Return on deposits and other12,873 dues expensed Return on deposits and other dues expensed 15,273 14,897 Net Spread earned before provisions Net Spread earned before provisions 20,814 17,888 17,731 (Provision) / reversal against non performing Islamic (Provision) / reversal against non performing Islamic financing and related financing and related assets (733) assets120 (442) (Provision) / reversal for diminution in the value of (Provision) / reversal for diminution in the value of investments and(587) impairment 65 investments and impairment (121) Net Spread after 19,494 provisions 18,073 Net Spread after provisions 17,168 forex and other Fee, commission, forex and other income Fee, commission, 5,576 4,035income 3,626 Dividend income and capital gain / Dividend income and capital gain / (loss) on investments (loss) on investments 2,001 1,622 971 Income before expenses Income before expenses 27,071 23,730 21,765 operating14,787 expenses 13,313 Administrative and operating expenses Administrative and 16,819 Profit before Taxation Profit before Taxation 10,252 8,943 8,452 Taxation Taxation 3,939 3,381 3,429 Profit after Taxation Profit after Taxation 6,313 5,562 5,023 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 Statement of Financial Position Islamic Financing and Related Assets 420,029 311,530 Total Assets 781,699 657,767 Total Deposits 673,188 564,024 Share Capital 10,629 10,027 Sub-ordinated sukuk 7,000 7,000 Total Shareholders Equity 28,149 34,338 Market Capitalization 71,321 67,422 Number of Staff 9,551 9,168 Number of Branches601 571 2017 2014 2012 2015 2014 2013 36,087 22,893 30,761 21,592 32,628 28,452 15,273 12,526 12,873 11,385 14,897 15,440 20,814 10,367 17,888 10,207 17,731 13,012 28,452 15,440 13,012 22,893 12,526 10,367 (733) (551) 2016 2013 120 (126) (395)(442) (551) (126) 84(587) 33 65 19,494 10,274 18,073 12,545 5,576 1,962 4,035 3,323 (56)(121) 17,168 9,756 1,4133,626 84 12,545 3,323 33 10,274 1,962 2,001 1,539 1,622 1,432 986 971 27,071 13,775 23,730 12,155 21,765 17,300 16,819 8,128 14,787 6,925 13,313 10,402 10,252 5,647 8,943 5,2308,452 6,898 3,939 1,690 3,381 1,7223,429 2,328 6,313 3,957 5,562 3,5085,023 4,570 1,432 17,300 10,402 6,898 2,328 4,570 1,539 13,775 8,128 5,647 1,690 3,957 175,712 437,510 380,422 10,027 23,275 47,129 7,429 428 127,623 329,725 289,811 10,027 17,908 39,488 6,248 351 207,569 531,850 471,821 10,027 25,557 45,875 8,581 551 420,029 175,712 781,699 437,510 673,188 380,422 10,629 10,027 -7,000 34,338 23,275 71,321 47,129 9,551 7,429 428 601 25.49 45.75 1.79 30.00 9.13 32.31 23.21 67.10 47.00 2.022.08 30.00 27.50 - - 6.00 10.95 10.31 28.07 17.86 67.24 39.38 2.40 2.20 30.00 20.00 - - 12.34 9.97 17.1425.49 30.0545.75 1.75 1.79 15.0030.00 11.00 8.59 9.13 23.21 47.00 2.02 27.50 10.31 17.86 39.38 2.20 20.00 9.97 Earning per Share (Rs) Earning per Share (Rs) 6.13 5.45 5.01 Net Spread to Gross Return (%) Net Spread to Gross Return (%) 57.68 58.15 54.34 to Gross24.56 Income (%) 22.71 Net Profit Before Tax to Gross Income (%) Net Profit Before Tax 23.48 to Gross Income Net Profit After Tax to Gross Income (%) Net Profit After Tax14.46 15.27 (%) 13.49 Admin Expenses to59.24 Income before provisions (%) Admin Expenses to Income before provisions (%) 62.80 59.62 4.566.13 57.68 45.73 23.48 20.77 14.46 13.76 59.24 58.55 5.45 3.95 58.15 45.28 24.56 21.39 15.27 14.99 62.80 58.61 3.50 5.01 47.2754.34 21.8022.71 14.6213.49 54.9359.62 4.56 45.73 20.77 13.76 58.55 3.95 45.28 21.39 14.99 58.61 Financing / Advances Ratio - ADR44.0 (%) Financing / Advances to Deposit Ratio - ADR (%) 62.4to Deposit 55.2 Investment to Deposit (%) Investment to Deposit Ratio - IDR (%) 17.71Ratio - IDR 23.08 31.01 Capital Adequacy12.89 Ratio (%) 12.91 Capital Adequacy Ratio (%) 10.98 Return on Average 0.88 Assets (%) 0.94 Return on Average Assets (%) 1.04 Return on Average20.20 Equity (%)20.71 Return on Average Equity (%) 20.57 46.262.4 17.71 29.99 12.89 11.88 1.190.88 20.20 22.19 55.2 44.0 23.08 52.31 12.91 12.48 0.94 1.31 20.71 23.69 38.5 44.0 66.2131.01 14.0810.98 1.48 1.04 24.3520.57 46.2 29.99 11.88 1.19 22.19 44.0 52.31 12.48 1.31 23.69 Ratios Ratios Break up Value (Rs) Break up Value (Rs) 32.31 Market Value per Share Market Value per Share (Rs) 67.10 (Rs) Price to Book Value2.08 Ratio Price to Book Value Ratio Cash Dividend (%)30.00 Cash Dividend (%) Stock Dividend (%) Stock Dividend (%) Right Shares (%) at Premium of Rs 40 / parRight Shares (%) 6.00 Price Earning Ratio Price Earning Ratio 10.95 28.07 67.24 2.40 30.00 12.34 311,530 88,678 207,569 127,623 657,767 274,437 531,850 329,725 564,024 230,426 471,821 289,811 10,027 9,034 10,027 10,027 7,000 28,149 15,494 25,557 17,908 67,422 27,147 45,875 39,488 9,168 5,9538,581 6,248 351571 310 551 (Comparitive information has been reclassified / rearranged for better presentation) 20 MEEZAN BANK LIMITED
  13. Rupees in Million 2010 12 ,094 6,606 5,488 2009 9,911 4,970 4,941 2011 2008 17,809 6,605 8,666 3,088 9,143 3,517 20072010 12,094 4,416 6,606 2,452 5,488 1,964 2009 9,911 4,970 4,941 2008 6,605 3,088 3,517 2007 4,416 2,452 1,964 Profit After Taxation Rupees in Million 6,313 6,500 6,000 5,562 5,500 5,023 5,000 4,570 4,500 3,957 4,000 3,508 3,500 3,000 (1,450) (1,443) (1,424) (428) (1,450) (435) (1,443) (428) (435) 2,500 2,000 1,500 (47) 3,991 2,056 (89) 3,409 1,332 35 (289) 7,754 2,800 1,347 802 (1)(47) 3,991 1,528 2,056 742 (89) 3,409 1,332 (289) 2,800 802 (1) 1,528 742 419 6,466 4,340 2,126 477 1,649 266 5,007 3,267 1,740 715 1,025 1,158 (95) 10,259 3,507 5,903 2,515 4,356 992 965 371 3,391 621 606 419 6,466 2,876 4,340 1,607 2,126 1,269 306 477 1,649 963 266 5,007 3,267 1,740 715 1,025 (95) 3,507 2,515 992 371 621 606 2,876 1,607 1,269 306 963 1,000 500 0 2012 2013 2014 2015 2016 2017 Total Deposits Rupees in Million 673,188 700,000 564,024 600,000 550,000 500,000 471,821 450,000 400,000 380,422 350,000 60,265 154,752 131,070 6,983 10,740 11,801 4,364 222 46,985 124,169 100,333 6,650 9,091 10,467 3,669 201 70,377 41,521 200,550 85,276 170,030 70,234 8,030 4,926 - 13,324 6,341 13,956 10,581 4,900 3,170 275 166 60,265 36,053 154,752 67,179 131,070 54,582 6,983 3,780 - 10,740 5,720 11,801 14,572 4,364 2,205 100 222 46,985 124,169 100,333 6,650 9,091 10,467 3,669 201 41,521 85,276 70,234 4,926 6,341 10,581 3,170 166 36,053 67,179 54,582 3,780 5,720 14,572 2,205 100 289,811 300,000 250,000 230,426 200,000 150,000 100,000 50,000 0 2012 2013 2014 2015 2016 2017 Total Assets Rupees in Million 781,699 800,000 750,000 700,000 657,767 650,000 15.38 16.90 1.10 15.00 8.24 13.67 15.74 1.15 5.00 9.72 16.60 12.87 17.38 21.48 1.05 1.67 10.00 12.50 8.60 35.004.63 17.61 15.38 15.13 16.90 38.55 2.551.10 - 15.00 20.00 - 19.678.24 13.67 15.74 1.15 5.00 9.72 12.87 21.48 1.67 8.60 35.00 17.61 15.13 38.55 2.55 20.00 19.67 2.05 45.38 14.59 11.32 54.50 1.62 49.85 15.12 8.91 49.96 3.75 1.22 51.34 53.25 21.44 13.57 16.69 8.49 50.68 59.54 1.962.05 45.38 44.47 14.59 22.02 11.32 16.71 54.50 48.52 1.62 49.85 15.12 8.91 49.96 1.22 53.25 13.57 8.49 59.54 1.96 44.47 22.02 16.71 48.52 46.0 41.94 12.41 1.18 16.63 46.8 23.21 12.77 0.98 13.28 41.4 59.1 57.92 20.68 14.89 9.58 1.91 0.82 28.18 10.30 66.146.0 41.94 19.30 12.41 10.71 1.701.18 16.63 18.37 46.8 23.21 12.77 0.98 13.28 59.1 20.68 9.58 0.82 10.30 66.1 19.30 10.71 1.70 18.37 600,000 531,850 550,000 500,000 437,510 450,000 400,000 329,725 350,000 300,000 250,000 274,437 200,000 150,000 100,000 50,000 0 2012 2013 2014 2015 2016 2017 Share Capital Rupees in Million 12,000 10,000 10,027 10,027 10,027 10,027 2013 2014 2015 2016 10,629 9,034 8,000 6,000 4,000 2,000 0 2012 2017 ANNUAL REPORT 2017 21
  14. Six Years ’ Horizontal Analysis Statement of Financial Position / Profit & Loss Account Rupees in Million Statement of Financial Position 2017 17 Vs 16 % Assets Cash and balances with treasury banks 64,556 Balances with other banks 4,896 Due from financial institutions 147,229 Investments 119,238 Islamic financing and related assets 420,029 Operating fixed assets 11,876 Deferred tax asset Other assets 13,875 781,699 2016 16 Vs 15 % 2015 15 Vs 14 % 2014 14 Vs 13 % 2013 13 Vs 12 % 2012 12 Vs 11 % 15 (59) 14 (8) 35 33 39 19 56,037 12,021 129,115 130,156 311,530 8,925 9,983 657,767 28 8 28 (11) 50 11 (29) 24 43,686 11,175 101,079 146,305 207,569 8,057 13,979 531,850 47 103 11 28 18 28 (100) (4) 22 29,729 4 5,501 55 90,766 1,120 114,089 (25) 175,712 38 6,273 12 815 522 14,625 182 437,510 33 28,583 49 3,554 (8) 7,443 1,389 151,614 (1) 127,623 44 5,595 14 131 (76) 5,182 18 329,725 20 19,125 3,851 500 152,460 88,678 4,898 546 4,379 274,437 15 64 (88) 55 26 23 (32) 14 37 11,168 36,813 673,188 7,000 8 18,445 746,622 22 15 19 (99) 34 19 9,131 39 32,006 135 564,024 20 7,000 100 1,362 247 13,770 5 627,293 24 6,560 13,610 471,821 393 13,119 505,503 17 (12) 24 100 8 22 5,620 15,465 380,422 12,113 413,620 55 36 31 102 33 3,615 11,375 289,811 6,011 310,812 3,059 34 18,461 100 230,426 36 5,928 14 257,874 38 35,077 15 30,474 16 26,347 10 23,890 26 18,913 14 16,563 20 10,629 13,369 10,340 6 38 23 10,027 9,700 8,422 13 21 10,027 8,588 6,942 18 17 10,027 7,289 5,958 105 38 10,027 3,551 4,330 11 29 17 9,034 2,760 3,700 12 34 14 739 (68) 2,325 194 790 28 616 (39) 1,005 (6) 1,069 133 35,077 15 26,347 10 23,890 26 18,913 14 16,563 20 Liabilities Bills payable Due to financial institutions Deposits and other accounts Sub-ordinated Sukuk Deferred tax liabilities Other liabilities Net Assets Represented by: Share capital Reserves Unappropriated profit Surplus on revaluation of investments 30,474 16 18 (38) 26 1 21 Profit & Loss Account 22 2017 17 Vs 16 % 2016 16 Vs 15 % 2015 15 Vs 14 % 2014 14 Vs 13 % 2013 13 Vs 12 % 2012 12 Vs 11 % Return on financing, investments and placements Return on deposits and other dues expensed 36,087 17 30,761 (6) 32,628 15 28,452 24 22,893 6 21,592 21 (15,273) 19 (12,873) (14) (14,897) (4) (15,440) 23 (12,526) 10 (11,385) 31 Net spread earned 20,814 16 17,888 1 17,731 36 13,012 26 10,367 2 10,207 12 (Provision) / reversal (1,320) (814) 185 (133) (563) 21 (467) 402 (93) (79) (451) (68) Net spread after provision/ reversal 19,494 8 18,073 5 17,168 37 12,545 22 10,274 5 9,756 22 Fee, commission, forex and other income Dividend income and capital gain 5,576 2,001 38 23 4,035 1,622 11 67 3,626 971 9 (32) 3,323 1,432 69 (7) 1,962 1,539 39 56 1,413 986 5 (15) Income before operating expenses 27,071 14 23,730 9 21,765 26 17,300 26 13,775 13 12,155 16 Administrative and operating expenses (16,819) 14 (14,787) 11 (13,313) 28 (10,402) 28 (8,128) 17 (6,925) 13 Profit before taxation 10,252 15 8,943 6 8,452 23 6,898 22 5,647 8 5,230 20 Taxation (3,939) 17 (3,381) (1) (3,429) 47 (2,328) 38 (1,690) (2) (1,722) 78 Profit after taxation 6,313 14 5,562 11 5,023 10 4,570 15 3,957 13 3,508 3 MEEZAN BANK LIMITED
  15. Six Years ’ Vertical Analysis Statement of Financial Position / Profit & Loss Account Statement of Financial Position Rupees in Million 2014 % 2013 % 2012 % 8 2 19 27 39 2 3 100 29,729 5,501 90,766 114,089 175,712 6,273 815 14,625 437,510 7 1 21 26 40 1 4 100 28,583 3,554 7,443 151,614 127,623 5,595 131 5,182 329,725 9 1 2 46 39 2 1 100 19,125 3,851 500 152,460 88,678 4,898 546 4,379 274,437 7 1 56 32 2 2 100 6,560 13,610 471,821 393 13,119 505,503 1 3 89 2 95 5,620 15,465 380,422 12,113 413,620 1 4 87 3 95 3,615 11,375 289,811 6,011 310,812 1 3 88 2 94 3,059 18,461 230,426 5,928 257,874 1 7 84 2 94 5 26,347 5 23,890 5 18,913 6 16,563 6 10,027 9,700 8,422 2 2 1 10,027 8,588 6,942 2 2 1 10,027 7,289 5,958 2 2 1 10,027 3,551 4,330 3 1 2 9,034 2,760 3,700 3 1 2 4 2,325 30,474 5 790 26,347 5 616 23,890 5 1,005 18,913 6 1,069 16,563 6 2017 % 2016 % 2015 % 2014 % 2013 % 2012 % 36,087 83 30,761 84 32,628 88 28,452 86 22,893 87 21,592 90 (15,273) (35) (12,873) (35) (14,897) (40) (15,440) (46) (12,526) (47) (11,385) (47) Net spread earned 20,814 48 17,888 49 17,731 48 13,012 40 10,367 40 10,207 43 (Provision) / reversal (1,320) (3) 185 - (563) (2) (467) (1) (93) - (451) (2) Net spread after provision / reversal 19,494 45 18,073 49 17,168 46 12,545 39 10,274 40 9,756 41 5,576 2,001 13 4 4,035 1,622 12 4 3,626 971 10 3 3,323 1,432 10 4 1,962 1,539 7 6 1,413 986 6 4 Income before operating expenses 27,071 62 23,730 65 21,765 59 17,300 53 13,775 53 12,155 51 Administrative and operating expenses (16,819) (39) (14,787) (41) (13,313) (36) (10,402) (32) (8,128) (32) (6,925) (29) Profit before taxation 10,252 23 8,943 24 8,452 23 6,898 21 5,647 21 5,230 22 Taxation (3,939) (9) (3,381) (9) (3,429) (9) (2,328) (7) (1,690) (6) (1,722) (7) 6,313 14 5,562 15 5,023 14 4,570 14 3,957 15 3,508 15 Assets Cash and balances with treasury banks Balances with other banks Due from financial institutions Investments Islamic financing and related assets Operating fixed assets Deferred tax asset Other assets Liabilities Bills payable Due to financial institutions Deposits and other accounts Sub-ordinated Sukuk Deferred tax liabilities Other liabilities Net Assets Represented by: Share capital Reserves Unappropriated profit Surplus on revaluation of investment 2017 % 2016 % 2015 64,556 4,896 147,229 119,238 420,029 11,876 13,875 781,699 8 1 19 15 54 1 2 100 56,037 12,021 129,115 130,156 311,530 8,925 9,983 657,767 9 2 20 20 47 1 1 100 43,686 11,175 101,079 146,305 207,569 8,057 13,979 531,850 11,168 36,813 673,188 7,000 8 18,445 746,622 1 5 86 1 3 96 9,131 32,006 564,024 7,000 1,362 13,770 627,293 5 86 1 3 95 35,077 4 30,474 10,629 13,369 10,340 1 2 1 739 35,077 % Profit & Loss Account Return on financing, investments and placements Return on deposits and other dues expensed Fee, comminssion, forex and other income Dividend income and capital gain Profit after taxation ANNUAL REPORT 2017 23
  16. Financial Analysis Statement of Financial Position The Bank ’s non-performing (NPL) coverage ratio stood at 133% in 2017 - one of the highest in the Banking industry in Pakistan. Advance to deposits ratio (ADR) of the Bank now stands at 62%. During the year under review, the total assets of the Bank grew by 19% to reach Rs 781 billion ($7.1 billion) as at December 31, 2017 as compared to Rs 658 billion as at December 31, 2016. The availability of Government of Pakistan (GoP) Ijarah Sukuk to deploy surplus liquidity continues to be a challenge for Islamic Banks. Only one auction of GoP Ijarah Sukuk was held during the year but unfortunately the issue size was small as compared to the demand for such instrument which led to a price war and the cut-off price was significantly lower than the equivalent instruments available to conventional banks. The Investments and Placements under Bai Muajjal increased slightly to Rs 266 billion from Rs 259 billion last year. In 2017, the Bank successfully completed a 6% Right Issue of shares to the existing shareholders at a price of Rs 50 per share (inclusive of Rs 40 as premium per share) approved by the Board which increased the Bank’s equity by Rs 3 billion. The Bank’s Capital Adequacy Ratio (CAR) now stands at 12.89% - well above the minimum mandatory level of 11.28% for the year 2017 and this Right Issue will support the future growth plans of the Bank. The return on average equity on enhanced capital stood at 20.20%. On the liability side, the Bank maintained its current and savings accounts (CASA) ratio at 75% despite intense competition for mobilization of low cost deposits in the industry and achieved a growth of 19% to close total deposits at Rs 673 billion. The Bank’s market share amongst the full-fledged dedicated Islamic Banks operating in Pakistan is approximately 58% and 35% for the Islamic Banking industry as a whole including Islamic Banking windows of conventional banks in Pakistan. The financing portfolio of the Bank has increased by Rs 109 billion to register growth of 35% during the year and closed at Rs 420 billion. Financing in Corporate segment, SME/Commercial segment and Consumer segment (primarily Car Ijarah and Easy Home) grew by 29%, 53% and 48% respectively. In the Corporate segment, major disbursem*nts were made to entities backed by Sovereign Guarantee which carry lower risk weight for CAR purposes. To further enhance its exposure in SME and Commercial segment, the Bank has engaged International Finance Corporation (IFC) to provide advisory and technical services to revamp existing SME financing segment into a more robust SME Banking Model. Statement of Financial Position 35,077 Rupees in Million Equity & Surplus Assets Liabilities 201 6 201 7 The Bank has one of the lowest infection ratio of 1.54% in the Banking industry which bears testimony to the fact that the Bank maintains a high quality financing portfolio. The Banking industry average portfolio infection ratio is 9%. However, recognizing some stresses in select sector exposures and prudent banking practices historically adopted by the Bank, an additional general provision of Rs 850 million against potential non-performing financing was approved by the Board during the year. This increase in General Provision also takes into account the aggressive growth in financing portfolio over the last few years. 30,474 627,293 657,767 746,622 781,699 Islamic Financing and Related Assets (Gross) 2017 3% 2% 1% 2016 1% 25% 1% 1% 4% 14% 12% 1% 7% 7% 17% 4% 3% 8% 5% 14% 17% 20% 8% Agriculture, food, forestry and fishing Automobile and transportation equipment Cement Chemical and pharmaceuticals Others Individuals Power (electricity), oil, gas and water Services Sugar Textile Wholesale and retail trade Transport, storage and communication 23% 2% Deposits 2017 17% 1% 2016 1% 14% 1% 1% 1% 2% 2% 1% 3% 2% Agriculture, food, forestry and fishing Chemical and pharmaceuticals Construction Individuals Services Textile Transport, storage and communication Wholesale and retail trade Others 3% 2% 3% 3% 69% 24 MEEZAN BANK LIMITED 74%
  17. Profit and Loss Account CASA to Total Deposit Administrative and operating expenses increased to Rs 16 .8 billion from Rs 14.8 billion – an increase of 14% primarily due to increase in staff expenses, rent and costs associated with new branches – an investment which has reaped fruits for the Bank, as is evident from the strong growth in deposits and profits over the years. The Bank maintained the distinction of being the fastest growing bank in the industry with the branch network of over 600 branches in 159 cities. 70 71 72 2014 2015 68 66 75 75 2016 2017 60 50 40 30 20 10 0 2012 2013 NPL and Coverage Ratios 10 9 8 140 133% 130 121% 114% 110% 7 118% 116% 120 110 6 5 100 90 5.30% 4 3.60% 3 3.80% 80 3.30% 70 2.14% 2 1 60 1.54% 2012 2013 2014 2015 2016 Profit and Loss 2017 Profit before tax 10,252 2016 Profit after tax 6,313 Profit before tax 8,943 Net spread 20,814 Operating Expense 16,819 Provisions 1,320 Coverage Ratio Growth in fee and commission income of 59% over last year stems from growth in trade finance business and other banking channels. The trade finance business handled by the Bank, crossed Rs 700 billion milestone and recorded growth of 29% over preceding year. This growth in trade business is supported by the Bank’s growing network of correspondent banking relationships around the world and better customer experience. Year-wise trend in % 80 NPL Ratio The Bank posted profit after tax of Rs 6.31 billion as compared to Rs 5.56 billion, an increase of 14% over the previous year. Earnings per share increased to Rs 6.13 per share from Rs 5.45 per share on enhanced capital after right issue. Notwithstanding the lower Discount Rate scenario and despite intense competition in the banking industry, the Bank’s net spread before provisions increased by 16% from Rs 17.9 billion to Rs 20.8 billion primarily due to rise in financing portfolio and continued focus on maintaining optimal cost of funds through strong relationship management and better customer experience. Profit after tax 5,562 2017 Rupees in Million Net spread 17,888 Operating Expense 14,788 Reversals 185 Non funded income 7,577 50 Non funded income 5,657 DuPont Analysis Description 2017 2016 2015 2014 2013 2012 Profit Margin - % 14.5% 15.3% 13.5% 13.8% 15.0% 14.6% Asset Turnover 0.06 0.06 0.08 0.09 0.09 0.10 Equity Multiplier - Times 23.04 22.15 19.85 18.63 18.09 16.48 20.20% 20.71% 20.57% 22.19% 23.69% 24.35% Return on Equity (ROE) - % ANNUAL REPORT 2017 25
  18. Calendar of Major Events Incorporation of the Bank January 27 , 1997 Commencement of Business of the Bank September 29, 1997 Issuance of Scheduled Islamic Commercial Bank license January 31, 2002 Commencement of Operations as Scheduled Islamic Commercial Bank March 20, 2002 Financial Calendar 2017 1st Quarter Results issued on April 20, 2017 3rd Quarter Results issued on October 25, 2017 2nd Quarter Results issued on July 26, 2017 Annual Results issued on February 14, 2018 22nd Annual General Meeting Scheduled on March 28, 2018 2016 1st Quarter Results issued on 2nd April 26, 2016 Quarter Results issued on August 24, 2016 3rd Quarter Results issued on October 28, 2016 Annual Results issued on February 16, 2017 21st Annual General Meeting March 28, 2017 Details of the Board meetings held outside Pakistan A total of four meetings were held during the year 2017, and all were held in Pakistan. Issues raised in last AGM The Annual General Meeting was held on March 28, 2017 at Meezan House, the Bank’s Head Office in Karachi. None of the participants raised any issues, and as such, there was no need for any further action in this matter. Monthly Market Statistics of Meezan Bank’s Share during 2017 Market Capitalisation Share Price Sensitivity 90 KSE 100 Index 52000 82.00 50000 80.00 48000 78.00 46000 76.00 44000 74.00 42000 72.00 40000 70.00 38000 68.00 36000 50 66.00 34000 64.00 32000 40 62.00 Share Price (Rupees) 80 70 60 26 Share Price 84.00 Jan Feb Mar Apr May Jun MEEZAN BANK LIMITED Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec 30000 KSE 100 Index Rupees in Billion
  19. Through Running Musharakah the Bank participates in the operating activities of the customer and shares profit and loss as per the actual performance of the business . During 2017, the Bank partnered with more than 140 companies, ranging from manufacturing to the service sector on the basis of profit and loss sharing. Running Musharakah was 1% of the Bank’s total financing portfolio when it was launched in 2011 - it now stands at 34% of the Bank’s total financing. The Bank ranks among the top banks globally in terms of percentage of financing through Shirkat-ul-Aqd. Runnning Musharakah Portfolio Over Time 34.0% 35 30 24.5% 25 22.4% 20 15.7% 15 7.8% 10 5 0 1.0% 1.4% 2011 2012 2013 2014 2015 2016 2017 State Bank of Pakistan regulates the Islamic Banking industry through a separate Islamic Banking Department, which regulates the industry through its own policies, regulations and guidelines in order to ensure Shariahcompliance in Islamic Banks. Islamic Banking Department of the State Bank of Pakistan works under its Shariah Board, which comprises of renowned and reputed Shariah Scholars including Justice (R) Mufti Muhammad Taqi Usmani, Mufti Muhammad Zubair Usmani and Dr. Muhammad Qaseem. Some of the key regulations under which Islamic Banking industry operates are: ■ Shari’ah Governance Framework for Islamic Banking Institutions – 2015 ■ Instructions for Profit & Loss Distribution and Pool Management for Islamic Banking Institutions – 2012 ■ Guidelines on Islamic Financing for Agriculture – 2008 ■ Risk Management Guidelines for Islamic Banking Institutions – 2008 ■ ■ Guidelines for Islamic Microfinance Business by Financial Institutions – 2007 Six AAOIFI standards adopted by State Bank of Pakistan. AAOIFI is the premier standard setting organization for Islamic Financial Institutions globally
  20. 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 Risk & Opportunity Report Business Continuity Plan Products & Services 30 30 31 32 34 40 43 45 46 48 49 50 52 54 55 56 57
  21. Corporate Profile Founded with the Vision of establishing ‘Islamic banking as banking of first choice’, the Bank commenced operations in 1997 as Al Meezan Investment Bank Limited. It converted to Meezan Bank Limited, a full-fledged Islamic commercial bank in 2002, when the State Bank of Pakistan issued it Pakistan’s first Islamic Commercial Banking license. Concurrently, the Bank acquired the Pakistan operations of Societe Generale, and started commercial banking with a small network of four branches, that has now grown to become one of the largest banking networks in the country with more than 600 branches in over 150 cities. Meezan Bank is a publicly listed company sponsored by leading financial institutions from Pakistan and the Middle East. The Bank offers a complete range of Islamic banking products and services through a retail banking network which is the 8th largest banking network in Pakistan. Meezan Bank has a strong Shariah-compliance setup that comprises of a dedicated Product Development and Shariah Compliance Department, a Resident Shariah Board Member and a Shariah Supervisory Board comprising of internationally renowned Shariah scholars. The Bank is well-recognized for its product development capability, Islamic banking research and advisory services, at both national and international levels. Credit Rating 2017 2016 Long Term AA AA Short Term A1+ A1+ The JCR-VIS Credit Rating Company Limited, an affiliate of Japan Credit Rating Agency, Japan, has reaffirmed the Bank’s long-term entity rating of AA (Double A) and short-term rating at A1+ (A One Plus) with stable outlook. The short-term rating of A1+ is the highest standard in short-term rating. The rating indicates sound performance indicators of the Bank. Meezan Bank is the only full-fledged Islamic bank with AA credit rating in the Islamic banking industry of Pakistan. 30 MEEZAN BANK LIMITED
  22. Shareholders Shareholding Structure Rs . in Million % Noor Financial Investment Co. Kuwait Pakistan Kuwait Investment Company (Pvt.) Ltd Islamic Development Bank Jeddah Others 5,220 3,189 991 1,229 49.11 30.00 9.32 11.57 Paid up Capital 10,629 100.00 Noor Financial Investment Company is a Kuwaiti investment company engaged in investment and financial activities primarily in Kuwait, the Middle East, Asia and other emerging markets. The company was established as the financing arm of the National Industries Group (NIG), which is one of the largest private sector industrial groups in Kuwait. Noor Investment provides a broad range of financial services through its investment banking department. These activities /services broadly include private equity, investment strategy & implementation, mergers & acquisition advisory, valuations, hedging & risk management, local / foreign listing, long-term financial planning and innovative structuring. The asset management department of the company also engages in managing proprietary and client portfolios of quoted and unquoted securities, real estate and funds in Kuwait, GCC and the MENA region. Pakistan Kuwait Investment Company (Private) Limited (PKIC), a joint venture between the Governments of Pakistan and Kuwait was established in 1979. PKIC is one of the most respected and profitable institutions in Pakistan. The company, operating for over 30 years in Pakistan, is engaged in investment and development banking activities in Pakistan. PKIC is the first financial institution in Pakistan that has been rated AAA (triple A) for the long-term by both PACRA and JCR-VIS Credit Rating Company, an affiliate of Japan Credit Rating Company. Islamic Development Bank (IDB) is located in Jeddah and is an International Financial Institution established in 1975 in pursuance of a declaration by the Conference of Finance Ministers of Muslim countries to foster economic development and social progress in member (Islamic) countries. IDB has an equity of approximately USD 9 billion and enjoys presence in 57 member countries. The Bank participates in equity capital and grants loans for productive projects and enterprises besides providing financial assistance in other forms for economic and social development. ANNUAL REPORT 2017 31
  23. Awards and Recognition 2017 Pakistan Banking Awards Best Islamic Bank Pakistan Stock Exchange Limited Top 25 Companies of the Year , 2016 Islamic Finance News (IFN) - Malaysia Best Islamic Bank in Pakistan Best Islamic Retail Bank - Global Award Pakistan Deal of the Year CFA Society Pakistan Islamic Bank of the Year Corporate Finance House - Fixed Income Mastercard MENA Acquirer Forum Most Innovative Solution Deployed for Cash Displacement World Islamic Banking Conference Country Level Award for the Banks Based In Pakistan Global Finance – World’s Best Bank Awards Best Bank in Asia-Pacific Region Silver Award Islamic Finance Deal –For Syndicated Project Finance Facility Pakistan Society of Human Resource Management Best Place to Work in Top 10 Best Place to Work Category Best Place to Work in Financial Services Industry Category Employers Federation of Pakistan (EFP) 1st Position - Best HRM Practices 3rd Position - Employer of the Year 2016 PMI Karachi Pakistan Chapter PMO of the Year ICAP and ICMAP 3 Position - Best Corporate Reports Awards Banking sector rd South Asian Federation of Accountants (SAFA) Certificate of Merit in the 'Private Sector Banks' category of Best Presented Accounts Award Global Finance - World’s Best Islamic Financial Institutions 2016 Asset Triple A Islamic Finance Awards Best Islamic Bank in Pakistan Best Islamic Bank for Treasury Management - Global award Runner-up ‘Most Innovative Islamic Bank' - Global award Pakistan Deal of the Year Best Islamic Financial Institution in Pakistan Islamic Bank of the Year, Pakistan Best Islamic Retail Bank, Pakistan Best Islamic Trade Finance Bank, Pakistan Best Islamic Investment Bank, Pakistan Sukuk House of the Year, Pakistan Best Supply Chain Finance Programme, for Meezan Bank and Karandaaz Pakistan Asset Triple A Asia Infrastructure Awards Transport deal of the year, Pakistan for Swat Expressway The Banker - United Kingdom Islamic Bank of the Year, Pakistan Global Islamic Finance Awards Shariah Authenticity Award Islamic Finance Forum of South Asia (IFFSA) Awards Gold Awards Best Islamic Bank Of The Year (Fully Fledged) Islamic Finance Entity Of The Year Islamic Finance Education Provider Islamic Finance Advisory Services Provider Islamic Finance Capital Markets Service Provider Islamic Investment Bank Of The Year 32 MEEZAN BANK LIMITED Islamic Finance News (IFN) - Malaysia Global Finance - New York Best Islamic Bank in Pakistan The Innovators - ‘Innovator in Islamic Finance 2016’ Asset Triple A – Hong Kong Best Islamic Bank in Pakistan Best Bank for Digital Innovation Best Digital Banking Product Meezan UPaisa Best Retail Bank Best Trade Finance Bank Best Investment Bank Sukuk House of the Year Best Deal, Pakistan Islamic Finance Forum of South Asia (IFFSA) Gold Award for ‘Islamic Bank of the Year - Pakistan’ Capital Markets Service Provider of the Year Islamic Microfinance Company/ Project of the Year Advisory Services Provider of the Year The Banker - United Kingdom Islamic Bank of the Year, Pakistan Pakistan Banking Awards Best Islamic Bank CFA Society of Pakistan Islamic Bank of the Year South Asian Federation of Accountants (SAFA) ‘Certificate of Merit’ - Best Presented Annual Report Awards ICAP & ICMAP 2nd Position - Best Corporate Reports Awards Banking sector Employers Federation of Pakistan 1st Prize - Best HRM Practices 2016 PakWheels.com - People’s Choice Awards ‘Most Popular Bank’ in Pakistan’s Islamic Auto Financing sector RTC-3 Potentials of Islamic Banking Forum Largest Islamic Bank in Pakistan 2015 Global Islamic Finance Awards (GIFA) Shariah Authenticity Award Islamic Finance News (IFN) - Malaysia Best Islamic Retail Bank - Global Award 3rd Best Overall Islamic Bank – Global Award Best Islamic Bank in Pakistan Pakistan Deal of the Year Asset Triple A - Hong Kong Best Islamic Bank in Pakistan Best Islamic Retail Bank in Pakistan Best Islamic Trade Finance Bank in Pakistan Best Islamic Investment Bank Best Sukuk House in Pakistan Best Islamic Trade Finance Deal Global Finance - New York Best Islamic Financial Institution in Pakistan AsiaMoney Best Islamic Bank in Pakistan The Banker - United Kingdom Top Islamic Bank in Pakistan
  24. South Asian Financial Disclosure Index Rankings Leading Islamic Bank of the region Ranked 10th in the top 15 global Islamic banks CFA Society of Pakistan Islamic Bank of the Year Corporate Finance House of the Year MasterCard Innovation Forum 2015 Best Shariah Compliant Product – MasterCard, Titanium Debit Card South Asian Federation of Accountants (SAFA) Best Presented Accounts Award – Private Sector Bank 2013 AsiaMoney Best Islamic Bank in Pakistan CFA Society of Pakistan Islamic Bank of the Year Corporate Finance House of the Year (Fixed Income) Islamic Finance News (IFN) - Malaysia Best Islamic Bank in Pakistan Ijarah Deal of the Year Pakistan Deal of the Year Global Islamic Finance Awards (GIFA) ICAP & ICMAP Best Research and Development in Islamic Finance Pakistan Observer Best Islamic Financial Institution in Pakistan 3rd Position - BCR Awards - Banking sector Global Finance - New York Largest Islamic Bank Asset Triple A - Hong Kong 2014 Islamic Finance News (IFN) - Malaysia Best Islamic Bank in Pakistan Musharakah Deal of the Year AsiaMoney Best Islamic Bank in Pakistan CFA Society of Pakistan Islamic Bank of the Year Asset Triple A – Hong Kong Best Islamic Bank in Pakistan Best Islamic Retail Bank in Pakistan Best Islamic Trade Finance Bank in Pakistan Sukuk House, Pakistan Best Deal, Pakistan Highly Commended - Best Islamic Structured Trade Finance Highly Commended Best Deal – Pakistan ICAP & ICMAP 3rd Position - BCR Awards - Banking sector South Asian Federation of Accountants (SAFA) Best Presented Accounts Award - Private Sector Banks The Banker - United Kingdom Top Islamic Bank in Pakistan Rozee.pk Top Employer in the Islamic Banking Industry Best Islamic Bank in Pakistan Best Islamic Retail Bank in Pakistan Best Islamic Trade Finance Bank in Pakistan Highly Commended Best Islamic Deal Pakistan ICAP & ICMAP 3rd Position - BCR Awards - Banking sector 2012 CFA Association Pakistan Islamic Bank of the Year Asset Triple A – Hong Kong Best Islamic Bank in Pakistan Best Islamic Trade Finance Bank in Pakistan Best Islamic Retail Bank in Pakistan Best Islamic Deal - Pakistan Highly Commended Deal - Pakistan Global Finance - New York Best Islamic Financial Institution in Pakistan Islamic Finance News (IFN) - Malaysia Best Deals of the Year AsiaMoney Best Islamic Bank in Pakistan ICAP & ICMAP 4 Position - BCR Awards - Banking sector th Islamic Finance News (IFN) - Malaysia Best Islamic Bank in Pakistan Best Deal of the Year Asset Triple A – Hong Kong Best Islamic Bank in Pakistan Best Islamic Trade Finance Bank in Pakistan Best Islamic Deal - Pakistan Global Finance - New York Best Islamic Financial Institution in Pakistan 2010 CFA Association Pakistan Islamic Bank of the Year Islamic Finance News (IFN) - Malaysia Best Islamic Bank in Pakistan AsiaMoney Best Islamic Bank in Pakistan Global Finance - New York Best Islamic Financial Institution in Pakistan 2009 Islamic Finance News (IFN) - Malaysia Best Islamic Bank in Pakistan Best Deal of the Year Global Finance - New York Best Islamic Financial Institution in Pakistan ICAP & ICMAP 5th Position - BCR Awards - Banking sector 2008 Islamic Finance News (IFN) - Malaysia Best Islamic Bank in Pakistan Best Deal of the Year Global Finance - New York Best Islamic Financial Institution in Pakistan ICAP & ICMAP 4th Position - BCR Awards - Banking sector 2007 Islamic Finance News (IFN) - Malaysia Best Islamic Bank in Pakistan 2011 CFA Association Pakistan Islamic Bank of the Year 16 PMI Karachi Pakistan Chapter ANNUAL REPORT 2017 33
  25. Meezan , the Arabic word for 'Balance' has been taken from Surah Al-Rahman. At Meezan Bank, we believe in maintaining a balance between the needs of our shareholders, our customers, our staff and other stakeholders. This approach will Insha’Allah help us achieve our Vision of ‘providing a strong foundation for establishing a fair and just society for mankind'.
  26. 1997 2002 Al Meezan Investment Bank acquires Pakistan operations of Societe Generale and is issued the Establishment of Al Meezan Investment Bank Al Meezan Investment Management Ltd . becomes a subsidiary of Meezan Bank through acquisition of majority shares Branch network reaches 10 branches nationwide while the deposit base grows to Rs. 7.7 billion 2004 Meezan Bank acts as the Shariah Structuring Advisor for the historic transaction of international Sukuk offering for USD 600 million under a mandate awarded by the Government of Pakistan Deposit base grows to Rs.13.7 billion Number of branches reaches 16 first Islamic Commercial Banking license by SBP. Now a full-fledged scheduled Islamic commercial bank, it is renamed as Meezan Bank A 24/7 Call Center is established Deposit base stood at Rs. 5.08 billion Pakistan's first Shariah-compliant Housing finance product is launched 2005 ATM/Debit Cards and ATMs are introduced Online Banking is launched across all branches 2006 2007 2008 2009 2010 2011 Cities BANKING Meezan Bank wins Best Islamic Bank in introduced for the first time in Pakistan Deposit base grows to Rs. 34 billion Dollar Mudarabah Certificates and Special Musharkah Certificates launched for liquidity management and inter-bank market Branch network reaches the milestone number of 100 branches in 31 cities Bank handles more than Rs.100 billion of Import/ Export business Deposit base grows to Rs. 70billion Import/Export business reaches Rs. 70 billion Deposit base grows to Rs. 54 billion Dedicated Islamic Banking Training Centers established in 3 cities Best Islamic Bank in Best Islamic Bank in Pakistan Introduction of Istisna financing for working capital needs of customers Total deposits reach Rs. 131 billion Import/ Export Business volume Rs. 143 billion Best Islamic Financial Institution in Pakistan Meezan Debit Cards launched Best Islamic Bank in Pakistan 9th largest bank in Pakistan in terms of branch network Islamic Bank of the Year Meezan House inaugurated Total assets cross Rs.200billion Meezan Bank becomes the Advisor and Lead Arranger for the first ever short-term Sukuk Best Islamic Bank in Pakistan Corporate Report Award Meezan Islamic Institution Deposit Account launched as a product tailored for Islamic Financial Institutions enabling them to manage their excess liquidity through a checking account with Meezan Bank Deposit base crosses Rs.100 billion Introduction of Tijarah financing allowing customers to raise funds for financing of stocks of finished goods Number of branches reaches 62 in 21 cities Deposit base grows to Rs. 22 billion Number of branches reaches 28 Branch Network expands to 40 cities 38 Islamic Banking seminars held in 23 cities, attended by over 4,400 participants Islamic Bank of the Year Launch of Wakalah based financing product for the development of partnerships between Islamic and Microfinance banks Launch of SBP establishes a dedicated Islamic Banking Department and constitutes a Shariah Board Best Deals of the Year Pakistan Best Islamic Bank in Pakistan Corporate Report Award and Meezan Euro Savings Account as well as Meezan Pound Savings Account launched Best Islamic Bank in Pakistan SME operations start as an independent business unit Profit/Return earned on financing and investment activities exceed Rs. 10 billion Launched Implementation of new core banking application T24 Meezan Bank stands among the top three auto-finance providers in the country Total deposits cross Rs. 230 billion 1 Best Islamic Financial Institution in Pakistan 8 Best Islamic Bank in Pakistan Best Deal of the Year Launch of first Government of Pakistan Ijarah Sukuk Islamic Bank of the Year Corporate Report Award 8 Best Islamic Financial Institution in Pakistan Islamic Export Refinance scheme is introduced in coordination with SBP Best Islamic Bank in Pakistan Best Islamic Trade Finance Bank in Pakistan Best Islamic Retail Bank in Pakistan Best Islamic Deal - Pakistan Home remittance service available at all branches Internet Banking launched Pakistan's first Shariah-compliant Auto Finance product is launched 2012 1 Riba-Free Certificates of Islamic Investment launched 2003 Best Islamic Bank in Pakistan Best Islamic Trade Finance Bank in Pakistan Best Islamic Deal Pakistan Launch of Meezan Visa Platinum Debit Card Best Islamic Bank in Pakistan Best Deal of the Year Launch of Meezan Premium Banking & Premium Banking Centers Best Islamic Financial Institution in Pakistan Launch of Mock Branches for staff training Technical services and support agreement with in Sri Lanka 110 Customers’ Appreciation Days and 27 Islamic Banking seminars held across the country Launch of Running Musharakah for working capital requirements of corporate customers & Launched Batch Hiring of over 550 employees Official Page crosses 85,000 Fans
  27. 2013 Over 350 100 Over Branches 2014 428 Branches Cities 117 2015 7th largest bank in terms of branch network 551 Branches 2016 Over 143 Cities 570 145 Over Branches Cities Cities Meezan Bank acquires Pakistan operations of HSBC Oman 8th largest bank in Pakistan in terms of branch network 2017 8th largest bank in Pakistan in terms of branch network Best Islamic Bank in Pakistan Total deposits reach Best Islamic Retail Bank in the world Rs . 289 billion CFA Society Pakistan Islamic Bank of the Year Corporate Finance House of the Year (Fixed Income) Best Islamic Financial Institution in Pakistan Best Bank in Asia-Pacific Region Total deposits reach Rs. 472 billion Islamic Bank of the Year Pakistan Best Islamic Bank in Pakistan Meezan Upaisa - World's First Islamic Branchless Banking Service Islamic Bank of the Year Shariah Authenticity Award Best Islamic Bank in Pakistan Musharakah Deal of the Year Islamic Bank of the Year Corporate Finance House of the year GLOBAL ISLAMIC FINANCE AWARD Best Islamic Bank in Pakistan Best Islamic Retail Bank in Pakistan Best Islamic Trade Finance Bank in Pakistan Sukuk House Pakistan Best Deal, Pakistan Best Islamic Structured Trade Finance Best Deal-Highly Commended, Pakistan Best Islamic Retail Bank Best Islamic Bank in Pakistan 3rd Best Overall Islamic Bank Pakistan Deal of the Year Best Islamic Financial Institution in Pakistan Mobile Banking App Launched Launch of Best Islamic Bank for Treasury Management - Global Award Most Innovative Islamic Bank -Global Award Runner-up Best Islamic Bank in Pakistan Pakistan Deal of the Year Best Islamic Bank in Pakistan Best Bank for Digital Innovation Best Digital Banking Product Best Retail Bank Best Trade Finance Bank Best Investment Bank Sukuk House of the Year Best Deal Pakistan Best Shariah-compliant Product Award 16 Launch of SMS Banking Best Islamic Bank, Pakistan Best Islamic Retail Bank, Pakistan Best Islamic Trade Finance Bank, Pakistan Best Islamic Investment Bank, Pakistan Best Sukuk House, Pakistan Best Islamic Trade Finance Deal, Pakistan Corporate Internet banking Best Islamic Bank in Pakistan Innovator in Islamic Finance 2016 Launched Top 25 Companies of the Year, 2016 Most Innovative Solution Deployed for Cash Displacement Launch of EMV Chip & NFC enabled Debit Card Top 10 Excellent Places to Work Best Place to Work in Financial Services Industry Best HRM Practices Employer of the Year 2016 Your one window solution for all your eBanking needs Launch of Centers of Excellence in Islamic Finance established at IBA, LUMS and IMSciences (Peshawar) Meezan Bank and Pak China Investment Company Limited enter into Strategic Cooperation Alliance to Capitalize CPEC Opportunities PMI Karachi Pakistan Chapter PMO of the Year Meezan Bank’s First Hajj booths at Haji Camp GLOBAL ISLAMIC FINANCE AWARD Best Research and Development in Islamic Finance Islamic Bank of the Year 6 5 Agreement with Ethical Finance Limited for establishing first Islamic commercial bank in Republic of Mauritius Best Islamic Bank in Pakistan Best Islamic Retail Bank in Pakistan Best Islamic Trade Finance Bank in Pakistan Highly Commended Best Islamic Deal Pakistan Best Islamic Bank in Pakistan Islamic Bank of the Year Capital Markets Service Provider of the Year in Pakistan Islamic Microfinance Company/Project of the Year’ Pakistan for Meezan UPaisa Advisory Services Provider of the Year 15 Government of Pakistan nominates Mr. Irfan Siddiqui & Dr. Muhammad Imran Ashraf Usmani as members of Steering committee of Islamic banking Total deposits reach Rs. 380 billion Agreement Signing with Karandaaz Pakistan 7 Best Islamic Bank in Pakistan Deals of the Year-Pakistan Meezan Bank acquires HSBC Pakistan 16 Best Islamic Bank in Pakistan Meezan Titanium MasterCard Debit Card Launched Accidental Death and Permanent Disability and ATM Cash Withdrawal Takaful coverage (Islamic Insurance) of up to Rs 1 million for all account holders Official Page crosses 130,000 Fans Online Account Opening Form Launched Strategic partner of 1st World Islamic Finance Forum organized by IBA CEIF Launch of New Corporate Website Official Page crosses 1 Million Fans Launch of secure online shopping with 3D secure Joint Financial Advisors to the Ministry of Finance for issuance of GoP Ijarah Sukuk Developed Shariah-compliant trading platform at Pakistan Mercantile Exchange (PMEX) Launch of e-IPO service for investors with CDC Completion of Sindh's first-ever Vocational Training CSR initiative
  28. Board of Directors Riyadh S . A. A. Edrees Chairman Mr. Riyadh S.A.A. Edrees has been a Director of Meezan Bank since October 2012. He is the Chairman of the Board and was also the Chairman of Human Resources and Remuneration Committee of the Bank till 14th February, 2018, upon which date, Independent Director Mr. Talal S. A. Al Shehab took over as Chairman of the Committee to fulfil the requirements of Listed Companies (Code of Corporate Governance) Regulations, 2017. Mr. Riyadh has also previously served as the Vice Chairman of Meezan Bank’s Board. Mr. Riyadh S.A.A. Edrees holds a B.Sc. degree in Chemical Engineering from Newcastle Upon Tyne University, U.K. and M.Sc. in Chemical Engineering from Kuwait University. His skills and experience encompass a wide range of industries and various roles including Executive Manager for Industrial Investments & Development Div. at National Industries Group Holding - (Kuwait), Assistant Lecturer at Kuwait University, Vice Chairman at Gas & Oil Fields Services Co. - (Kuwait), Board member at Kuwait Rock Company - (Kuwait), Vice Chairman at Eastern United Petroleum Services (Kuwait), Kuwait Ceramic Company - (Kuwait), Director at Sajaa Gas Private Limited Co.(UAE), Board member at K-Electric Pakistan, United Gas Transmissions Company Limited Co. – (UAE). Directorships and other recent offices held: ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ Deputy CEO Investment & Mega Projects, National Industries Group Holding – Kuwait Chairman, Privatization Holding Co. – Kuwait Board Member, Ikarus Petroleum Industries - Kuwait Board Member, Noor Financial Investment Co. – Kuwait Vice Chairman – Noor Telecommunication Co. – Kuwait Chairman, IT Partners Information Technology Co. – Kuwait Advisory Board Member, Markaz Energy Fund - Kuwait Board Member, Saudi International Petrochemical Company (SIPCHEM) – KSA Vice Chairman, Airport International Group – Jordan Chairman, Middle East Complex for Engineering, Electronics and Heavy Industries Co. - Jordan Board Member, Investment Committee of Bunyah Fund of the Kuwait Investment Co.- Bahrain Advisory Board Member, Cleantech I & II Zouk Venture Limited - U.K. Faisal A. A. A. Al-Nassar Mr. Faisal A.A.A. Al-Nassar has been a Director of Meezan Bank since March 2015. He is Vice Chairman of the Board and also Chairman of the Risk Management Committee of the Board. Mr. Faisal A.A.A. Al-Nassar has a Bachelor’s degree in Accounting and Finance from Kuwait University and has held many senior management positions in the finance industry including Corporate Affairs Executive Manager at National Industries Group Holding Co., Auditor for government agencies in Kuwait Bureau of Accountancy and Head of Taxation Department, Ministry of Finance, Kuwait. 40 MEEZAN BANK LIMITED Directorships and other recent offices held: ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ Deputy Chief Executive Officer, Finance and Administration at National Industries Group Holding Co. Chairman and CEO, Al Durra National Real Estate Company Chairman, Noor Executive Committee Chairman, Shorfat al Safwain KSA Chairman, Durrat Alshameya Investment in KSA Chairman, Director and Chairman Audit Committee, Abu Dhabi Marina Real Estate Investment Company Chairman, Director, Noor Al Salehia Real Estate Director, Noor Financial Investment Company Director, Noor Audit Committee Director, Noortel Director, Investment Committee and Arabic Investment Group, Egypt General Manager, Ikarus Real Estate - Dubai Bader H.A.M.A Al-Rabiah Mr. Bader H.A.M.A. Al-Rabiah has been a Director of Meezan Bank since November 2015. Mr. Bader H.A.M.A. Al-Rabiah has a strong academic background in accounting and a focused experience in investments honed over the past 14 years. He was involved in establishing the Real Estate Investment Department at Noor Financial Investment Company and served as the Chairman at Arab Investment, Real Estate and Agricultural Development Group, Egypt. Directorships and other recent offices held: ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ Chairman & CEO Noor Salhia Real Estate Company Chairman, Palms Agro Production Director, Noor Financial Investment Co. Director, International Hotels Group Reserve Director, Kuwait Finance House General Manager Tamouh National & General Trading & Contracting Vice Chairman, Al-Durra National Real Estate Co. Board member, International Hotel Group (Jordan) Chairman, Arab Investment Real Estate and Agriculture (Egypt) General Manager, Sidra Middle East for Electrical, Mechanical And Building Contracting Co. General Manager, Ikarus Real Estate (UAE) General Manager, Noor Al-Salhiya Real Estate Company (KSA) Mansur Khan Mr. Mansur Khan has been a Director of Meezan Bank since August 2016. He is also a member of the Information Technology Committee of the Board. He is the Managing Director of Pak Kuwait Investment Co. Ltd. (PKIC) since February 2014 and has over 30 years of diversified experience, and a proven track record in Development/Commercial/Investment Banking. He has done Masters in Business Administration (with distinction) from Pace University, New York, USA; majoring in Financial Management. Mr. Mansur Khan has served as President/CEO of Zarai Taraqiati Bank Limited (ZTBL), SME (Small and Medium
  29. Enterprises ) Bank Limited, Managing Director of Punjab Small Industries Corporation (PSIC) and the Sudanese Microfinance Development Facility (SMDF). He has international experience of working in Asia, Africa, USA, Europe and the Middle East. Prior to joining Pak Kuwait as Managing Director, he was associated with Weidemann Associates Inc, a Crown Agents USA company. Mr. Mansur Khan was a fighter pilot in the Pakistan Air Force from 1970 to 1978. He held Directorships in Engro Corporation, Sudanese Microfinance Development Facility, Zarai Taraqiati Bank Ltd., National Commodity Exchange Ltd, Saudi Pak Agricultural & Investment Company Ltd, National Database & Registration Authority, Kissan Support Services Ltd, SME Bank Ltd, SME Leasing Ltd, TMT venture Capital Fund, Small and Medium Enterprise Dev. Auth, Business Competitiveness/Support Funds, Punjab Small Industries Corporation, Pak-Kuwait Takaful Co Ltd and Pakistan Steel Mills Corp Ltd. A Certified Director from Pakistan Institute of Corporate Governance (PICG), Mr. Khan currently serves on the boards of PKIC, The General Tyre and Rubber Co. of Pakistan Ltd, National Clearing Co. Pakistan Ltd and Meezan Bank Limited. Alaa A. Al-Sarawi Mr. Alaa A. Al-Sarawi has been a Director of Meezan Bank since January 2009. He is also a member of the Audit Committee of the Board. Mr. Alaa A. Al-Sarawi is a Senior Investment Manager at the Kuwait Investment Authority (KIA). After successfully completing KIA training program, he held various senior management positions in the investment space. He completed his Bachelors of Business Administration, Minor in Government from Eastern Washington University in 1995 and received a Diploma in Accounting from Kuwait Business College in 1990. He has served as board member in several companies and has attended many courses, conferences and seminars, both local and overseas. Saad Fazil Abbasi Mr. Saad Fazil Abbasi joined the Board of Directors of Meezan Bank in February 2018. Mr. Saad Fazil Abbasi is a Joint Secretary to the Government of Pakistan’s presently posted in the Ministry of Finance. Mr. Saad Fazil Abbasi holds an LLM degree in International Economic & Business Law from Kyushu University, Japan. He has served as the Joint Secretary to the Government of Pakistan (Privatization Division)/ Director General (Privatization Commission). Apart from Government of Pakistan he also has worked with Multilateral agencies such as the Asian Development Bank and the DFID as a consultant. Among his Government experience he has served in all major Ministries at the Federal level and on the Provincial Government level has remained an Aide to the Chief Minister of KPK. He has also worked with Regulators such as PEMRA and PPRA where he drafted Pakistan’s first law on procurement. Presently he is heading the Regulation Wing in the Finance Division. Muhammad Zarrug Rajab Mr. Muhammad Zarrug Rajab has been a Director of Meezan Bank since 2015. He is also a member of the Audit Committee of the Board. Mr. Muhammad Zarrug Rajab holds a Bachelors degree in Commerce from Libyan University and is a Fellow Chartered Accountant (England & Wales). He has held various senior management positions including Director at Bahrain Islamic Bank (BISB), Board Member at BISB Bahrain and Al Meezan Investments Pakistan and at Islamic Development Bank Jeddah. He has also held the prestigious positions of Auditor General of Libya, Minister of Treasury Libya and Governor of Libyan Central Bank. Mohammad Abdul Aleem Mohammad Abdul Aleem has been a Director on the Board of Meezan Bank since October 2010. He is the Chairman of the Audit Committee of the Board and also of the Information Technology Committee of the Board. Mr. Mohammad Abdul Aleem is a Fellow member of ICAP and has the honour of achieving Gold Medal for standing first in Pakistan in 1970. He is also a Fellow member of the Institute of Cost and Management Accountant. He started his career with A. F. Ferguson and then worked for National Refinery Ltd., before moving on to a Senior Executive role in Exxon Chemicals Pakistan, which is now known as Engro Corporation. During his 16 years with Exxon/ Engro he served both in Pakistan and in Singapore. Mr. Mohammad Abdul Aleem joined Pakistan Tobacco Co. in 1991 as its CFO before being elevated in 1995 as the CEO of British American Tobacco subsidiaries overseas based in Cambodia and subsequently in Mauritius looking after the Indian Ocean region. On return to Pakistan in 2004, he was inducted in leadership positions for leading GOP owned corporations, Pakistan Telecommunication Company and PIA before moving on in 2008 as Managing Director, Pakistan State Oil Company. Currently he is the CEO and Secretary General of Overseas Investors Chamber of Commerce and Industry. Mr. Mohammad Abdul Aleem has been active also on the corporate governance front and has in the past been a board member of LUMS and Pakistan Refinery and Chairman of Telephone Industries of Pakistan and Faysal Asset Management Company. Currently, he is the Board member and Chairman Audit Committee of Engro Corporation, Meezan Bank and Dawood Hercules Corporation. He is also the Chairman of Meezan Bank’s Board Information Technology Committee. He also gives his time to non-profit organizations in the field of education and is currently the Vice Chairman of Professional Education Foundation and Chairman of Intellect School Board. ANNUAL REPORT 2017 41
  30. Noorur Rahman Abid Mr . Noorur Rahman Abid has been a Director of Meezan Bank since January 2014. He is also a member of the Audit Committee and Human Resources and Remuneration Committee of the Board. Mr. Noorur Rahman Abid is a Fellow Chartered Accountant from Institute of Chartered Accountants in England and Wales and has held several senior management positions including Assurance Leader for Ernst & Young Middle East and North Africa, Engagement Partner for audits of large wholesale bank based in Bahrain as well as the largest Investment bank based in Bahrain, Chairman of Auditing Standards Committee and Deputy Chairman of Accounting and Auditing Standards Board of AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions). He played an instrumental role in promoting several successful initiatives, including the Islamic Banking Center of Excellence in Bahrain and was declared winner of the World Islamic Banking Conference 2012 Industry Leadership Award in recognition of his contribution to Islamic Banking. Irfan Siddiqui President & CEO Mr. Irfan Siddiqui is the founding President and Chief Executive Officer of Meezan Bank. Having articled with Coopers & Lybrand, London from 1975-1979, Mr. Irfan Siddiqui qualified as a Chartered Accountant from the Institute of Chartered Accountants in England and Wales. He has held several senior management positions including Chief Executive Officer at Al-Meezan Investment Bank Limited, General Manager at Pakistan Kuwait Investment Company, Advisor to the Managing Director at Kuwait Investment Authority, Manager Finance and Operation at Abu Dhabi Investment Company and Senior Business Analyst at Exxon Chemical (Pakistan) Ltd. Directorships and other recent offices held: ■ ■ ■ Directorships and other recent offices held: ■ ■ ■ ■ ■ ■ ■ Kuwait Finance House, Kuwait Kuwait Finance House, Bahrain Kuwait Finance House, Malaysia Arcapita Investment Management, Bahrain Al Shaheer Corporation Ltd Member of Board of Trustees, Accounting and Auditing Organization for Islamic Financial Institutions Dr Solaiman Fakeeh Hospital, Saudi Arabia Talal S. A. Al-Shehab Mr. Talal S. A. Al-Shehab has been a Director of Meezan Bank since November 2015. He is also a member of the Board Human Resources and Remuneration Committee of the Bank. Mr. Talal S. A. Al-Shehab holds a Bachelors degree in Accounting and Auditing from Kuwait University, Certificate in Credit Management from Institute of Banking Studies and American Business Accounting Certificate from Kuwait Association for Accountants. He started his career in the Taxation Department in the Ministry of Finance, Kuwait and has held senior management positions including Manager of Corporate Banking Division at Ahli United Bank and Corporate Finance Manager at Warba Investment Company. Directorships and other recent offices held: ■ ■ ■ ■ ■ ■ ■ 42 CEO, Al-Masar Leasing and Investment Company Chairman and Acting CEO, Priority Automobile Company Chairman, National Information Technology Company Chairman, Al-Reyada Finance & Investment Company Director, Unicapta Consultant Company Director, Marsa Abu Dhabi R/E Investment Company Independent Board Member, Amar Finance & Investment Company MEEZAN BANK LIMITED ■ ■ ■ Member of Board of Trustees, Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), Bahrain Member, IBA CEIF Board of Management, Centre for Excellence in Islamic Finance (CEIF), IBA Member of Government of Pakistan Steering Committee for ‘Promotion of Islamic Banking in Pakistan’ (2013 – 2016) Member of Government of Pakistan sub-committee on awareness, training and capacity building for ‘Promotion of Islamic Banking in Pakistan’ Member of the PBA Sub-Committee on Islamic Banking President of the Islamic Finance Association of Pakistan Ariful Islam Executive Director & Deputy CEO Mr. Ariful Islam joined the Bank as its first Chief Operating Officer in April 1999. He is presently the Bank’s Deputy CEO and an Executive Board Member. He is also a member of the Board Risk Management Committee as well as a member of several management committees including Board Information Technology Committee of the Bank. Mr. Ariful Islam qualified as a Chartered Accountant from the Institute of Chartered Accountants in England and Wales in 1982. He is also a Fellow Member of the Institute of Chartered Accountants in Pakistan. He worked with KPMG (formerly Peat Marwick Mitchell & Co., London Office) before moving back to Pakistan in 1985. He has over 30 years of banking experience and has held several senior management positions including Executive Vice President & Regional Manager South at Faysal Bank Limited and Senior Executive Vice President & Head of Investment Banking at MCB Bank Limited. Directorships and other recent offices held: ■ ■ ■ Chairman of the Board, Al-Meezan Investment Management Limited Member of the HR Committee, Al Meezan Investment Management Limited Director, Atlas Battery Limited
  31. Shariah Supervisory Board Justice (Retd.) Muhammad Taqi Usmani ■ Justice (Retd.) Muhammad Taqi Usmani is a renowned ■ Chairman figure in the field of Shariah, particularly in Islamic Finance. He currently holds advisory positions in a number of financial institutions practicing Islamic Banking and Finance. Justice (Retd.) Muhammad Taqi Usmani has vast experience in Islamic Shariah, teaching various subjects on Islam for more than 50 years. He has served as a Judge in the Shariat Appellate Bench, Supreme Court of Pakistan from 1982 to 2002. He is also the Editor-in-Chief of the magazine Albalagh (a weekly publication of Jamia Darul Uloom, Karachi) as well as an active contributor of articles in leading Pakistani newspapers. Justice (Retd.) Muhammad Taqi Usmani graduated from Punjab University, Pakistan in 1970 and also holds an LL.B. from Karachi University, Pakistan. Prior to these, he completed the Takhassus course, which is the specialization course of Islamic Fiqh and Fatwa (Islamic Jurisprudence) from Jamia Darul Uloom Karachi, Pakistan. In March 2004, His Highness Sheikh Mohammad Bin Rashid Al Maktoum (Dubai Crown Prince and UAE Minister of Defense) presented a special award to Justice (Retd.) Muhammad Taqi Usmani in recognition of his lifetime service and achievement in Islamic Finance at the occasion of International Islamic Finance Forum, Dubai, which is one of the biggest events in the Islamic Finance Industry. Current Board Memberships: ■ ■ ■ ■ ■ ■ ■ ■ Vice President and Shaikul-Hadith, Jamia Darul Uloom, Karachi Chairman, International Shariah Standard Council set up by the Accounting and Auditing Organization for Islamic Financial Institutions(AAOIFI), Bahrain. Awards Received His Highness King Abdullah (of Jordan) Award Wisamul Istiqlal Award presented by His Highness King Abdullah of Jordan His Highness Prince Muhammad bin Raashid Aal Maktoom Award Lifetime Achievement Award presented by the Islamic Business and Finance Magazine IDB Prize in Islamic Banking and Finance 2011 2010 2004 2011 2014 Sheikh Esam Mohamed Ishaq Board Member Born in Bahrain, Sheikh Esam Mohamed Ishaq graduated from McGill University, Montreal, Canada and also studied Shariah with a number of Sheikhs in the traditional manner. He is a member of the High Council of Islamic Affairs of the Government of Bahrain and holds various Shariah positions in many social, commercial and educational institutions. Currently he also teaches Fiqh, Aqeeda and Tafseer courses in various Centres of Islamic Studies, supervised by the Ministry of Islamic Affairs in Bahrain. He holds memberships of the following institutions: ■ ■ ■ The Governance Board of Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), Bahrain The Shariah Supervisory Committee of the Maldives Monetary Authority (MMA), Maldives The Shariah Panel of International Islamic Financial Market (IIFM), Bahrain The International Advisory Panel of Islamic Banking and Finance Institute Malaysia (IBFIM), Malaysia ■ Member, Islamic Fiqh Academy of Rabita-al-‘Alam-e-Islami, Makkah In addition to membership of the Shariah Supervisory Boards of a number of local, regional and international Islamic Financial Institutions (IFIs), he is the Chairman of Shariah Supervisory Boards of the following IFIs: Fellow of the Royal Aal al-Bayt Academy, Jordan Chairman Centre for Islamic Economics Pakistan since 1991 ■ Chairman Shariah Board Abu Dhabi Islamic Bank, U.A.E. ■ Chairman Shariah Board Meezan Bank Ltd., Karachi, Pakistan ■ Chairman Shariah Board Pak-Kuwait Takaful, Karachi ■ Chairman Shariah Board Pak-Qatar Takaful, Karachi ■ Member Shariah Board Guidance Financial Group, USA Permanent Member International Islamic Fiqh Academy, Jeddah, sponsored by OIC ■ ■ Member Unified Shariah Board Islamic Development Bank Jeddah Chairman Shariah Board Arif Habib Investments – Pakistan International Islamic Fund, Karachi Chairman Shariah Board Arcapita Investment Fund, Bahrain ■ The Family Bank for Microfinance, Bahrain Tamweel Africa Holding, Senegal Investment Dar Bank, Bahrain Eco Islamic Bank, Kyrgyzstan Furthermore, Sheikh Esam is Chairman of the Muslim Educational Society, Vice Chair & Shariah Advisor for Discover Islam Centre & member of the Board of Trustees of Al- Iman Islamic Schools, Bahrain. Dr. Muhammad Imran Ashraf Usmani Resident Shariah Board Member Dr. Mufti Muhammad Imran Ashraf Usmani, son of Justice (Retd.) Mufti Muhammad Taqi Usmani, graduated with ANNUAL REPORT 2017 43
  32. specialization in Islamic Fiqh (Islamic jurisprudence) from Jamia Darul-Uloom, Karachi, where he has been teaching Fiqh since 1990. He also holds an LL.B. and Ph.D. in Islamic finance. He is a member of the administration board of Jamia Darul-Uloom, Karachi. Presently Dr. Usmani is the Resident Shariah Board Member at Meezan Bank and is responsible for Research and Product Development of Islamic banking products, advisory for Shariah-compliant banking and supervision of Shariah Audit & Compliance. Dr. Usmani is the author of numerous publications related to Islamic finance and other Shariah related subjects. He has presented papers in numerous national and international seminars and has delivered lectures at academic institutions including Harvard, LSE, LUMS and IBA. In past Dr. Usmani has served as an advisor / member of Shariah Boards of several renowned institutions since 1997 including the State Bank of Pakistan, HSBC - Amanah Finance, UBS - Switzerland, Guidance Financial Group USA, Lloyds TSB Bank - UK, Japan Bank for International Cooperation (JABIC), Credit Suisse Switzerland, RBS Global, Old Mutual Albarakah Equity & Balanced Funds South Africa, AIG Takaful, ACR ReTakaful Malaysia, Capitas Group USA, Bank of London and Middle East Kuwait, BMI Bank Bahrain, Al Khaliji Bank Qatar, Sarasin Bank Switzerland, DCD Group Dubai, International Centre for Education in Islamic Finance (INCEIF) and other mutual and property funds, Takaful Companies and international Sukuk etc. At present Dr. Usmani is serving at different capacities at various organizations which are as under: ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ 44 Faculty Member – Jamia Darul Uloom Director – Hira Foundation School Resident Shariah Board Member – Meezan Bank Ltd Research Faculty Member – Department of Economics Karachi University President & Founder Trustee – Ihsan Trust Committee Member – Implementation Committee For Promotion of Islamic Banking By Ministry of Finance Academic Committee Chairman / Board Member / Faculty Member – Centre for Excellence In Islamic Finance CEIF (IBA) Member Central Board – Center for Islamic Economics (CIE) Shariah Board Member – Chairman Shariah Board NBP Fullerton Asset Management Company (NAFA) Shariah Board Member – Al Meezan Mutual Funds Shariah Advisor – PMEX Chairman – Islamic Index Pakistan Stock Exchange (PSX) Shariah Board Member – Observer Shariah Advisor / Shariah Board Secretary – Guidance Financial Group USA Member Central Shariah Supervisory Board – AIG Charity Takaful Company (Global) Shariah Board Member – Sarasin Bank Switzerland Shariah Board Member – AAOIFI Dubai Shariah Board Member – International Islamic Financial Market Bahrain IIFM MEEZAN BANK LIMITED ■ ■ ■ Board Member – International Islamic Rating Agency Bahrain Shariah Board Member – Amanah Islamic Finance (AIFA) Australia Chairman Shariah Supervisory Council – Amanah Bank Sri Lanka
  33. Corporate Information Board of Directors Riyadh S . A. A. Edrees Faisal A.A.A. Al-Nassar Bader H.A.M.A. Al-Rabiah Mansur Khan Alaa A. Al-Sarawi Muhammad Zarrug Rajab Mohammad Abdul Aleem Noorur Rahman Abid Talal S.A. Al-Shehab Irfan Siddiqui Ariful Islam Shariah Supervisory Board Justice (Retd.) Muhammad Taqi Usmani Sheikh Esam Mohamed Ishaq Dr. Muhammad Imran Ashraf Usmani Chairman (Non-Executive Director) Vice Chairman (Non-Executive Director) Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Independent Director Independent Director Independent Director President & CEO Executive Director & Deputy CEO Chairman Member Resident Shariah Board Member Auditors EY Ford Rhodes, Chartered Accountants Chief Financial Officer Shabbir Hamza Khandwala Company Secretary Muhammad Sohail Khan Registered Office Meezan House C-25, Estate Avenue, SITE, Karachi-Pakistan. Shares Registrar THK Associates (Pvt.) Ltd. 1st Floor, 40-C, Block-6, P.E.C.H.S.,Karachi-75400, Pakistan. Ph: (92-21) 111-000-322, Fax: (92-21) 34168271 Email: secretariat@thk.com.pk Website: www.thk.com.pk Contacts PABX: (92-21) 38103500 24/7 Call Centre: 111- 331-331 & 111- 331-332 Email: info@meezanbank.com Website: www.meezanbank.com Social Media: www.facebook.com/MeezanBank www.linkedin.com/company/meezan-bank-ltd www.twitter.com/MeezanBankLtd ANNUAL REPORT 2017 45
  34. Board Committees Board Human Resources and Remuneration Committee Mr . Riyadh S. A. A. Edrees (Chairman) Mr. Noorur Rahman Abid Mr. Talal S. A. Al-Shehab Terms of Reference The Board Human Resources and Remuneration Committee (BHRRC) is responsible for ensuring that the Bank manages its Human Resource in the light of the best practices of the industry. The responsibilities of the BHRRC include reviewing and recommending Human Resource Management policies to the Board of Directors in light of local and international best practices which also includes but is not limited to remuneration practices defined by the State Bank of Pakistan, recommending to the Board the selection, evaluation, compensation (including retirement benefits) and succession planning of key personnel. The Committee also makes recommendations to the Board regarding the structure of compensation package of Executive Directors, President & Chief Executive Officer, Key Executives and of any other employee or group of employees along with ensuring implementation of separate remuneration structures for material risk takers and material risk controllers. The Committee also monitors the training activities, utilization of training and development budget and implementation of approved training and development policy of the Bank to ensure that the members of staff are adequately trained for the job they are expected to perform. Board Risk Management Committee Mr. Faisal A.A.A. Al-Nassar (Chairman) Mr. Ariful Islam (Deputy CEO) Terms of Reference The Board Risk Management Committee (BRMC) is responsible for assessing the Bank’s policies on all major risk categories including credit, market, liquidity and operational risk and adequacy of the risk management function of the Bank. The BRMC reviews the adequacy of the Bank’s capital in accordance with laid down rules and regulations as per Basel Accord. It also reviews the techniques developed and implemented to measure the Bank’s risk exposure. Its responsibilities also include evaluating the risk profile and appetite of the Bank and ensuring that systems are in place for monitoring overall risk of the Bank. The Committee reviews exception reports highlighting deviations from the approved policies as well as deliberates on risk related reports including early warning signals of potential risks emerging from the Bank’s activities. Board Audit Committee Mr. Mohammad Abdul Aleem (Chairman) Mr. Noorur Rahman Abid Mr. Alaa A. Al-Sarawi Mr. Muhammad Zarrug Rajab Terms of Reference The Audit Committee is responsible for determination of appropriate measures for safeguarding the Bank’s assets; review of quarterly, half-yearly and annual financial statements; review of management letter issued by external auditors and management’s response thereto; review of the scope and extent of internal audit / shariah audit; consideration of major findings, internal investigations of activities characterized by fraud, corruption and abuse of power and management's response thereto; ascertaining that the internal control systems are adequate and effective; determination of compliance with relevant statutory requirements; monitoring compliance with the best practices of corporate governance and identification of significant violations thereof and oversight of implementation of Internal Controls over Financial Reporting (ICFR) program across the Bank, ensure effectiveness of overall management of compliance risk and consideration of any other issue or matter as may be assigned by the Board of Directors. 46 MEEZAN BANK LIMITED
  35. Board Information Technology Committee **** Mr. Mohammad Abdul Aleem (Chairman) Mr. Mansur Khan Mr. Ariful Islam (Deputy CEO) Terms of Reference The Board Information Technology Committee (BoIT) is responsible for advising and reporting to the Board on status of technology activities and digital initiatives for their ease in decision making, reviewing IT and digital strategies as well as relevant policies before submission to Board. BoIT reviews and approves technology related polices periodically in light of major technological /regulatory developments and ensures risk management strategies are designed and implemented to achieve resilience such as ability to respond to wide scale disruptions, including cyber-attacks and attacks on multiple critical infrastructure sectors. The Committee also receives periodic updates from IT Steering Committee to monitor all technology related projects and ensures that technology procurements are aligned with the IT strategy approved by the Board. If deemed necessary, the Committee may seek expert opinion from independent sources wherein the quorum will comprise of any two members. Dates and Attendance of Board Committees during 2017 Name of Director Board Human Resources and Remuneration Committee Board Audit Committee Board Risk Management Committee No. of Meetings 14-Feb-17 18-Apr-17 25-Jul-17 25-Oct-17 14-Feb-17 18-Apr-17 25-Jul-17 24-Oct-17 14-Feb-17 18-Apr-17 25-Jul-17 24-Oct-17 Attended Mr. Riyadh S. A. A. Edrees (Chairman) 4/4 P P P P - - - - - - - - Mr. Noorur Rahman Abid 4/4 P P P P - - - - - - - - Mr. Irfan Siddiqui (President & CEO)* 2/2 P P N/A N/A - - - - - - - - Mr. Talal S.A. Al- Shehab** 2/2 N/A N/A P P - - - - - - - - Mr. Faisal A.A.A. Al - Nassar 4/4 - - - - P P P P - - - - Syeda Azra Mujtaba*** 4/4 - - - - P P P P - - - - Mr. Ariful Islam (Deputy CEO) 4/4 - - - - P P P P - - - - Mr. Mohammad Abdul Aleem 4/4 - - - - - - - - P P P P Mr. Noorur Rahman Abid 4/4 - - - - - - - - P P P P Mr. Alaa A.Al Sarawi 4/4 - - - - - - - - P P P P Mr. Muhammad Zarrug Rajab 4/4 - - - - - - - - P P P P * Mr. Irfan Siddiqui was replaced by Mr. Talal S.A. Al-Shehab on April 18, 2017 (2nd meeting held in 2017) due to reconstitution of Board Human Resources and Remuneration Committee. ** Mr. Talal S.A. Al-Shehab was appointed as Member of Human Resources and Remuneration Committee on April 18, 2017 (2nd meeting held in 2017). *** Syeda Azra Mujtaba resigned on January 25, 2018. **** Board IT Committee was constituted on October 25, 2017 and no meeting of the Committee was held in 2017. ANNUAL REPORT 2017 47
  36. Organization Structure AUDIT COMMITTEE BOARD OF DIRECTORS SHARIAH SUPERVISORY BOARD RESIDENT SHARIAH BOARD MEMBER Shariah Audit & Advisory Internal Audit & Business Risk Review Company Secretariat PRESIDENT & CEO Finance Product Development & Shariah Compliance Legal Affairs General Services and Special Assets Management Human Resources, Learning & Development Risk Management Compliance DEPUTY CEO BRANCH NETWORK BUSINESS SEGMENTS SUPPORT Bahawalpur Retail Banking Operations Balochistan Treasury & Financial Institutions Information Technology & Digital Banking Faisalabad Corporate & Investment Banking Customer Support Gujranwala Commercial Banking Information Security Hyderabad SME & Agriculture Finance Corporate Communication Consumer Finance Project Management Office Karachi (East) Karachi (North) Karachi (South) Karachi (West) Lahore (East) Lahore (West) Multan North Potohar 48 MEEZAN BANK LIMITED Functional reporting Administrative reporting
  37. Management Team Head Office Irfan Siddiqui Ariful Islam Arshad Majeed Faiz Ur Rehman Ijaz Farooq Muhammad Abdullah Ahmed Shabbir Hamza Khandwala Syed Amir Ali Zia Ul Hassan Ahmed Ali Siddiqui Muhammad Raza Munawar Rizvi Syed Tariq Hassan Khalid Zaman Khan Muhammad Ismail Muhammad Sohail Khan Ebrahim Yakoob Muhammad Farhan Ul Haq Usmani Muhammad Umar Khan Fareedy President & CEO Executive Director & Deputy CEO Consumer Finance Information Technology & Digital Banking Retail Banking, Commercial, SME & Agriculture Treasury & Financial Institution Finance Corporate & Investment Banking Operations Product Development & Shariah Compliance Customer Support General Services and Special Assets Management Risk Management Human Resources, Learning & Development Compliance Company Secretary Internal Audit & Business Risk Review Shariah Audit & Advisory Legal Affairs Regions Muhammad Saleem Khan Anwar Ul Haq Kazi Muhammad Aamir Syed Salman Ahmed Kamran Zafar Mateen Mahmood Aamir Ali Durrani Abid Hussain Abid Khalid Masood Mashkoor A.G. Khan Moazzam Saeed Khan Muhammad Tufail Rahim Bux Memon General Manager – North & Potohar Regions General Manager – Lahore East Region General Manager – Karachi East Region General Manager – Lahore West Region Regional Manager – Karachi West Region Regional Manager – Karachi North Region Regional Manager – Balochistan Region Regional Manager – Gujranwala Region Regional Manager – Bahawalpur Region Regional Manager – Karachi South Region Regional Manager – Faisalabad Region Regional Manager – Multan Region Regional Manager – Hyderabad Region Resident Shariah Board Member Dr. Muhammad Imran Ashraf Usmani ANNUAL REPORT 2017 49
  38. Lorem ipsum Management Committees Asset Liability Management Committee Terms of Reference The Asset Liability Management Committee (ALCO) is responsible for reviewing the Asset and Liability structure of the Bank, transfer pricing, monitoring the liquidity situation, evaluating asset classes and taking decisions with regards to risks and rewards associated with purchasing and selling of these assets. Market and Liquidity risks are examined based on stress testing exercises and gap analysis while considering the overall economic environment of the country. The ALCO is also responsible for monitoring policy rate movements and taking necessary steps across all assets and liabilities to ensure that the overall profitability of the Bank is maximized. This is mainly performed by alterations in the profit rates offered across different deposit products. It is also responsible for ensuring that the Bank’s overall operations are fully compliant with regulatory framework for the business as provided by the State Bank of Pakistan. Business Continuity Steering Committee Terms of Reference The Business Continuity Steering Committee (BCSC) is responsible for ensuring that adequate business continuity/ disaster recovery plans are prepared, tested and that decision making authority in the event of a crisis is clearly defined. The BCSC reviews and recommends Business Continuity Plan for approval of the Board. It facilitates in execution of Business Continuity Plan as and when invoked and in resumption of critical business activities. BCSC steers BCP project(s) and their implementation and provides guidance on project direction to ensure that organizational requirements are met. It is also responsible for reviewing the findings of mock drills/actual disasters and facilitating in removal of identified gaps. President & CEO - Chairman Deputy CEO - Alternate Chair Chief Financial Officer & Group Head Finance Group Head Retail, Commercial, SME & Agriculture Finance Group Head Consumer Finance Group Head Corporate & Investment Banking Group Head Risk Management Group Head Treasury & Financial Institutions Deputy CEO - Chairman CRO & Group Head Risk Management Group Head Operations Group Head Retail, Commercial, SME & Agriculture Finance Group Head General Services & Special Assets Management Head of Compliance Manager IT Disaster Recovery Head Enterprise Risk Management Management Committee* Group Head Information Technology & Digital Banking Group Head Retail, Commercial, SME & Agriculture Finance Group Head Treasury & Financial Institutions Group Head Consumer Finance Chief Financial Officer & Group Head Finance Group Head Corporate & Investment Banking Group Head Operations Head of Product Development & Shariah Compliance Group Head Customer Support Group Head General Services & Special Assets Management CRO & Group Head Risk Management Head of Human Resources, Learning & Development Company Secretary Head of Internal Audit & Business Risk Review Head of Compliance Head of Shariah Audit & Advisory Head of Legal Affairs * The Business Review Committee was merged into the Management Committee during the year. The rationale for this merger was to promote cross-functional synergy for enhancing operational efficiency as well as achieving the Bank’s strategic objectives through a more comprehensive platform comprising representation of all business and support units. Credit Risk Management Committee President & CEO - Chairman Deputy CEO Chief Financial Officer & Group Head Finance CRO & Group Head Risk Management Group Head Retail, Commercial, SME & Agriculture Finance Group Head Corporate & Investment Banking Group Head Treasury & Financial Institutions Head of Credit Risk 50 MEEZAN BANK LIMITED Terms of Reference The Management Committee (MC) is responsible for monitoring and overseeing the administrative, operational and business matters of the Bank to ensure that they are carried out keeping the founding principles, objectives and values in view. It also spearheads the adoption of best practices in all operations of the Bank, makes all processes and procedures efficient and effective and encourages and facilitates improvement at all levels and in all functions of the Bank. The MC achieves this objective by scanning the market for latest developments in banking practices and procedures, with focus on effective delivery of Islamic Banking to Meezan Bank’s customers. It also makes recommendations to the CEO/DCEO in the light of local and international best practices in both business and operations. The MC is also responsible for keeping the CEO/DCEO fully informed of its actions and ensures reporting and obtains approval from the CEO/DCEO before making decisions. Terms of Reference The Credit Risk Management Committee (CRMC) is responsible for overseeing credit risk activities on Bank wide basis while ensuring compliance with regulatory requirements and internal policies. The CRMC’s responsibilities also include providing support and guiding front lines in managing their businesses, performing finance portfolio review, establishing financing standards and benchmarks, maintaining adequate industry diversification and deciding upon provisioning. It is also required for delegating financing approving powers and prudential limits on large financing exposures.
  39. Management Committees Disciplinary Action Committee Terms of Reference The Disciplinary Action Committee (DAC) is responsible for taking action on any violation of policies and procedures, acts of fraud and forgery, breaches of discipline and code of conduct, ethics and business practices, law of the land and statutory regulations of SBP by employees. Disciplinary Action Review Committee Terms of Reference The Disciplinary Action Review Committee (DARC) is responsible for reviewing the appeals of the staff against whom DAC has already taken disciplinary action. The DARC is formed with a view to ensure a fresh review of each appeal filed against the DAC decision. Head of Compliance - Chairman Group Head General Services & Special Assets Management CRO & Group Head Risk Management Head of Human Resources, Learning & Development Head of Internal Audit & Business Risk Review Deputy CEO - Chairman Company Secretary Head of Legal Affairs Compliance & Operational Risk Management Committee* President & CEO - Chairman Deputy CEO Chief Financial Officer & Group Head Finance Group Head Information Technology & Digital Banking Group Head Retail, Commercial, SME & Agriculture Finance Group Head Operations Group Head Product Development & Shariah Compliance CRO & Group Head Risk Management Head of Human Resources, Learning & Development Head of Compliance Head Enterprise Risk Management * This Committee was earlier called Internal Control and Operational Risk Committee. In order to meet SBP guidelines on Compliance Risk Management, ICORC has been reconstituted as Compliance & Operational Risk Management Committee in line with regulatory requirements." Terms of Reference The Compliance & Operational Risk Management Committee (CORMC) is responsible for overseeing compliance risk by reviewing the adequacy of controls in place to meet regulatory requirements. The Committee is responsibe for promoting compliance culture in the Bank, facilitate in implementation of Compliance Program and oversee Money Laundering and Financing Terrorism risk. In addition, the Committee also oversees Operational Risk Framework by ensuring that policies and procedures are in place in all key risk areas and by reviewing Key Risk Indicators. The Committee also monitors level of compliance of major unresolved and recurring issues pointed out in the Internal Audit, Shariah Audit and SBP Inspection Report. IT Steering Committee Terms of Reference The IT Steering Committee (ITSC) is responsible for identifying, prioritizing, and overseeing IT plans and projects. The ITSC does this by working with the Information Technology department to establish overall priorities and provide general direction for IT initiatives by identifying and sponsoring projects that support the Bank's business plan. It also assists the Bank's senior management, including IT Head, in effectively utilizing IT resources to meet the business and operational needs of the Bank, as well as in resolving conflicts in demand for IT services and resources. Investment Committee Terms of Reference The Investment Committee (IC) is responsible for ensuring that the Bank's investments in listed equity securities are made in compliance with the: Deputy CEO - Chairman Group Head Information Technology Group Head Operations Group Head Consumer Finance Group Head Retail, Commercial, SME & Agriculture Finance Group Head Corporate & Investment Banking Head of Product Development & Shariah Compliance Manager Information Security Deputy CEO - Chairman Chief Financial Officer & Group Head Finance Chief Executive Officer of Al Meezan Investment Management Limited Chief Investment Officer of Al Meezan Investment Management Limited (i) Investment Policy of the Bank (ii) Limits prescribed under Prudential Regulations issued by the State Bank of Pakistan and (iii) Directives of Shariah Supervisory Board of the Bank The IC also reviews the performance of equity investment portfolio through its regular meetings and discussions wherein the members also discuss the forgoing investments and future strategies in line with investment policy and market dynamics. ANNUAL REPORT 2017 51
  40. Corporate Governance Evaluation of the Board of Directors The Board of Directors of Meezan Bank sets the Bank ’s strategic direction and ensures that the organization stays true to this direction - enabling it to achieve its long-term objectives while ensuring regulatory compliance. To discharge its fiduciary responsibility of safeguarding the stakeholders’ interests, the Board of Directors has developed criteria for its performance evaluation as required by the State Bank of Pakistan and the Securities and Exchange Commission of Pakistan. The Board of Directors discusses strategic objectives, budgetary expenses and projected national and international macroeconomic indicators to ensure that the Bank’s business strategy stays aligned with the macroeconomic indicators. The Board of Directors and its subcommittees are competent and experienced, representing diversified educational and vocational backgrounds which are invaluable in determining the overall direction of the organization. The Board of Directors is keen to ensure that it reviews the effectiveness of its performance periodically. To that end, all individual Board members answer a comprehensive questionnaire focused on evaluating, from various angles, whether the Board has discharged its duties diligently and with foresight. A committee of Directors is designated to collate individual responses and present them to the Board for deliberation and discussion. During the self-evaluation exercise, the Board evaluates itself from the following perspectives: ■ ■ ■ ■ ■ ■ Evaluation of the overall Board Evaluation of the Chairperson Evaluation of Individual Directors Evaluation of Independent Directors Evaluation of Board Committees Evaluation of the CEO This exercise in critical self-assessment allows the Board to evaluate its performance and overall effectiveness in setting strategies, devising control processes, reading market trends by monitoring micro and macroeconomic factors, and responding to adverse unforeseen situations to further the cause of a learning organization. This process also ensures that the Board is constantly growing intellectually and the responsibility of steering the Bank to new heights of success is discharged effectively and efficiently. Performance Review of the President & CEO The President & CEO of Meezan Bank is responsible for supervising and leading the strategic and managerial affairs of the Bank. Various elements of the President & CEO’s performance are monitored continuously and discussed periodically by the Board. As leader of the organization and executor of the strategy approved by the Board to further the interests of all stakeholders of the Bank, the President & CEO is evaluated on parameters such as financial performance and profitability, budget allocation and utilization of resources, 52 MEEZAN BANK LIMITED organizational expansion, sustainability of product lines, credit ratings and inculcation of the desired organizational culture which is conducive to professional and ethical excellence. Roles and Responsibilities of the Chairman The Chairman of the Board of Directors ensures that the organization keeps true to its long-term vision. Responsible for leadership of the Board, the Chairman ensures that the Board plays an effective role in fulfilling all its responsibilities. The Chairman’s role entails the following: ■ ■ ■ ■ ■ Ensure that all members of the Board may participate in all meetings and have the opportunity to express their opinion. Ensure that dissent of directors, if any, is properly recorded in the minutes. Ensure that minutes truly reflect what transpired during the meeting. Ensure that the Board discharges its role effectively and swiftly in line with regulatory requirements. Ensure that the Board subcommittees perform their designated functions with due diligence. Roles and Responsibilities of the President & CEO The President & CEO’s role constitutes an absolutely engaged position, demanding complete involvement and shepherding of the organization. The role entails the following: ■ ■ ■ ■ ■ ■ ■ ■ Provide an enabling environment within the Bank to facilitate promulgation of a culture of Shariahcompliance. Ensure execution of the strategy developed by the Board. Ensure that the Bank maintains its business position and brand image as the leading Islamic Bank of the country. Efficiently allocate and manage organizational resources and budgets to ensure achievement of short- and mid-term objectives that contribute to the attainment of the long-term strategic goals. Establish a system of checks and controls to supplement the fast-paced growth of the Bank. Provide liaison between the Board and the Bank’s management to ensure alignment of managerial efforts with Board’s directives. Foster a culture of professionalism and high ethical standards within the Bank. Facilitate an organizational culture of development of innovative products and services to service the growing needs of a diverse range of customers. Role of Shariah Supervisory Board The Shariah Supervisory Board (SSB) is entrusted with the duty of directing, reviewing and supervising the activities of the Bank in order to ensure that they are in compliance with the rules and principles of Shariah. All products and services of the Bank are launched with the approval of the Shariah Supervisory Board whose roles also entail the following:
  41. ■ ■ ■ ■ To develop a comprehensive Shariah-compliance framework for all areas of operations of the Bank that serves as a guiding principle to the Bank for maintaining its commitments towards adherence to principles of Shariah. Ensure Shariah-compliance of all aspects of the Bank by virtue of having unhindered access to all books of accounts, records and documents. Guide and direct the Bank through rigorous deliberation on issues placed before the Shariah Supervisory Board. Monitor the Shariah-compliance of the Bank through Shariah Audit and Shariah-compliance reviews and prescribe appropriate enforcements whenever needed. Directors’ Qualification Members of Meezan Bank’s Board are experienced and qualified professionals who bring a diverse range of professional and technical expertise to the organization. The Directors had attended a Directors Certification program as required under Code of Corporate Governance that the Bank had arranged in 2016. Accordingly, the Bank is in compliance with respect to training requirements of its Directors. Code of Conduct & Ethical Standards for Directors The Bank has also developed ‘Code of Conduct & Ethical Standards for Directors’ as per requirements of Code of Corporate Governance which is signed by every Director of the Bank. Investors’ Relations section on the Corporate Website This relevant section is available on the Bank’s website: www.meezanbank.com Investor Grievances Meezan Bank has established a robust grievance reporting mechanism which seeks to resolve any complaints or unattended issues if, despite all vigilance, do occur. The mechanism put in place allows for such matters to be reported electronically, in writing or over the phone. To ensure that the stakeholders may register their complaints conveniently, a multitude of online forms is available on Meezan Bank’s Corporate website (www.meezanbank.com). The Investor Complaints Form, on submission, is sent directly to the Office of the Company Secretary. Similarly, a general complaints form for reporting and resolution of business-related complaints sends registered issues to relevant departments. A dedicated email address (complaints@meezanbank.com) is also in place for the express purpose of reporting issues if the stakeholder feels the need to email rather than use online forms. Furthermore, grievances may also be lodged by calling the Bank’s Call Center (UAN: 111-331-331 & 111-331-332), which is functional round the clock, where officers are available to assist stakeholders with their queries and complaints. Directors’ Profiles and their Involvement / engagement in other companies This information has been incorporated in the Directors’ profile. Non-Executive Directors At present all the Directors on the Board are non-executive except for President & CEO and the Deputy CEO. Independent Directors and their Independence The Board has 03 (three) Independent Directors and they meet the criteria of independence under Code of Corporate Governance. Statement of Compliance with the Code of Corporate Governance The Statement of Compliance with Code of Corporate Governance is annexed with this annual report. Accessibility of Annual Report Annual Report 2017 and other information of the Bank are accessible on Bank’s website: www.meezanbank.com. ANNUAL REPORT 2017 53
  42. SWOT Analysis 54 S STRENGTHS W WEAKNESSES O OPPORTUNITIES T THREATS Being aware of the environment in which one operates , as well as of one's own strengths and weaknesses, is a key element in the success or failure of any business. Meezan Bank's management is cognizant of the fact that the economy and the banking industry are in a state of flux and regularly conducts SWOT analysis of the organization to capitalize on its strengths and work on its weaknesses in view of the opportunities available in its environment and the threats that it needs to overcome. A SWOT summary of the business as it stands today is given below: MEEZAN BANK LIMITED ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ Pakistan's largest Islamic bank Largest market share of Pakistan's Islamic banking sector Comprehensive menu of truly Shariah-compliant products and services Strong financial indicators Dedicated Shariah ■ Supervisory Board comprising of world-renowned Shariah scholars Dedicated department for development of Shariahcompliant products, research and Shariah audit Limited opportunities for investment of surplus liquidity Limited availability of human resources with Islamic banking knowledge Increasing awareness about Islamic financial services and demand for Shariah-compliant products and services Growing local and international Islamic banking market Significant potential for market penetration Macro-economic challenges Conventional banks entering Islamic banking market Misconceptions and misunderstandings among the general public about Islamic banking
  43. Risk and Opportunity Report One of the major concerns haunting all entities , irrespective of the nature, size and complexity of their business is the missed business opportunities that arise when necessary risks are not taken. Pursuing opportunities requires taking risks, which most are often reluctant to do so, because of the fear of the potential negative consequences. This equally applies to the banking business which by its very nature is risky coupled with enhanced opportunities over the period of time. Banks are exposed to commercial and financial risks including credit, concentration, liquidity, market, rate of return and equity investment risks. Moreover, Meezan Bank being the premier Islamic Bank has to manage an important risk namely Shariah non-compliance risk that is only unique to Islamic banking. Key Sources of Uncertainity Rapidly changing environment brings with it number of uncertainties. The decrease in foreign exchange reserves, modest growth in the inflation rate, volatility in global oil prices, widening trade deficit, pressure on exchange rate flexibility along with rising external deficit, low level of fiscal discipline, delaying privatization process, dwindling performance of stock exchange market and increase in power sector receivables will have their bearings on economy including banking sector of the country. No change in discount rate that remained on the lowest side has its implications on profitability of banking sector as a whole. An upward increase in the interest rate scenario will ease the pressure on performance of banks. However, improved security condition, energy supply and infrastructure investments have their positive impacts. This is reflected in the private sector credit take-off and improved recoveries of non-performing financing. Enhanced realization for financial inclusion in the form of branchless and digital banking, need for efficient alternate distribution channels with increasing types of facilities and security features, inadequate focus on small and medium financing, search for new channels to upscale fee based income and outreach of fintechs in embracing wide range of activities put pressure on banking sector to think and act out of the box. Lot of futuristic objectives also depend on materialization of strategic initiatives under China Pakistan Economic Corridor (CPEC) considered as game changer under global plan of Road Belt Initiative. However, CPEC has its own challenges in terms of its regional context, political polarization within and financial & feasibility intricacies of projects involved. Several opportunities can be created under CPEC which include infrastructure project financing and share of Pakistani banks in those projects. The fruition of this corridor strengthens Pakistan’s long-term economic prospects and with it the public sector financing is expected to rise. In the context of Islamic banks, deployment of excess liquidity leads to uncertainty as there seems no offering of fresh Government of Pakistan Sukuks. Meezan Bank continued to explore opportunities to achieve its strategic objectives while ensuring proper risk mitigates and controls in place. Under the overall supervision of the Board of Directors and Shariah Supervisory Board, various business units of the Bank continued to explore new business opportunities in close coordination with Risk Management, Compliance, PDSC,Information Technology and Operations departments, keeping in mind the risk appetite of the Bank. New business opportunities are supported through state of the art data centre, successful implementation of new version of core banking system, broad spectrum of alternate distribution channels with enhanced security environment, increased focus on personalized banking and high standards of service quality. While searching for new business opportunities and improving its internal processes, the Bank is fully cognizant of strategic, Shariah non-compliance, regulatory and reputational risks as well as risks arising from people, processes, systems and external events. Risk management in banking has been transformed over the past decade, largely in response to regulations that emerged from the global financial crisis, technological innovations and cyber crimes. The Bank continuously improves upon its Risk Management Framework established by the Board of Directors by enhancing oversight by the Board, its Board Risk Management Committee and Management Committees. The Bank implements an entity wide ‘Three Lines of Defence” model for risk management. Business lines/ front offices serve as first line of defence and are primarily responsible for managing risks on day-to-day basis. Risk management and other control functions being the second line of defence are responsible for assisting business lines for designing and implementing adequate controls to manage risks. The internal audit function is responsible for providing independent assurance on adequacy of Bank’s risk management environment. The Bank vigorously improves upon its risk policies, procedural manuals, systems, tools and techniques, management information systems and human resources capacity. The Bank has enhanced its collaboration with solution providers for strengthening its control profile. Risk management tools help the Bank in identification, assessment, reporting and management of both conventional risks and risks peculiar to Meezan Bank. Further, these tools are subject to continual development and refinement. Risk Management strategies for various risk types and business continuity plan and IT disaster recovery arrangements are also in place to mitigate actual and potential risks. This enables the transformation of Bank’s risk management methodology from being ‘crisis fighters’ to ‘proactive and systematic risk managers’. ANNUAL REPORT 2017 55
  44. Materiality Approach While managing various risks , the Bank also focuses on materiality concept. Resources are diversified to medium to high risky areas while minor risks are typically managed through transfer and outsourcing strategy. The Bank manages all its critical operations on its own. The Bank defines its risk appetite at the level of risk it is prepared to take while pursuing its business strategy recognizing a range of possible outcomes as business plans are implemented. Meezan Bank’s risk appetite is expressed both in qualitative and quantitative terms to allow tracking of performance in line with strategic plan, business environment and expectations of stakeholders. The Bank emphasizes on diversified risk assessment tools and techniques and risk mitigates to better deal with the opportunities that it comes across. Integrated efforts help the Bank in significantly expanding its deposit base, financing portfolio and branch network without exposing itself to unwarranted risks. The Bank will continue to explore new business opportunities coupled with proper risk mitigants and controls to serve its widening customer base Insha’Allah. Business Continuity Plan The Business Continuity Management (BCM) is a life cycle with the objective of ensuring organizational resilience during crisis situations. In Meezan Bank the business continuity is managed at strategic, tactical and operational level. It involves documented plans and effective decision making, coordinated efforts and operational continuity. The Bank has in place a comprehensive business continuity framework with clear set of governance structure, business continuity and information technology disaster recovery plans, clearly defined roles and responsibilities of individuals and teams for disaster response, recovery, resumption and restoration of activities to a pre-defined level of operation following disruption. The BCM program is in line with the guidelines issued by the regulator and industry standards and is subject to periodic reviews. It sets out the agreed arrangements for bringing disaster events under control and ensures availability of necessary resources for maintaining critical business functions. Having a BCM framework in place helps the Bank to ensure safety of human resources, protection of critical assets and resumption of mission critical activities from alternate processing site(s) in case the primary site(s) are not accessible or available. In Meezan Bank, the first priority is always is to ensure the safety of human life in case of any disaster. Detailed business continuity including information disaster recovery plans have been established with the approval of the Board of Directors. The Bank has also established Alternate Processing Sites at three different locations within Karachi with the overall objective to ensure resumption of Mission Critical Activities (MCAs) in case of disaster. IT disaster recovery is managed from Islamabad. The Bank’s BCM team continuously strives to improve upon business continuity preparedness of the Bank. During the year, the Bank continued testing the effectiveness of business continuity arrangements through periodic drills, performance of critical operations from alternate sites, information technology disaster management activities as well as evacuation exercises. Branch evacuation procedures have been further refined and emergency response teams have been streamlined. The Bank conducted evacuation drills for its entire branch network that enables the Bank to test the resilience against unforeseen hazardous eventualities. Outcomes of drills are documented and necessary improvements are an on-going process. This strengthens the confidence of stakeholders regarding the availability of products and services under stress scenarios and embeds business continuity within the organizational culture of the Bank. 56 MEEZAN BANK LIMITED
  45. Products and Services Meezan Bank offers a diverse range of Shariah-compliant banking products and services to cater customer requirements . All products of the Bank are approved by the Shariah Supervisory Board and are completely Riba-Free. Meezan Rupee Current Account This is a checking account that works on the basis of 'Qard' and provides the convenience of conducting day-to-day transactions. There is no restriction on withdrawals or number of transactions and there is no deduction of service charges if the balance maintained is low. Meezan Kids Club Account Meezan Kids Club Account is introduced for children under the age of 12 years to cultivate the habit of saving in the early years. The account can be opened from Rs 500 onwards. The profit is paid on monthly basis. VISA Debit card fee is waived for the first year. Exciting gifts are given to Kids Club members on account opening. Meezan Rupee Savings Account Meezan Bank's Rupee Savings Account provides monthly profit along with a variety of free packaged benefits. Profit is calculated on daily balance and credited into the account on a monthly basis. Minimum investment required for opening an account is Rs 100 and there is no deduction of service charges if the balance maintained is low. Meezan Teens Club Account Meezan Teens Club Account is Pakistan's first teens account designed to cater the requirements of the age group of 12 to 18 years. Teens Club account can be opened from Rs 1,000. The profit is paid on monthly basis. VISA Debit card fee is waived for the first year. Exciting account opening gifts await the Teens Club members. Meezan Bachat Account Meezan Bachat Account is targeted towards individuals including housewives, retired and salaried customers who desire a high profit rate. The minimum investment required for opening an account is Rs 50,000. Profit is calculated with a higher weightage for account balance up to Rs 25 million. There is no restriction on withdrawals or numbers of transactions and there is no deduction of service charges if the balance maintained is low. Meezan Kafalah is a savings plan through which customers can save for their future plans such as education or wedding of their child, going for Hajj, planning for old age etc. Meezan Kafalah is a Shariah-compliant alternative to bancassurance with easy exit option at any time. An individual can start his plan with monthly contribution as low as Rs 2,000 only. The Bank also provides maximum Takaful coverage of upto Rs 15 million. Plans are available from 3 to 15 years. Karobari Munafa Account Meezan Bank's Karobari Munafa Account is a savings account where profit is calculated on daily balance and credited into the account on a monthly basis. The minimum investment required for opening an account is Rs 1 million. There is no restriction on withdrawals or number of transactions and there is no deduction of service charges if the balance maintained is low. Meezan Kafalah Meezan Labbaik Meezan Labbaik facilitates customers who wish to perform Hajj & Umrah via renowned agents on Bank’s panel. Customers have multiple Travel Asaan payment options allowing them to decide when and how they want to pay off the plan. Alternatively, customers can also avail Mudarabah based Labbaik Savings Asaan Account in which customers can save for the Hajj & Umrah of their parents, spouse, children or other family members on some future date. Customers can also apply for Hajj through the Bank’s branches on the Govt. Hajj Scheme as announced by the Government of Pakistan. ANNUAL REPORT 2017 57
  46. Foreign Currency Current Account Meezan Foreign Currency Current Account is a Qarz based account that can be opened with just USD / Pound/Euro 100. There is no deduction of service charges if the balance is low. Certificates of Islamic Investment Certificates of Islamic Investment are Term Deposit certificates for investment periods ranging from 3 months to 5 years with profit payment on monthly, quarterly and maturity basis. Minimum investment required is Rs 50,000 for profit payment option of quarterly and at maturity. To receive monthly profit payment, a minimum investment of Rs 200,000 is required. There is no limit on maximum investment. Pre-mature withdrawal can be made as per the approved schedule. Meezan Asaan Current Account Meezan Asaan Current Account provides swift and hassle-free account opening process, since there is no requirement of submitting any proof of income document for opening this account. Account works on the basis of ‘Qard’ and can be opened with a minimum investment of Rs 100/- and a valid CNIC. Meezan Asaan Account Holder can withdraw maximum Rs 500,000 from his account, during the month and can maintain a maximum credit balance of Rs 500,000. Meezan Amdan Certificate Meezan Amdan Certificate is a Term Deposit certificate that offers a higher expected monthly profit to investors for periods of 5 1/2 & 7 years. It is ideal for those individuals and organizations that need a regular stream of monthly income. Minimum investment required is Rs 100,000 for regular customers, while for widows and senior citizens the minimum investment is Rs 50,000. Pre-mature withdrawal can be made as per the approved schedule. Meezan Asaan Savings Account Meezan Asaan Savings Account provides swift and hassle-free account opening process, since there is no requirement of submitting any proof of income document for opening this account. Account works on the basis of ‘Mudarabah’ and can be opened with a minimum investment of Rs 100/- and a valid CNIC. Meezan Asaan Account Holder can withdraw maximum Rs 500,000 from his account, during the month and can maintain a maximum credit balance of Rs. 500,000. Meezan Payroll Card Meezan Payroll Card enables companies to manage payments (salary, pension, staff reimbursem*nts and bonus) in a cost effective, secure and efficient manner. Companies can easily issue Meezan Payroll Card to their employees and once employees’ salaries are loaded onto their accounts, they can immediately draw cash from any of Meezan Bank’s or 1Link member bank’s ATMs. Monthly Mudarabah Certificate The Monthly Mudarabah Certificate is a short-term deposit product for an investment period of one month only. Profit is paid on maturity with re-investment option available on a continuous basis. Minimum investment required is Rs 100,000. Pre-mature withdrawal can be made as per the approved schedule. Meezan Payroll Card not only allows cash withdrawals through ATMs, but also allows customers to pay bills, top-up mobile credits and transfer funds to any 1Link member bank through Meezan Bank ATMs. Takaful Coverage In line with its customer focused strategy, Meezan Bank is offering Takaful coverage to individuals and sole propertiership account holders in case of accidental death or permanent disability. Customers maintaining an average monthly balance of Rs 10,000 and above, are entitled to a Takaful cover of upto maximum Rs 1 million. In addition, ATM cash withdrawal Takaful Coverage, on the amount withdrawn from any ATM, is offered to all the account holders, in case money is snatched within the radius of 1.5 kms and 30 minutes.* *(conditions apply, please refer to the Bank’s website) 58 MEEZAN BANK LIMITED
  47. Online Branches Meezan Bank offers free Online Banking facility on all Pak Rupee Accounts to its customers . This enables the Bank’s customers to access their accounts and conduct banking transactions from any of Meezan Bank's 600+ branches nationwide, regardless of which branch or city they have their account in. This facility provides great convenience for depositing and withdrawing cash, making pay orders and availing numerous other banking services. Meezan Premium Banking Meezan Premium Banking is the Bank’s Shariah-compliant priority banking service developed to address the needs of high net worth customers. Premium Banking customers enjoy special privileges such as: ■ ■ ■ ■ ■ Meezan MasterCard Platinum Debit Card - a very prestigious card, offering discounts at selected retail outlets and restaurants across the country. Access to International CIP lounges at selected airports in Pakistan and Middle East. Dedicated Premium Banking Centres at Karachi, Lahore, Islamabad, Sialkot and Faisalabad. Premium Phone Banking-a dedicated Call Centre exclusively for Premium Banking customers. Fee waivers on selected banking services. Internet Banking Meezan Bank’s Internet Banking facility provides customers global access to their account 24 hours a day, 7 days a week. The Internet Banking facility offers a suite of features such as account statement views, payment of utility bills with QuickPay service, funds transfer facility, cheque status inquiry, complaint logging, chequebook requisition, pay order request and stop payment marking. Customers can also invest and redeem funds from Al-Meezan Mutual Funds. Online Banking Mobile Banking App Designed for the customer on the move, the App is available to download through Google Play and Apple App Store. Compatible with all major Android and iOS versions, the App allows customers to check debit card discounts as well as to view account activity, pay bills, top-up mobile phone credits, transfer funds and block/unblock cards in a fast, convenient and secure way. Secure e-Commerce Payments Meezan Debit Cards now offer secure and seamless online shopping experience via Verified by Visa and Mastercard SecureCode service. This latest technology ensures online safety by authenticating transactions through a unique code sent to customers’ registered mobile or email address; eliminating the need for WebPay Session activation. Fonepay Meezan Bank has partnered with Mastercard and Fonepay to launch the latest award winning innovation in payments based on QR technology. Meezan Bank customers can now simply scan the QR image displayed at shops to make the payment at over 50,000 merchants in Pakistan. Meezan Secure Online Payment Meezan Fonepay Meezan ATM Network Meezan Bank offers a nationwide network of over 580 ATMs located at its branches and at prominent off-site locations across the country. Meezan Bank ATMs offer Funds Transfer, Bill Payment, Mutual Funds Investment and Redemption, Instant Debit Card Activation, Debit Card PIN generation and PIN change facilities in addition to cash withdrawals. ANNUAL REPORT 2017 59
  48. SMS Alerts Meezan Bank 's SMS Alerts service keeps customers informed about activities in their accounts; enabling them to keep track of their financial transactions along with latest account balance. Meezan Bank customers also get email alerts of their transactions which is particularly helpful for customers traveling abroad. Corporate SMS Alert service has also been launched to meet the needs of corporate clients. Meezan VISA Debit Card Meezan VISA Debit Card provides convenience to customers to access their money anytime and anywhere, at all outlets and ATMs displaying the VISA symbol. The new NFC based payment capability on Meezan VISA Debit Card allows customers to pay for any transaction on the go by just tapping the card at the merchant counters accepting NFC payments. Moreover, EMV Chip ensures advanced security available to counter skimming frauds. Meezan MasterCard Debit Card Meezan MasterCard Titanium Debit Card is the first Titanium debit card launched in Pakistan. The debit card comes packed with benefits for the frequent traveller offering free access to airport lounges across the Middle East, coupled with a wide array of exclusive offers and discounts within Pakistan and worldwide. Moreover, Meezan MasterCard Platinum Debit Card caters to exlusive needs of Premium Banking customers with even more features and benefits. MasterCard User Guide Terms and Conditions Utility Bill Payment IBFT Postpaid (Inter Bank Funds Transfer) Mobile Bill Payment Mini Statement Cash Withdrawal 111-331-331 & 111-331-332 Meezan PayPak Debit Card PayPak is a domestic payment scheme owned and operated by 1Link Guarantee Ltd duly approved by State Bank of Pakistan. Meezan PayPak Debit Card is a PIN based card that ensures utmost security not only at ATM machines for cash withdrawal but also at POS terminals while shopping at all merchant outlets across Pakistan. SMS Banking Meezan SMS Banking is an interactive service that allows our customers to access their account on demand anytime, anywhere from their mobile phone. 60 MEEZAN BANK LIMITED Prepaid Mobile Phone Airtime Purchase www.meezanbank.com Commercial Vehicles Ijarah Meezan Commercial Vehicles- Ijarah offers financing facility for all the vehicles that can be used for commercial purposes. This includes financing to logistics, transportation, distribution and oil marketing companies etc. The facility ranges from small truck, vans, coasters, buses to heavy trucks, truck chassis, prime movers etc. This product also provides customized financing plans for specific SME and Corporate customers. Meezan Consumer Ease Durable Goods Meezan Consumer Ease – Durable Goods Financing is first ever Shariah-compliant limit based financing facility, which allows customers to purchase laptops, generators and various consumer durable items such as LED TVs, air conditioners, washing machines, mobile phones etc. on easy and affordable monthly installments. A one-time limit approval makes the process simple and hassle-free for the customer, making him/her eligible for multiple financing facilities for Riba-free goods. The Consumer Ease products are based on Shariah concept of Musawamah, which is a general and regular kind of sale. Car Ijarah Based on Ijarah principle, Car Ijarah is an auto finance facility. It is a car rental agreement under which the Bank purchases a new/used/imported car of the customer's choice and rents it out for a period of 1 to 7 years, agreed at the time of the contract. Rental payments start after one month delivery of vehicle to the customer. The Bank also provides Takaful cover of the car. Meezan SMS Alerts
  49. Bike Ijarah Meezan Bike Ijarah is a Shariah-compliant solution which is based on Ijarah principle . Under this facility the Bank purchases the bike and rents it out to the customer for a period of 1 to 3 years, agreed at the time of the contract. Rental payments start after delivery of vehicle to the customer. The facility includes full comprehensive Takaful cover as well. Easy Home Based on the principle of Diminishing Musharakah, Easy Home is a Shariah-compliant home financing facility, in which a customer can buy or build a house, renovate an existing house or replace the conventional house loan with Easy Home facility. With flexible financing tailored to support the customer's need, Meezan Easy Home provides one of the best home financing options in the country with a hassle-free process and a quick turn-around time. Financing Products Meezan Bank offers a wide range of products to its Corporate, Commercial and SME Customers to meet their financial needs. Following is a list of the generic products that are used to offer financing solutions: Murabaha Meezan Bank offers a convenient and easy to use solution for financing raw material and inventory requirements of the customer through Islamic mode of Murabaha. Murabaha is a sale transaction where the seller discloses the cost and profit to the buyer at the time of execution of sale. Murabaha is a short term Islamic facility for meeting asset based working capital requirement of customers where instead of providing a loan, Meezan Bank sells the required asset to the customer on spot or deferred basis. Musawamah Musawamah is a bargain sale in which the Bank does not disclose the cost and profit to the customer. Istisna Meezan Bank offers an Istisna based solution to finance complete working capital requirements of its customers. Istisna is a type of sale transaction where the buyer places an order with the seller to manufacture certain asset and the sale is completed upon delivery of the asset to the buyer. Under this facility, Meezan Bank provides funds to customers for manufacturing certain assets for the Bank and then, upon delivery, sells the assets in the market. Commodity Salam This is a working capital financing solution whereby Bank and Customer enter into a sale contract in which sale price is paid by the Bank in advance and Customer delivers the commodity/goods on deferred basis. Upon delivery, Bank sells the goods in the market. Tijarah This is a working capital solution especially for those customers who sell their inventory on credit and require funds for operations during the credit period. In Tijarah, the Bank purchases the finished goods from the customer and after taking the delivery, sells the goods in the market. Ijarah Meezan Bank provides Ijarah based products to provide flexible solution for meeting long term financing requirements of the customers. Ijarah technically means to give something on rent. The Bank uses this product for medium and long term financing purposes where the Bank acquires the asset required by the customer and then leases it to the customer for a fixed period. This product is used for the financing of assets such as plant, machinery, generators, equipment etc. Running Musharakah This is a Shirkatul-aqd based financing facility offered to the customers where the Bank participates in the operating activities of the customer and shares profit and loss as per the actual performance of the business. This product is also used as a viable financing solution for Service Industry and Travel Agents whose financing needs are generally not addressed by other Asset backed products. Diminishing Musharakah This is a medium and long term financing product, where the Bank and the customer jointly purchase an asset and create joint ownership in the asset. The Bank then leases its share in the asset to the customer while the customer purchases units of ownership in the asset from the Bank at periodic intervals. Upon purchase of all the units the customer becomes the owner of the asset. This mode is used for financing of fixed assets such as land, factory, building etc. Structured Finance Solutions In order to provide solutions to unique financing requirements of the customers such as project financing, CAPEX and BMR requirements, short term retail sukuks etc, Meezan Bank offers specialized hybrid solutions that are specifically developed as per the special financing requirement of the customer. Shariah-compliant range of Trade Financing Solutions Import Financing Meezan Bank offers a comprehensive solution for all the import related financing requirement of its customers. Some of the major import financing products are as follows: Letter of Credit Services In order to facilitate imports of customers, Meezan Bank offers letter of credit establishment services on Wakalah basis at competitive rates and unmatched service quality. ANNUAL REPORT 2017 61
  50. Short-term Import Financing Meezan Bank offers flexible and convenient import financing facility on the basis of Musawamah / Murabaha. If the customer wants to finance its letter of credit, the Bank appoints the customer as its agent to import the goods and customer establishes the LC as an agent of the Bank. Upon receiving possession of the goods, the Bank sells the goods to the customer on a deferred payment bases. Finance against Imported Merchandize Meezan Bank also offers finance against imported merchandize facilities to its customers on the basis of Musawamah/Murabaha. Under this facility, the Bank appoints the customer as its agent to import the goods and the customer establishes the LC as an agent of the Bank. Upon receiving possession of the goods, the Bank sells the goods to the customer on deferred payment basis and then keeps the same goods under its pledge for securing the payment obligations of the customer. Hedging Facilities In order to hedge the risk of foreign currency price fluctuations, Meezan Bank offers a Shariah-compliant hedging facility on the basis of Wa’ad. Long term Import Financing Meezan Bank offers long term import finance facilities on the basis of Ijarah or Diminishing Musharakah where the customer imports the asset either as the Bank’s agent (in case of Ijarah) or as the Bank’s partner (in case of Diminishing Musharakah). Upon receipt of the asset, the asset is leased to the customer for a specified period as per the rules of Ijarah. Export Financing Meezan Bank also offers a full range product menu for exporters where all the requirements of the exporters can be fulfilled under one roof in a convenient manner. Some of the major facilities for exporters are as follows: . Hedging Facilities In order to hedge the risk of foreign currency price fluctuations, Meezan Bank offers Shariah-compliant hedging facility on the basis of Wa’ad Salam & Murabaha as alternative to Export Bill Discounting In order to provide financing for the immediate financing needs of the exporters Meezan Bank offers a Shariah-compliant alternative to export bill discounting where instead of providing loan against the export order, Meezan Bank keeps the export bill as security and extends a fresh Murabaha financing facility to the customer or purchases FCY against Pak rupees from the customer on Salam basis at spot rates to cater to the financing requirements of the customer. Guarantee Services In order to facilitate trade, Meezan Bank offers Shariah-compliant guarantee facility to its customers where the Bank provides different types of payment and performance guarantees on behalf of the customer. 62 MEEZAN BANK LIMITED Meezan eBiz Meezan eBiz allows customers to execute critical banking transactions in real time over the internet while maintaining the security of information exchanged over this channel. With the help of Meezan eBiz, customers can view their account balances, account details, account statements as well as efficiently conduct their day-to-day transactions such as fund transfers, IBFT, salary payments, bill payments, payment orders etc via an automated, secure and versatile electronic processing platform. Meezan eBiz+ Meezan eBiz+ is a customized payments & Cash Management solution that allows corporate customers to not only electronically manage their banking relationship, but also reduce operational overhead by outsourcing the management of collections and payments. Each installation is tailor-made to meet customers’ specific requirements including Host to Host integration with customer ERP system. The functionalities available in addition to the features offered by eBiz+ include: One window solution for all your Cash Management needs ■ ■ ■ ■ Managing collections through customized deposit slip, e-collections, Payment Vouchers and Direct Debit and Alternate Delivery Channels (ADC) Managing payment electronically, such as funds transfer, IBFT, Pay-order issuance, RTGS, Corporate cheques issuance as well as dividends payments Advance level customized reports and e-alerts (email, SMS, SFTP) Online real time account statement and MIS which can be downloaded into multiple formats for auto-reconciliation
  51. The Year in Review Chairman ’s Review Directors’ Report to the Members Directors’ Report to the Members (Urdu) Annexure to the Directors’ Report Statement of Value Added and Distributed Allocation of Income and Expenses to Remunerative Depositors’ Pool Statement of Inventory Statement of Financing Portfolio Income Business and Operations Review Marketing & Corporate Communication Corporate Social Responsibility Sustainability Report 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 the Code of Corporate Governance Statement of Internal Controls Notice of Annual General Meeting 66 68 81 82 83 84 85 85 86 106 107 109 117 118 123 124 125 126 128 129
  52. Chairman ’s Review Alhamdulillah, it gives me great pleasure to present the Annual Report of Meezan Bank for the year 2017. Meezan Bank has now completed 15 years of Islamic commercial banking in Pakistan, starting from humble beginnings with a network of 4 branches in 2002 to close the year 2017 with 601 branches. On behalf of the Board of Directors of the Bank I would like to congratulate and thank the management team for their excellent performance and for establishing Meezan Bank as the clear leader in Islamic Banking in Pakistan. The achievements of Meezan Bank have been recognized by numerous international and local awards including the prestigious IFN award for ‘Best Islamic Retail Bank’ in the world, and the ‘Top 25 Companies for 2016’ award by the Pakistan Stock Exchange. Going forward, it will be our endeavor to maintain Meezan Bank’s leadership position and we remain committed to growing our branch network and increasing our investment in technology. At the same time, we believe that the SME sector plays a pivotal role in Pakistan’s economy and we will increase our exposure to this sector in the coming years. For this purpose we are working with the International Finance Corporation, the private sector arm of the World Bank, to develop various new products for SME customers and implement a comprehensive SME Banking model. We are confident that this initiative will contribute positively towards strengthening the backbone of Pakistan’s economy. We are also investing in building our ‘Branchless Banking’ capability so as to take Islamic Banking to the grassroots of the country and ensure that the large ‘unbanked’ segment of the population can get access to formal financial services. This also supports the Government of Pakistan’s Financial Inclusion objectives and we are fully committed to this endeavor. It will be our endeavor to maintain Meezan Bank’s leadership position and we remain committed to growing our branch network and increasing our investment in technology. 66 MEEZAN BANK LIMITED
  53. During 2017 Meezan Bank successfully completed a 6 % Rights Issue amounting to Rs. 3 billion to further strengthen the capital base of the Bank. The shareholders of the Bank stand fully committed to its future capital needs so as to ensure that we can maintain our growth trajectory. Islamic Banking now represents 14% of the total banking sector, and its market share is increasing every year. As the industry grows, the shortage of Shariah-compliant securities (GoP Sukuks) is of some concern and we would urge the State Bank of Pakistan and the Ministry of Finance to address this important need of the Islamic Banking industry. I would like to take this opportunity to congratulate the State Bank of Pakistan on being recognized as the ‘Best Central Bank in Promoting Islamic Finance’ by Islamic Finance News – Malaysia. This award clearly reflects on the commitment of State Bank towards the implementation of Islamic Banking in Pakistan. I would like to express my gratitude to the State Bank of Pakistan, Ministry of Finance and the Securities & Exchange Commission of Pakistan for their continuous commitment to establish a viable Islamic financial system in the country. I would also like to thank our valuable shareholders, members of the Shariah Supervisory Board and my fellow Board members as well as all Meezan Bank staff for their hard work and dedication that has made it possible for the Bank to achieve such heights of success. Finally, and most importantly, I would like to thank our customers for their support and trust in Islamic Banking, which is the single most important factor in driving the success of Islamic Banking in Pakistan. Riyadh S. A. A. Edrees Chairman February 14, 2018 ANNUAL REPORT 2017 67
  54. Directors ' Report to the Members On behalf of the Board of Directors, we are pleased to present the twenty-first Annual Report setting out the detailed financial results of the Bank for the year ended December 31, 2017. Alhamdulillah, Meezan Bank has completed fifteen years of operations as a full-fledged Islamic commercial bank and has maintained the distinction of being the fastest growing bank in the industry over this period. We are grateful for the blessing of Allah and the commendable team effort that has allowed us to become the dominant leader of the Islamic Banking Industry in Pakistan with a branch network of 601 branches in more than 150 cities. Economic Overview Pakistan’s economy performed well during the year 2017. Real GDP growth maintained its upward trajectory and increased to 5.3% for fiscal year 2016 – 2017 which is the highest in a decade. Pakistan has been ranked the third fastest growing economy in the world as per IMF world outlook database. The Government’s efforts to address the chronic power shortage in the country has finally started to bear fruit with 2,873 MW additional capacity coming on line. This has reduced the disruption faced by industry due to power ‘black-outs’. Overall improvement in business sentiment, historic low interest rate and increased infrastructure spending with a big push from projects under China Pakistan Economic Corridor (CPEC) has boosted private sector credit off-take during the year. Another positive development was the improvement in the law and order situation in the country and this has been one of the factors that has increased business confidence. The high growth of the economy has also brought its fair share of challenges, particularly on external and fiscal account. Renewed pressure on external account finally gave way to a much-needed adjustment in currency as Pakistan Rupee was depreciated in early December 2017, however, the same has been relatively stabilized since then. A major achievement in second half of 2017 was simultaneous launch of USD 2.5 billion Pakistan’s international Sukuk and Euro Bond for 5/10 year tenure where the country obtained both favorable pricing and participation (with bids of around USD 8 billion). Benign movement in oil prices in early 2017, better food supplies and no major budgetary implication on inflation led CPI to clock in at 4.5%. The State Bank of Pakistan (SBP) maintained the policy rate at 5.75% in 2017 as inflationary expectation appears well-anchored. The Pakistan Stock Exchange experienced a volatile year, as the first half of the year embraced optimism on account of Pakistan’s inclusion in MSCI Emerging Markets Index while the latter half observed deteriorating sentiments on the back of political uncertainties. GDP Growth Rate 6% 5.3% 5% 4.5% 4% 3% 3.6% 3.8% 3.7% 4.0% 2011-12 2012-13 2013-14 4.1% 2.6% 2% 1% 0% 2009-10 2010-11 2014-15 2015-16 2016-17 Our Performance Alhamdulillah, the year 2017 was a year of notable achievements for Meezan Bank. Despite low discount rates, as mentioned above, the Bank recorded excellent results and maintained its position as the leading Islamic bank in Pakistan. Meezan is also ranked as the fastest growing bank in the country. The key business results achieved in 2017 are as under: Key Business Results 68 2017 2016 Growth Financing Rs 420 Billion Rs 312 Billion 35% Branch Network 601 Branches 571 Branches 5% Presence 159 Cities 146 Cities 9% Deposits Rs 673 Billion Rs 564 Billion 19% Total Assets Rs 782 Billion Rs 658 Billion 19% Profit After Tax Rs 6.31 Billion Rs 5.56 Billion 14% 6% Right Issue to Existing Shareholders Rs 3 Billion - 100% Equity Rs 34.3 Billion Rs 28.1 Billion 22% Trade Business (Imports and Exports) Rs 710 Billion Rs 552 Billion 29% MEEZAN BANK LIMITED
  55. Financial Results Rs in Millions PROFIT AND LOSS ACCOUNT 2017 Profit / return earned on islamic financing, investments and placements 2016 36,087 30,761 (15,273) (12,873) Net spread before provisions 20,814 17,888 Net spread after provisions / reversals 19,494 18,073 Income from dealing in foreign currencies 1,140 1,208 Dividend income 1,176 744 Capital gain on investments 825 878 Other income 270 208 27,071 23,731 Return on deposits and other dues expensed (Provision) / reversal against non-performing islamic financing and investments (1,320) Fee, commission and brokerage income 4,166 Income before expenses Administrative and other expenses (14,788) 10,252 8,943 Taxation (3,939) (3,381) 6,313 5,562 Profit after taxation The Bank posted a profit after tax of Rs 6.31 billion compared to Rs 5.56 billion in the previous year, showing a healthy growth of 14%. The Bank’s net spread before provisions also increased by 16%, primarily due to the Bank’s continued focus to increase its financing portfolio while maintaining a low cost of funds. Profit After Tax 6,000 5,023 5,000 4,000 Financing 450,000 6,313 400,000 Rupees in Millions 420,029 350,000 311,530 300,000 4,570 3,957 250,000 175,712 200,000 3,000 150,000 2,000 207,569 127,623 100,000 1,000 0 segment, SME / Commercial segment and Consumer segment (primarily Car Ijarah and Easy Home) grew by 29%, 53% and 48% respectively over the previous year. The Advance to Deposits Ratio (ADR) of the Bank now stands higher at 62%, as compared to 55% in 2016. Rupees in Millions 5,562 2,620 (16,819) Profit before taxation 7,000 185 50,000 2013 2014 2015 2016 2017 A significant achievement during the year was the impressive increase in the financing portfolio of the Bank that increased by 35% to reach Rs 420 billion from Rs 312 billion in 2016. The Bank increased its financing exposure in all sectors while simultaneously maintaining quality of its portfolio and ensuring that all the risk parameters are met. The Bank aims to enhance its exposure in Small and Medium Enterprise (SME) and Commercial segment and has engaged International Finance Corporation (IFC) to provide advisory and technical services to revamp existing SME financing segment into a more robust SME Banking Model. The focus remains on building a high quality financing portfolio targeting top notch corporate, commercial and retail clients. Financing in Corporate 0 2013 2014 2015 2016 2017 Notwithstanding the high growth in the financing portfolio, it is commendable that the Bank has one of the lowest non-performing financing ratios in the Banking Industry of 1.5%, down from 2.1% in 2016 as compared to an average of 9% for the Banking Industry as a whole - a testimony to the stringent risk acceptance parameters of the Bank. Recognizing some stresses in select sector exposures and prudent banking practices historically adopted by the Bank, an additional general provision of Rs 850 million against potential non-performing financings was approved by the Board during the year under review. This increase in General Provision also takes into account the aggressive growth in financing over the last few years. The Bank maintains a comfortable level of provisions against its ANNUAL REPORT 2017 69
  56. non-performing financing with coverage ratio of 133 %. With a diversified product base, the Bank is well positioned to cater to all financing needs of our customers in a Shariah compliant manner. Advances to Deposits Ratio - ADR 70% 62% 60% 55% 50% 44% 46% 44% 40% 30% 2013 2014 2015 2016 2017 The availability of Government of Pakistan (GoP) Ijarah Sukuk to deploy surplus liquidity continues to be a challenge for Islamic Banks. Only one auction of GoP Ijarah Sukuk was held during the year but unfortunately the issue size was small, relative to the demand for such instruments, which led to a price war and the cut-off price was significantly lower than the equivalent instruments available to conventional banks. However, efficient liquidity management ensured that Meezan Bank was able to increase placements with other top-rated Financial Institutions from Rs 129 billion to Rs 147 billion. Robust deposit growth of 19% was achieved during the year, closing the year at Rs 673 billion up from Rs 564 billion. Despite intense competition in the industry, the Bank not only expanded its deposit base but also maintained an optimal cost of funds through strong relationship management and better customer experience. An extensive branch network of over 600 branches in 159 cities gives the Bank excellent coverage throughout the country and has contributed to the consistent growth of the Bank. This ‘brick & mortar’ network is well supplemented by the comprehensive array of digital services, such as Internet Banking, Mobile App and Branchless Banking, and ensures that customers enjoy a seamless and efficient banking experience. Deposits Rupees in Millions 700,000 673,188 600,000 564,024 380,422 400,000 300,000 289,811 200,000 100,000 0 70 2013 2014 MEEZAN BANK LIMITED 2015 2016 Fee and commission income maintained its strong momentum and grew by 59% from last year with major contribution from trade finance income and other banking channels. On expenses side, administrative and operating expenses increased to Rs 16.8 billion from Rs 14.8 billion primarily due to increase in staff expenses, rent and costs associated with new branches – an investment which has reaped fruits for the Bank, as is evident from the strong growth in deposits and profits over the years. Technology An important milestone achieved during the year was the successful upgrade of the Bank’s core banking system Temenos (T24) to its new release of R16. The upgrade was achieved through a well-coordinated effort between all stakeholders, overseen by the Project Management Office, and ensured the Go-live was achieved on schedule in a seamless manner without any business disruption. All Alternate Delivery Channels (ADC) services remained fully functional during the entire period of upgrade, a first in the Banking Industry in Pakistan. This upgrade, besides enhancing system efficiencies, has enabled the Bank to offer new services such as Digital Banking, quick development of new products and integration with Fintechs and other digital channels. Right Shares and Capital Adequacy Ratio The Bank successfully completed a 6% Right Issue of shares to the existing shareholders during the year at a price of Rs 50 per share (inclusive of Rs 40 as premium per share) approved by the Board in its meeting held on July 26, 2017. As a result the Bank’s equity (including share premium) increased by Rs 3 billion and has further strengthened the Bank’s Capital Adequacy Ratio (“CAR”). The Bank’s CAR now stands at 12.89% - well above the minimum mandatory level of 11.28% for the year 2017 and this will support the future growth plans of the Bank. The return on average equity – on enhanced capital stood at 20.20%. Earnings per Share and Dividend Due to increase in profitability, the Earnings per Share increased from Rs 5.45 to Rs 6.13 per share, reflecting an increase of 13%. The Board has recommended the final cash dividend of Rs 1.25 per share (12.5 %) for the year 2017. This declaration, together with the earlier interim cash dividend of 17.5% paid in the third quarter of 2017, brings the total payout for the year to Rs 3.00 per share (30%). The Bank has maintained its unbroken payout record since the date of listing on the Stock Exchange. 471,821 500,000 Another milestone achieved during the year was the healthy growth in the trade business volume handled by the Bank, that increased by 29%, to Rs 710 billion compared to Rs 552 billion last year. This was made possible due to the extensive branch network and efficient Treasury management of the Bank. 2017 Islamic Banking Industry Islamic Banking has taken strong roots in Pakistan with Meezan Bank as a market leader offering a complete range of Islamic banking products and services. Islamic Banking Industry deposit accounts for almost 14% of the total Banking Industry deposits. The Bank’s market share
  57. amongst the full-fledged dedicated Islamic Banks operating in Pakistan is approximately 58 %. Meezan’s market share for the Islamic Banking Industry as a whole including Islamic Banking windows of conventional banks in Pakistan is 35%. Global Finance • Best Islamic Financial Institution in Pakistan – World’s Best Islamic Financial Institutions Awards • Best Bank in Asia-Pacific Region – World’s Best Bank Awards Share of Meezan Bank in Islamic Banking Industry - Based on deposits ICAP & ICMAP • Best Corporate Reports Award (Securing Third position) – Banking Sector 25% 35% Pakistan Stock Exchange Limited • Top 25 Companies of the Year, 2016 40% Meezan Bank Islamic Windows of Conventional Banks Other Islamic Banks Credit Rating The JCR-VIS Credit Rating Company Limited, an affiliate of Japan Credit Rating Agency, Japan has reaffirmed the Bank’s long-term entity rating of AA (Double A) and short-term rating at A1+ (A One Plus) with stable outlook. The short-term rating of A1+ is the highest standard in short-term rating. The JCR-VIS Credit Rating Company Limited has also reaffirmed Sub-ordinated (Tier II) sukuk rating at AA- (Double A minus). These ratings indicate sound performance of the Bank. Meezan Bank is the only Islamic bank in Pakistan with AA and A1+ credit rating. Corporate Awards and Recognitions Meezan Bank won the following prestigious awards during the year: Islamic Finance News (IFN) • Best Islamic Retail Bank - Global Award • Best Islamic Bank in Pakistan • Pakistan Deal of the Year Asset Triple A - Islamic Finance Awards • Islamic Bank of the Year • Best Retail Bank • Best Trade Finance Bank • Best Investment Bank • Sukuk House of the Year • Best Supply Chain Finance Program • Transport deal of the year, Pakistan CFA Society of Pakistan • Islamic Bank of the Year • Corporate Finance House - Fixed Income World Islamic Banking Conference • Country Level Award for the Banks based in Pakistan Pakistan Banking Awards • Best Islamic Bank Islamic Finance Forum of South Asian (IFFSA) Awards • Gold Award for Best Islamic Bank of the Year • Gold Award for Islamic Finance Entity of the Year • Gold Award for Islamic Finance Education Provider • Gold Award for Islamic Finance Advisory Services Provider • Gold Award for Islamic Finance Capital Markets Service Provider • Gold Award for Islamic Investment Bank of the Year • Silver Award for Islamic Finance Deal – For Syndicated Project Finance Facility The Banker • Islamic Bank of the Year, Pakistan Global Islamic Finance Awards • Shariah Authenticity Award South Asian Federation of Accountants (SAFA) • 'Certificate of Merit' in the 'Private Sector Banks' category of Best Presented Accounts Award MasterCard MENA Acquirer Forum • Most Innovative Solution Deployed Displacement for Cash Pakistan Society of Human Resource Management • Best Place to Work in Top 10 Best Place to Work Category • Best Place to Work in Financial Services Industry Category Employers Federation of Pakistan • Best HRM Practices – 1st Prize • Employer of the Year 2016 – 3rd Position PMI Karachi Pakistan Chapter • PMO of the Year Corporate Social Responsibility Charity is one of the most important constituents of a healthy society. Keeping this and the Islamic principles of Ihsan in mind, Meezan Bank recognizes its responsibility as a conscieneious corporate citizen and keeps Corporate Social Responsibility as an integral element of its value system. As a socially responsible organization, the Bank recognizes that it is part of the community at large and that there is a strong need to contribute to the society and support those in need, be it on financial or non-financial basis. The Bank remains committed to its objective of paying back to the society - both ANNUAL REPORT 2017 71
  58. directly and indirectly , and in this regard has contributed through various ways and means. The disclosure required under Companies Corporate Social Responsibility (General Order, 2009) has been duly made in the Annual Report. Corporate and Financial Reporting Framework The Board of Directors is fully cognizant of its responsibility under the Code of Corporate Governance issued by the Securities and Exchange Commission of Pakistan and adopted by the State Bank of Pakistan. The following statements are a manifestation of its commitment towards high standards of Corporate Governance and continuous organizational improvement. 1. The financial statements prepared by the Management of the Bank present fairly its state of affairs, the results of its operations, cash flow and changes in equity. 2. Proper books of account of the Bank have been maintained. 3. Appropriate accounting policies have been consistently applied in preparation of financial statements. The accounting estimates are based on reasonable and prudent judgment. 4. International Financial Reporting Standards as applicable in Pakistan have been followed in preparation of financial statements and any departure from these has been adequately disclosed. 5. The system of internal controls is sound in design and has been effectively implemented and monitored. The ultimate responsibility of the effectiveness of internal controls system and its monitoring lies with the Board. An Audit Committee has been formed for this purpose that meets periodically and independently throughout the year with the management and also the internal and external auditors to discuss the effectiveness of internal controls system and other financial reporting matters. In addition, there are financial forecasts and budgetary control procedures in place, which are reviewed and monitored throughout the year to indicate and evaluate variances from the budget. 6. There are no doubts upon the Bank’s ability to continue as a going concern, Insha’Allah. 7. The Directors of the Bank are in compliance with respect to training requirements. 8. There has been no material departure from the best practices of Corporate Governance as detailed in the rule book of Pakistan Stock Exchange. 9. Key operating and financial data for the last six years in summarized form, categories and pattern of shareholding is included in this annual report. 10. The value of investments of the Bank’s recognized Provident Fund and Gratuity Fund as at December 31, 2017 are as under: - Staff Provident Fund - Staff Gratuity Fund Rs 2,314.8 million Rs 855.9 million 11. The purchase and sale of shares by the Directors, 72 MEEZAN BANK LIMITED Chief Executive, Chief Financial Officer, Head of Internal Audit and Company Secretary during the year and pattern of shareholding is included in the report. Compliance with Code of Corporate Governance The requirements of the Code of Corporate Governance set out by the Pakistan Stock Exchange in the rule book of Pakistan Stock Exchange relevant for the year ended December 31, 2017 have been adopted by the Bank and have been duly complied with. A statement to this effect is included in this Annual report. Risk Management Framework Risk Management Framework in Meezan Bank encompasses sound governance and organizational structure, policy & procedural framework, risk assessment techniques, tools, systems and reporting structure closely aligned with the Bank’s strategy set by its Board of Directors and commensurate with size of the Bank. The Bank implements an entity wide ‘Three Lines of Defence’ model for risk management. Business lines / front offices serve as first line of defence and are primarily responsible for managing risks on day-to-day basis. Risk management and other control functions being the second line of defence are responsible for assisting business lines for designing and implementing adequate controls to manage risks. The internal audit function is responsible for providing independent assurance on adequacy of Bank’s risk management environment. Risk Management activities broadly take place simultaneously at different hierarchy levels i.e. strategic, macro and micro. The overall responsibility for risk management rests with the Board of Directors and it has constituted Board Risk Management Committee comprising of Board members with clear terms of reference. Under the guidance of the Board, the scope of Risk Management Group (RMG) has been continuously refined since its inception, mainly focusing on establishing & improving upon risk management policies, procedural manuals, limit structure, systems and controls. It also includes risk assessment techniques, periodic monitoring, multilevel reporting of risk profile, generating early warning signals and enhancing level of awareness about risk management principles and practices at all levels of the organization. These developments are in line with applicable Shariah guidelines, regulatory framework including but not limited to Basel accord, industry benchmarks and nature of Bank’s businesses. Specialized committees comprising of senior management team members with relevant experience and expertise perform their functions a per their approved terms of reference so as to ensure that risk exposures are within tolerable level and in line with strategic and business goals. The committees include: 1. Credit Risk Management Committee (CRMC) 2. Asset Liability Management Committee (ALCO) 3. Compliance & Operational Risk Management Committee (CORMC) The CRMC ensures that credit risk activities are in line with approved policies, regulatory requirements, Bank’s risk appetite and industry norms. Credit Committee, the
  59. sub-committee of CRMC is the highest level body for approval of financing transactions . ALCO reviews market, liquidity and country risk exposures, assets and liabilities mix and maturity profile, sets pricing and takes decisions for sound liquidity management. The Bank has established the Compliance and Operational Risk Management Committee (CORMC) replacing Internal Controls & Operational Risk Management Committee (ICORC) that will focus on compliance risk issues in addition to operational risk and control issues previously covered under ICORC. The Committee will also facilitate in implementation of compliance program and oversee money laundering and financing terrorism risk. Credit risk is being managed through comprehensive financing policies and detailed procedures, well-defined credit approval mechanism, prudently delegated financing approval authorities, optimal risk-reward trade off, concentration limits, adequate collateral coverage, documentation and hindsight reviews. Growth in financing is ensured while focusing on comprehensive risk analysis, portfolio diversification and improved turnaround time. The Bank conducts stress testing for credit, market, liquidity and operational risk by applying various shocks under different scenarios. Market risk is managed through the Board approved market risk policy; approval of market risk limits, counterparty and dealer limits and regular review and monitoring of the investment portfolio by the Bank’s ALCO. The Bank applies value at risk techniques for market risk measurement. Day-to-day liquidity management is done through cash flow matching, bank placements, deposit mix, meeting regulatory reserve requirement and maintaining adequate liquid assets. Further, the Bank has also implemented the SBP Basel Liquidity guidelines which also strengthen the liquidity risk framework. Country risk exposures are managed through policy parameters and limits establishment. Contingency funding plan is in place to address liquidity management in times of crisis situations. Operational risk is managed through standing operating procedures, deployment of necessary human resources, training and development, segregation of duties, strengthening maker and checker and approving mechanism, risk indicators, system based reports, business continuity and disaster recovery plans. Under RMG, capacity building both in terms of hiring of additional fresh and experienced human resources and participation in variety of training and development program is a continuous process. Full-fledged credit risk function caters corporate, investment banking, commercial & SME, agriculture and consumer business segments. The coverage of RMG in credit assessment of individual and group customers has been enhanced through four-eye principle, limits structuring and deployment of risk officers in the field. During the year, the Bank automated its financing approval process by implementing “Financing Origination System” for corporate and commercial customers. Enterprise Risk Management (ERM) setup is in place under RMG catering market, liquidity, financial institutions, operational, business continuity risks, Basel implementation, hindsight reviews of financing cases, their monitoring and risks related policy framework. The role of ERM has been closely integrated into formulating capital strategy of the Bank. The role of market risk function in monitoring of treasury activities has been strengthened with limits structuring, their monitoring, reporting and system improvements. Operational losses reporting, risk and control self-assessment, enhanced coverage of key risk indicators and improvements in processes through risk identification, mitigates and awareness sessions reflects upon continuous improvements in operational risk management framework. Coverage of business continuity plans has been further strengthened at branch level by conducting evacuation drills. Enhanced coverage of information reports from risk perspective, close coordination with other stakeholders to view risk profile at enterprise level and risk modules will further strengthen the role of RMG in identification, assessment, reporting and managing risks. Statement of Internal Controls The Board is pleased to endorse the Statement made by the Management relating to internal controls. The Management’s statement on internal controls is included in this Annual Report. Pattern of Shareholding The pattern of Shareholding as at December 31, 2017 is included in this Annual Report. Directors The record of Board meetings held during the year and attended by the Directors is as follows: Name of Directors No. of No. of Meetings Meetings held Attended Mr. Riyadh S.A.A. Edrees - Chairman 4 4 Mr. Faisal A.A.A. Al - Nassar - Vice Chairman 4 4 Mr. Bader H.A.M.A. Al-Rabiah 4 4 Mr. Mansur Khan 4 4 Mr. Alaa A. Al - Sarawi 4 4 Syeda Azra Mujtaba* 4 4 Mr. Muhammad Zarrug Rajab 4 4 Mr. Mohammad Abdul Aleem 4 4 Mr. Noorur Rahman Abid 4 4 Mr. Talal S.A. Al-Shehab 4 4 Mr. Irfan Siddiqui - President & CEO 4 4 Mr. Ariful Islam - DCEO 4 4 * Syeda Azra Mujtaba resigned on January 25, 2018. The Board wishes to place on record its appreciation for the valuable services rendered by Syeda Azra Mujtaba during her association with the Bank. The attendance in meetings of the Committees formed by the Board held during the year is included in this Annual Report. ANNUAL REPORT 2017 73
  60. The Bank has a policy in place for dealing with conflicts of interest relating to members of the Board . Under this policy, any Director who has a business interest in a matter being presented at a Board meeting does not participate in neither the discussion nor the decision on that matter. The policy is applied consistently and there was no breach of this policy during the year. Auditors The present auditors, EY Ford Rhodes, Chartered Accountants retire and being eligible offer themselves for reappointment. As required under Code of Corporate Governance, the Board and the Audit Committee has recommended the appointment of EY Ford Rhodes, Chartered Accountants as auditors of the Bank for the year ending December 31, 2018. Al Meezan Investment Management Limited – Subsidiary We acknowledge the excellent performance of our subsidiary, Al Meezan Investment Management Limited (Al Meezan). Al Meezan is the leading asset management company in Pakistan with the distinction of having exclusive mandate of providing Shariah-compliant investment solutions to its investors. Al Meezan offers a comprehensive product suite of 13 mutual funds and multiple investment plans spanning from basic equity and income funds to commodity funds, dedicated equity fund and aggressive asset allocation funds. Al Meezan also manages the largest Voluntary Pension Fund in Pakistan. With Assets under Management (AUMs) of Rs 93 Billion as at December 2017, it is the largest Shariah compliant asset management company of the country with healthy investor base of over 70,000 investors. Future Outlook and Strategy In January 2018, the SBP reversed the monetary policy stance and increased the policy rate (Target rate) by 25 basis points to 6 percent in the light of recent Rupee depreciation, increase in international oil prices and growing inflationary pressures. However, 2018 will still be a challenging year for the Banking industry in the back-drop of the uncertain economic scenario amidst general elections in 2018. The increasing cost of business, primarily due to increase in rent and oil prices will keep the inflation graph upwards. Our focus will be on maintaining the growth momentum and asset quality. At the same time, recognizing the importance of the SME segment, the Bank engaged IFC Advisory services to help the Bank develop new SME Banking products and will Insa’Allah launch a full-fledged SME Banking Model in 2018. To support growth plans in the SME segment, the Bank plans to add more head count in the SME business Team. Meezan Bank is committed to bringing Islamic Banking to the large unbanked population in the country and plans are afoot to expand its Branchless Banking. This will also support the Government’s initiative on Financial Inclusion. Despite the challenging external environment, the Bank intends to continue its branch expansion strategy and will add more branches during the year to further increase its 74 MEEZAN BANK LIMITED geographical presence across the country. The Bank’s priority is to ensure that Islamic banking products and services are made available across the length and breadth of Pakistan through an extensive branch network duly supported by new technologies that is critical for effective market penetration. Islamic banking has a good future in Pakistan and its share in the country’s Banking Industry is continuously rising. We believe that a robust and viable Islamic Banking industry will play a critical role in increasing the savings rate in the country. Meezan Bank remains committed to its Vision to ‘establish Islamic banking as banking of first choice’ and will continue to play its pioneering role in Islamic banking to contribute to the growth of Islamic banking in Pakistan. The Board is confident that the Bank will Insha’Allah continue to play its leadership role in evolving Islamic Banking Industry in Pakistan. Acknowledgement The landmark achievements of Meezan Bank would not have been possible without the proactive support of our diversified customer base, for which we remain indebted to them. We sincerely thank each one of our team members for their hard work and commitment. May Allah Almighty bestow His blessings on our entire team and their families. We would like to express our gratitude to the State Bank of Pakistan, Ministry of Finance and the Securities and Exchange Commission of Pakistan for their continuous commitment to establish a viable Islamic financial system in the country. We also congratulate the State Bank of Pakistan (SBP) for being voted as the ‘Best Central Bank for promoting Islamic finance’ by a poll conducted by ‘International Finance News’ – an arm of Red Money Group, Malaysia. We are hopeful that with the continued efforts of the Ministry of Finance, SBP’s Islamic Banking Department and Implementation Committee for promotion of Islamic Banking, there will be more Sukuk issues in the future. We would also like to thank our Board members, shareholders, holders of Sub-ordinated Sukuk (Tier II) and the members of the Shariah Supervisory Board for their unrelenting efforts towards establishing Meezan Bank as the premier Islamic bank. May Allah Almighty give us the strength and wisdom to further expand our Vision of establishing Islamic banking as banking of first choice. On behalf of the Board. Riyadh S.A.A. Edrees Chairman Karachi: February 14, 2018 Irfan Siddiqui President & CEO
  61. ANNUAL REPORT 2017 75
  62. 76 MEEZAN BANK LIMITED
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  64. Share of Meezan Bank in Islamic Banking Industry - Based on deposits 25 % 40% 78 MEEZAN BANK LIMITED 35% Meezan Bank Islamic Windows of Conventional Banks Other Islamic Banks
  65. Advances to Deposits Ratio - ADR 70 % 62% 60% 55% 50% 44% 46% 44% 40% 30% 2013 2014 2015 2016 2017 Deposits Rupees in Millions 700,000 673,188 600,000 564,024 471,821 500,000 380,422 400,000 300,000 289,811 200,000 100,000 0 2013 2014 2015 2016 2017 ANNUAL REPORT 2017 79
  66. 2017 (Capital Gain) Financing Rupees in Millions 450,000 420,029 Profit After Tax Rupees in Millions 7,000 6,313 400,000 6,000 350,000 311,530 5,000 300,000 250,000 175,712 200,000 150,000 5,023 4,000 207,569 5,562 4,570 3,957 3,000 127,623 2,000 100,000 1,000 50,000 0 80 2013 2014 MEEZAN BANK LIMITED 2015 2016 2017 0 2013 2014 2015 2016 2017
  67. GDP Growth Rate 6 % 5.3% 5% 4.5% 4% 3% 3.6% 3.8% 3.7% 2011-12 2012-13 2013-14 4.1% 4.0% 2.6% 2% 1% 0% 2009-10 2010-11 2014-15 2015-16 2016-17 2017 2016 2017 35% 312 420 5% 571 601 9% 146 159 19% 564 673 19% 658 782 14% 5.56 6.31 100% - 22% 28.1 34.3 29% 552 710 3 ANNUAL REPORT 2017 81
  68. Annexure to the Directors ’ Report For the year ended December 31, 2017 The purchase and sale of shares by the Directors, Chief Executive, Chief Financial Officer (CFO) and Company Secretary, their spouses and minor children during the year are given below: Number of Shares as at Jan. 01, 2017 Number of Shares purchased during the year Number of Shares sold during the year Bonus Shares alloted during the year Right Shares Subscribed Number of Shares as at Dec. 31, 2017 184,325 - - - 11,059 195,384 NAME OF DIRECTORS Mr. Mohammad Abdul Aleem Mr. Noorur Rahman Abid Mr. Irfan Siddiqui Mr. Ariful Islam 2,857,683 3,218,067 - - - - 171,460 193,083 3,029,143 3,411,150 1,796,393 - - - 107,783 1,904,176 554,131 - - - 33,247 587,378 - - - - - - - 638 CHIEF FINANCIAL OFFICER Mr. Shabbir Hamza Khandwala HEAD OF INTERNAL AUDIT Mr. Ebrahim Yakoob COMPANY SECRETARY Mr. Muhammad Sohail Khan 82 - - MEEZAN BANK LIMITED - 10,648 - 11,286
  69. Statement of Value Added and Distributed 2017 Rupees in ‘000 % 2016 Rupees in ‘000 % 34,766,800 97.0% 30,946,295 100.2% Fee, commission and brokerage income 4,165,971 11.6% 2,619,769 8.5% Dividend income 1,176,517 3.3% 744,090 2.4% Income from dealing in foreign currencies 1,139,648 3.2% 1,207,563 3.9% Capital gain on sale of securities and other income 1,094,520 3.1% 1,085,897 3.5% Value Added Profit / return on Islamic financing, investments and placements - net of provision / reversal 42,343,456 Administrative and other expenses excluding salaries, depreciation, amortisation and workers welfare fund (6,509,838) 35,833,618 36,603,614 (18.2%) 100% (5,715,311) 30,888,303 (18.5%) 100% Value allocated as follows: To Depositors / Financial Institutions Profit on deposits and other dues expensed 15,272,792 43% 12,872,844 42% To Employees Salaries, allowances & other benefits 8,431,392 24% 7,341,726 24% To Shareholders Cash Dividend 3,008,213 8% 3,008,213 10% 241,377 3,939,243 4,180,620 1% 11% 12% 178,081 3,381,225 3,559,306 1% 11% 12% 1,636,047 3,304,554 4,940,601 5% 8% 13% 1,552,816 2,553,398 4,106,214 5% 7% 12% 35,833,618 100% 30,888,303 100% To Government Workers Welfare Fund Income tax To Expansion Depreciation & Amortisation Retained in business Statement of Value Added & Distributed 2017 Statement of Value Added & Distributed 2016 13% 12% 12% 12% 43% 42% 10% 8% 24% 24% To Depositors/Financial Insitutions To Employees To Shareholders To Government To Expansion ANNUAL REPORT 2017 83
  70. Allocation of Income and Expenses to Remunerative Depositors ’ Pool For the year ended December 31, 2017 2017 2016 Rupees in '000 Income from financing activities Income from investments 20,793,510 14,888,529 8,612,593 6,372,190 37,584,672 31,979,106 (959,646) (650,841) 5,969,474 Income from placements with financial institutions Other income attributable to pools 2,209,095 Total Income Less: Directly attributable charges to pools including takaful (Note) Less: Profit on assets allocated to IERS and other special pools (5,035,426) 9,455,774 1,262,613 (3,921,857) Less: Profit share allocated to bank's equity and other pools in Mudarabah pools (9,249,421) (6,195,117) Gross distributable Income 22,340,179 21,211,291 Mudarib (Bank) share of profit before Hiba 11,323,001 10,200,347 Less: Hiba from Mudarib (Bank) share (1,491,157) Net Mudarib (Bank) share of profit Rab-ul-Maal share of profit Rab-ul-Maal share of profit is distributed as follows: Remunerative depositors' profit share in Mudarabah pools (976,328) 9,831,844 9,224,019 12,508,335 11,987,272 12,508,335 11,987,272 The Bank maintain following four remunerative general pools: Rupee deposit pool Dollar deposit pool Pound deposit pool Euro deposit pool Rupee deposit pool Dollar deposit pool Pound deposit pool Euro deposit pool Net Income allocated to General Pool and bank's equity Profit share allocated to bank's equity and other pools Mudarib (Bank) share of profit 30,903,519 644,561 29,535 11,985 9,158,057 78,055 7,863 5,446 10,872,732 424,879 19,505 5,885 31,589,600 9,249,421 11,323,001 Hiba from Mudarib (Bank) share Net Mudarib (Bank) share of profit Remunerative depositors' share in Mudarabah pool 1,491,157 - 9,381,575 424,879 19,505 5,885 12,363,887 141,627 2,167 654 1,491,157 9,831,844 12,508,335 2017 Rupees in '000 2016 Rupees in '000 26,939,714 434,120 27,362 5,212 6,118,625 68,703 6,222 1,567 9,912,320 266,573 18,232 3,222 976,328 - 8,935,992 266,573 18,232 3,222 11,885,097 98,844 2,908 423 27,406,408 6,195,117 10,200,347 976,328 9,224,019 11,987,272 Note: Administrative and operating expenses (including salaries and marketing costs) are paid by the Bank and not charged to the Depositors' pool as per the guidelines of Mudarabah Pools. 84 MEEZAN BANK LIMITED
  71. Statement of Inventory Meezan Bank provides financing through various sale-based modes including Murabaha , Musawamah, Istisna, Tijarah, Salam, etc. Under these modes, the Bank either purchases the goods to be financed or gets them manufactured. It then sells the goods to the customer on spot / deferred basis. This statement signifies the difference of Islamic modes of financing that is based on trade of real assets and goods. It also demonstrates the exposure that the Bank takes in different sectors. The goods lying unsold at the date of the financial statements are carried as inventory in the financial statements of the Bank. The sector wise detail of inventory held by the Bank as at December 31, 2017 is as follows: Sector 2017 Rs. in ‘000 Nature of Inventory 2016 Rs. in ‘000 Agriculture & Food Products Corn, Sugar, Soyabean, Canola, Rice (Grain, Paddy), Wheat, Spices, Syrups, Oil Cake 9,888,109 7,860,063 Chemical and Pharmaceutical Chemicals, Medicines, Petroleum Products (HSD, LSFO, HSFO, PMG), Paints, Fertilizer 2,988,451 1,204,048 Construction Iron & Steel, Sanitary items & Fittings, Pipes, Cement Bags 2,314,681 187,025 Footwear & Leather Garments Wet Blue, Finished Leather Paper, Packaging & Material Packing Material, Chip Boards, Glass Vials, Glass Bottles Textile 375 4,978 79,493 98,414 Cotton (Raw Cotton, Bales, Fabric, Yarn), Bed Sheets, Garments, Home Textile Products (Towels, Pillow Covers, etc) 4,241,682 3,200,391 Wholesale & Retail Trade Rock Phosphate, Coal, Caps and Corks, Edible Oil, Dairy products, Juices, Confectionary Items, Baby Products, Toiletries, Medical Machinery 1,332,267 893,486 Others Poultry Feed, Float Glass, Polypropylene, Olein Oil, Copper Wire, Bottle Caps, Ship Scrap, Battery Lead Panels, Electronic Components, Sport Goods, Cars, ATM Machines, Fans, Foam, Auto Spare Parts Grand Total 937,754 2,334,297 21,782,812 15,782,702 Sector-wise Breakup 6% 4% 11% 14% 20% 45% Agriculture & Food Products Textile Chemical and Pharmaceutical Construction Wholesale & Retail Trade Others Statement of Financing Portfolio Income Meezan Bank provides financing to its Corporate, Commercial, SME, Agriculture and Consumer banking customers using a variety of Shariah-compliant modes of financing. The below mentioned matrix shows the percentage of income earned on different financing modes, and depicts a well balanced and diversified financing portfolio of the Bank. The diversification has been achieved by using arrangements based on trade, rent, joint ownership, profit / loss partnership and agency, to suitably meet the needs of customers and provide a halal return. Rs in Million Islamic mode of financing Amount 2017 % Amount 2016 % Diminishing Musharakah 6,629 30.84% 6,004 40.21% Running Musharakah 6,276 29.20% 2,652 17.76% Ijarah 2,036 9.47% 1,860 12.46% Istisna 1,989 9.25% 1,354 9.07% Wakalah 1,753 8.16% 615 4.12% Murabaha 1,072 4.99% 948 6.35% Musawamah 907 4.22% 752 5.04% Tijarah 449 2.09% 342 2.29% Others 385 1.78% 404 2.70% 21,496 100.00% 14,931 100.00% Total ANNUAL REPORT 2017 85
  72. Business and Operations Review Business Review Meezan Bank , in its sixteenth year of operations as a full-fledged Islamic Commercial Bank, maintained its growth momentum and recorded excellent results for the year 2017. Profit after tax increased to Rs 6.31 billion from Rs 5.56 billion in 2016 – a commendable growth of 14%. The Bank has the distinction of being the fastest growing bank in the industry with a branch network of over 600 branches in more than 150 cities and an asset base of Rs 781 billion. The Bank’s variety of product offering serves the masses, mid-tier customers and premium banking customers. Key achievements of the Bank during the year are as follows: ■ ■ ■ ■ 19% growth in the deposit base, which closed at Rs 673 billion Growth in financings by 35% with ADR improving to a historically high level of 62% Trade business volume surpassed Rs 700 billion Successful upgrade of core banking software Temenos (T24) The Bank issued 6% Right shares to the existing shareholders at a price of Rs 50 per share (inclusive of Rs 40 as premium per share) enhancing the Bank’s equity by Rs 3 billion and further strengthening its Capital Adequacy Ratio (CAR). The Bank’s CAR now stands at 12.89%, well above the minimum mandatory level of 11.28% for the year 2017. The Bank maintained its current and savings accounts (CASA) ratio despite intense competition in the industry for mobilization of low cost deposits. The Bank’s excellent brand image, effective relationship management and extensive network of over 600 online branches in more than 150 cities enabled it to not only enhance its deposit base but also maintain optimal cost of funds. The Bank’s extensive and well-distributed branch Retains Top Position as the Best Islamic Bank at the 2 Pakistan Banking Awards 2017 nd 86 MEEZAN BANK LIMITED network gives it excellent outreach throughout the country and has been a key contributor to its success. Financing portfolio of the Bank grew by 35% in 2017. The Bank recorded a growth of 29%, 53% and 48% respectively in Corporate, SME/Commercial and Consumer segments. The Bank has also engaged with International Finance Corporation (IFC) and Karandaaz Pakistan to further penetrate the SME and Commercial sector. The Bank’s focus remains on building a high quality financing portfolio targeting the best corporate, commercial and retail clients. The financing portfolio is well-diversified by segments, with maturities comfortably balanced at 67% in short-term and 33% in long-term. The Advances to Deposit Ratio (ADR) of the Bank improved to 62% as compared to 55% in 2016. The Bank’s non-performing financing ratio of 1.5% is one of the lowest in the Banking industry which reflects on the excellent asset quality of the Bank. Trade business volume handled by the Bank achieved an impressive growth of 29% over the previous year. This achievement was the direct result of the Bank’s customer centric approach supported by its extensive branch network and efficient Treasury management. The Bank considers trade finance as a core business activity as it not only brings trade related fees, forex and other ancillary income but also contributes to its current account balances, and thereby, to its overall profitability. The Bank also successfully upgraded its core banking system Temenos (T24) to the new release of R16. All Alternate Distribution Channels (ADC) services remained fully functional during the entire upgrade period, a first in the banking industry in Pakistan. This upgrade, besides enhancing system efficiencies, has enabled the Bank to offer new services such as Digital Banking, facilitated quick development of new products and has enabled integration with Fintech and other digital channels.
  73. Retail Banking Deposits Meezan Bank offers an extensive range of deposit products - current , savings and term deposit accounts, and is a market leader in offering innovative Shariahcompliant products and services to cater to the diverse needs of both individuals and companies-ranging from SME’s to large corporates. The Bank’s wide range of deposit products has enabled it to achieve exponential growth through a large, well-diversified and stable customer and deposit base. The Bank’s total deposits as of December 31, 2017 stood at Rs 673 billion, increasing 19% over 2016. CASA mix remained stable at 74% enabling the Bank to minimize the impact of reducing spreads as a result of historically low rates. Deposits Rupees in Billion 700 500 350 250 564 Enriching customer journeys and expanding the array of branchless services is a key focus for 2018. At the same time, the Bank will continue its efforts to develop into a highly customer centric bank that offers personalized customer services. Branch Network Branches 650 600 551 428 450 400 289 350 230 300 Cities 601 571 500 200 351 310 250 150 200 100 150 5 0 0 The rich and ever-expanding set of features on Meezan Bank’s digital touchpoints mean that customers can transfer funds, pay bills, view the discounts available nearest to them and get detailed information on their account activity and financing offerings whenever and wherever they want. 550 472 380 450 300 4% R2 CAG 600 673 through branches. Meezan Bank’s Call Center is only a single, convenient phone call away, ready to guide customers on issuing debit cards or obtaining Shariah-compliant house financing. 100 2012 2013 2014 2015 2016 2017 Meezan Bank has the largest Islamic banking customer base in the country. Since its inception in 2002, the Bank has been growing at a fast pace and has attained the position of being the country’s 8th largest bank (out of a total of 30 conventional and Islamic banks) in a short span of 15 years, which has only been possible due to the continuous support and patronage of its customers. The Bank is playing a key role in promoting Financial Inclusion (making financial services available to those sections of the population that do not have access to formal banking channels) by opening branches in remote cities and placing special emphasis on two products - Meezan Asaan Account and Branchless Banking - that allow this segment of the population to open bank accounts and conduct financial transactions using their mobile phones. Financial Inclusion is an important goal of both the Government of Pakistan and the State Bank of Pakistan and Meezan Bank is committed to supporting this initiative. Meezan Bank’s relentless focus on ease and convenience of access to its value-added products has led the Bank to offer the latest and best of cutting-edge secure technological solutions. The Bank offers a highly diverse portfolio of digital channels for accessing its products, thus providing convenient banking on-the-go. The Bank’s customers now have multiple, always available touchpoints to access their financial information, ranging from ATMs to internet, mobile and SMS banking, in addition to tailored services provided 90 103 117 143 146 154 50 0 2012 2013 2014 2015 2016 2017 Wealth Management Meezan Bank offers a complete range of deposit and other investment products that provide its customers a complete Wealth Management solution. Dedicated Relationship Managers cater to the various investment needs of customers by identifying investment opportunities for them, providing them investment advice and educating them about the various products offered by the Bank. Meezan Kafalah Meezan Kafalah is a Shariah-compliant alternative to Bancatakaful products. It is a simple and profitable savings plan with natural life Takaful coverage, along with many features that make it an attractive deposit product for customers. Meezan Kafalah has received a high take-up from retail customers since it is designed to meet their long-term savings objective with the added protection of Takaful (Islamic insurance) cover. To date, the Bank has provided Takaful coverage to more than 22,000 customers. Meezan Premium Banking Meezan Premium Banking caters to the banking needs of its high net worth individual customers and sole proprietors and provides them with exclusive services and value added benefits, ranging from personalized banking services to exclusive discounts and other privileges. ANNUAL REPORT 2017 87
  74. Premium Banking customers enjoy priority service at all branches and also have access to state-of-the-art Premium Banking Centers in major cities of the country . During the year, a new Premium Banking Desk at Tufail Road Branch – Lahore was also inaugurated to facilitate high net worth customers of the area. needs - cash withdrawal, shopping and payments, e-commerce i.e. online shopping, funds transfer, bill payments, balance and statement inquiries, product and services information and complaint registrations, among many other services offered. Meezan Bank has always strived to make banking a convenient and pleasant experience for its customers and this philosophy is especially visible in the Bank’s Alternate Distribution Channels. Strengthening of Alternate Distribution Channels The Bank further strengthened its Alternate Distribution Channels during 2017. Countrywide ATM Network was enhanced with an addition of 35 new ATMs, taking the total number of on-site and off-site ATMs to 580. Meezan Bank strives to maintain one of the best up-times for its ATM services and customers’ trust is evident in the increasing transaction volumes on the Bank ATMs which increased by 26% during the year. Some of the benefits currently being offered under Meezan Premium Banking are: ■ ■ ■ ■ ■ ■ Meezan Mastercard Platinum Debit Card – the Bank’s most prestigious Debit Card, offering access to local and international lounges, discounts at selected retail outlets and restaurants across the country, along with higher transactional, withdrawal and fund transfer limits. Access to airport lounges at Karachi, Lahore, Islamabad, Multan and Sialkot and selected airports in Middle East through Meezan Mastercard Debit Card on international flights. Dedicated Premium Banking Centers at Karachi, Lahore, Islamabad, Faisalabad and Sialkot. Private conference rooms for short business meetings at Premium Banking Centers. Premium Phone Banking – a dedicated Call Center exclusively for Premium Banking customers. Fee waivers on selected banking and ADC Services. Alternate Distribution Channels In addition to its traditional ‘brick and mortar’ branch network, Meezan Bank provides banking services through a broad spectrum of channels, including: ■ ■ ■ ■ ■ ■ The largest ATM network of any Islamic Bank Internet Banking Mobile App SMS Banking Visa and Mastercard Debit cards 24/7 Call Centre These channels are often collectively referred to as Alternate Distribution Channels (ADC). In addition to these, the Bank also provides e-Statement and SMS Alert facilities. A robust state-of-the-art ADC infrastructure is an integral part of the Bank’s corporate philosophy, which emphasizes digital innovation. The main focus of the Bank’s digital strategy is to provide customers with convenient and secure access to their accounts for all banking requirements, wherever and whenever they require. Customers can use ADCs for all their basic banking 88 MEEZAN BANK LIMITED Meezan Bank’s Mobile Banking App gives customers easy access to their accounts through their smart phones, providing them a wide range of banking services such as funds transfer, bill payment of over 46 utility companies, payment and top-up of phone credit and viewing account balance on a user-friendly and portable mobile interface. With over 270,000 downloads, the App has been amongst the most trending applications in its category on both Google’s Play Store and Apple Store. The Bank’s Internet and Mobile Banking subscribers also more than doubled during the year. The Bank’s in-house Call Centre is managed by a large team of phone banking professionals, facilitating customers and the general public nationwide for banking transactions and general banking or product enquiries. The numbers of subscribers to the Bank’s SMS Alert Service grew by 31% while its Debit Cards also continue to gain popularity among customers by virtue of offering one of the finest features in the market i.e NFC & EMV Chip.The total number of Debit cards increased by 45% while the number of Point of Sale (POS) transactions also increased by 49% during 2017. Record growth was also achieved in the area of e-Commerce transactions that grew by almost seven fold during the year. Meezan MasterCard Platinum and Visa Platinum cards contribute in serving the Bank’s Premium banking customers through unique propositions that include higher withdrawal limits, higher discounts, complimentary access to domestic and international airport lounges and other benefits.
  75. The Bank also launched PayPak Debit Card during the year powered by Pakistan ’s first indigenous payment scheme managed by 1-Link, ‘PayPak’. One of the key objectives of this scheme is to enhance the reach of affordable payment services across Pakistan. Continuous focus on Innovation and Security The Bank has recently launched the FonePay App, which is powered by MasterCard Masterpass. This App allows Meezan Bank’s customers to pay by scanning the QR code at merchant outlets with their smart phones. Over 50,000 FonePay merchants were registered during 2017 to accept QR payments. In recognition of launching this innovative payment system in Pakistan, Meezan Bank was awarded Mastercard’s ‘The most innovative solution deployed to displace cash’ award for the MENA Region. Meezan Bank partnered with VISA and Mastercard and launched Pakistan’s first contactless Debit Cards during the year. The EMV (Europay, Mastercard and VISA) embedded microchip based cards offer the most advanced security feature to the Bank’s customers to prevent skimming frauds. Furthermore, the NFC (Near Field Communication) technology available in the cards allows customers to conveniently ‘Tap n Pay’ for their purchases at merchant outlets. As a part of its continuous efforts to provide the most secure banking experience to its customers, Meezan Bank also signed up with Visa and MasterCard for their 3DSecure services known as ‘Verified by Visa’ and ‘MasterCard SecureCode’ respectively to provide the ultimate standard of online security to its customers for their ever increasing e-commerce transactions. A 24/7 Transaction Monitoring Unit was also setup to monitor all critical ADC transactions on real time basis in order to detect any suspicious transactions or patterns and take immediate steps to protect the Bank and its customers. Meezan Bank is committed to providing value-added products and services to its customers to make their transactional experience convenient and secure and is continuously working towards introducing new products, services and payment methods for its customers. Growth% compared to 2016 DEBIT CARDS 45% INTERNET BANKING AND MOBILE APP SUBSCRIBERS 62% CALL CENTER CALLS 18% HIGHLIGHTS YEAR 2017 SMS SUBSCRIBERS 31% POS TRANSACTIONS 73% ATM TRANSACTIONS 27% BILL PAYMENT TRANSACTIONS 52% IBFT TRANSACTIONS 45% ANNUAL REPORT 2017 89
  76. Payments and Cash Management The Bank offers two Cash Management products , Meezan eBiz and Meezan eBiz+. More than 1000 Corporate, Commercial and SME customers are availing the benefits of this electronic product suite to manage their collections, payments, MIS and reconciliation needs, resulting in increased business productivity. Meezan eBiz Meezan eBiz allows customers to execute banking transactions instantly over the internet in a secure and convenient manner. With the help of Meezan eBiz, customers can view and download their account balances, account details, account statements as well as efficiently conduct their day-to-day transactions such as Intra and Inter Bank Fund Transfers, salary payments, utility bill payments, Payorder issuance and many more via an automated, secure and versatile electronic processing platform. Initiative (PRI) and non-PRI arrangements. A focused approach towards this segment has contributed in improving the banking experience of customers and has allowed the Bank to progressively grow this business segment. In order to promote its home remittance business, Meezan Bank launched a two-month long marketing campaign in the month of Eid-ul-Adha, through which customers were encouraged to use banking channel for remittance. The campaign targeted Cash-Overthe-Counter (COC) beneficiaries in the local market which enabled the Bank to make inroads into the yet untapped market where the beneficiaries were already receiving funds via unofficial channels. The Bank also increased its outreach, expanding its market share in the UAE, and tapping new markets in Australia and Japan. Meezan eBiz+ Meezan eBiz+ is a comprehensive customized Cash Management solution which allows Corporate, Commercial and SME customers to not only electronically manage their banking relationship, but also reduce operational burden by outsourcing the management of country wide collection and payment needs. Each implementation is tailor-made to meet customers’ specific MIS and reconciliation requirements. Functionality available, in addition to features of eBiz+, includes: One window solution for all your Cash Management needs ■ ■ ■ ■ ■ Manage collections through branches as well as electronic and ADC channels Manage payment like funds transfer, Inter Bank Funds Transfer, Payorder issuance, RTGS, corporate cheques issuance as well as e-Dividend payments Real Time Information through online reporting for reconciliation and transactional alert through SFTP, email and SMS Host to host integration with customer ERP system for both collection and payments execution Dedicated Customer Service / Client Service Team With excellent system integration capabilities, the Bank has not only received a very positive response from local companies but also from multinational companies, and acts as a trusted strategic partner for their transactional banking needs. The number of Cash Management mandates being handled by the Bank grew by over 80% during the year. Home Remittance The Bank plays an active role in the nationwide drive of stimulating and formalizing home remittances through banking channels under the Pakistan Remittance 90 MEEZAN BANK LIMITED To facilitate its customers the Bank runs a dedicated Home Remittance Customer Support service. This unit directly resolves queries of Home Remittance customers in order to provide them better service and prompt resolution of complaints. Branchless Banking Almost 70% of Pakistan’s population remains unbanked due to reasons such as lack of access to a physical branch network, hesitation to avail interest-based banking facilities, stringent KYC etc. Providing this section of the population access to Islamic banking is a major step towards realizing Meezan Bank’s Vision of establishing ‘Islamic banking as banking of first choice’. There are over 140 million mobile phone subscribers in Pakistan while the total number of bank accounts is only around 35 million. At the same time, the total number of ‘smart phones’ in the country is now reported to have crossed 40 million and availability of 3G and 4G services means that mobile phone subscribers can now easily conduct banking transactions – namely payments (P2P, B2P, G2P, etc.), mobile top-ups, account transfers etc. The Bank is well positioned to serve this market segment, being one of twelve banks in the country that have a ‘Branchless Banking’ license – a prerequisite to this product offering.
  77. Corporate Banking Meezan Bank provides a comprehensive range of financial services to a large number of corporate clients including multinationals and public sector entities , by partnering with them to build long-term relationships. These services include traditional products required by companies for managing their working capital and trade finance needs to more sophisticated and innovative solutions for large-scale investments. By drawing on the expertise of in-house product specialists and Shariah scholars working under the guidance of its Shariah Supervisory Board, the Bank is capable of providing Shariah-compliant financing solutions to meet the working capital finance, import finance, export re-finance, financing for commodity operations, long-term finance, documentary credit requirements and project financing needs of its customers. The Bank’s Corporate Banking relationship teams work closely with Treasury, Cash Management, Investment Banking, Commercial Banking and Consumer Banking departments to develop and deliver suitable value-added products that fulfil the diverse business needs of the Bank’s corporate clients. As a part of its efforts to efficiently satisfy the financing needs of its customers, the Bank recently up-graded its credit approval process and implemented ‘BRisk’, an automated Financing Origination and Approval System. The system is capable of electronically originating and processing Financing Proposals, Internal Risk Rating and Calculation of Risk Weighted Assets. Implementation of this system will not only monitor and improve turnaround time of financing approvals but will also lead to paperless processing and archiving of financing proposals. Despite the business challenges faced during the year caused by uncertain political environment and declining exports as well as the increasing competition among banks, the Bank was able to perform well both in terms of Corporate Banking financing and trade. Corporate Financing The Bank grew its corporate financing portfolio by 30% over the year. The focused business development strategy adopted by the Bank to vigilantly build a high quality and well diversified portfolio has enabled the Bank to grow its corporate financing book at a CAGR of 30% since 2013, with non-performing financing kept under 1.6%. A detailed description of financing products offered by the Bank is on page 61. Investment Banking Meezan Bank provides a wide range of advisory services and financing solutions including on-and off-balance sheet structured finance, project finance, syndications and Sukuk to cater to both short and long term financing needs of its clientele through Shariah-compliant modes. With a team of highly qualified and experienced professional including ACAs, MBAs, ACCAs and CFA Charter holders, the Bank is well equipped to provide strategic advisory and creative financial solutions for raising equity and Shariah-complaint financing for its clients. During 2017, the Bank successfully led arrangement of over Rs. 232 billion in financing and capital market transactions, bringing the total volume of Investment Banking transactions arranged by the Bank to Rs. 780 billion. The Bank has been widely acknowledged by numerous international bodies for providing innovative and tailored Investment banking solutions to cater to the specialized needs of its diverse clientele. The Bank will continue to leverage its deal structuring & placement capability and its relationship with corporate customers & financial institutions while innovating in the field of Islamic corporate finance. The focus will be on maintaining its position as the market leader in the Islamic banking industry of Pakistan and establish Islamic banking as banking of first choice. MoU signing ceremony with Punjab Board of Investment and Trade ANNUAL REPORT 2017 91
  78. Investment Banking Awards 2017
  79. Major Investment Banking Transactions WAPDA – DASU – I Sukh Chayn Valley Private Limited Power Holding Private Limited 2,160 MW Hydel Power Project Syndicated Project Finance Facility Syndicated Islamic Term Finance Facility Syndicated Islamic Term Finance Facility Rs. 144 billion Rs. 2.275 billion Rs. 20 billion Mandated Lead Arranger & Advisor & Shariah Structuring Agent Mandated Lead Advisor & Arranger, Investment Agent, Shariah Structuring Agent Mandated Lead Arranger CHERAT CEMENT Cherat Cement Company Limited Shifa International Hospitals Limited Syndicated Islamic Finance Facility Syndicated Islamic Finance Facility Lead Advisor & Arranger, Shariah Structuring Agent and Investment Agent Lead Advisor & Arranger, Shariah Structuring Agent and Investment Agent Rs. 13 billion Rs. 2 billion
  80. Commercial Banking (Including Small & Medium Enterprises (SE & ME) and Agricultural Finance) Meezan Bank is cognizant of the fact that in order to achieve its Vision of establishing ‘Islamic Banking as banking of first choice’ it must increase the outreach of Islamic banking well beyond the blue-chip corporate sector. Accordingly, the Bank has developed a very clear focus on developing the SME and Agriculture sector, which represents the backbone of Pakistan’s economy, and achieved a 56% growth of the total financing portfolio of this segment. Small & Medium Enterprises Small and Medium Enterpirses represent more than 90% of business entities in Pakistan and growth and development of this sector is of vital importance for sustainable socio-economic development of the country. The Bank has employed a dedicated team to cater to the banking needs of this segment of the economy. The Bank closed its SME financing book at Rs 14.2 billion in 2017 against Rs 10.5 billion in 2016, registering a 35% growth. One of the key challenges in making banking inroads in this sector is availability of trained human resources. Recognizing this challenge, the Bank is working with several universities in Punjab and Sindh to address the capacity building constraint in the SME segment. The Bank engaged the International Finance Corporation (IFC) for providing advisory and technical services for revamping its exiting SME financing segment into a robust SME Banking Model. According to IFC, the Bank is well positioned to capitalize on the opportunities available in the industry. The Bank has achieved significant growth in SME financing segment during last 3 years, and IFC feels that the Bank has the potential to grow this business to the next level through a focused growth strategy. The Bank is now working aggressively on developing new SME Banking products to launch a full fledge SME Banking Model in 2018. provide technical support. Karandaaz promotes access to finance for small businesses through a commercially directed investment platform, and financial inclusion for individuals by employing technology enabled digital solutions. Meezan Bank is the first Pakistani bank to be selected by Karandaaz for their specialized Supply Chain Partnership Program and the two organizations will provide Rs 5 billion financing to small and mid-sized corporate vendors and distributors. The program entails partnering with key corporate customers to provide financing to their supply chain business partners. Towards this end the Bank has signed mandates with top tier corporate operating in Automotive, Fertilizer & FMCG sectors of the economy are in place. This initiative has successfully brought a large number of SMEs customers in the financing net through structured financing programs. The VCF program achieved good traction during 2017 and the portfolio more than doubled during the year. Agriculture Financing Agriculture holds great significance for any developing country. Increase in agricultural productivity leads to increase in the income of rural population which in turn leads to more demand for industrial products. The progress of agriculture sector therefore provides a sound base for economic development and is considered one of the preconditions for takeoff or self-sustained growth of any developing economy. The GDP growth rate in Pakistan, being an agricultural country, is mostly reliant upon the growth rate of the agriculture sector. Providing financing to the agriculture sector is therefore a very direct contribution towards supporting the growth of the country’s economy and Meezan Bank is fully committed to providing this support. Supply Chain Financing Program with Karandaaz In 2015, the Bank partnered with Karandaaz Pakistan to initiate a program for providing financing to vendors and distributors operating in organized supply chains in Pakistan through structured financing programs otherwise also referred to as Value Chain Financing (VCF). Karandaaz Pakistan has financial and institutional support from leading international development finance institutions, principally United Kingdom's Department for International Development (DFID) and the Bill & Melinda Gates Foundation. The Consultative Group to Assist the Poor (CGAP), a member of the World Bank Group, managed the start-up phase of the Company and continues to 94 MEEZAN BANK LIMITED Being aware of the importance of expanding its outreach to the agriculture sector, Meezan Bank has launched Islamic Agricultural Finance to enable the farming sector to avail Shariah-compliant financing for their needs. The Bank’s Agriculture financing portfolio grew by 40% during the year. Portfolio Mix Meezan Bank has a diversified commodity financing mix, well-spread amongst Wheat, Edible Oil & Seed,
  81. Cotton Ginning , Fertilizer, Coal, Sugar, Rice, Feed, and Steel sectors. Furthermore, the Bank is continuously exploring new and untapped sectors of the economy in order to enhance its portfolio and to diversify its risk. for this increase was high demand triggered by launch of new models by Toyota and Honda. Reduction in financing cost due to low SBP discount rate further incentivized customers to avail car financing. Non Performing Finances Meezan Bank, 16 years after launching its Auto Finance business, is among the top three banks in the Auto Finance market of Pakistan with over 23,000 active contracts that comprise new, used and imported vehicles. The Auto Finance portfolio of the Bank grew by a healthy 45.6% during the year. Despite the strong growth in asset numbers, the Bank has maintained strong credit screening and Risk Management criteria, since these form the backbone of any financing institution. Testimony to the effectiveness of the Bank’s strong credit approval criteria is the fact that the Bank’s NPL ratio for the Commercial Banking segment has improved from 3% to 2% Commercial Vehicles Financing Meezan Bank entered the Commercial Vehicles financing business in January 2016. The Bank povides financing for commercial vehicles’ needs of the SME and Corporate sector such as Oil, Goods, Passenger, Logistics and Transportation Companies. Financing is offered for all types of Commercial Vehicles ranging from Heavy Trucks, Prime Movers and Buses to Light Commercial Vehicles. The Bank has remained active in implementing a number of changes to improve the infrastructure, product features and management of its Auto Finance business. The Bank follows a strategy of maintaining stringent credit criteria for the Consumer Finance segment. The Bank has built a portfolio of Rs. 8.10 billion within a short span of two years, with an outstanding portfolio of Rs. 6.5 Billion as of December 31, 2017. Easy Home Islamic banks have emerged as key financiers for the housing sector and Meezan Bank, the largest Islamic bank in Pakistan, stands amongst the leading Housing Finance providers in the country. Housing Finance portfolio of the Bank grew by 28% during the year, with the disbursem*nt figure for 2017 being the highest ever Housing Finance disbursem*nt in a single year. Trade Business Islamic Banking is ideally suited to cater to the trade finance needs of customers and the Bank’s trade business (Import & Export) performed very well in 2017, registering a 29% growth. The Bank, with excellent service delivery capabilities and well equipped teams of professionals, has been trusted both by local customers and multinational companies to be the strategic banking partner for their 360 degrees banking needs. Consumer Finance Meezan Bank is the pioneer in providing Shariahcompliant consumer financing in the country and offers various consumer asset products to its customers. Performance for 2017 is provided below: Car Ijarah The automobile industry of Pakistan grew by 26% in 2017 with car sales standing at 274,236 units compared to 217,679 units last year. A major reason Meezan Consumer Ease Meezan Bank’s Consumer Ease Unit offers Shariahcompliant consumer durable goods financing to its customers. This business segment is progressively growing and offers financing for a diverse range of consumer durables. ANNUAL REPORT 2017 95
  82. Labbaik Savings Asaan is alternatively offered to customers who wish to perform Hajj /Umrah later in life (i.e. 6 months to 20 years) under a Mudarabah based deposit account in which the customer gets profit every month on the deposited amount. Labbaik Hajj & Umrah Meezan Labbaik, Hajj & Umrah Facility is a completely Halal & Riba-free travel solution for Hajj & Umrah, that was initiated by the Bank as a Corporate Social Responsibility project and has gained immense popularity over the years, especially after its enrolment in Government Hajj Scheme in 2015. Under Labbaik, Meezan Bank is enrolled in Govt. Hajj Scheme through which customers can file their Hajj applications through its branches and be eligible for Hajj ballot conducted by the Ministry of Religious Affairs and Inter Faith Harmony (MORA & IH). In its third year of enlistment i.e. 2017, the Bank collected over 45 thousand Hajj applications and retained its 4th position among the ten (10) banks on MORA’s panel. Highlights of the current season include allocation of reserved Hajj quota to Meezan Bank for widows, low income employees, ministers etc. Only the top four Banks were given this privilege. The purpose built Hajj booths in 10 cities of the country facilitated more than 15,000 pilgrims. Apart from special giveaways, Saudi Riyals were also available in ample quantity to the satisfaction of the pilgrims. Meezan Bank’s Karachi Haji Camp pioneered to be the only bank booth (nationwide) which offered ATM facility to the pilgrims. Labbaik also facilitates customers who wish to perform private Hajj or Umrah through packages of well-reputed travel agents on the Bank’s panel and 400 pilgrims availed this facility. The Bank's role in Labbaik is limited to sales and funds collection agent of the travel agent while all travel related arrangements are made by the Travel Partners. Labbaik Travel Asaan provides two payment alternates to customers i.e. Upfront Plan in which the customer pays the complete cost before travelling and the Instalment Plan in which the customer makes a down payment before travelling while the balance amount is paid in 12 equal monthly instalments without any additional charges. 96 MEEZAN BANK LIMITED Treasury and Financial Institutions Meezan Bank has one of the most well equipped Treasuries in the country, both in terms of people and systems. The Bank offers a wide range of Shariahcompliant products that not only serves the foreign exchange needs of its clients but also makes effective utilization of excess liquidity to generate profits that are paid as return to depositors. Meezan Bank’s Foreign Exchange trading desk is responsible for effective management of the Bank’s foreign exchange risk. The Bank’s Treasury is an active market maker known for providing foreign exchange liquidity and stability in the volatile inter-bank market. The Bank is the forerunner in the development of the Islamic Outright market, which allows effective cash flow management in a Shariah-compliant manner. FX trading desk’s activity enables the Treasury Marketing Unit (TMU) with competitive pricing which in turn results in generating generous foreign exchange flows. Competitive pricing is also one of the major reasons Meezan Bank has been so successful in boosting its overall trade business. With the rapid growth of the Bank, its trading desk has started facilitating other inter-bank counterparts in hedging their G7 exposure. Over the past few years, the Bank has intensified its focus on developing its human resource, systems, processes and offerings. This well blended combination of people, process, products, and systems, coupled with the Bank’s customer-centric approach has yielded great benefits for the organization. Notwithstanding stable exchange rates and a general lull in business activity and forward bookings, Treasury’s sales team not only booked sizable trade volumes, increasing trade turnover by over 11% during the year, but also delivered on its target expectations for the year. The Bank’s strong sales efforts and well-tailored products helped in not only deepening existing relationships but also forging new ones.
  83. Volume of FX Business routed through Treasury USD Billion 5 ,807 6000 5000 4,739 Correspondent Banking Network 5,235 FI Banks 435 450 4000 400 3000 350 370 310 406 389 342 300 2000 250 1000 0 In order to support the Bank’s growing trade business the number of Correspondent Banking arrangements increased from 406 to 435. 200 150 2015 2016 2017 100 50 The FX Interbank Desk lent much support to the sales team due to its active presence in the market. Not only did they trade robust volumes on the USD PKR counter, but also increased their activity in the G7 markets, taking on substantial exposures backed by trade transactions. With the branch expansion strategy in motion and a steadily increasing deposit base, the treasury book also increased in quantum. The ALM Desk hence faced with the daunting task of effective deployment of excess liquidity, given the limited avenues for investment and placement available to Islamic banks. Enhancing the challenge, the Islamic money market also remained liquid due to maturities amounting to Rs 93 billion on account of Bai Muajjal and GOP Ijarah 15 issue with the State Bank of Pakistan. The ALM desk managed these inflows through successful participation in the Sukuk auction of GOP Ijarah 19 issue, as well as through successive Bai Muajjal transactions totaling Rs 150 billion, done on a secured basis, so as to ensure effective deployment of funds while incurring minimal capital charge. In addition, the ALM Desk capitalized on the market movements, realizing capital gains to the tune of Rs 291 million for the Bank, based on their firm grip and view on the market. The Bank’s Financial Institutions (FI) and correspondent banking network grew further keeping in view the Vision and Mission of the Bank. To provide wide area of service across the globe, relationships with a number of banks have been developed. The Bank’s Correspondent Banking network now spreads to 86 countries with over 700 correspondents. The broadened network provides customers with one stop solution for their banking needs including export and import transactions, foreign remittances etc. Back to back guarantee business has also expanded with an increased number of international banks and this reflects an improved image of the Bank internationally as well as an enhanced level of comfort of correspondent banks. The beneficiaries of these guarantees include government and private entities including SSGC, Pakistan Railways, CMA, Civil Aviation Authority and various others with applicants belonging to 18 countries. 0 2012 2013 2014 2015 2016 2017 With an aim to provide better services to its customers for their international remittances involving trade and personal remittances, two new nostro accounts were opened with J.P. Morgan Australia and ICBC Pakistan for Australian Dollar and Chinese Yuan respectively. The Bank currently has 25 active nostro accounts in 17 currencies which enables its customers to carry out their banking transactions without facing onerous currency conversion charges. DID YOU KNOW ISLAMIC BANKS MAINTAINING DEPOSITS WITH THE STATE BANK It is mandatory for every commercial bank to keep a specified percentage of deposits raised from Current and Saving account holders as reserves with State Bank of Pakistan (SBP).The Cash Reserve Requirement (CRR) of Islamic banks is placed with SBP in a current account on which no return is paid to the bank. Besides CRR, Islamic Banks have to invest 14% of their deposits in Islamic financial securities such as GoP Ijarah Sukuks to fulfill Statutory Liquidity Requirement (SLR). The income earned from these securities is free from any Riba and is therefore fully Shariah-compliant. Furthermore, Islamic banking institutes are not allowed to invest in T-Bills or PIB’s to maintain their SLR’s. ANNUAL REPORT 2017 97
  84. Al Meezan Investment Management Limited Asset Management The asset management business of Meezan Bank is managed by its subsidiary , Al Meezan Investment Management Limited (Al Meezan). The company has been in operation since 1995 and has one of the longest and most consistent track records among private sector companies managing mutual funds in Pakistan. It also has the distinction of being the only asset management company in Pakistan with the exclusive mandate of providing Shariah-compliant investment solutions to its investors. In addition, to the core business of asset management, Al Meezan is also licensed to render Investment Advisory Services and manage Voluntary Pension Schemes. Al Meezan, with a track record of over 22 years of Fund Management, has always strived to serve its esteemed clientele with distinction and service excellence. This is evident, in the fact that over these two decades, Al Meezan has developed a healthy investor base of over 70,000 customers, who have entrusted the company with providing them unique investment options and competitive returns. Since inception, the company has grown considerably and has added to its credit multiple achievements. The Company offers a comprehensive product suite of 14 mutual funds and multiple investment plans spanning from basic equity and income funds to commodity funds, dedicated equity fund and aggressive asset allocation funds. The company also manages the largest Voluntary Pension Fund in Pakistan. With Assets Under Management (AUMs) crossing the Rs. 100 billion mark in December 2017 (including Separately Managed Accounts), Al Meezan is the largest Shariah-compliant Asset Management company in the country. It has a market share of 16% in mutual funds industry and 40% in the Shariah-compliant mutual funds segment. Al Meezan has also won several accolades during 2017 as given below: ■ ■ ■ ■ Best Islamic Asset Management House of the Year- Pakistan The Asset Triple A The Award for Maximum Mutual Fund IPO’s SAFE-PSX Pakistan IPO Summit CIO 100 Honoree (2017) CIO 100 Symposium Asset Management Company of the year –Gold IFFSA Awards 2017 During the year, the JCR-VIS Credit Rating Company upgraded Management Quality Rating of Al Meezan from AM2++ to AM1, which denotes that the Asset Manager exhibits excellent management characteristics. This is the highest management quality rating that could be assigned to any management company, thus placing Al Meezan at the top of the rating scale and denotes excellent management characteristics. 98 MEEZAN BANK LIMITED The AUMs of Al Meezan have recorded an average annual growth of over 18% during the last five years, as shown below: Funds Under Management of Al Meezan Rupees in Billion Funds under Management Discretionary Portfolios 117 120 104 100 78 80 59 60 40 20 0 66 48 39 37 2012 45 2013 56 2014 61 2015 10 9 94 2017 30-Nov 71 2016 The Product Development team at Al Meezan works proactively to introduce new Shariah-compliant investment structures while the Product Development and Shariah Compliance team of Meezan Bank ensures Shariah-compliance of funds under management of Al Meezan. During the year, Al Meezan successfully launched Meezan Dedicated Equity Fund (MDEF). Moreover, four additional plans, namely Meezan Strategic Allocation Plan – III (MSAP-III), Meezan Strategic Allocation Plan IV (MSAP-IV), Meezan Strategic Allocation Plan V (MSAP-V), Meezan Capital Preservation Plan III (MCPP-III) were introduced during the same period that have generated considerable investor interest and enthusiasm. The plans are part of the series under our existing fund of funds i.e. Meezan Strategic Allocation Fund (MSAF). The fund-wise break up of assets under management along with return on these funds since inception and for calendar year 2017, are as under:
  85. Islamic Mutual Funds Net Assets Rs . million (December 31, 2017) Annualized Return since Inception till December 31, 2017 CY17 Returns FY17 Returns 6,940 16.5% -18.7% 23.0% 40,296 19.3% -19.4% 22.9% 1,593 1,516 17.5% N/A -18.2% -6.8% 15.9% 6.9% 1,332 N/A -3.2% N/A 10,994 14.1% 4.2% 5.1% 8,345 10.8% 5.8% 6.1% 2,364 10.6% 3.9% 6.6% Equity Al Meezan Mutual Fund (AMMF) Meezan Islamic Fund (MIF) KSE Meezan Index Fund (KMIF) Meezan Energy Fund Meezan Dedicated Equity Fund* Fixed Income Meezan Islamic Income Fund (MIIF) Meezan Cash Fund (MCF) Meezan Sovereign Fund (MSF) Asset Allocation Fund Meezan Asset Allocation Fund 2,818 2.6% -15.5% 18.1% 7,999 14.7% -10.6% 14.9% 518 293 309 834 720 2,271 594 13.1% 11.2% 8.7% 9.2% 7.4% 7.1% 0.3% -14.1% 8.4% 2.4% -8.2% -16.6% -16.6% -16.1% 16.9% 13.3% 9.7% 18.8% 18.1% 18.0% 16.9% 2,095 1,408 1,500 1,685 532 64 -5.1% -14.5% N/A N/A N/A N/A -15.2% -15.4% -16.7% -15.4% -3.2% 0.1% 8.9% -1.2% -3.3% -3.0% N/A N/A 382 2.4% 5.7% -7.2% 5,185 2,347 16.4% 11.2% -20.5% 3.1% 20.4% 4.9% 752 44 10.9% -4.4% 3.2% 6.5% 4.4% -9.4% Balanced Fund Meezan Balanced Fund (MBF) Fund of Funds Meezan Financial Planning Fund of Fund Aggressive Moderate Conservative MAAP-I MAAP-II MAAP-III MAAP-IV Meezan Strategic Allocation Fund MSAP-I MSAP-II MSAP-III* MSAP-IV* MSAP-V* MCPP-III* Operations Review For an organization to deliver products and services that consistently meet the expectations of its customers, it needs to have an efficient support functions infrastructure. At Meezan Bank, the support units work together to ensure that all transactions undertaken by the Bank are in accordance with the directives of its Shariah Advisor and the Shariah Supervisory Board (SSB) as well as with the Bank’s Policies and Procedures. Some of the key support units are: Service Quality The Bank believes in a service culture that ensures consistent delivery of its products and services to customers across all banking channels, meeting stringent service quality standards monitored regularly by a dedicated team. A Service Board comprising senior level representation from various business and support units and chaired by the Bank’s President & CEO, meets regularly to review service quality performance of the Bank and takes measures to ensure delivery of a superior banking experience to the Bank’s customers. The Bank has developed Key Service Indicators that help its dedicated Service Quality team evaluate and report on the performance of branches and Head Office departments on a common and clearly defined scale. This team also evaluates the Service Quality Rating of branches through a Branch Service Scorecard. The Bank also uses service evaluation techniques such as Mystery Shopping and conducts Customer Satisfaction Surveys for obtaining feedback from customers for improving its product and services. The Bank has a dedicated Complaint Management team that handles customer complaints under the Customer Grievances Handling policy approved by the Bank’s Board. The Bank’s robust complaint handing mechanism allows its customers to log complaints through a number of channels, including a 24/7 Call Centre, website, a dedicated email address for complaints and ‘Hearing and Caring’ dropboxes placed at branches nationwide. Commodity Fund Meezan Gold Fund Pension Fund Meezan Tahaffuz Pension Fund Equity Sub fund Debt Sub Fund Money Market sub fund Gold sub Fund Total 92,907 *launched in CY-2017 ANNUAL REPORT 2017 99
  86. Information Technology Meezan Bank delivers its customers a superior banking experience through state-of-the-art technological solutions that provide smooth , secure, efficient and convenient access to its products and services. The Bank’s digital strategy is focused on having a robust, stable, secure and always-available platform. Its digital readiness further enables it to seamlessly and efficiently incorporate the latest technologies and infrastructure, facilitating expansion of its portfolio and touchpoints with new, agile and enterprise-class solutions. Some of the key technology-related initiatives of the Banks in 2017 were: Core Banking System Upgrade (Temenos T24 Upgrade to Release 16) Meezan Bank has a robust Core Banking platform that is extremely reliable, scalable and resilient, and is able to deliver uninterrupted round-the-clock operations. To ensure maximum uptime, the Bank has in place a recovery mechanism for all critical services, enabling it to comfortably manage its increasing transaction volumes. The Bank upgraded its core banking system to T24 R16 during the year. This project has helped the Bank improve work efficiency at both its branches and Head Office. The system is capable of modular enhancements and eases the task of business process re-engineering across the organization. The Bank optimized the upgrade process so that a 52 hour conversion process was completed in just 18 hours, during which time the Bank’s ADC services were available throughout, providing its customers uninterrupted banking convenience. Business Process Automation Providing Agility and Efficiency Automation in Credit Management, Swift, RTGS, Cash Management and integration with external financial systems have all increased back-end efficiency, translating into increased front-end effectiveness and a better customer experience. Integration of different business models has also enabled the Bank to simplify complex business processes. Digital Transformation Readiness The development of Enterprise Integration capabilities has enabled Meezan Bank to conveniently integrate with mobile applications, financial technology companies, telecommunications corporations, e-shopping providers as well as its business partners. This has enabled the Bank to increase its reliance on digital solutions and is proving very useful in enhancing and expanding the Bank’s portfolio of financial products and services. State-of-the-Art Network Security In 2017, the Bank deployed advanced network security solutions across its branches and on its network, providing increased security and information protection. The various technology initiatives undertaken have enabled the Bank to grow as Pakistan’s premier innovative digital bank and are contributing towards its 3-pronged digital strategy of Go Mobile, Go Social and Go Analytical. The key focus 100 MEEZAN BANK LIMITED of all these efforts is to provide a world-class banking experience to its customers. Product Development and Shariah Compliance (PDSC) Shariah-compliance is a way of life at Meezan Bank and the Bank has a zero tolerance policy in this regard. Various checks and balances ensure that all the products, services, processes, policies and procedures of the Bank are fully Shariah-compliant. To continually meet this objective, a dedicated department named ‘Product Development and Shariah Compliance’ (PDSC) was formally established in 2005. This department also provides a centralized hub for research and product development activities, finding practical and Shariahcompliant solutions for different financial needs, conducting Islamic banking trainings and Shariahcompliance exercises. PDSC works under the guidance and direct supervision of the Bank’s Resident Shariah Board Member, Dr. Muhammad Imran Ashraf Usmani and the Shariah Supervisory Board (SSB) of the Bank. The department carries out diversified functions that include: ■ ■ ■ ■ ■ ■ Facilitating new research and product development activities Refining existing products and procedures Providing Islamic banking trainings to new and existing staff members Conducting regular Shariah reviews of branches and departments Coordinating with the Bank’s Shariah Supervisory Board Facilitating learning programs of Islamic banking, both in-house and at external avenues including educational institutes and training companies The Bank has achieved such success and recognition in its research and product development activities that the practices and procedures adopted by Meezan Bank are accepted as benchmarks of the Islamic banking industry, both locally and internationally. Product Development and Structuring The Bank has a dedicated product development and structuring team that works with clients, Shariah scholars, lawyers, law firms and accountants to develop client-specific solutions to enable clients to obtain Shariah-compliant financing facilities. More than 2,500 such cases were processed during 2017. The Bank’s staff also visited over 170 clients to gain hands-on understanding of their business processes to develop Shariah-compliant financing solutions that suit their needs. The Bank supported Pakistan Mercantile Exchange (PMEX) for development of a Shariah-compliant liquidity management platform to support the Islamic banking industry and successfully conducted a test transaction through this platform. In order to increase access of financing to the SME segment, the SSB approved a new product that enables SMEs in managing their cost of financing. The SSB also modified and improved the existing structure for Murabaha-based shares financing. The Bank is also focusing on program-based financing to the SME
  87. sector and in this regard Guidelines for Commercial Equipment and Commercial Vehicle Ijarah have been issued . Staff members of the Bank worked with IBA CEIF for development of articles and case studies on Islamic banking products and practices. A case study on the challenges being faced by Meezan Bank, titled ‘Meezan Bank: Category leader in Islamic Banking’, jointly written by IBA and Meezan Bank, was accepted and published by Emerald. ■ ■ ■ Contributions towards the Islamic Banking Industry of Pakistan ■ ■ ■ Generally, very few solutions are available to support the financing needs of the travel industry and one of the important needs of travel operators is issuance of guarantees in favor of various beneficiaries. The Bank has developed guidelines for providing a Shariah-compliant guarantee solution to travel operators, based on the nature of security being offered by them. In order to reduce Turn-around Time of transaction approval process, the Bank developed standardized Shariah process flows of Murabaha, Istisna, Tijarah, Running Muharakah and Commodity Salam and is also working on standardization of other processes. The Bank is also working with State Bank of Pakistan’s sub-committee on National Financial Inclusion for the development of a low cost housing finance solution for the masses. On the corporate banking side, the Bank continued its efforts to increase Shirkatul Aqd-based financings, as a result of which the quantum of Running Musharakah transactions continued to rise and the total Running Musharakah financing at year-end stood at slightly over Rs 145 billion, which is now 34% of the Bank’s total financing portfolio. The Shariah Supervisory Board has also approved certain guidelines to improve the controls and risk management of Running Musharakah product. Syndicated financing of Rs. 13 billion for capacity expansion project of a large cement producer Diminishing Musharakah-based solution for Rs. 2.275 billion financing for development of residential colony in Islamabad Diminishing Musharakah based structure for Shifa International to facilitate financing of Rs. 2 billion for their expansion project Meezan Bank is one of the Joint Financial Advisors to the Government of Pakistan for the issuance of Government of Pakistan Ijarah Sukuk. During the year, the Bank played a key role in execution of GOP Sukuk on M1 Motorway generating Shariah-compliant financing of Rs.71 billion. The Bank has been actively supporting the State Bank of Pakistan for various matters relating to the Islamic banking industry, such as improvement of Shariah Governance Framework, solutions for Energy Finance Scheme, issuance of new Sukuk etc The Bank’s RSBM, Dr. Muhammad Imran Ashraf Usmani, also played an important role as a member of the Implementation Committee formed by the Finance Minister to implement the suggestions being laid down by the Prime Minister’s Steering Committee. The Bank also supported the Government towards introduction of tax reforms for Islamic banking in the last federal budget. Internal Training ■ Meezan Bank has put into place a rigorous training regime for its staff, in order to enhance their knowledge and skills on Islamic finance. The learning initiatives include basic orientation for all new staff, specialized functional modules on various business products and processes, certificate programs on Islamic banking as well as refresher programs. During the year more than 93 sessions were held where knowledge pertaining to Islamic baking was extended to more than 3,000 employees of the Bank. Apart from routine training sessions such as Islamic Banking Certification, Six-day Advance Level courses on Islamic finance and refreshers on various Shariah-related topics, the Bank also arranged special sessions for function-specific teams to enhance the understanding of Islamic banking products and working policies. The Bank worked on five syndicated/structured transactions involving hybrids of various structures such as Ijarah, Diminishing Musharakah, etc. Some of the major transactions are as follows: ■ ■ Infrastructure development financing of Government by jointly structuring syndicated solution of up to Rs. 144 billion to WAPDA for construction of 2,160 MW run-of-river Dasu Hydropower Project Stage -1 Wakalatul Istismar-based structure for Power Holding Pvt Ltd for their funding requirement of Rs. 30 billion ANNUAL REPORT 2017 101
  88. ■ The Bank invited a number of professionals and academicians from abroad to share their knowledge on various practical and academic issues with the Bank’s middle and senior level staff. External Training (Customer & Public Awareness Initiatives) ■ ■ ■ Meezan Bank’s efforts towards realizing its Vision have led to numerous projects and partnerships focused on creating awareness about Islamic banking among different segments of the society. The Bank arranged approximately 55 seminars in more than 38 cities of Pakistan which were attended by more than 5,600 participants The Bank’s staff members conducted various training programs at National Institute of Banking & Finance (NIBAF) and Institute of Bankers Pakistan (IBP). Meezan Bank’s staff taught Islamic banking courses and conducted seminars at a number of reputable universities across the country In the scholastic field, Meezan Bank also provides support to Journal of Islamic Banking and Finance through contribution of academic and scholarly articles and research papers that a robust Shariah control system is in place and is working effectively. To ensure efficiency of Shariah controls, the Shariah Audit function focuses on the following areas: ■ ■ ■ ■ ■ ■ ■ ■ Evaluation and assessment of Shariah control systems that are in place Eradication of non-Shariah-compliant income, if any, and identification of Shariah-compliant returns Support bank’s staff in learning, developing and refining Shariah skills as a tool to mitigate Shariah non-compliance risk Conducting on-site sessions with staff members to enhance their Islamic banking knowledge; training sessions on ‘How to improve Shariah Audit Rating’ are also conducted as a hand-holding activity at branches across the country Evaluation of Treasury operations on an ongoing basis to assist Treasury in ensuring Shariahcompliance in their day to day operations Conducting audits of pool management, profit calculation and distribution process in order to ensure Shariah-compliance as well as to protect depositor’s rights as ‘Rab-ul-maal’ Continuously improving the quality of Shariah reviews and audits by the way of introducing new risk-based evaluation methodologies and models for assessing bank’s activities Implementation of Quality Assurance and review so as to bring best practices and standardization to Shariah Audit activities Islamic Financial Advisory The Bank continued to play a key role in supporting IBA Centre for Excellence in Islamic Finance (IBA-CEIF) towards the common aim of capacity building for the industry and spreading the message of Islamic banking. In this regard, various sessions for banking practitioners, Shariah scholars, judges and academicians were conducted with the support of Meezan Bank. One of the initiatives of IBA-CEIF was to conduct banking knowledge and awareness sessions for Shariah scholars. Under this initiative a total of five sessions for Shariah Scholars, seven for small traders and three sessions for Zakat funds utilization were conducted during 2017. Meezan Bank regularly facilitates banking as well as non-banking financial institutions, including mutual funds, stock exchanges, Takaful companies and other corporate entities, both locally and internationally, in developing Shariah-compliant products for their business needs. The Bank entered into an arrangement with Pakistan Mercantile Exchange (PMEX) for developing a liquidity management solution through which the pilot phase of Shariah-compliant Commodity Trading Platform was launched. This liquidity management solution would provide a Shariah-compliant platform for introducing Islamic alternatives to T-bills and bonds and thereby provide a much needed liquidity investment venue to the industry. The Bank also assisted Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) in developing draft of Internal Shariah Audit Standard. Meezan Bank is also a strategic partner for Lahore University of Management Sciences (LUMS) and Institute of Management Sciences, Peshawar by supporting the activities and sessions organized by these institutes. Shariah Audit & Islamic Financial Advisory Shariah Audit Meezan Bank has a dedicated and independent Shariah Audit function in place to ensure that all its operations are carried out in compliance with Shariah rules and principles as prescribed by the Shariah Supervisory Board, Resident Shariah Board Member (RSBM) and State Bank of Pakistan, as well as to ensure 102 MEEZAN BANK LIMITED The Bank extended Islamic financial advisory services in Australia to an Islamic cooperative institution related to housing finance and also conducted training of their
  89. directors and staff . The Bank is in the process of advising the institution to introduce Takaful services in Australia as well. The Bank also extended its services to Bahrain Institute of Banking and Finance (BIBF) through sharing its expertise, knowledge and experience by preparing content for upcoming AAOIFI courses. For this purpose, the Bank prepared presentations simplifying the clauses, short case study / practical examples and self-assessment exercises for all AAOIFI Shariah and Accounting Standards. In the area of Capital Markets, the Bank facilitated its clients in launching numerous investment funds and plans across the year, bringing total funds and plans under advisory to more than 45 with a total size of over PKR 140 Billion. The Bank provided regular support to Pakistan Stock Exchange (PSX) in maintenance and re-composition of the two Islamic indices. In addition, the Bank also supported PSX in developing a solution for introducing a dedicated Islamic Counter at PSX for Shariah-conscious investors, besides extending support to National Clearing Company of Pakistan Limited (NCCPL) and Securities and Exchange Commission of Pakistan for introducing a Shariah-complaint shares financing product. The Bank also extended its support to industry players such as National Institute of Banking and Finance (NIBAF), Centre for Excellence in Islamic Finance – Institute of Business Administration (IBA CEIF), Institute of Bankers Pakistan (IBP) and Pakistan Stock Exchange (PSX) by assisting in conducting various sessions on Islamic banking and finance. The Bank offers distance learning programs on Islamic Finance to professionals and students through an internally established unit ‘International Institute of Islamic Bankers’ (IIIB), which is Pakistan’s first institute accredited by Finance Accreditation Agency (FAA), Malaysia. This unit’s flagship course ‘Certification in Islamic Banking and Finance’ is a four month e-learning certification program comprising a practical case study based interactive course designed by experienced industry professionals. One of the batches of 2017 was a BSO (Cash Officers) Batch. In which substantial number of officers were hired. A differently abled individual was also inducted in this batch so as to provide such individuals the opportunity to realize their full potential by giving them career opportunities where they can be productive despite the challenges they face. A new batch program for the induction of PDSC Shariah Scholars batch, which was a first-of-its-kind initiative in the Islamic banking sector, was initiated in 2017. Six qualified Shariah Scholars were inducted under this program. With this batch on-board, there are now 10 Shariah Scholars working with the Bank in Product Development & Shariah Compliance and Shariah Audit & Advisory departments enabling the Bank to develop innovative Islamic banking products, conduct trainings and carry on research for providing financing solutions to customers. The active recruitment exercises helped in growing the Bank’s Headcount by 4.7% in 2017. Staff Headcount 2016 Central 2017 2,738 2,833 North 1,141 1,195 South 2,241 2,295 Head Office 1,623 1,783 Staff Headcount 15% 35% Human Resources Being the country’s leading Islamic bank and one of the largest banks in the country, Meezan Bank believes in building a dynamic and professionally competent workforce that is fully capable of providing a world-class banking experience to its customers. The Bank’s branch network of over 600 branches across more than 150 cities is supported by a staff of over 8,000 full time employees and 1,400 outsourced staff. The Bank gives special attention to the well-being of its most important asset - its employees, and considers them the key to its success. The Bank has worked towards becoming an Employer of Choice by attracting, developing, retaining and caring for best quality resources, and continually striving to build a dynamic and professionally competent workforce. In 2017, the Bank inducted 1,919 staff, out of which 232 were inducted through batch hiring. The batch hiring initiative enables the Bank to develop a regular talent pipeline for its ever expanding branch network. It also enables the Bank to contribute to the society by providing employment opportunity to qualified, competent but otherwise professionally inexperienced youth and developing them into professional bankers. 28% 22% Central South Head Office North The Bank believes in providing career development and diversification opportunities to its staff such that they may find growth and progress within the organization. One manifestation of this belief is that the Bank gives its staff a fair and equal opportunity to apply for vacancies created within the organization. During 2017, 19 jobs were filled through internally sourced talent, while 292 elevations were made across the Bank at different levels (as compared to 252 elevations in 2016). This approach creates a culture of merit-based career growth within the Bank and is also a strong enabler in talent retention. ANNUAL REPORT 2017 103
  90. Elevations 300 250 290 252 200 150 The Bank conducted a total of 489 in-house learning programs for 14 ,729 (7,860 unique) participants encompassing 677 learning days. In-house trainings comprise induction, Islamic banking, technical, role-specific and leadership/soft skills programs. 100 50 0 2016 2017 Meezan Bank has always been cognizant of the importance of caring for its employees and their families. The Bank established an Employee Benevolent Fund Trust (EBFT) in 2012 for providing financial assistance to employees for welfare, education and marriage needs. Establishment of EBFT evidences Meezan Bank’s keenness in achieving excellence in all its affairs. Such an initiative is rarely seen in the banking industry and highlights the Bank’s sincerity towards being an employee-friendly organization. A testimony to the Bank’s commitment to following best practices in its HR matters is the HR awards that the Bank has won. The Bank received the following prestigious awards during the year: ■ ■ ■ programs are conducted across the year under an organized learning calendar. In addition to class-room-style learning facilities, the Bank also has mock branches at Karachi, Lahore and Islamabad where technical training programs are conducted on a regular basis. The Bank provides a multitude of learning opportunities to its staff through different channels comprising classroom, video conferencing, e-learning and knowledge sharing sessions. Best HRM practices award in the category of ‘Large National Companies’ by Employers Federation of Pakistan. The award was announced at the Annual International HRM Conference held in November 2017 at Karachi. The conference was supported by the International Labour Organization (ILO). Meezan Bank was ranked as The Best Place to Work in the Financial Services Industry and was also among the top 10 Best Places to Work in Pakistan, as announced by Engage Consulting and Pakistan Society of Human Resource Management in October 2017. Meezan Bank secured third position in Employer of the Year 2016 Awards in the category of ‘Large National Companies,’ organized by the Employers' Federation of Pakistan. Induction Programs are mandatory for all new staff. The primary purpose of these programs is to get the new joiners familiarized with Meezan Bank’s Vision, Mission, culture, values, history, key policies etc. There are two types of Induction Programs: the ‘Orientation Program’, which is a two-day program for all new joiners and the ‘BSO Batch Training’ which is a ten-day program for freshly inducted batches of Branch Service Officers (BSO). Internal Trainings Sessions 8% 3% 9% 42% 16% 22% Technical Training Soft Skill Induction External Trainings Sessions 10% 10% 50% The achievements have helped the Bank come closer to achieving its goal of becoming the Employer of First Choice, which is another step towards its Vision of establishing Islamic banking as banking of first choice. Learning and Development Meezan Bank is not only the largest and leading Islamic bank in Pakistan, but is also one of the largest banks in the country. This success could not have been achieved without a motivated and professionally competent team. Meezan Bank’s learning and development philosophy consists of providing a variety of learning opportunities to its staff through in-house, external and international training programs. The Bank has three dedicated learning centers located at Karachi, Lahore and Islamabad and additional training facilities at Multan and Peshawar where learning 104 MEEZAN BANK LIMITED Islamic Banking Role Specitic Leadership 78% 64% 75% 67% Islamic Banking Role Specific Technical Seminar/AwarenessRole Leadership Soft Skill Leadership
  91. Islamic banking trainings are a major element of the Bank ’s learning regime. A total of 43 different Islamic banking training programs were held across the country. These programs included Islamic Banker’s Certification (basic and advanced levels), 6 Days advanced Islamic Finance course, Asset Refresher programs, Improving Shariah Audit Rating, Senior Executives Islamic Banking, Shariah Governance Framework Trainings etc. procedures (SOPs) as well as Shariah guidelines, SBP regulations and all related legal requirements. Proper alignment of operations capabilities with overall organizational goals and objectives has a significant impact on business performance, and consequently, on competitive strength. Cognizant of this fact, Meezan Bank has developed its Operations function into a strong, resilient and effective business partner for revenue generating functions, thus providing the needed impetus to its efforts of establishing Islamic banking as banking of first choice. The Bank has focused on continuous improvement of policies, procedures and turnaround time (TAT), thus enhancing operational efficiency and improving effective utilization of resources. The emphasis has been on leveraging latest technologies to improve operating efficiency and staff productivity. The Bank is committed to making substantial investments to achieve this objective. As a part of the Bank’s focused efforts to continually upgrade the quality of its customer-facing staff, several role-specific programs were conducted across the year. These included: Transformation of Personal Bankers into High Performing Inbound Sales Force, Transformation of Business Development Officers into High Performing Outbound Sales Force, Workshop for Newly Elevated Operation Managers, Cash Operations Refresher for BSO Cash Officers, Account Opening Refresher for PBOs, Branch Manager Certification etc. Technical trainings, designed to develop specific technical capabilities of staff handling specialized assignments, include AML/CFT, Foreign Exchange Regulations, Trade, Export/Import, Preparation of Credit Proposal etc. The Bank laid special focus on AML/CFT training programs this year and a total of 59 sessions were held across Pakistan, benefitting 2,212 staff. The Bank also organized 121 soft skills programs benefitting 3,326 staff members. These programs comprised Leadership Development Program for Islamic Financial Institutions, Transforming Managers into Leaders, Train-The-Trainer etc. The Bank regularly invests in external training programs and staff of all levels are regularly sent to attend carefully selected training programs conducted by professional training organizations. Operations Meezan Bank’s Operations department works as a partner of all business units and is responsible for end-to-end operations of Retail Banking, Trade Finance, Credit Administration, Centralized operations, Debit Cards, Cash Houses, Treasury and Capital Market operations, Mutual Funds, Reconciliation, SWIFT and Central Bank Reporting. The primary function of the Operations department is to ensure that all transactions are accurately processed in line with Meezan Bank’s internal policies, procedures and standard operating ANNUAL REPORT 2017 105
  92. Marketing & Corporate Communication During 2017, the Bank launched several initiatives focused on enhancing its brand image and highlighting the various milestones that it had achieved. CELEBRATING SAY NO TO RIBA TODAY In line with Meezan Bank’s completion of 15 years, a celebratory campaign was launched through traditional, digital & social media accompanied with on-ground activities in the branches to thank customers for their patronage and support. YEARS OF ISLAMIC BANKING IN PAKISTAN Major Initiatives to Support & Promote Islamic Banking • The Bank placed its corporate and product ads on top of Islamic pages of major newspapers of the country to promote the cause of Islamic banking. • Live sessions, video interviews of CEO & senior management & product videos were shared with public through the Bank’s social media channels to create general awareness of Islamic finance. • Exclusive and informative Q/A message on difference between Islamic and conventional banking was designed for Facebook which reached a large number of people across the country. Events & Sponsorship Exclusive Product Campaigns on Traditional, Digital & Social Media The Bank sponsored and participated in more than 20 public events nationwide that provided excellent marketing mileage and increased its brand visibility as well as promoted awareness of Islamic banking among the general public. • Meezan Debit Card campaign to highlight the most innovative and advanced features of our new cards • Meezan Mobile App campaign to highlight the speed and ease of use of Meezan Bank’s Mobile App • Riba se Azaadi • Current Account • Over 15 product focused in-house campaigns on social media for Car and Home financing, Home Remittance, Current Account & Kafalah. MEEZAN BANK’S SOCIAL MEDIA PRESENCE & FOOTPRINT Over LIKES 1.5m FOLLOWERS 41,500+ 90% Response Rate One of the Largest fan bases in Pakistan’s banking industry 20 th in World’s Top 100 Banks on Facebook by The Financial Brand GROWTH 43% since 2016 Leading the banking industry of Pakistan with largest follower base digital publication based in the USA 106 MEEZAN BANK LIMITED FOLLOWERS FOLLOWERS More than More than 10,600 The top page among all banks in Pakistan! Others 64% (Approx) Meezan 36% SUBSCRIBERS 3,500 GROWTH 41%since 2016 Over 2,207 First dedicated Islamic Banking Channel in the country
  93. Corporate Social Responsibility Meezan Bank believes in creating value for its stakeholders and society simultaneously , in a manner that is integrally linked to its values and the Islamic principle of Ihsan. The Bank recognizes that it is part of the community at large and that there is a strong need to contribute to the society. Throughout 2017, the Bank partnered with various organizations to design and implement initiatives, primarily in the healthcare and education sectors, benefitting the society. Some of our most recent and also the most ambitious projects are mentioned below: Education Employee Volunteering for TCF Rahbar – Youth Mentoring Programme The Citizens Foundation (TCF) is one of Pakistan’s leading non-profit organizations in the field of education for the less privileged. The Rahbar Programme forms part of the many volunteering initiatives of the organization, and is designed specifically for eighth and ninth grade students of TCF with an aim to mentor the youth to become responsible and productive members of the society. Meezan Bank supported this mentoring program, which is driven by ‘Thought to Destiny’ theme whereby Bank employees voluntarily mentored TCF students by dedicating their six Saturdays during the last cycle of Rahbar in 2017. Commercial Partnership with Deutsche Gesellschaft furs International Zusammenarbeit - (Deutsche Company for International Cooperation - GIZ) and Vocational Training Institute for Women (VTIW) Cooperative Vocational Trainings (CVTs) are based on the modified ‘Dual Training’ concept in order to equip the youth with skills that will enable them to get employment in future. Meezan Bank, in partnership with Deutsche Gesellschaft furs International Zusammenarbeit – Deutsche Company for International Cooperation (GIZ) and Vocational Training Institute for Women (VTIW), Bufferzone supported the TVET (Technical and Vocational Education and Training) Reform Support Programme launched for the first time in Sindh Province. Through this program, the Bank shortlisted eight female candidates from the underprivileged sections of the society and sponsored a one-year training program for each candidate to equip them with skills necessary to enter the job market. The candidates received a 6-month classroom training at the partner institute and were later provided with a 6-month on-job training program, which commenced with rigorous branch banking training and in the second phase by placement at various departments of the Head Office. Meezan Bank, through this unique certified program has been able to groom and empower the candidates with the necessary training and skills, enabling them to now earn better livelihood and support their families. Given the positive and progressive impact of this initiative that also falls in line with our robust gender action plans to encourage more female participation, the Bank has employed three candidates from this Programme, offering them permanent positions at different departments. Centres for Excellence in Islamic Finance at Lahore University of Management Sciences (LUMS), Institute of Business Administration (IBA) and IM Sciences (Peshawar) Lahore University of Management Sciences (LUMS), Institute of Business Administration (IBA) and IM Sciences are among Pakistan’s leading private sector educational institutions. Meezan Bank entered into cause-related partnerships with these institutions in order to help foster the learning and development of Islamic banking and finance across the country by supporting their newly established Centres for Excellence in Islamic Finance. With an altruistic motivation to support the cause of Shariah-compliant banking services and increase awareness about Islamic finance, Meezan Bank worked closely with these institutes to facilitate development and launch of training programs on Islamic banking and finance and co-author case studies and research papers. Meezan Bank’s employees also participated as guest speakers in several executive programs at these educational institutions. This contribution plays an instrumental role in the promotion of ethical practices across the country, as the Bank aims to equip students and executives with adequate Islamic knowledge and professional skills. The partnerships have proved to be a great success and more than 1500 students have benefited from this initiative since inception. IBA Ihsan Trust National Talent Hunt Program Meezan Bank’s partnership with Institute of Business Administration (IBA) for the Ihsan Trust National Talent Hunt Program to select meritorious, yet needy students of various Intermediate Boards of the country entered its ninth successive year in 2017. Meezan Bank facilitated IBA in the selection process by providing its branches as well as its talent management resources (HR) for interviews at provincial and federal capitals of the country. A total of 40 students were selected and given admission in IBA out of the 57 students who were shortlisted following the Orientation Program and Admission Test. Professional Education Foundation (PEF) Professional Education Foundation (PEF) is a not-for-profit organization established in 2009 with the sole aim to ANNUAL REPORT 2017 107
  94. financially support the underprivileged students in their professional education . Since its establishment, PEF has funded around 1200 students at 34 public sector universities across Pakistan. Meezan Bank facilitated PEF in its Zakat/Donation collection campaign during the month of Ramadan while also serving as their awareness partner, providing visibility to the organization through placement and distribution of flyers at selected branches across Pakistan. Healthcare The Indus Hospital Since its inception in 2005, the Indus Hospital (TIH) has been running an unparalleled and unique health care business model, whereby it provides premium healthcare at no cost at all to low income populations. The Bank, in collaboration with The Indus Hospital, has taken the following initiatives as part of its CSR activities: Blood Donation Drive Since 2014, the Bank is supporting The Indus Hospital through successful voluntary Blood Donation Drives at its Head Office located in Karachi. This year , as always, the Bank held a blood donation drive with the objective of encouraging people to donate blood while at the same time keeping track of their health conditions. Staff members from Head Office and branches participated in this activity with great enthusiasm. In addition to proper screening for blood donation, the staff members were also screened for various diseases including Hepatitis as well as other infectious diseases for free. TIH Golf Fundraiser Meezan Bank, with its aim to support quality healthcare for all segments of the society, supported The Indus Hospital in its Golf Fundraiser, held at Karachi Golf Club. The event engaged more than 100 golfers and top CEOs of several organizations. This fundraiser not only helped create awareness about the philanthropic activities of TIH, Karachi but also helped collect voluntary financial support to expand the number of beds in the hospital vicinity. Layton Rahmatulla Benevolent Trust (LRBT) Golf Tournament 2017 Layton Rahmatullah Benevolent Trust (LRBT) is Pakistan's largest non-governmental organisation working to fight blindness in the country. Established in 1984, it is based in Karachi with hospitals and primary eye care centres throughout the country. Meezan Bank participated in the LRBT Golf Tournament, held at the Karachi Golf Club. This was the first charity golf tournament held by the organisation to raise funds for the treatment of Cataract, Glaucoma, retinal and corneal diseases among underprivileged children and adults who cannot afford the treatment. The event also helped raise awareness regarding LRBT reaching another milestone of 108 MEEZAN BANK LIMITED treating its 37th million patient - a 6 year old girl from Malir, Karachi. Shaukat Khanum Memorial Cancer Hospital (SKMCH) Shaukat Khanum Memorial Cancer Hospital (SKMCH) and Research Centre has established itself as a centre of excellence providing comprehensive care, free of cost, to thousands of cancer patients in Pakistan. Meezan Bank first joined hands with the SKMCH in 2010, when an MOU was signed, whereby the Bank has placed collection boxes in all Meezan Bank branches within Sindh and Balochistan. Under this agreement, the collected amount is directly deposited to the hospital’s main collection account through Meezan Bank’s free online banking service. The initiative has shown extremely positive results as the collection from these boxes has increased significantly, especially in those areas where the hospital did not have prominent presence or donation collection channels. Sindh Institute of Urology Transplant (SIUT) Sindh Institute of Urology Transplant (SIUT) is one-of-itskind centre for kidney transplantation in Pakistan and has been providing free medical treatment for kidney and liver diseases to patients, predominantly from the rural and poor urban strata with virtually no access to medical facilities. SIUT’s extensive facilities, which house state-of-the-art equipment, enable them to provide free treatment to Pakistanis. Meezan Bank contributed to SIUT by raising their awareness amongst its customer population through information leaflets and banners strategically placed within the branches. Behbud Association Karachi Behbud Association, Karachi is a registered non-profit organization, working for over 50 years, focusing on poverty alleviation and empowerment of underprivileged and marginalized communities through interventions in education, health, vocational training, income generation and disaster relief. Meezan Bank sponsored Behbud Association Karachi in holding the Behbud Carnival Sunset Club, Karachi. The Carnival aimed to raise funds for Behbud’s development projects and charitable activities, encompassing education, health and vocational training for the empowerment of women.
  95. Sustainability Report As Pakistan ’s leading Islamic Bank, Meezan Bank believes in playing a prominent role in contributing to the United Nations Sustainable Development Goals (SDGs). With a key focus on responsible growth and environmental, social and governance impact; the Bank aims to develop and implement sustainable business practices that fully meet the expectations that the society has from responsible corporate citizens. Meezan Bank's consciousness of its responsibility towards society and stakeholders is also expressed in its Vision and Mission statements. Institutional Investors Meezan Bank holds regulatory and internal meetings with its Institutional Investors in the form of Board of Director meetings and Board Committee meetings, which are planned and announced on a periodic basis. Stakeholders Meezan Bank’s Stakeholders Shareholders Shareholders’ engagement is ensured through Annual General Meeting held every year, which all shareholders are invited to attend. This meeting provides the shareholders an opportunity to interact with the Bank’s senior management and share their suggestions, concerns and views. Shareholders, represented by the Board of Directors Customers: Retail, Corporate, Consumer and Commercial Banking customers Depositors Regulators (Government) Employees Business partners: Suppliers & Service Providers Peers: other financial institutions (Islamic as well as conventional) Trade Associations Opinion-formers: Journalists, special interest groups, public via multiple communication channels Meezan Bank's stakeholders are the people and organizations that affect or are affected by its operations. The Bank’s commitment to its stakeholders is central to its sustainability strategy and reflects the values that allow it to create shared success with its clients, communities and other stakeholders. Customers & Public Meezan Bank's customers include individual and corporate depositors, large corporations as well as small & medium enterprises. The Bank ensures that all customer segments are engaged through numerous forums and via multiple channels. To achieve this, the Bank regularly conducts a number of activities during the year for its customers as well as the general public, such as Islamic banking seminars, workshops, local get-togethers on new branch openings and occasion based activities. ■ Islamic Banking Seminars & Workshops a series of free Islamic banking education initiatives for all that are conducted across the country on a regular basis in order to enhance awareness and dispel common confusions about Islamic banking. Developed in partnership with the Bank’s leading Shariah finance experts who break-down Islamic finance topics into approachable and tailored content; the seminars help individuals understand the concepts of Islamic finance and thereby promote the cause of Islamic banking as a whole. The Islamic banking seminars and workshops are open-to-public local events that are attended by residents and traders of the locality as well as members of local trade bodies and chambers. The seminars also give the Bank an opportunity to interact, understand and get feedback from customers for further improvement of products and services. In 2017, around 55 Islamic banking seminars and workshops were conducted nationwide across 38 cities that were attended by more than 5,600 participants. Stakeholder Engagement Stakeholder relationships are long-term relationships which should be handled professionally and with sincerity. Meezan Bank engages its stakeholders through numerous channels, while maintaining focus on its Mission to optimize ‘stakeholders' value through an organizational culture based on learning, fairness, respect for individual enterprise and performance. ANNUAL REPORT 2017 109
  96. ■ ■ Branch Opening Events offer another opportunity where all staff of a new branch meet the residents and businessmen of the locality. This event adds value by giving a jump-start to the business activities as well as giving the potential customers an opportunity to meet the new branch team and develop a better understanding of Islamic banking and the products and services that Meezan Bank offers. their quality of working relationships is improved through regular interactions in the form of staff gatherings at both local and regional levels. Keeping up with the aim of finding an improved fit between its employees’ needs and organisation’s benefits, the senior management team held multiple on-site and off-site Strategy Sessions. The meetings, in addition to providing a venue for exchange of creative ideas also proved to be an effective team-building initiative. Independence Day Celebrations are hosted across the country including the Bank’s Head Office, Branches and Regional offices. Customers are invited with their friends and families to visit their branch and interact with branch staff. These events further emphasize the inculcation of positive image building in our children as well as give Meezan Bank's staff the opportunity to connect with customers and their families, hence strengthening relationship with customers. To acknowledge the efforts of the team members, a Service Conference was organized in Islamabad, which was the second iteration of this initiative. During this conference, key achievements were acknowledged and new benchmarks of service quality excellence were set for the future. Similarly, the fifth offsite Consumer Conference was arranged to celebrate business achievements, develop future business strategy and to review internal service measures to achieve even higher standards of customer service. ■ Employees Critical to fostering sustainable growth and development is the Bank’s focus on investing in its employees and providing them with an environment where they can thrive. Considered as Meezan Bank’s most valuable asset; the Bank provides its employees with an inclusive environment that provides them with multiple growth opportunities, recognizes and rewards their performance and supports them in ensuring their financial, physical and emotional wellness. Meezan Bank uses various means to ensure that its employees stay motivated and committed to the cause of Islamic banking and are groomed to develop into better professionals as well as productive members of the society. Some of the initiatives undertaken by the Bank for its staff are: ■ ■ 110 Appreciation of Achievements Academic and professional achievements are milestones in an individual's career. Meezan Bank acknowledges the outstanding performance of its team members in order to boost employee morale and create a positive work environment. The Bank recognizes its employees and teams via internal email circulations and publication in quarterly newsletter. It also follows the practice of making the published research work of its employees available to all staff in electronic form. Additionally, the Bank distributes service awards on yearly basis to staff members who complete 5 and 10 years of service. Staff get-togethers The Bank supports a culture of valuing and appreciating its staff and makes efforts to ensure that MEEZAN BANK LIMITED ■ Skill-based Contests The Bank employs various methods to boost employee motivation, engagement and teamwork including knowledge and skill-based competitions. Apart from multiple online competitions, a photography contest based on the theme ‘Spring at Meezan House’ was conducted for staff stationed at the Head Office. The initiative received an overwhelming response from the employees. The Bank also invited an independent jury for the selection of ten best photographs; whose contributors received both awards and acknowledgment in the Bank’s Newsletter. Recruitment & Succession Planning Meezan Bank aims to strengthen its capabilities and secure customers primarily through recruitment of skilled professionals. The Bank believes that a sustainable and resilient organizational hierarchy forms the foundation for sustainable growth. The Bank develops sustainable policies for retaining and managing human capital at the Bank. The recruitment process is transparent and is detailed in the Human Resource Manual accessible to all staff via the Intranet. Meezan Bank uses, where applicable, all available media for job advertisem*nt as part of its recruitment process, including the Bank's corporate website, social media channels Facebook & LinkedIn, and print advertising in prominent local newspapers. The Bank's management encourages existing employees to apply for vacant positions to allow staff
  97. to grow professionally . Towards this end, internal searches are conducted to fill vacant slots within the organization as well. In 2017, the Bank recruited staff through batch hiring across the country for the positions of Branch Service Officers who are responsible for managing day-to-day operational tasks in the branches. All the batches were hired under a transparent and merit-driven process. The Bank held 18 induction sessions through participation in Job Fairs held at different cities across Pakistan including Karachi, Lahore, Multan, Quetta, Mirpur and Islamabad to benefit from the entourage of competent and capable young individuals. The Bank also ensures implementation of the Bank's succession planning policy. The policy and procedure for design and implementation of succession planning is anchored by the Bank’s top management and facilitated by the HR team. Successors are identified on the basis of their potential as well as their performance and experience. ■ ■ Employment of Special Persons Meezan Bank operates under its corporate philosophy of providing merit-based support to people with disabilities, providing them livelihood and self-reliance opportunities. The Bank has hired people who face challenges such as lack of speech, inadequate or no hearing and physical deformity. These persons have been placed in jobs where they can be productive despite the challenges they face. Employee Benevolent Fund Trust (EBFT) Meezan Bank has always been on the forefront of providing its employees with the best opportunities to realize their potential. This forms part of the Bank’s commitment to make this Bank a great place to work. As an extension of this philosophy, the Bank realizes its responsibility towards its employees and their families, encouraging a culture of respect and care. The Bank’s Human Resource policies are dedicated to supporting employees during major life events. In addition to providing an extensive healthcare coverage to help meet the expenses of employees; the Bank also has a joint employee and company-funded Employee Benevolent Fund Trust (EBFT) that allows eligible employees to seek financial support for themselves and for their families during difficult times. Nature of Approved EBFT Cases The Bank processed a total of 204 cases during the year 2017 out of which 200 cases were approved. ■ Internal & External Communication Channels The Bank disseminates information about its various achievements, activities and initiatives to the external world by engaging internal staff and external stakeholders through the Annual Report, regular Press Releases, publication of the quarterly newsletterPAGES, direct customer communications such as SMS, customer letters, e-statements and emails and through social media channels. The Bank also engages customers by arranging its visibility and accessibility on public discussion forums, seminars and electronic & print media. Green IT: Introducing Energy Efficiency at work In line with United Nations Sustainable Development Goals, Meezan Bank is working to reduce its energy footprints through better usage of its information technology and communication infrastructure. Some of the key initiatives are as follows: Use of Technology to Reduce Business Travel Meezan Bank has invested in the installation of high-quality video conferencing facilities at all major offices across the country, an initiative that has efficient usage in trainings, meetings, interviews and conferences. As a result, video conferencing has become a sensible alternative to business trips and has reduced the Bank’s volume of business flights considerably. Over the last few years, the Bank has managed to not only reduce its overall travel costs but also reduced its contribution to aviation emissions. Encouraging Paper-free Environment The Bank is striving to improve its working efficiency, control operating expenses as well as make its contribution towards reducing deforestation by reducing the use of paper for photocopying and printing. The following steps have been taken towards this end: ■ 120 120 100 ■ 80 ■ 60 38 40 20 0 Medical Marriage 23 19 Education Others Provision of Accelerated / Advance Bonus This concept was introduced in 2017, under which the Bank facilitates its employees through provision of advanced bonus opportunity that allows them greater financial freedom. In addition, the Bank’s pay-for-performance philosophy extends to Saturday Allowances for branches, paying eligible employees with additional wages for any additional hours they put in. ■ Implementation of electronic process flows for certain HR related processes Implementation of an electronic IT helpdesk and document repository system Introduction of an eco-printing campaign at work by introducing dual-sided printing across the organization The Bank has a tracking system in place for photocopied documents made at the Head Office. This system enables the Bank to control the wastage resulting from photocopies. ANNUAL REPORT 2017 111
  98. Increasing Energy Efficiency through a Next-Generation Data Center Meezan Bank ’s implementation of state-of-the-art Data Center has helped the Bank to deploy more efficient remote working technologies, while also double the utilization of its existing hardware. The Bank is also currently working on increasing the energy efficiency in its Data Center to promote a more sustainable and eco-friendly infrastructure. Conducting Online Employee Satisfaction Survey This survey is an on-going practice and is conducted on a nationwide basis regularly to gauge employees’ level of job satisfaction. Recently, the Bank has taken the initiative of conducting the Survey online, in an effort to reduce the eco-impact of paper. The initiative not only serves as an opportunity to engage the employees but also encourages their inclusion through an ‘online’ methodology that increases participation. The switch to online technology has also enabled the Bank to provide error free direct input and data analysis. Implementation of the Bank’s Intranet Portal Meezan Bank became the first bank in Pakistan to launch a comprehensive intranet portal - Meezan World, based on the latest platform of IBM WebSphere and IBM Connections. The portal has the capacity to build workflows, facilitate project & document management, initiate discussions and also serve as Business Continuity Planning tool, allowing employees to work from any Meezan office, in case of an emergency. Implementation of state-of-the-art T24 software The Bank has a state-of-the-art T24 software to shift from paper-cheque payments to electronic payments. The software serves as a gateway for multiple banking services including treasury, electronic payments and foreign exchange transactions, apart from managing multiple payment channels including ATMs, Internet banking, mobile banking and others. In 2017, T24 usage has enabled efficient management of increased transaction volume of over 100%. Implementation of Centralized Account Opening Workflow Due to growth in branch network and future expansion plans, the Bank strategically implemented Centralized Account Opening (CAO) Workflow to streamline the document movement between branches and Head Office along with digital archiving of account opening form and documentation and introduction of paperless environment through electronic account opening form. This has resulted in savings of both cost and time and has increased overall efficiency. Learning & Development Staff Training Meezan Bank offers an extensive range of training opportunities to employees for their professional development. Training includes technical training courses and workshops as well as specialized soft skills trainings. ■ 112 The internal learning programs are managed under an organized learning calendar through a large pool of internal trainers whereas externally offered MEEZAN BANK LIMITED opportunities are used for developing and enhancing specialized technical as well as soft skills. ■ ■ The Bank has mock branches at Karachi, Lahore and Islamabad which enable the staff to get trained in a simulated branch environment and equip them with the practical elements of their day-to-day core banking systems related to work. The mock branch at Karachi is also equipped with an ATM for hands-on ATM-related trainings. Keeping up with the Bank’s aim of encouraging workforce development through a multitude of learning opportunities, Guest Speaker Sessions have been initiated for employees as well as Senior Management so they can get key insights from some of the most renowned industry experts and accomplished professionals and businessmen. The initiative has received a very favourable response from the audience and has helped broaden the intellectual horizon of the audience. Health & Recreation Meezan Bank demonstrates a strong commitment to improving the health and well-being of its employees through a workplace wellness program that not only focuses on providing a pleasant working environment to its staff but also encourages participation in healthy activities during the workday. The Bank believes in promoting a healthy lifestyle for its employees to create a healthier, more productive workforce. The following efforts evidence the Bank’s commitment to adopting healthy habits and in making this organization an excellent workplace. Medical Benefits & Health Facilities The medical assistance benefits give peace of mind to individuals and enable them to focus on their professional responsibilities without having to worry about financial risks in the event of a medical problem. Hospitalization coverage therefore forms an integral component of the total compensation package offered by Meezan Bank. In keeping with its stated compensation philosophy of offering a balanced and competitive remuneration package for attracting and retaining talent, the Bank has instituted outpatient, hospitalization and maternity benefit plans for its employees by providing coverage for these eventualities. Gym & Swimming Pool The Bank encourages a healthy lifestyle for its employees by providing both male and female employees access to independent and modern gymnasium facilities and separate recreational areas at Meezan House along with a 1,200 sqft swimming pool. The facilities are supported by specialized swimming and fitness trainers to assist the staff in their exercise and diet routine.
  99. Cafeteria at Subsidized Cost The Bank also provides hygienically cooked meals at a subsidized cost to its staff at the Head Office ; which is prepared in an on-location kitchen. The staff is also provided with multiple tea and coffee areas for refreshments throughout the day. Day Care Facility for Working Parents In order to facilitate working parents at Meezan Bank, a Day Care Centre facility is available at its Head Office located in Karachi. Equipped with all the key requirements, this facility caters to children aged 2 months to 3 years. The child-friendly environment gives an opportunity to many determined women who want to contribute to the cause of Islamic banking while maintaining a balance with their responsibilities at home. Launched in 2015, this facility is warmly welcomed by employees and till date, 12 children have been enrolled and taken care of successfully. Company Sports Meezan Bank organizes a variety of sports activities for its employees. Cricket, a national favourite, is promoted within the organization and financial industry through participation of Meezan Bank's cricket team in local cricket tournaments. The Bank regularly organizes cricket tournaments for inter-department, inter-branch and inter-region teams that travel and compete within the country. ■ ■ ■ ■ ■ ■ ■ ■ ■ Employees The Bank has invested in protecting its employees through the following means: ■ ■ A well-designed fire fighting system, with availability of trained fire fighters at the location. Regular fire and evacuation drills are conducted to help employees become aware of the steps in case of an emergency. This year the Bank held a branch evacuation exercise at a massive scale of 568 branches, in order to ascertain the level of preparedness in case of any emergency or disaster. The Bank has trained and assigned a team to provide assistance to staff in the case of a fire or natural calamity. Customers Safety measures have been taken to protect customers using ATMs and other ADC channels by implementing the following: ■ Safety Measures High-tech security systems and security guards are deployed at the Bank's premises Installation of locks and cameras in all ATM rooms with 24/7 recording Anti-skimming devices have been installed on all ATMs ATM-safe-usage-guidelines are displayed on all ATM screens for customers before they undertake a transaction Meezan Internet Banking website is encrypted with 256 bit encryption two-factor authentication for funds-transfer transactions on Internet Banking Recording of all customer calls to the Call Centre IVR Transactions are secured via a separate Telephone Banking PIN (T-PIN) Meezan Bank's SMS alerts service keeps the customers constantly updated of any activity (Debit or Credit) in their account Selection of Business Partners Meezan Bank ensures that its business partners are selected and approved through a detailed review and selection process. The Bank's procurement team is empowered to finalize the best supplier and service provider based on quality, costing, historic performance and market reputation. The process is reviewed by the Internal Audit team to ensure compliance to the approved internal processes as well as market norms. Medical and Life Takaful coverage Shuttle transportation with security at subsidized cost for travelling to and from Meezan House (Head Office) ANNUAL REPORT 2017 113
  100. Service Quality Monitoring Meezan Bank has Pakistan 's largest Islamic banking branch network of over 600 branches in more than 150 cities. The branches work under defined operational procedures which are constantly reviewed and monitored through the Service Quality department and Shariah Audits conducted by the PDSC department. Service Quality Coordinators are in place to review and report branch activity and results and to support branch staff in ensuring delivery of a pleasant and professional banking experience to its customers. Furthermore, branches are incentivised to enhance their Service Quality and Shariah-compliance delivery through Service Champion Awards and Shariah Audit Rating Awards. These are mentioned and highlighted via MIS, internal announcements through Bank's quarterly newsletter and the intranet portal. Energy Conservation through Energy-Efficient Office Building Structure Meezan Bank constantly takes energy-saving measures at its Head Office. The Head Office building has been constructed using glass panels and atriums which allow natural light to come in throughout the day, thereby almost eliminating the need for artificial lighting in large sections of the building during working hours. The energyconserving centralized cooling system also contributes to reduced electricity consumption in the office building. Complaint Management System The Bank has a dedicated team which handles and addresses customer complaints as per the Customer Grievances Handling policy approved by the Board. All complaints of the customers that are received through various channels are logged in a Complaint Management System to keep track of their resolution. The Bank has a complaint escalation mechanism whereby all complaints are escalated to the senior management if not resolved within the stipulated time. During the year 2017, the Bank upgraded its Complaint Management System with the implementation of round-robin functionality whereby complaints are automatically assigned to the concerned staff which resulted in increase in productivity of complaint handling of the Bank. Furthermore, the Bank enhanced the role of complaint management department for fixing the root-causes of complaints while resolving customer grievances. In Year 2017, the Bank received 49,851 complaints and average complaint resolution time was 4.5 working days. Environmental Sustainability Reducing Environmental Impacts of Business Activities In an effort to reduce the overall impact of its business activities on the environment and to minimize greenhouse gas emissions, Meezan Bank actively employs initiatives to reduce emissions from its operations, daily activities as well as employee travel. Some of our most noteworthy initiatives, including reduction in direct and indirect energy consumption are mentioned below: Energy Conservation through Re-Designed Branch Signage An integral part of Meezan Bank's branding is its branch signage which is the most commonly visible image of the Bank. The Bank has redesigned its branch signages using new LED lights. After the redesigning, the overall energy consumption has decreased by approximately 60% compared to the previous design which used incandescent tubelights. Keeping in mind that the Bank has over 600 branches across Pakistan; this contributes significantly in reducing the overall energy consumption by the Bank. 114 MEEZAN BANK LIMITED Minimizing Carbon Footprint through Shuttle Bus Service At Meezan Bank, we embrace the idea of minimizing our environmental impact through continuous development of our internal processes. In pursuit of the same aim, the Bank provides its Head Office staff with a secure pick-and-drop facility that is currently being availed by almost 50% of the Head Office staff. The initiative has helped the Bank to minimize use of personal transport, effectively curtailing fuel consumption as well as increasing staff convenience and motivation. Maintaining Sustainable Banking Operations The Bank has an extensive network in more than 150 cities across the country and strives to construct, manage and upgrade its facilities with sustainability and improved efficiency as its guiding principles. From various energy conservation efforts to the implementation of smart business practices, the Bank is now working towards increased awareness among its stakeholders to address and to minimize the social and environmental impacts of its operations. Some of these include: ■ ■ ■ ■ Installation of LED lights at the entire Head Office building to reduce electricity consumption Deployment of energy efficient ATMs as part of the Bank's focus on providing technologically advanced facilities to its customers along with reducing the usage of diesel and electricity Installation of multi-function printer/photocopier machines that allow decommissioning two devices, a laser copier and a scanner, resulting in elimination of separate machines and reduction of overall paper consumption Implementation of dual-side printing initiative across the organization, which will reduce paper usage to a significant extent
  101. ■ the Takaful benefit covers the outstanding amount payable to the Bank. The Takaful cover is also available in case of customer's natural or accidental disability. The Life Takaful cover provides great comfort to the Bank's Housing Finance customers as well as their family members. Minimizing Carbon emission through a large plantation section at the Head Office that utilizes recycled ablution water from the in-house mosque Green Banking Meezan Bank is committed to driving growth for green banking initiatives by financing clean-energy projects and engaging with environmentally conscious clients, investors and shareholders. The Bank is, therefore, continuously exploring opportunities to support and finance environment friendly projects as its contribution towards making our planet more sustainable. The Bank made this contribution by advising and arranging financing for the development of 180 MW of green energy wind farms in Pakistan. In 2017 only, the Bank committed Rs 25 billion green financing for the development of two mega hydro power projects with a combined capacity of around 3,200 MW. ■ ■ The Bank facilitates its Laptop Financing customers by providing free of cost Takaful coverage during the financing tenure of the Laptop. Theft and damage to laptop are covered by the Bank's approved Takaful company for which the Bank pays the premium. The Bank's Auto, Bike and Commercial Vehicle Finance operates under the Ijarah model under which the Bank takes responsibility for comprehensive Takaful coverage of the vehicle over the complete financing period along with providing the additional facilities of tracker with free monitoring and accidental death coverage to the customers. Business Ethics & Anti-Corruption Measures The Bank is also evaluating various other opportunities for financing of low carbon high-impact clean energy projects. The Bank has also entered into an agreement with United State Agency for International Development (‘USAID’) for promoting the development of green energy in Pakistan and has developed an ‘Environmental & Social Policy’ that provides guidance and reaffirms the Bank’s commitment to provide a better and sustainable environment for generations to come. E-statements The Bank also provides E-statement facility through which customers can receive periodical account statements directly via email. This facility is offered at no additional cost; all that is required is a personal e-mail address on which the e-statements are being sent. Consumer Protection Measures The Bank has taken the following measures to provide financial risk coverage to its deposit account holders and consumer finance customers: ■ ■ Takaful Coverage for ‘Accidental Death and Permanent Disability’ and ‘ATM Cash Withdrawal Theft’ to all deposit account holders who are maintaining an average monthly balance of Rs. 10,000/- or more. The critical need of Life Takaful Coverage has been addressed for Housing Finance customers by providing a completely Shariah-compliant Life Takaful cover. In the event of death of a customer, Meezan Bank has a comprehensive Code of Conduct and Standard of Ethics that forms part of its Human Resource Policy. The Bank's Disciplinary Action Committee (DAC) takes action on any violation of policies & procedures, acts of fraud & forgery, breaches of discipline and code of conduct, ethics & business practices, law of the land and any statutory regulations by an employee. Appeals of the staff against which DAC takes disciplinary actions are reviewed by an independent Disciplinary Action Review Committee, which has been formed with a view to ensure a fresh review of each appeal filed against the DAC decision. Furthermore, to ensure dignified and healthy work environment, the Bank has also established an Anti-Harassment Committee that deals with the instances of sexual harassment reported either verbally or in writing. Rural Development Program Meezan Bank, as a premier Islamic bank, is striving to connect Pakistan’s financial sector to sociallyresponsible finance and to further expand agricultural finance vertical in 2018. The Bank has developed a reasonable portfolio in 2017 to cater agricultural financing needs of Sindh and Punjab. The Bank’s focus on Shariah-compliant financing structures promotes profit and loss sharing, emphasizes on tangible assets and real economy and thus supports transactions that serve a real purpose. These efforts towards agri-finance include provision of agricultural inputs to the farmers, Ijarah-based agricultural financing in case of movable property and development of further Islamic financing products best suited for farming community. For this purpose, the Bank is also considering to establish an independent vertical to optimize the opportunity and potential of this segment. Meezan Bank appreciates the role of its Regulators (State Bank of Pakistan as well as Government of Pakistan) for their strong support and involvement for the development of this segment. ANNUAL REPORT 2017 115
  102. Meezan Bank ’s Contribution to United Nations Sustainable Development Goals Meezan Bank operates with a Vision to ‘…facilitate the implementation of an equitable economic system, providing a strong foundation for establishing a fair and just society for mankind.’ As a result our focus on sustainability is imbedded deep in our business model. In September 2015, the United Nations (UN) introduced a set of goals to end poverty, protect the planet and ensure prosperity for all as part of a new sustainable development agenda that has been adopted by 195 countries across the world. During 2017, Meezan Bank focused on the following Sustainable Development Goals (SGDs), which it believes are in line with its sustainability strategy. 1 NOPOVERITY 4 QUALITY EDUCATION AND 7 AFORDABLE CLEAN ENERGY WORK AND 8 DECENT ECONOMIC GROWTH 17 PARTNERSHIPS FOR THE GOAL Through its commercial partnership with Deutsche Gesellschaft für International Zusammenarbeit and Vocational Training Institute for Women (VTIW); Meezan Bank has aimed to empower the underprivileged female individuals of the society enabling them to earn a livelihood for themselves and their families. Through its strategic initiatives Centres for Excellence in Islamic Finance at Lahore University of Management Sciences (LUMS), Institute of Business Administration (IBA) and IM Sciences (Peshawar), the Bank is making a substantial contribution in increasing the relevant skills for employment and entrepreneurship of youth in the country. Through its focus on financing green energy projects in the country such as green energy wind farms and hydro power projects, the Bank is creating opportunities for modern and sustainable energy services and promoting investment in energy infrastructure and clean energy technology. Through its focus on employee development, training and championing public education and awareness regarding finance, the Bank is not only promoting a healthy work environment but also strengthening the country’s economy by expanding the access of individuals to Islamic Banking. As Pakistan’s first Bank to Partner with Karandaaz Pakistan for specialized Supply Chain Partnership Program, the Bank is strengthening domestic resource mobilization as well as mobilizing financial resources for SMEs in the country. Source: www.un.org/sustainabledevelopment/sustainable-development-goals/ 116 MEEZAN BANK LIMITED
  103. Report of the Board Audit Committee Board Audit Committee (BAC) comprises of four non-executive directors having vast experience and knowledge of finance and accounting. The Chairman and one other member are independent directors. Bank has adopted Committee of Sponsoring Organizations (COSO) Integrated Internal Control Framework and the charter of Internal Audit & BRR department (IAD) provides complete independence to Head - IAD alongwith free access to BAC. BAC has been proactively focusing on effectiveness of internal controls, risk management, compliance and governance processes in accordance with the requirements of code of corporate governance and Terms of Reference (ToRs) of BAC duly approved by the Board of Directors. During year 2017, four BAC meetings were held and following major activities were performed by BAC in accordance with its approved terms of reference. ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ BAC reviewed quarterly, half yearly and annual financial statements of the Bank and recommended the same for approval of the Board. BAC reviewed management letters issued by the external auditors, management's response and their compliance status and held discussions with external auditors on major observations. BAC also recommended the appointment of external auditors and their fees to the Board. BAC reviewed and approved the audit strategy, audit plan, scope and extent of the work to be performed by internal audit (IAD) and Shariah audit. BAC also reviewed adequacy of resources as per the scope. BAC reviewed significant findings of internal audit and Shariah audit alongwith monitoring of its timely compliance. BAC also reviewed the whistle blowing mechanism. BAC reviewed major findings of internal investigations with respect to fraud & forgery and whistle blowing along with management’s action thereto. BAC also reviewed annual review report of fraud, forgeries and robberies. BAC reviewed related party transactions and recommended the same for Board’s approval. BAC reviewed the AML environment, compliance and AML activity report, compliance policy and compliance program, Institutional Risk Assessment Framework (IRAF) – Self Assessment Questionnaire and SBP inspection reports alongwith monitoring of its compliance status. BAC reviewed internal Audit manuals, programs, revision in polices, ToRs of BAC and recommended the same for Board’s approval. BAC reviewed Shariah audit manual and ensured compliance of corrective actions determined by Shariah Supervisory Board on the reports of Shariah audit. BAC reviewed the independent assurance report on compliance with Shariah rules and principles alongwith monitoring of its compliance status. BAC reviewed and had an oversight of implementation of Internal Controls over Financial Reporting (ICFR) program across the bank. BAC reviewed the internal quality assurance reviews along with its progress and implementation status. BAC conducted self assessment of its performance to review compliance with SECP Listed companies (code of Corporate Governance) and SBP circulars. Self assessment report was also presented to the Board. BAC reviewed statement on internal control system and recommended the same for endorsem*nt by the Board. BAC also held separate meetings with external audit and internal audit respectively without the CFO and the management in line with the Code of Corporate Governance. Mohammad Abdul Aleem Chairman-BAC ANNUAL REPORT 2017 117
  104. Shariah Supervisory Board Report - 2017 The SSB appreciates the efforts of RSBM and PDSC team in playing an active role in the implementation committee made by the Federal Minister and in supporting Government for introducing tax reforms for Islamic modes of financing . All praises to Allah ( ). This was the sixteenth year of Islamic commercial banking for Meezan Bank Limited which is under review. During the year, the Shariah Supervisory Board (SSB) of Meezan Bank held six meetings to review various issues, referred to them by the Bank. Meezan Bank Limited has a team of professionals in the Product Development & Shariah Compliance department (PDSC) working under the guidance of RSBM. The main objective of this department is to facilitate and ensure Shariah compliance in all the new researches & product development activities, refinement of existing products & procedures, conducting Islamic banking trainings, Shariah-compliance review of branches, Head Office Units and for each class of transactions, relevant documentation and process flows on test check basis and to provide secretarial services to the Bank’s Shariah Supervisory Board. In addition, a separate Shariah Audit Department is working under the Audit Committee of Board of Directors’ to review the overall Shariah-compliance in the Bank’s activities which submits the report to RSBM / Shariah Board for information, review and determination of appropriate corrective actions. We, SSB appreciate the efforts of the staff of PDSC and Shariah Audit Department for their efforts in promoting and strengthening the environment of Shariah compliance in the Bank. It gives us comfort to note that other than few operational matters there are no other pending Shariah related issues in the Bank and this shows the high level of commitment of the staff, management and the board members. It is also encouraging to know that there are more than 9500 staff members in the Bank who are the source of Halal income for their families. During the year ended December 31, 2017 major developments are as under: Research and New Product Development The SSB recognizes the efforts of the Bank for conducting around 170 customer and industry visits to understand the business model and reviewing more than 2500 different types of transactions as per the guidance of RSBM/SSB. Structuring and documentation of 5 syndicated transactions, involving hybrids of various structures such as Ijarah and Diminishing Musharakah, were prepared by PDSC under the supervision of RSBM. All the syndicate transactions were catered towards various government and private entities such as WAPDA, Power Holding Pvt. Ltd, Cherat Cement Ltd, Sukh Chain Valley, Shifa International for various purposes such as infrastructure development, capital expansion and power project financing. It is worth mentioning that to strengthen the Shariah-compliance control, physical inspection of delivery was carried in almost all the Istisna and Tijarah transactions. 118 MEEZAN BANK LIMITED During the year, the SSB provided guidelines for different issues, most noteworthy of them were: ■ ■ ■ ■ ■ ■ ■ ■ ■ Structure of Murabaha transactions through the Pakistan Mercantile Exchange (PMEX) platform for liquidity management of Islamic Banking Industry. Wakalah and Murabaha based structure for oil field acquisition. Standardized process flows for Murabaha, Istisna, and Tijarah products. Murabaha based financing structure for the purchase of Shariah-compliant shares. Shirkat ul aqd based structure for development of a residential product. Murabaha` based solution for reducing cost of financing for SME customers. Personal financing product for converting interest based debts. GOP Ijarah sukuk structure. Risk Management solutions for strengthening Running Musharkah product of the Bank. Training & Development SSB is pleased to note that the year 2017 was highly productive in terms of Islamic Banking Products Training. A special training session was arranged at Darul Uloom Karachi for the members of Board of Directors of the Bank which was conducted by the Chairman of the SSB and its honourable member Sheikh Esam Ishaq. During the year around 70 members of the senior management and executives of the Bank were also given training on Islamic Banking. During the year 93 training sessions comprising of 985 man-hours were organized for the staff members across Pakistan catering to more than 3,000 employees of the Bank. This number includes orientation sessions for new joiners, refresher programs and certification programs in Islamic Financial Products. Other than the training of internal staff the Bank also conducted 55 seminars in 38 cities which were attended by more than 5,600 participants representing customers, general public, professionals and students of various universities. SSB also appreciates the efforts of the Bank in supporting IBA CEIF in conducting various specialized sessions for ulema, traders, academicians, judges and bankers which are crucial for dispensing message of Islamic Banking in Pakistan. Shariah Advisory and Industry support The SSB is also pleased to share that the Bank is actively supporting the Islamic finance industry across the globe by providing tailor-made Shariah advisory solutions for their business needs. Some of the notable services provided by the Bank during the year are: ■ Shariah advisory and training services to an Islamic cooperative institution in Australia related to housing finance and also advising the client to introduce Takaful services in Australia as well.
  105. ■ ■ ■ Assisting the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) in developing draft exposure of Internal Shariah Audit Standard. Shariah advisory services in Bahrain to a reputed learning institute. Facilitation of the Bank’s capital market clients for launching various funds and plans bringing the total number of funds and plans under its advisory to more than 45 covering more than half of the Islamic mutual fund industry. Review of Assets The Bank primarily used Diminishing Musharakah, Running Musharakah, Istisna, Ijarah, Murabaha, Musawamah, Salam – Bills, Wakalah Tul Istithmar, Tijarah, Salam – Commodity, Musharakah and Bai Muajjal for its financing activities during the year. The SSB is pleased to note that the Bank has moved towards diversification in the usage of various financing products and has reduced the reliance on Murabaha, as is evident from the Bank’s financing portfolio. There is a proportionate growth of 38.29% in Musharakah based financing (including Running Musharakah) from previous year. There is also a proportionate growth of 15.94% in Ijarah. The Bank’s total financing portfolio reached Rs. 429 billion (gross) as of December 31, 2017. Financing Modes 2017 % 2016 % Growth / (Decline) % Diminishing Musharakah 19.72 31.86 (38.04) Musharakah & Running Musharakah 34.16 24.73 38.29 Istisna 13.31 12.94 2.96 Ijarah 9.22 7.96 15.94 Murabaha 4.61 5.51 (16.31) Musawamah 4.54 4.75 (4.31) Salam - Bills 2.76 4.12 (32.94) Wakalah Tul Istithmar 7.29 3.99 82.83 Tijarah 1.91 1.87 2.17 Salam - Commodity 0.96 0.63 36.11 Other 1.52 1.63 (6.23) During 2017, the percentage of direct payment for Murabaha financings to Corporate and SME/Commercial customers was 81%. It is highly recommended that efforts be continued to increase this percentage of direct payment of Murabaha transactions. We appreciate that the Bank is also focusing on financing alternative energy projects to reduce carbon footprints. Summary of Direct Payment in Murabaha Financing for Meezan Bank 2017 Overall Portfolio 2016 81% 87% Corporate 100% 100% SME/Commercial 76% 86% Growth/(Decline) (6)% Segment wise (10)% 100% 2017 100% 100% 76% 80% 2016 86% 60% 40% 20% 0 100% 80% Corporate SME/Commercial 87% 2017 2016 81% 60% 40% 20% 0 Overall Portfolio Review of Deposits The Bank continued to offer different type of deposit products based on Shariah-compliant modes such as ‘Mudarabah’ & ‘Qard’. It is heartening to see deposits grow by 19.4% to reach a sum of Rs. 673 billion as on December 31, 2017. During the year, the process of allocation of assets and funds to various deposit pools, announcement of overall profit sharing ratios for Mudarabah-based deposits, monthly allocation of weightages and distribution of income to deposit accounts were monitored and reviewed in accordance with the respective pool management guidelines of SBP and Meezan Bank. It is heartening to know that Meezan Asaan Account has been contributing towards the goal of Financial Inclusion in Pakistan, with over 230,000 Meezan Asaan accounts (all New to Bank relationships). As the idea of "Asaan Account" was given by Meezan Bank to SBP, it is encouraging to see such growth and formalization of the economy through Islamic Banking. Shariah Audit Department The Shariah Audit function plays a vital role in achieving the objective of ensuring Shariah-compliance by evaluating adherence to Shariah guidelines in each and every activity undertaken by the Bank. As part of the Shariah Governance Framework, issued by the State Bank of Pakistan (SBP), a separate Shariah Audit Department reporting to the Audit Committee of Board of Directors’ is effectively in place. This department is playing a significant role towards accomplishment of the objective of ensuring Shariah-compliance by evaluating the adherence to Shariah guidelines prescribed by Shariah Supervisory Board, Resident Shariah Board Member and Shariah guidelines of Islamic Banking Division of SBP. The Shariah Audit function keeps a continuous check on all activities starting right from the time of opening of a branch and goes hand in hand at each step of product offering till the stage of final profit distribution to the customers. Shariah Audit of 614 branches, area offices, consumer & corporate hubs, Head Office departments and ANNUAL REPORT 2017 119
  106. special assignments was conducted as a part of the Bank ’s efforts to strengthen the internal Shariah controls mechanism. These audits not only cover the transactions that the branches/departments undertake but also include an evaluation of the knowledge of staff pertaining to Islamic Finance. Charity During the year an amount of Rs 31.4 million was transferred to the Charity Payable Account. This includes Rs 1.9 million to purify the dividend income earned from the investment made in the Shariah-compliant stocks by the Bank and Rs 29.5 million transferred to Charity Payable Account in the normal course of business on account of non-timely payments by customers in various financial transactions. An amount of Rs 31.05 million was disbursed from the Charity Account after approval of the Resident Shariah Board Member. Details of charity account are available in the note # 19.4 Review of Financing Assets We have noted that as per our guidelines, the Bank reversed the financing of PKR 296 million provided to its customers under Murabaha & Istisna without any profit as those transactions could not be converted into real trade due to genuine business reasons. Similarly, in Ijarah financing the Bank being the owner of asset bore the loss of Rs. 0.22 million due to shortfall in takaful claims. Recommendations Based on the review of various transactions, reports of Internal and External Shariah Audit and Shariah Compliance operations of the Bank, it is recommended that: ■ ■ ■ ■ ■ ■ ■ ■ ■ 120 The Bank should propose Shariah-compliant avenues to the Government of Pakistan to meet its short term and long term financing requirements in a Shariah Compliant yet convenient manner. The Bank should explore Shariah compliant products and solutions for FinTech, internet banking and branchless banking. The Bank should focus on targeting government and semi-government institutions, for Shariahcompliant deposits and Shariah-compliant financing as this will have a greater beneficial impact on our society. Due care regarding the mind-set and commitment towards the cause of Islamic banking should be taken during the hiring process of new staff. The Bank should pursue with State Bank of Pakistan for launch of different Islamic schemes, Islamic Benchmark Rate and Islamic Discount window. For liquidity management purposes, the Bank should use Bai Muajjal when other avenues like Musharakah placement, Commodity Murabaha through PMEX and Sukuk are not available. China Pakistan Economic Corridor is a very essential project for Pakistan’s economy. Bank should pursue the GoP to maximize the Islamization of financing this project in order to increase the financing share of Islamic Banks in CPEC projects. The Bank should conduct awareness sessions regarding Islamic Finance for Shariah Scholars, industry practitioners, lawyers, the Judiciary, members of the legislature, public representatives, academics, media professionals, business community, and members of the Armed Forces. The Bank should more proactively employee the social media for increasing the public awareness for the socio-economics benefits of Islamic financial system. MEEZAN BANK LIMITED ■ ■ ■ The Bank in collaboration with academia, Higher Education Commission and educational text boards should take initiatives to design the courses or chapters related to the benefit of Islamic financial system on society. The Bank should initiate and support SME & Agriculture financing to alleviate poverty currently prevailing in the rural areas of the country. The Bank shall encourage energy projects which are environmental friendly such as solar panels and windmills. The Bank should work on launch of deposit products for senior citizens and widows. Conclusion As per the charter of the Bank, it is mandatory on the management and employees to ensure application of Shariah principles and guidelines issued by the Shariah Supervisory Board and Resident Shariah Board Member in all activities of the Bank. The prime responsibility for ensuring Shariah compliance of the Bank’s operations thus lies with the Board of Directors and Executive Management. Based on the extensive reviews of sample cases for each class of transaction, related documentations, processes, profit distribution mechanism for the depositors by PDSC Department, review of Internal Shariah Audit and External Shariah Audit reports and Management’s representation made in this regard, the Bank, in our opinion, has complied with the rules & principles of Islamic Shariah in light of the guidelines and directives given by the Shariah Supervisory Board, Resident Shariah Board Member of Meezan Bank and guidelines issued by Shariah Board of SBP related to Shariah-compliance. The non-compliant income identified during the review is being transferred to the Charity Account through a well-defined system and being utilized properly in accordance with the instructions of SSB. Based on the strength and capacity of the full-fledged PDSC department and policies / guidelines for the Shariah compliance issued at the Bank, we are of the opinion that an effective mechanism is in place to ensure Shariah compliance in overall operations of the Bank. May Allah ( ) bless us with the best Tawfeeq to accomplish His cherished tasks, make us successful in this world and in the life hereafter and forgive our mistakes. Wassalam Alaikum WaRahmat Allah Wa Barakatuh. Dr. Muhammad Imran Ashraf Usmani Resident Shariah Board Member Sheikh Esam Mohamed Ishaq Member Shariah Supervisory Board Justice (Retd.) Muhammad Taqi Usmani Chairman Shariah Supervisory Board Dated: 15th Jamada al-Awwal 1439 H / February 02, 2018
  107. ANNUAL REPORT 2017 121
  108. 100 % 2017 100% 100% 76% 80% 2016 86% 60% 40% 20% 0 100% 80% 87% 2017 2016 81% 60% 40% 20% 0 2016 % 2017 % (38.04) 31.86 19.72 38.29 24.73 34.16 2.96 12.94 13.31 15.94 7.96 9.22 (16.31) 5.51 4.61 (4.31) 4.75 4.54 (32.94) 4.12 2.76 82.83 3.99 7.29 2.17 1.87 1.91 36.11 0.63 0.96 (6.23) 1.63 1.52 (6)% (10)% 122 MEEZAN BANK LIMITED 2016 2017 87% 81% 100% 100% 86% 76%
  109. 2017 ANNUAL REPORT 2017 123
  110. Statement of Sources and Uses of Charity Fund For the year ended December 31 , 2017 Opening Balance at January 01 2017 2016 Rupees in '000 1,637 10,851 29,502 1,937 172 24,899 2,587 712 405 33,248 39,454 (26,450) (2,700) (1,900) (32,867) (2,900) (100) (1,950) Additions during the year Received from customers on delayed payment Dividend Purification Amount Non-shariah Compliant Income Profit on Charity Saving Account Less: Distribution of Charity Education Health Islamic Microfinance Community Development Closing Balance at December 31 31,611 (31,050) 2,198 28,603 (37,817) 1,637 Note: Details of charity payments of Rs 100,000 and above are disclosed in note 19.4.1 to the financial statements of the Bank. 124 MEEZAN BANK LIMITED
  111. 118
  112. Statement of Compliance with the Code of Corporate Governance For the year ended December 31 , 2017 This statement is being presented to comply with the Code of Corporate Governance (CCG) contained in Regulation No. 5.19 of the listing regulations of the Pakistan Stock Exchange Limited where the Bank is listed for the purpose of establishing a framework of good governance, whereby a listed company is managed in compliance with the best practices of corporate governance. The Bank has applied the principles contained in the Code in the following manner: 1. The Bank encourages representation of independent, non-executive directors and directors representing minority interests on the Board of Directors. As at December 31, 2017 the Board included: Category Names Independent Directors Mr. Mohammad Abdul Aleem Mr. Noorur Rahman Abid Mr. Talal S.A. Al-Shehab Executive Directors Mr. Irfan Siddiqui Mr. Ariful Islam Non-Executive Directors Mr. Riyadh S. A. A. Edrees Mr. Faisal A.A.A. Al-Nassar Mr. Bader H.A.M.A. Al-Rabiah Mr. Mansur Khan Mr. Alaa A. Al-Sarawi Syeda Azra Mujtaba Mr. Muhammad Zarrug Rajab The independent directors have been approved by the State Bank of Pakistan. Further, the independent directors meet the criteria of independence under clause 5.19.1(b) of the CCG. 2. The Directors have confirmed that none of them is serving as a director on more than seven listed companies in Pakistan including the Bank. 3. All the resident Directors of the Bank are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company, a Development Financial Institution or a Non-Banking Financial Institution or, being a member of Pakistan stock exchange, has been declared as a defaulter by Pakistan stock exchange. 4. No casual vacancy occurred on the Board of Directors during the year. 5. The Bank has prepared a ‘Code of Conduct’ and has ensured that appropriate steps have been taken to disseminate it throughout the Bank along with its supporting policies and procedures. 6. The Board has developed a Vision / Mission statement, overall corporate strategy and significant policies of the Bank. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained. 7. All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the CEO, other executive and non-executive directors, have been taken by the Board. 8. The meetings of the Board were presided over by the Chairman and the Board met at least once in every quarter. Written notices of the board meetings, along with agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated. 9. The Bank is in Compliance with respect to training requirements of its directors as eleven directors have completed their Directors’ training. One Director claimed exemption from the training requirement having complied with the minimum education and experience criteria. 10. During the year a new Company Secretary was appointed by the Board of Directors, on January 5, 2017, upon retirement of the previous Company Secretary. There was no new appointment of Chief Financial Officer (CFO) and Head of Internal Audit during the current year. 126 MEEZAN BANK LIMITED
  113. 11 . The Directors’ Report for this year has been prepared in compliance with the requirements of the Code and fully describes the salient matters required to be disclosed. 12. The financial statements of the Bank were duly endorsed by the CEO and CFO before the approval of the Board. 13. The Directors, CEO and Executives do not hold any interest in the shares of the Bank other than that disclosed in the pattern of shareholding. 14. The Bank has complied with all the corporate and financial reporting requirements of the Code. 15. The Board has formed an Audit Committee. It comprises of four members, all of whom are Non-Executive Directors and the Chairman of the Audit Committee is an Independent Director. 16. The meetings of the Audit Committee were held at least once every quarter prior to approval of interim and final results of the Bank and as required by the Code. The terms of reference of the committee have been formed and advised to the committee for compliance. 17. The Board has formed a Human Resources and Remuneration Committee. It comprises of three members; two Independent Directors and a Non-Executive Director. The Chairman of the committee is a Non-Executive Director. 18. The Bank has continued to present the details of all related party transactions before the Audit Committee and upon their recommendation to the board for review and approval. The definition of related party used is in accordance with the applicable financial reporting frame work as the regulations under Section 208 of the Companies Act, 2017 have not yet been issued. 19. The Board has set up an effective Internal Audit function comprising of professionals, who are suitably qualified and experienced for the purpose and are conversant with the policies and procedures of the Bank. 20. The statutory auditors of the Bank have confirmed that they have been given a satisfactory rating under the quality control review program of the ICAP, that they or any of the partners of the firm, their spouses and minor children do not hold shares of the Bank and that the firm and all its partners are in compliance with the International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by the ICAP. 21. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the listing Regulations and the auditors have confirmed that they have observed IFAC guidelines in this regard. 22. The ‘closed period’, prior to the announcement of interim/ final results and business decisions, which may materially affect the market price of the Bank’s securities, was determined and intimated to directors, employees and the stock exchange. 23. Material/price sensitive information has been disseminated among all market participants at once through the Pakistan Stock Exchange Limited. 24. The Bank has complied with the requirements relating to maintenance of register of persons having access to inside information by a designated senior management officer in a timely manner and maintained proper record including basis for inclusion or exclusion of names of persons from the said list. 25. We confirm that all other material principles included in the Code have been complied with. Irfan Siddiqui President & CEO Ariful Islam Deputy CEO February 14, 2018 ANNUAL REPORT 2017 127
  114. Statement of Internal Controls This statement is presented to comply with the requirements of State Bank of Pakistan (SBP) circular no. BSD 7 dated May 27, 2004 “Guidelines on Internal Controls” and SBP’s OSED Circular No.01 dated February 07, 2014 “Instructions on Internal Controls over Financial Reporting (ICFR)”. The management of the Bank is responsible for establishing and maintaining an adequate and effective system of internal controls which has the main objectives of ensuring effectiveness and efficiency of operations, reliability of financial reporting, safeguarding of assets and compliance with applicable laws and regulations. The control activities are being closely monitored across the Bank through Compliance, Risk Management, Shariah and Internal Audit departments, which covers all banking activities in general and key risk areas in particular. The Management has Compliance and Operational Risk Management Committee (CORMC) which focuses on compliance risk issues and reviews the adequacy of controls and systems to meet the regulatory requirements. The Board of Directors has formed an Audit Committee which has direct oversight responsibility to ensure the independence of the internal and external audit function. The Audit Committee meets atleast once every quarter to discuss the scope and results of the work performed by the Compliance, Shariah and Internal Audit departments. The Audit Committee also meets with external auditors prior to approval of half-yearly and annual results of the Bank. Based on observations and weaknesses found and identified by the auditors both internal and external and the Compliance, Risk Management and Shariah audit teams, improvements are brought about by the management in internal controls to ensure non-recurrence of those exceptions and elimination of such weaknesses to the maximum possible level. While the Internal Controls System is effectively implemented and monitored, there are inherent limitations in the effectiveness of any system, including the possibility of human error or system failure, circumvention and overriding of controls. Accordingly, even an effective internal control system can provide reasonable but not absolute assurance that the system's objective will be achieved. Alhamdulillah, the Bank had successfully completed all stages of its ICFR program during 2014 and has been granted exemption from the requirement of submission of Auditor-issued Long Form Report through SBP OSED letter /SU-12/017(01)/358/15 dated January 05, 2015. The Bank is now required to only submit annual assessment report on efficacy of ICFR duly signed by Chairman, Audit Committee. Having successfully achieved closure on ICFR, the Bank remains cognizant of its responsibility to continuously improve and with this view continues to strengthen its system of Internal Controls on an on-going basis. Based on the above, the Board of Directors endorses the management's evaluation of Internal Controls. On behalf of the Board. Ariful Islam Deputy CEO February 14, 2018 128 MEEZAN BANK LIMITED Irfan Siddiqui President & CEO
  115. Notice of 22nd Annual General Meeting Notice is hereby given that the 22nd Annual General Meeting of the Members of Meezan Bank Limited will be held Insha-Allah on Wednesday , March 28, 2018 at 9:30 a.m. at Meezan House C-25, Estate Avenue, SITE, Karachi to transact the following business: ORDINARY BUSINESS 1. To confirm the minutes of the 21st Annual General Meeting held on March 28, 2017. 2. To receive, consider and adopt the Annual Audited Accounts of the Bank, Audited Consolidated Accounts for the year ended December 31, 2017 together with the Auditors’ and Directors’ Reports thereon. 3. To appoint auditors of the Bank for the year ending December 31, 2018 and to fix their remuneration. The present auditors, M/s EY Ford Rhodes., Chartered Accountants, retire and being eligible, offer themselves for reappointment. 4. To consider and, if thought fit, approve as recommended by the Board of Directors, final cash Dividend at the rate of Rs 1.25 per share i.e. 12.50% in addition to Rs. 1.75 per share i.e. 17.50% interim cash Dividend already declared/paid for the year December 31, 2017. SPECIAL BUSINESS 5. To consider and if thought fit approve the transmission of the Annual Reports including annual audited accounts, notice of annual general meetings and other information contained therein to the members/shareholders of the Bank through CD/DVD/USB at their registered addresses as allowed by the Securities and Exchange Commission of Pakistan (SECP) instead of transmitting the same in hard copies and to pass the following resolution as Ordinary Resolution; “Resolved that transmission of Annual Reports including annual audited accounts, notice of annual general meetings and other information contained therein to the members of the company at their registered addresses in soft form i.e. through CD/DVD/USB instead of transmitting the said accounts in hard copies, in terms of SRO 470(1)/2016 dated May 31, 2016, be and is hereby approved. Further resolved that the Bank shall provide hard copies of all future Annual Reports to those members only, who request the Bank, in writing, to receive hard copies of the accounts” Further resolved that the Chief Executive Officer and/or Company Secretary be and are hereby authorized to do all necessary acts, deeds and things in connection and ancillary thereto as may be required or expedient to give effect to the spirit and intent of the above resolution”. 6. To approve the remuneration paid/payable to the Chairman, Vice-Chairman and Non-Executive Directors of the Bank for the year ended December 31, 2017 for attending Board Meetings and Meetings of the Committees formed by the Board and to pass the following resolution as ordinary resolution: “Resolved that the remuneration paid/payable to the Chairman, Vice-Chairman and Non-Executive Directors of the Bank for the year ended December 31, 2017 for attending Board Meetings and Meetings of the Committees formed by the Board, as disclosed in note 37 of the Audited Financial Statements of the Bank be and is hereby approved.” 7. To transact any other business with the permission of the Chair. Statements under section 134 (3) of the Companies Act 2017 pertaining to special business are enclosed. By Order of the Board Karachi March 06, 2018 Muhammad Sohail Khan Company Secretary ANNUAL REPORT 2017 129
  116. Notes : i) The Members’ Register will remain closed from March 21, 2018 to March 28, 2018 (both days inclusive) to determine the names of members entitled to receive the 12.50% cash dividend and attend and vote in the meeting. ii) A member eligible to attend and vote at this meeting may appoint any person as proxy to attend and vote in the meeting. Proxies in order to be effective must be received at the Registered Office not less than forty eight (48) hours before the holding of the meeting. iii) An individual beneficial owner of the Central Depository Company, entitled to vote at this meeting must bring his/her Computerized National Identity Card along with the participant ID numbers and sub account numbers with him/her to prove his/her identity, and in case of proxy must enclose an attested copy of his/her Computerized National Identity Card. Representatives of corporate members should bring the usual documents required for such purpose. For Information of the Members: iv) The Government of Pakistan has made certain amendments in Section 150 of the Income Tax Ordinance, 2001 whereby different rates are prescribed for deduction of withholding tax on the amount of dividend paid by the companies/banks. These rates are as per law. To enable the Bank to make tax deduction on the amount of Cash Dividend, all the members whose names are not entered into Federal Board of Revenue (FBR)’s Active Tax-Payers List (ATL), despite the fact that they are tax return filers are advised to make sure that their names are entered into ATL, before the date of book closure for cash dividend, otherwise tax on their cash dividend will be deducted as non-filer. All shareholders who hold shares jointly are requested to provide shareholding proportions of Principal shareholder and Joint-holder(s) in respect of shares held by them to our Shares Registrar, in writing as follows: Principal Shareholder Folio/ CDS Total Shares Name and CNIC No. Shareholding Proportion (No. of Shares) Joint Shareholder Name and CNIC No. Shareholding Proportion (No. of Shares) The required information must reach our Shares Registrar by the close of business (5:00 pm) on March 20, 2018; otherwise it will be assumed that the shares are equally held by Principal shareholder and Joint Holder(s) and tax will be deducted according to proportionate holding of each shareholder as clarified by the FBR vide its clarification letter No I(54) Exp/2014-132872-R dated September 25, 2014. Shareholders claiming tax exemption under clause 47(B) of Part IV of the Second Schedule of Income Tax Ordinance, 2001 are requested to provide valid exemption certificate under section 159 (1) of the Income Tax Ordinance, 2001 latest by March 20, 2018 to our Shares Registrar as required vide FBR clarification letter No. 1(43)DG (WHT)/2008-Vol.II-66417-R dated May 12, 2015. v) As per directives to the listed companies issued by Securities and Exchange Commission of Pakistan (SECP), the Dividend Warrants should bear CNIC number of the registered member(s), except in the case of minor (s) and corporate member(s). Accordingly, all those shareholders holding shares in physical form who have not yet recorded their CNIC No. contact our Shares Registrar, THK Associates (Pvt.) Ltd., 1st Floor, 40-C, Block-6, P.E.C.H.S, Karachi-75400. Phone No. 111-000-322, alongwith copy of valid CNIC. The shareholders who are maintaining their accounts with Participants/Brokers should also update their record and provide valid CNIC to the respective Participants/Brokers. The corporate members having CDC accounts are required to have their National Tax Number (NTN) updated with their respective participants, whereas corporate entities having physical shares should send a copy of their NTN certificate to Company’s Shares Registrar. vi) Under section 242 of the Companies Act, 2017, it is mandatory for a listed company to pay cash dividend to shareholders only through electronic mode directly into bank account designated by the entitled shareholders. In order to receive dividend directly into bank account, shareholders are requested to fill in Electronic Credit Mandate Form available on Bank’s website and send it duly signed alogwith a copy of CNIC to the registrar of the company, THK Associates (Pvt.) Ltd., 1st Floor, 40-C, Block-6, P.E.C.H.S, Karachi-75400 in case of physical shares. In case of shares are held in CDC then the above Electronic Credit Mandate Form must be submitted directly to shareholder(s)’ broker/participant/CDC account services. ANNUAL REPORT 2017 130
  117. Electronic Credit Mandate Form Folio Number /CDC Sub Account Number Name of Shareholder Title of the Bank Account International Bank Account Number Name of Bank Name of Bank Branch/Address Cellular and Landline number CNIC/NTN (Attach copy) Signature of Shareholder vii) Annual Accounts of the Bank for the financial year ended December 31, 2017 have been provided on the Company’s website-www.meezanbank.com STATEMENTS UNDER SECTION 134(3) OF THE COMPANIES ACT 2017 These statements set out the material facts concerning the resolution contained in items (5) and (6) of the notice pertaining to the special business to be transacted at the Annual General Meeting of the Bank to be held on March 28, 2018. Circulation of Annual Reports through CD/DVD/USB Securities and Exchange Commission of Pakistan has vide S.R.O 470(I)/2016 dated 31 May 2016 allowed the companies to circulate the Annual Reports including annual audited accounts, notices of annual general meetings and other information contained therein of the Company to its members through CD/DVD/USB subject to obtaining consent of the shareholders in the general meeting. The Company shall supply the hard copies of the aforesaid document to the shareholders on demand, free of cost, within one week of such demand. After approval of the shareholders, the Company will place a Standard Request Form on its website to communicate their need of hard copies of the documents along with postal and email address of the Company Secretary/Share Registrar to whom such requests shall be made. The directors of the Bank have no vested interest, directly or indirectly in the above business, save to the extent of their shareholding of the Bank. Directors’ Remuneration The remuneration paid/payable to the non-executive directors was approved by the Board of Directors in terms of Article 52 of the Articles of Association of the Bank. The remuneration requires approval (which is permissible on post facto basis) of the shareholders in Annual General Meeting in terms of requirements of the Prudential Regulations for Corporate/Commercial Banking issued by the State Bank of Pakistan. The non-executive directors are interested in the payment of remuneration and the remaining members of the Board have no interest in the matter. ANNUAL REPORT 2017 131
  118. 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) 134 135 136 137 138 139 140 214
  119. Unconsolidated Statement of Financial Position As at December 31 , 2017 Note 2017 2016 Rupees in ‘000 ASSETS Cash and balances with treasury banks Balances with other banks Due from financial institutions - net Investments - net Islamic financing and related assets - net Operating fixed assets Deferred tax asset Other assets - net 7 8 9 10 11 12 64,556,170 4,895,816 147,229,221 119,238,246 420,029,088 11,875,358 13,875,297 781,699,196 56,036,849 12,021,351 129,115,165 130,156,297 311,530,270 8,924,328 9,982,837 657,767,097 14 15 16 17 18 19 11,168,093 36,813,295 673,187,807 7,000,000 8,182 18,444,426 746,621,803 35,077,393 9,130,998 32,005,501 564,023,853 7,000,000 1,362,909 13,770,218 627,293,479 30,473,618 Share capital Reserves Unappropriated profit 20 21 Surplus on revaluation of investments - net of tax 22 10,629,022 13,368,809 10,340,589 34,338,420 738,973 35,077,393 10,027,379 9,699,685 8,422,009 28,149,073 2,324,545 30,473,618 CONTINGENCIES AND COMMITMENTS 23 13 LIABILITIES Bills payable Due to financial institutions Deposits and other accounts Sub-ordinated Sukuk Deferred tax liabilities Other liabilities NET ASSETS REPRESENTED BY The annexed notes 1 to 46 and Annexure 1 form an integral part of these unconsolidated financial statements. Riyadh S. A. A. Edrees Chairman Irfan Siddiqui President & CEO Faisal A. A. A. Al-Nassar Director Mansur Khan Director Shabbir Hamza Khandwala Chief Financial Officer ANNUAL REPORT 2017 135
  120. Unconsolidated Profit and Loss Account For the year ended December 31 , 2017 Note 2017 2016 Rupees in ‘000 Profit / return earned on Islamic financing and related assets, investments and placements Profit on deposits and other dues expensed Net spread earned Provision / (reversal of provision) against non-performing Islamic financing and related assets - net Provision / (reversal of provision) against diminution in the value of investments Provision against off balance sheet obligations Bad debts written off directly 24 25 36,087,203 15,272,792 20,814,411 30,761,376 12,872,844 17,888,532 11.10 720,189 (120,246) 10.7 19.3 586,732 13,482 1,320,403 19,494,008 (64,673) (184,919) 18,073,451 4,165,971 1,176,517 1,139,648 824,926 269,594 7,576,656 2,619,769 744,090 1,207,563 877,680 208,217 5,657,319 27,070,664 23,730,770 16,579,977 (13,524) 10,824 241,377 16,818,654 10,252,010 10,252,010 14,680,291 (74,038) 3,600 178,081 14,787,934 8,942,836 8,942,836 4,096,185 344,016 (500,958) 3,939,243 6,312,767 2,996,908 240,647 143,670 3,381,225 5,561,611 Net spread after provisions OTHER INCOME Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Capital gain on sale of investments - net Other income Total other income 26 27 OTHER EXPENSES Administrative expenses Other reversals of provisions Other charges Workers Welfare Fund Total other expenses 28 29 Extraordinary / unusual items Profit before taxation Taxation - Current - Prior years - Deferred 30 Profit after taxation Rupees Basic and diluted earnings per share 31 6.13 Restated 5.45 The annexed notes 1 to 46 and Annexure 1 form an integral part of these unconsolidated financial statements. Riyadh S. A. A. Edrees Chairman 136 Irfan Siddiqui President & CEO MEEZAN BANK LIMITED Faisal A. A. A. Al-Nassar Director Mansur Khan Director Shabbir Hamza Khandwala Chief Financial Officer
  121. Unconsolidated Statement of Comprehensive Income For the year ended December 31 , 2017 Note 2017 2016 Rupees in ‘000 Profit after taxation for the year 6,312,767 5,561,611 (189,878) 59,832 Other comprehensive income Items that may not be reclassified to profit and loss account Remeasurements of defined benefit plan 34 Tax on remeasurements of defined benefit plan Comprehensive income transferred to statement of changes in equity 66,457 (20,941) (123,421) 38,891 6,189,346 5,600,502 (2,439,341) 2,360,337 853,769 (826,118) (1,585,572) 1,534,219 Components of comprehensive income not reflected in equity (Deficit) / surplus on revaluation of investments 22 Deferred tax on revaluation of investments The annexed notes 1 to 46 and Annexure 1 form an integral part of these unconsolidated financial statements. Riyadh S. A. A. Edrees Chairman Irfan Siddiqui President & CEO Faisal A. A. A. Al-Nassar Director Mansur Khan Director Shabbir Hamza Khandwala Chief Financial Officer ANNUAL REPORT 2017 137
  122. Unconsolidated Statement of Changes in Equity For the year ended December 31 , 2017 Share capital Share premium 10,027,379 Balance as at January 01, 2016 Profit after taxation for the year Capital reserves Statutory reserve* - 5,403,050 Revenue reserves Non Distributable Capital Reserve Gain on Bargain Purchase Rupees in ‘000 3,117,547 General reserve Unappropriated profit 66,766 Total 6,942,042 25,556,784 - - - - - 5,561,611 5,561,611 Remeasurements on defined benefit plan - - - - - 59,832 59,832 Tax on remeasurements on defined benefit plan - - - - - (20,941) 38,891 (20,941) 38,891 - - - - (1,112,322) - - - - (1,253,422) Other comprehensive income for the year Other appropriations Transfer to statutory reserve 1,112,322 - Transactions with owners recognised directly in equity Final cash dividend for the year 2015 Interim cash dividend for the year 2016 Balance as at December 31, 2016 Profit after taxation for the year 10,027,379 - 6,515,372 3,117,547 66,766 (1,253,422) (1,754,791) (1,754,791) (3,008,213) 8,422,009 (3,008,213) 28,149,073 - - - - - 6,312,767 6,312,767 Remeasurements on defined benefit plan - - - - - (189,878) (189,878) Tax on remeasurements on defined benefit plan - - - - - 66,457 (123,421) 66,457 (123,421) - - - - (1,262,553) - - - Other comprehensive income for the year Other appropriations Transfer to statutory reserve 1,262,553 - Transactions with owners recognised directly in equity Issue of right shares (note 20.2) 601,643 2,406,571 - 3,008,214 Final cash dividend for the year 2016 - - - - - (1,253,422) (1,253,422) Interim cash dividend for the year 2017 - - - - - (1,754,791) (1,754,791) Balance as at December 31, 2017 10,629,022 2,406,571 7,777,925 3,117,547 66,766 (3,008,213) (3,008,213) 10,340,589 34,338,420 *This represents reserve created under section 21(i)(a) of the Banking Companies Ordinance,1962. The annexed notes 1 to 46 and Annexure 1 form an integral part of these unconsolidated financial statements. Riyadh S. A. A. Edrees Chairman 138 Irfan Siddiqui President & CEO MEEZAN BANK LIMITED Faisal A. A. A. Al-Nassar Director Mansur Khan Director Shabbir Hamza Khandwala Chief Financial Officer
  123. Unconsolidated Cash Flow Statement For the year ended December 31 , 2017 Note 2017 2016 Rupees in ‘000 CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation Less: Dividend income 10,252,010 (1,176,517) 9,075,493 8,942,836 (744,090) 8,198,746 1,465,891 170,156 1,386,419 166,397 720,189 (120,246) 586,732 279,078 (72,928) 3,149,118 12,224,611 (64,673) 268,150 (50,600) 1,585,447 9,784,193 (18,114,056) (109,219,007) (3,880,360) (131,213,423) (28,035,689) (103,841,201) 3,999,137 (127,877,753) 2,037,095 4,807,794 109,163,954 3,791,152 119,799,995 811,183 (123,356) (3,836,755) (3,148,928) 2,570,674 18,395,950 92,202,894 (64,532) 113,104,986 (4,988,574) (276,480) (2,475,684) (7,740,738) CASH FLOWS FROM INVESTING ACTIVITIES Net investments in - available for sale securities - held to maturity securities - associated entities Dividend received Investments in operating fixed assets Proceeds from sale of fixed assets Net cash generated from investing activities 7,884,619 7,359 1,164,417 (4,653,329) 139,180 4,542,246 46,640,384 (28,000,000) (66,774) 741,415 (2,463,891) 94,090 16,945,224 CASH FLOWS FROM FINANCING ACTIVITIES Issuance of Right Shares Issuance of Sub-ordinated Sukuk Dividend paid Net cash generated from financing activities 3,008,214 (3,007,746) 468 7,000,000 (3,006,982) 3,993,018 Adjustments for non-cash charges and other items: Depreciation Amortisation Provision / (reversal of provision) against non-performing Islamic financing and related assets - net Provision / (reversal of provision) against diminution in the value of investments Charge for defined benefit plan Gain on sale of operating fixed assets (Increase) / decrease in operating assets Due from financial institutions Islamic financing and related assets Other assets Increase / (decrease) in operating liabilities Bills payable Due to financial institutions Deposits and other accounts Other liabilities Contribution to defined benefit plan Income tax paid Net cash used in operating activities Increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year 32 1,393,786 68,058,200 13,197,504 54,860,696 Cash and cash equivalents at the end of the year 32 69,451,986 68,058,200 The annexed notes 1 to 46 and Annexure 1 form an integral part of these unconsolidated financial statements. Riyadh S. A. A. Edrees Chairman Irfan Siddiqui President & CEO Faisal A. A. A. Al-Nassar Director Mansur Khan Director Shabbir Hamza Khandwala Chief Financial Officer ANNUAL REPORT 2017 139
  124. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 1 2 LEGAL STATUS AND NATURE OF BUSINESS 1.1 Meezan Bank Limited (the Bank) was incorporated in Pakistan on January 27, 1997, as a public limited company under the Companies Act, 2017 (previously Companies Ordinance, 1984), and its shares are quoted on the Pakistan Stock Exchange Limited. The Bank was registered as an ‘Investment Finance Company’ on August 8, 1997, and carried on the business of investment banking as permitted under SRO 585(I)/87 dated July 13, 1987, in accordance and in conformity with the principles of Islamic Shariah. A ‘Certificate of Commencement of Business' was issued to the Bank on September 29, 1997. 1.2 The Bank was granted a ‘Scheduled Islamic Commercial Bank’ license on January 31, 2002 and formally commenced operations as a Scheduled Islamic Commercial Bank with effect from March 20, 2002, on receiving notification in this regard from the State Bank of Pakistan (the SBP) under section 37 of the State Bank of Pakistan Act, 1956. Currently, the Bank is engaged in corporate, commercial, consumer, investment and retail banking activities. 1.3 The Bank was operating through six hundred and one branches as at December 31, 2017 (2016: five hundred and seventy one). Its registered office is situated at Meezan House, C-25, Estate Avenue, SITE, Karachi, Pakistan. 1.4 Based on the financial statements of the Bank for the year ended December 31, 2016, the JCR - VIS Credit Rating Company Limited has reaffirmed the Bank's medium to long-term rating as "AA" and the short-term rating as "A1+" with stable outlook. BASIS OF PRESENTATION The Bank provides Islamic financing and related assets mainly through Murabaha, Istisna, Tijarah, Ijarah, Diminishing Musharakah, Running Musharakah, Bai Muajjal, Musawamah, Service Ijarah, Wakalah Tul Istithmar and Export Refinance under Islamic Export Refinance Scheme of the State Bank of Pakistan as briefly explained in note 6.3. The purchases and sales arising under these arrangements are not reflected in these financial statements as such but are restricted to the amount of facility actually utilised and the appropriate portion of profit thereon. The income on such financing is recognised in accordance with the principles of Islamic Shariah. However, income, if any, received which does not comply with the principles of Islamic Shariah is recognised as charity payable if so directed by the Shariah Advisor of the Bank. 3 STATEMENT OF COMPLIANCE 3.1 These unconsolidated financial statements (here-in-after referred to as "financial statements") have been prepared in accordance with the approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board and Islamic Financial Accounting Standards (IFASs) issued by the Institute of Chartered Accountants of Pakistan, as are notified by Securities and Exchange Commission of Pakistan (SECP), provisions of the Companies Ordinance, 1984 (repealed note 3.1.1), the Banking Companies Ordinance, 1962, and the directives issued by the SECP and SBP. Wherever the requirements of provisions of the Companies Ordinance, 1984 (repealed - note 3.1.1), the Banking Companies Ordinance, 1962, the IFAS notified by the SECP and directives issued by the SECP and the SBP differ from the requirements of IFRS, the provisions of the Companies Ordinance, 1984 (repealed - note 3.1.1) and the Banking Companies Ordinance, 1962, IFAS notified by the SECP and the directives issued by the SECP and the SBP shall prevail. 3.1.1 140 The Companies Ordinance, 1984 has been repealed after the enactment of Companies Act, 2017. However, as allowed by the SECP vide its circular dated October 04, 2017, this unconsolidated financial statements have been prepared in accordance with the provisions of the repealed Companies Ordinance, 1984. 3.2 The SBP, through its BSD Circular No. 10 dated August 26, 2002, has deferred the implementation of International Accounting Standard (IAS) 39 - "Financial Instruments: Recognition and Measurement" and IAS 40 - "Investment Property" for Banking Companies in Pakistan, till further instructions. Accordingly, the requirements of these Standards have not been considered in the preparation of these financial statements. Further, the SECP has deferred the applicability of International Financial Reporting Standard (IFRS) 7 - "Financial Instruments: Disclosures" through its S.R.O. 411(I)/2008 dated April 28, 2008. Accordingly, the requirements of this standard have also not been considered in the preparation of these financial statements. However, investments and non-banking assets have been classified and valued in accordance with the requirements prescribed by the SBP through various circulars. 3.3 IFRS 8 - "Operating Segments" is effective for the Bank’s accounting period beginning on or after January 1, 2009. All Banking Companies in Pakistan are required to prepare their annual financial statements in line with the format prescribed under BSD Circular No. 4 dated February 17, 2006, ‘Revised Forms of Annual Financial Statements’, effective from the accounting year ended December 31, 2006. The management of the Bank believes that as the SBP has defined the segment categorisation in the above mentioned circular, the SBP requirements prevail over the requirements specified in IFRS 8. Accordingly, segment information disclosed in these financial statements is based on the requirements laid down by the SBP. 3.4 The SBP vide its BSD Circular No. 07 dated April 20, 2010 has clarified that for the purpose of preparation of financial statements in accordance with International Accounting Standard - 1 (Revised), 'Presentation of Financial Statements', two statement approach shall be adopted i.e. separate 'Profit and Loss Account' and 'Statement of Comprehensive Income' shall be presented and Balance Sheet shall be renamed as 'Statement of Financial Position'. The surplus / (deficit) on revaluation of available for sale (AFS) securities is required to be included in the 'Statement of Comprehensive Income'. MEEZAN BANK LIMITED
  125. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 However, it should continue to be shown separately in the Statement of Financial Position below equity. Accordingly, the above requirements have been adopted in the preparation of these financial statements. 3.5 Standards, interpretations and amendments to published approved accounting standards that are effective in the current year: The accounting policies adopted in the preparation of these financial statements are consistent with those of the previous financial year except as describe below: New Standards, Interpretations and Amendments The Bank has adopted the following accounting standards, amendments and interpretation of IFRSs which became effective for the current year: Standard or Interpretation - IAS 7 - Statement of Cash Flow – Disclosure Initiative - (Amendments) - IAS 12 - Income Taxes – Recognition of Deferred Tax Assets for Unrealized losses (Amendments) Improvements to Accounting Standards Issued by the IASB in September 2014 - IFRS 12 - Disclosure of Interests in Other Entities - Clarification of the scope of the disclosure requirements in IFRS 12 The adoption of the above amendments, improvements to accounting standards and interpretations did not have any effect on the financial statements. 3.6 Standards, interpretations and amendments to published approved accounting standards that are not yet effective: 3.6.1 The following standards, amendments and interpretations with respect to the approved accounting standards as applicable in Pakistan would be effective from the dates mentioned below against the respective standard or interpretation. Effective date (accounting periods beginning on or after) Standard, Interpretations and Amendments - IFRS 2 – Share-based Payments – Classification and Measurement of Share-based Payments Transactions (Amendments) January 01, 2018 - IFRS 10 – Consolidated Financial Statements and IAS 28 - Investment in Associates and Joint Ventures - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendment) Not yet finalized - IFRS 4 – Insurance Contracts: Applying IFRS 9 - Financial Instruments with IFRS 4 – Insurance Contracts – (Amendments) January 01, 2018 - IFRS 9 – Financial Instruments: Classification and Measurement July 01, 2018 - IFRS 9 – Prepayment Features with Negative Compensation – (Amendments) January 01, 2018 - IFRS 15 – Revenue from Contracts with Customers January 01, 2018 - IFRIC Interpretation 22 – Foreign Currency Transactions and Advance Consideration January 01, 2018 - IFRIC 23 – Uncertainty over Income Tax Treatments January 01, 2019 3.6.2 The above standards, amendments and interpretations are not expected to have any material impact on the Bank's financial statements in the period of initial application. With regard to IFRS 9, the Bank considers that as the Prudential Regulations and other SBP directives currently provide the accounting framework for the measurement and valuation of investments and provision against non performing financing, the implementation of IFRS 9 may require changes in the regulatory regime. Therefore, the Bank expects that the SBP would issue suitable guidance and instruction on the application of IFRS 9 for the banking sector of Pakistan. 3.6.3 In addition to the above standards and amendments, improvements to various accounting standards have also been issued by the IASB. Such improvements are generally effective for accounting periods beginning on or after January 01, 2018 and January 01, 2019. The Bank expects that such improvements to the standards will not have any impact on the Bank's financial statements in the period of initial application. ANNUAL REPORT 2017 141
  126. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 Further, following new standards have been issued by IASB which are yet to be notified by the SECP for the purpose of applicability in Pakistan. Standards IFRS 14 – Regulatory Deferral Accounts IFRS 16 – Leases IFRS 17 – Insurance Contracts 4 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS 4.1 The preparation of the financial statements in conformity with the approved accounting standards as applicable in Pakistan requires the use of certain critical accounting estimates. It also requires management to exercise judgments in the process of applying the Bank’s accounting policies. The significant accounting areas where various assumptions and estimates are significant to the Bank's financial statements or where judgment was exercised in the application of the accounting policies are as follows: (a) Classification of investments in accordance with the Bank's policy (notes 6.4 and 10); (b) Provision against non-performing Islamic financing and related assets (notes 6.3.2 and 11); (c) Impairment of investments in equity instruments of subsidiary, associates and non associate entities (notes 6.4.5 and 10); (d) Accounting for defined benefit plan (notes 6.12 and 34); (e) Depreciation / amortisation of operating fixed assets (notes 6.5 and 12); and (f) Assumption and estimation in recognition of provision for taxation (current and prior years) and deferred taxation (notes 6.7,18,19 and 30) Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectation of future events that are believed to be reasonable under the circ*mstances. Actual results may differ from these estimates. 5 BASIS OF MEASUREMENT 5.1 5.2 These financial statements have been prepared under the historical cost convention except that certain investments and commitments in respect of foreign exchange contracts have been marked to market and are carried at fair value. In addition, obligations in respect of staff retirement benefits, end of service benefits and employees compensated leave absences are carried at present value. Functional and Presentation Currency Items included in the financial statements are measured using the currency of the primary economic environment in which the Bank operates. These financial statements are presented in Pakistani Rupees, which is the Bank's functional and presentation currency. 5.3 Rounding off Figures have been rounded off to the nearest thousand rupees unless otherwise stated. 6 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these financial statements are set out below. 6.1 Cash and cash equivalents Cash and cash equivalents comprise of cash and balances with treasury banks and balances with other banks in current and deposit accounts. 6.2 Due to / from financial institutions Bai Muajjal In Bai Muajjal, the Bank sells sukuk on credit to other financial institutions. The credit price is agreed at the time of sale and such proceeds are received at the end of the credit period. Musharaka / Modaraba In Musharaka / Modaraba, the Bank invests in the Shariah compliant business pools of the financial institutions at the agreed profit and loss sharing ratio. Musharaka from State Bank of Pakistan under IERS Under IERS, the Bank accepts funds from the SBP under Shirkat-ul-Aqd to constitute a pool for investment in export refinance portfolio of the Bank under the guidelines issued by the SBP. The profit of the pool is shared as per the agreed weightages between the partners. 142 MEEZAN BANK LIMITED
  127. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 6.3 Islamic financing and related assets Murabaha In Murabaha transactions, the Bank purchases the goods and after taking the possession, sells them to the customer on cost plus profit basis either in a spot or credit transaction. Ijarah In Ijarah financing, the Bank provides the asset on pre-agreed rentals for specific tenors to the customers. Istisna In Istisna financing, the Bank places an order to purchase some specific goods / commodities from its customers to be delivered to the Bank within an agreed time. The goods are then sold by the customer on behalf of the bank and the amount hence financed alongwith profit is paid back to the Bank. Tijarah In Tijarah financing, the Bank purchases specific goods / commodities on cash basis from its customers for onward sale by the customer on behalf of the Bank and on subsequent sale, the financed amount alongwith profit is paid back by the customer to the Bank. Diminishing Musharakah In Diminishing Musharakah financing, the Bank enters into Musharakah based on Shirkat-ul-milk for financing an agreed share of fixed asset (e.g. house, land, plant or machinery) with its customers. The customers pay periodic profit as per the agreement for the utilisation of the Bank's Musharakah share and also periodically purchase the Bank's share over the tenure of the transaction. Running Musharakah In Running Musharakah financing, the Bank enters into financing with the customer based on Shirkatul Aqd or Business Partnership in the customer's operating business. Under this mechanism the customer can withdraw and return funds to the Bank subject to his Running Musharakah Financing limit during the Musharakah Period. At the end of each quarter / half year the customer pays the provisional profit as per the desired profit rate which is subject to final settlement based on the relevant quarterly / half yearly / annual accounts of the customer. Bai Muajjal In Bai Muajjal financing, the Bank sells Shariah compliant sukuk on credit to customers. The credit price is agreed at the time of sale and such proceeds are received at the end of the credit period. Service Ijarah In Service Ijarah financing, the Bank provides financing by acquiring certain agreed services from the customer. After the purchase of services, the Bank appoints the customer to sell these services in the market over a period and provide a sale confirmation of such sale. The profit is only accrued from the date of receipt of such confirmation. Wakalah tul Istithmar In Wakalah tul Istithmar financing, the Bank enters into investment agency transaction with customer acting as an agent of the Bank. Under this mechanism, the funds disbursed are invested by the customer on behalf of the Bank and are recorded as financing upon their investment in the business. At the end of each quarter / half year / other defined period, the customer pays the provisional profit which is subject to adjustment upon actual declaration of wakala business performance by the agent. Musawamah In Musawamah financing, the Bank purchases the goods and after taking the possession, sells them to the customer either in spot or credit transaction, without disclosing the cost. 6.3.1 Islamic financing and related assets are stated net of specific and general provisions against non-performing Islamic financing and related assets which are charged to the profit and loss account. Funds disbursed, under financing arrangements for purchase of goods / assets are recorded as advance. On culmination, financings are recorded at the deferred sale price net of profit. Goods purchased but remaining unsold at the statement of financial position date are recorded as inventories. ANNUAL REPORT 2017 143
  128. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 6.3.2 Provision against non-performing Islamic financing and related assets Specific provision The Bank determines provisions against Islamic financing and related assets on a prudent basis in accordance with the requirements of the Prudential Regulations issued by the SBP. General provision In accordance with Prudential Regulations issued by the SBP, general provision against consumer financing should be maintained at varying percentages based on the non-performing loan ratio present in the portfolio. These percentages range from 1% to 2.5% for secured and 4% to 7% for unsecured portfolio. In addition to the above mentioned requirements, the Bank has also created a general provision in respect of financing against potential losses present in the portfolio. This provision is based on management's best estimate and is approved by the Board of Directors of the Bank. The net provisions made / reversed during the year is charged to the profit and loss account and accumulated provision is netted off against Islamic financing and related assets. Islamic financing and related assets are written off when there are no realistic prospects of recovery. 6.3.3 Inventories The Bank values its inventories at the lower of cost and net realisable value. The net realisable value is the estimated selling price in the ordinary course of business less the estimated cost necessary to make the sale. Cost of inventories represents actual purchases made by the Bank / customers as an agent of the Bank for subsequent sale. 6.4 Investments 6.4.1 Classification The Bank classifies its investments as follows: - Held for trading These are investments which are either acquired for generating profits from short-term fluctuations in market prices or are securities included in a portfolio for which there is evidence of a recent actual pattern of short-term profit taking. - Held to maturity These are investments with fixed or determinable payments and maturity that the Bank has the positive intent and ability to hold till maturity. - Available for sale These are investments, which do not fall under 'held for trading' or 'held to maturity' categories. - Associates Associates are all entities over which the Bank has significant influence but not control. - Subsidiary Subsidiary is an entity over which the Bank has control. 6.4.2 Regular way contracts All purchases and sales of investments that require delivery within the time frame established by regulation or market convention are recognised at the trade date, which is the date on which the Bank commits to purchase or sell the investments. 144 MEEZAN BANK LIMITED
  129. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 6.4.3 Initial recognition and measurement Investments other than those categorised as 'held for trading' are initially recognised at fair value which includes transaction costs associated with the investments. Investments classified as 'held for trading' are initially recognised at fair value and transaction costs are expensed in the profit and loss account. 6.4.4 Subsequent measurement Subsequent to initial recognition investments are valued as follows: - Held for trading These are measured at subsequent reporting dates at fair value. Gains and losses on remeasurement are included in the net profit and loss for the year. - Held to maturity These are measured at amortised cost using the effective profit rate method, less any impairment loss recognised to reflect irrecoverable amount. - Available for sale In accordance with the requirements specified by the SBP, quoted securities (other than those classified as 'held to maturity' and 'investments in associates and subsidiary'), are subsequently re-measured to market value. Unquoted equity securities are valued at the lower of cost and break-up value. Break-up value of unquoted equity securities is calculated with reference to the net assets of the investee company as per the latest available audited financial statements. Investment in other unquoted securities are valued at cost less impairment losses, if any. Surplus / deficit arising on revaluation of quoted securities which are classified as 'available for sale', is included in the Statement of Comprehensive Income but is kept in a separate account which is shown in the Statement of Financial Position below equity. - Investments in associates and subsidiary Investment in associates and subsidiary is carried at cost less accumulated impairment losses, if any. 6.4.5 Impairment Available for sale and Held to maturity investments Impairment loss in respect of investments classified as available for sale and held to maturity (except sukuk certificates) is recognised based on management's assessment of objective evidence of impairment as a result of one or more events that may have an impact on the estimated future cash flows of the investments. A significant or prolonged decline in fair value of an equity investment below its cost is also considered an objective evidence of impairment. Provision for diminution in the value of sukuk certificates is made as per the Prudential Regulations issued by the SBP. In case of impairment of available for sale securities, the cumulative loss that has been recognised directly in surplus / (deficit) on revaluation of securities on the statement of financial position below equity is removed there from and is recognised in the profit and loss account. For investments classified as held to maturity, the impairment loss is recognised in the profit and loss account. Investment in associates and subsidiary In respect of investment in associates and subsidiary, the Bank reviews their carrying values at each reporting date to assess whether there is an indication of impairment. Such indication may include significant and prolonged decline in the market value, significant changes with an adverse impact on the entity, carrying amount of net assets in excess of market capitalisation etc. Management also takes into account that these investments are held for long term and therefore considers decline of up to 40% in value (applying significant decline criteria) and up to 12 months (for applying prolonged criteria) for the purposes of assessing significant and prolonged decline for listed investments. However, any threshold should be justifiable in view of other factors present for the entity. The amount of impairment loss would be determined based on the higher of value in use and fair value less cost to sell. Impairment loss is recognised in the profit and loss account. 6.4.6 Cost of investment is determined on moving average basis. ANNUAL REPORT 2017 145
  130. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 6.5 Operating fixed assets 6.5.1 Tangible assets Tangible operating fixed assets are stated at cost less accumulated depreciation and any identified impairment loss. Items of fixed assets costing Rs 20,000 or less are not capitalised and are charged off in the month of purchase. Profit or loss on disposal of fixed assets is included in the profit and loss account currently. 6.5.2 Intangible assets Intangible assets comprise of computer software. Intangible assets with definite useful lives are stated at cost less accumulated amortisation and impairment losses (if any). 6.5.3 Subsequent costs Subsequent costs are included in the asset's carrying amounts or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Bank and the cost of the item can be measured reliably. All other repairs and maintenance expenditure are charged to the profit and loss account as and when incurred. 6.5.4 Depreciation / amortisation Depreciation / amortisation is charged to the profit and loss account by applying the straight line method in accordance with the rates specified in notes 12.2 and 12.4 whereby the depreciable value of an asset is written off over its estimated service life. The Bank charges depreciation / amortisation from the month of acquisition and upto the month preceding the disposal. 6.5.5 Capital work-in-progress Capital work-in-progress is stated at cost less accumulated impairment losses, if any. 6.5.6 Useful lives and residual values Useful lives and residual values are reviewed at each Statement of Financial Position date and adjusted if impact on depreciation / amortisation is significant. 6.5.7 Impairment The Bank assesses at each Statement of Financial Position date whether there is any indication that the operating fixed assets may be impaired. If such indication exists, the carrying amounts of such assets are reviewed to assess whether they are recorded in excess of their recoverable amounts. Where carrying values exceed the respective recoverable amounts, assets are written down to their recoverable amounts and the resulting impairment charge is recognised in the profit and loss account. 6.6 Ijarah Assets (IFAS 2) Ijarah assets are stated at cost less accumulated depreciation and are disclosed as part of 'Islamic financing and related assets'. The rental received / receivable on Ijarah under Islamic Financial Accounting Standard - 2 ‘Ijarah’ (IFAS 2) are recorded as income / revenue. - Depreciation The Bank charges depreciation from the date of recognition of Ijarah of respective assets to mustajir. Ijarah assets are depreciated over the period of Ijarah using the straight line method. - Ijarah Rentals Ijarah rentals outstanding are disclosed in 'other assets' on the Statement of Financial Position at amortised cost. - Impairment Impairment of Ijarah assets is determined in accordance with the Prudential Regulations issued by the SBP. The provision for impairment of Ijarah assets is shown as part of 'Islamic financing and related assets'. 146 MEEZAN BANK LIMITED
  131. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 6.7 Taxation Income tax expense comprises of current and deferred tax. Income tax expense is recognised in the profit and loss account except to the extent that it relates to items recognised directly in equity or below equity, in which case it is recognised in equity or below equity. Current The charge for current taxation is based on expected taxable income for the year at the current rates of taxation, after taking into consideration available tax credits, rebates, tax losses, etc. The charge for current tax also includes adjustments to tax payable in respect of previous years including those arising from assessments finalised during the year and are separately disclosed. Deferred Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for taxation purposes. Deferred tax is not recognised for the temporary differences relating to initial recognition of goodwill, initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profits and differences relating to investments in subsidiaries to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the assets can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefits will be realised. 6.8 Non-banking assets acquired in satisfaction of claims The non-banking assets acquired in satisfaction of claims are carried at revalued amounts less accumulated depreciation. These assets are revalued by professionally qualified valuers with sufficient regularity to ensure their net carrying value does not differ materially from their fair value. Surplus arising on revaluation of property, if any, is credited to the 'surplus on revaluation of assets' account which is shown in the Statement of Financial Position below equity. Any deficit arising on revaluation is taken to profit and loss account directly. Legal fees, transfer cost and direct cost of acquiring title to property is charged to the profit and loss account. 6.9 Deposits Deposits are generated on the basis of two modes i.e. Qard and Modaraba. Deposits taken on Qard basis are classified as 'Current accounts' and Deposits generated on Modaraba basis are classified as 'Savings deposits' and 'Fixed deposits'. No profit or loss is passed on to current account depositors, however the funds of current accounts are treated as equity for the purpose of profit calculation and any profit earned / loss incurred on those funds are allocated to the equity of the Bank. While the product features of each product differ, there is usually no restriction on withdrawals or number of transactions in current and saving accounts. In case of fixed deposits, pre-mature withdrawals can be made as per approved terms only. Profits realised in investment pools are distributed in pre-agreed profit sharing ratio. Rab-ul-Maal share is distributed among depositors according to weightages assigned at the inception of profit calculation period. Mudarib can distribute its share of profit to Rab-ul-Maal upto a maximum of 50% of their profit as Incentive profits (Hiba). Profits are distributed from the pool such that the depositors (remunerative) only bear the risk of assets in the pool during the profit calculation period. In case of loss in a pool during the profit calculation period, the loss is distributed among the depositors (remunerative) according to their ratio of Investments. Asset pools are created at the Bank’s discretion and the Bank can add, amend, transfer an asset to any other pool in the interests of the deposit holders. 6.10 Sub-ordinated Sukuk The Bank records sub-ordinated sukuk initially at the amount of proceeds received. Profit accrued on sub-ordinated sukuk is charged to the profit and loss account. ANNUAL REPORT 2017 147
  132. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 6.11 Pool Management The Bank operates general and specific pools for deposits and inter-bank funds accepted / acquired under Modaraba and Musharakah modes. Under the general deposits pools, the Bank accepts funds on Modaraba basis from depositors (Rab-ul-Maal) where the Bank acts as Manager (Mudarib) and invests the funds in the Shariah Compliant modes of financing, investments and placements. When investing funds, the Bank prioritizes the funds received from depositors over the funds generated from own sources after meeting the regulatory requirement relating to such deposits. Specific pools are operated for funds acquired / accepted from the State Bank of Pakistan and other banks for Islamic Export Refinance to the Bank's customers and liquidity management respectively under the Musharakah / Modaraba modes. The profit of each deposit pool is calculated on all the remunerative assets booked by utilising the funds from the pool after deduction of expenses directly incurred in earning the income of such pool along with related fee income, if any. The directly related costs comprise of depreciation on ijarah assets, takaful premium, documentation charges etc. No expense of general or administrative nature is charged to the pools. No provisions against any non-performing asset of the pool is passed on to the pool except on the actual loss / write-off of such non-performing asset. The profit of the pool is shared between equity and other members of the pool on the basis of Musharakah at gross level (before charging of mudarib fee) as per the investment ratio of the equity. The profit of the pool is shared among the members of the pool on pre-defined mechanism based on the weightages announced before the profit calculation period after charging of mudarib fee. During the year, the Bank has given General Hiba to the depositors of PKR General Pool, keeping in view the prescribed guidelines of Pool Management provided by the SBP and with the approval of the Bank's Shariah Advisor. However, Hiba are given at the sole discretion of the Bank without any contractual commitment and can be withdrawn or reduced by the Bank at its sole discretion. The risk characteristic of each pool mainly depends on the assets and liability profile of each pool. As per the Bank's policy, relatively low risk / secured financing transactions and assets are allocated to general depositors pool of PKR, USD, GBP and Euro. The Bank maintains General Pools (PKR, USD, EUR, GBP), FI Pools, IERS pool and Equity pool. The general pools are exposed to general credit risk, asset ownership risk and profit rate risk of the underlying assets involved. General Pools: For General Pools (PKR, USD, EUR, GBP), the Bank allocates PKR financing to Corporate, SME and Consumer Finance customers in diversified sectors and avenues of the economy / business as mentioned in note 41.1.1.1. Investments in Sovereign Guarantee Sukuk, Bai Muajjal with State Bank of Pakistan are also done through General Pools. All remunerative deposits are tagged to these general pools and their funds generated from the depositors are invested on priority basis. Due to limited investment options in USD, GBP and EURO pool, funds from FCY pools are invested in available International Sukuk, Shariah Compliant Nostro accounts and the remaining funds are taken out and invested in PKR general pool as part of equity. In such cases return from PKR General Pool is given back to FCY pools, so that returns can be passed on to FCY pool customers accordingly. IERS Pools: The IERS pool assets comprise of Sovereign Guarantee Sukuk, and financing to / sukuk of blue chip companies and exporters as allowed under the applicable laws and regulations, and as such are exposed to lower credit risk. The Musharakah with SBP under IERS is tagged to the IERS pool. FI Pools: The FI pool assets generally comprise of Sovereign Guarantee Sukuk only and the related liability of the FI pool comprise of Musharakah / Modaraba from other banks and financial institutions. These pools are created to meet the liquidity requirements of the Bank. Equity Pools: All other assets including fixed assets, exposure in shares, PKR bai-salam financing and subsidized financing to the Bank's employees are tagged to equity pool. To safeguard the interest of customers, all high risk investments are done through equity pool. The Bank as Mudarib in the general pools is responsible for financing costs / assets such as land, building, furniture, fixtures, computers and IT system from its own sources / equity. 148 MEEZAN BANK LIMITED
  133. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 6.12 Staff retirement benefits Defined benefit plan The Bank operates an approved funded gratuity scheme for its permanent employees. The scheme was approved by the tax authorities in April 2000. The liability recognised in the Statement of Financial Position in respect of defined benefit gratuity scheme is the present value of the defined benefit obligation at the Statement of Financial Position date less the fair value of plan assets. Contributions to the fund are made on the basis of actuarial recommendations. The defined benefit obligation is calculated periodically by an independent actuary using the projected unit credit method. Last valuation was conducted as on December 31, 2017. The Bank also operates End of Service unfunded defined benefit scheme as approved by the Board of Directors for the benefit of the founding President and Chief Executive Officer of the Bank. The defined benefit obligation for this benefit has been calculated by an independent actuary using the projected unit credit method. The valuation has been carried out on December 31, 2017. Amounts arising as a result of "Remeasurements", representing the actuarial gains and losses and the difference between the actual investment returns and the return implied by the net return cost are recognised in the Statement of Financial Position immediately, with a charge or credit to "Other Comprehensive Income" in the periods in which they occur. Defined contribution plan The Bank also operates a recognised contributory provident fund for all permanent employees. Equal monthly contributions are made, both by the Bank and the employees, to the fund at a rate of 10% of basic salary. 6.13 Compensated absences The Bank recognises liability in respect of employees compensated absences in the period in which these are earned upto the date of Statement of Financial Position. The provision has been recognised on the basis of actuarial valuation conducted as at December 31, 2017, on the basis of projected unit credit method. 6.14 Dividend and reserves Dividend declared and appropriations, except for transfer to statutory reserve, made subsequent to the date of Statement of Financial Position are considered as non adjusting events and are recorded in the financial statements in the year in which these are approved by the directors / shareholders as appropriate. 6.15 Foreign currency transactions Transactions and balances Foreign currency transactions are recorded in rupees at exchange rates prevailing on the date of transaction. Monetary assets, monetary liabilities and contingencies and commitments in foreign currencies except forward contracts are reported in Rupees at exchange rates prevalent on the Statement of Financial Position date. Forward contracts other than contracts with the SBP relating to the foreign currency deposits are valued at forward rates applicable to the respective maturities of the relevant foreign exchange contracts. Forward contracts with the SBP relating to foreign currency deposit, are valued at spot rate prevailing at the Statement of Financial Position date. Exchange gains and losses are included in the profit and loss account currently. Commitments Commitments for outstanding forward foreign exchange contracts are disclosed at the rates applicable at the reporting date. Contingent liabilities / commitments for letters of credit, acceptances and letters of guarantee denominated in foreign currencies are expressed in rupee terms at the exchange rates ruling on the reporting date. Translation gains and losses are included in the profit and loss account. 6.16 Provisions and contingent assets and liabilities Provisions are recognised when the Bank has a present legal or constructive obligation arising as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. Provisions are reviewed at each date of Statement of Financial Position and are adjusted to reflect the current best estimate. ANNUAL REPORT 2017 149
  134. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 Contingent assets are not recognised, and are also not disclosed unless an inflow of economic benefits is probable. Contingent liabilities are not recognised and are disclosed unless the probability of an outflow of resources embodying economic benefits are remote. 6.17 Acceptances Acceptances comprise undertakings by the Bank to pay bills of exchange drawn on customers. The Bank expects most acceptances to be settled simultaneously with the reimbursem*nt from the customers. Acceptances are accounted for as off-balance sheet transactions and are disclosed as contingent liabilities and commitments. 6.18 Offsetting Financial assets and financial liabilities are offset and the net amount is reported in the Statement of Financial Position when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only when permitted by the approved accounting standards as applicable in Pakistan. 6.19 6.20 Revenue recognition i) Profit on Murabaha and Commodity Murabaha is recognised on an accrual basis. Profit on murabaha transactions for the period from the date of disbursem*nt to the date of culmination of murabaha is recognised immediately upon the later date. ii) Rental on Ijarah contracts under Islamic Financial Accounting Standard - 2 Ijarah (IFAS 2) are recognised as income on an accrual basis. iii) Profit on Bai Muajjal transaction is recognised on an accrual basis. iv) Profit on Diminishing Musharakah financing is recognised on an accrual basis. v) Profit on Running Musharakah financing is booked on an accrual basis and is adjusted upon declaration of profit by Musharakah partners. vi) Profit on Tijarah and Istisna financing is recognised on an accrual basis commencing from time of sale of goods till the realisation of sale proceeds by the Bank. vii) Profit on Service Ijarah is recognised on an accrual basis commencing from the date of confirmation of sale. viii) Profit on Wakalah tul Istithmar is recognized on an accrual basis and is adjusted upon actual declaration of wakalah business performance by the agent. ix) Profit on Sukuk is recognised on an accrual basis. Where Sukuk (excluding held for trading securities) are purchased at a premium or discount, those premiums / discounts are amortised through the profit and loss account over the remaining maturity, using the effective yield / profit method. x) Commission on letters of credit, acceptances and guarantees is recognised on receipt basis, except for commission on guarantees in excess of Rs 200,000 which is recognised over the period of the guarantee. Fee and brokerage income are recognised when earned. xi) Dividend income is recognised when the Bank’s right to receive dividend is established. xii) Gain or loss on sale of investments is included in the profit and loss account. xiii) Gain or loss on disposal of operating fixed assets, ijarah assets and musharaka assets, if any, is taken to the profit and loss account in the period in which they arise. xiv) Profit suspended in compliance with the Prudential Regulations issued by the SBP is recorded on receipt basis. Profit on rescheduled / restructured financing and investments are recognised as permitted by the SBP, except where, in the opinion of the management, it would not be prudent to do so. Segment reporting A segment is a distinguishable component of the Bank that is engaged in providing products or services (business segment) or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. The Bank's primary format of reporting is based on business segments. 6.20.1 Business segments Corporate Finance Corporate Finance includes investment banking, syndications, IPO related activities (excluding investments), secondary private placements, underwriting and securitisation. 150 MEEZAN BANK LIMITED
  135. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 Trading and Sales It includes equity, foreign exchanges, commodities, own securities and placements. Retail Banking It includes retail financing, deposits and banking services offered to its retail customers and small and medium enterprises. Corporate and Commercial Banking It includes project finance, export finance, trade finance, Ijarah, guarantees and bills of exchange relating to its Corporate and Commercial customers. Agency Services It includes depository receipts, custody, issuer and paying agents. 6.20.2 Geographical segments The Bank operates only in Pakistan. 6.21 Impairment The carrying amount of the assets are reviewed at each Statement of Financial Position date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of the relevant asset is estimated. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in the profit and loss account. An impairment loss is reversed if the reversal can be objectively related to an event occurring after the impairment loss was recognised. Note 7 With the State Bank of Pakistan in - local currency current accounts - foreign currency current accounts 7.1 7.1 With the National Bank of Pakistan in - local currency current accounts 7.1 16,244,335 2,515,745 14,725,026 2,159,517 25,011,106 4,100,803 20,323,435 3,138,134 16,684,181 64,556,170 15,690,737 56,036,849 These include local and foreign currency amounts required to be maintained by the Bank with the SBP as stipulated by the SBP. These accounts are non-remunerative in nature. BALANCES WITH OTHER BANKS Note Outside Pakistan - in current accounts - in deposit accounts 2017 2016 Rupees in ‘000 In Pakistan - in current accounts - in deposit accounts / term deposit receipts 8.1 2016 Rupees in ‘000 CASH AND BALANCES WITH TREASURY BANKS In hand - local currency - foreign currencies 8 2017 8.1 3,699,377 - 2,000,041 9,000,000 1,084,534 111,905 4,895,816 814,335 206,975 12,021,351 The return on these balances is around 0.58% (2016: 0.28%) per annum. ANNUAL REPORT 2017 151
  136. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 9 DUE FROM FINANCIAL INSTITUTIONS Note Bai Muajjal: With Scheduled Banks - Secured With State Bank of Pakistan With Scheduled / Other Banks Musharakah - Secured Commodity Murabaha Provision against non-performing amounts due from financial institutions 9.1 2017 2016 Rupees in ‘000 9.1 9.2 9.3 9.5 142,229,221 15,500 142,244,721 5,000,000 26,066 147,270,787 77,829,747 31,413,175 19,887,743 129,130,665 26,066 129,156,731 (41,566) 147,229,221 (41,566) 129,115,165 The average return on this product is 5.80% (2016: 5.75%) per annum. The balances have maturities ranging between January 2018 to November 2018 (2016: January 2017 to December 2017). These Bai Muajjal are secured against Federal Government securities received as collateral and having market value of Rs 146,067 million as at December 31, 2017 (2016: Rs 80,305 million). 2017 2016 Rupees in ‘000 9.2 Bai Muajjal Placements Less: Deferred Income Profit Receivable shown in other assets Bai Muajjal Placements 150,162,125 (3,440,686) (4,476,718) 142,244,721 136,298,219 (3,631,432) (3,536,122) 129,130,665 9.3 The average returns on this product is 5.83% (2016: Nil) per annum and are due to mature in November 2018 (2016: Nil). These Musharakah are secured against Federal Government securities received as collateral and having market value of Rs 5,068 million as at December 31, 2017 (2016: Nil). 2017 2016 Rupees in ‘000 152 9.4 Particulars of due from financial institutions In local currency In foreign currencies 9.5 Provision against non-performing amounts due from financial institutions Opening balance Less: charge / reversal Closing balance MEEZAN BANK LIMITED 147,229,221 147,229,221 129,115,165 129,115,165 41,566 41,566 41,566 41,566
  137. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 10 INVESTMENTS 10.1 Investments by types 2017 Note Held by the Bank Given as collateral 2016 Total Held by the Bank Given as collateral Total Rupees in ‘000 Available for sale securities - Sukuk - Shares / Units 10.3 10.3 83,839,856 5,271,140 89,110,996 - 83,839,856 5,271,140 89,110,996 92,571,703 4,423,912 96,995,615 - 92,571,703 4,423,912 96,995,615 Held to maturity securities - Sukuk 10.4 28,000,000 - 28,000,000 28,000,000 - 28,000,000 Subsidiary (unlisted) - Shares 10.5 63,050 - 63,050 63,050 - 63,050 Associates (listed) - Units of funds 10.6 1,894,761 - 1,894,761 1,902,120 - 1,902,120 119,068,807 - 119,068,807 126,960,785 - 126,960,785 In related parties Investment at cost / carrying value Less: Provision against diminution in value of investments Investments (net of provision) 10.7 (967,444) 118,101,363 - (967,444) 118,101,363 (380,712) 126,580,073 - (380,712) 126,580,073 Surplus on revaluation of investments classified as 'available for sale' Investments at market value 22 1,136,883 119,238,246 - 1,136,883 119,238,246 3,576,224 130,156,297 - 3,576,224 130,156,297 10.2 Investments by segments Federal Government Securities GoP Ijarah Sukuk Sukuk Certificates / Bonds Sukuk Certificates Global Sukuk Bonds Fully paid up ordinary shares Listed companies Unlisted companies - subsidiary - others Units of open end funds - associates - others Total investment at cost / carrying value Less: Provision against diminution in value of investments Note 2016 Rupees in ‘000 10.3 & 10.4 84,895,331 96,937,287 10.3 10.3 21,911,179 5,033,346 16,090,897 7,543,519 10.3 4,367,016 3,519,788 10.5 10.3 63,050 854,124 63,050 854,124 10.6 10.3 1,894,761 50,000 119,068,807 (967,444) 1,902,120 50,000 126,960,785 (380,712) 118,101,363 126,580,073 1,136,883 119,238,246 3,576,224 130,156,297 10.7 Investments (net of provision) Surplus on revaluation of investments classified as 'available for sale' Investments at market value 2017 22 ANNUAL REPORT 2017 153
  138. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 10.3 Quality of available for sale securities The Bank holds investments in ordinary shares (nominal value of Rs 10 each, unless stated otherwise), sukuk certificates and other securities in the following investees: Name of the investee 2017 2016 2017 Number of shares / units / certificates Ordinary Shares Automobile parts and accessories Honda Atlas Cars (Pakistan) Limited Indus Motor Company Limited Market value / cost Rupees in ‘000 Entity rating long term / short term 2016 Market value Entity rating / cost long term / short term Rupees in ‘000 369,700 - 408,000 47,400 91,345 - 75,930 42,684 189,438 - Unrated Not Applicable 272,805 76,529 Unrated Unrated Construction and materials (cement) Cherat Cement Company Limited D.G. Khan Cement Company Limited Fauji Cement Company Limited Kohat Cement Limited Lucky Cement Company Limited Pioneer Cement Limited Power Cement Limited 624,800 1,488,146 1,094,500 263,800 549,265 589,600 18,040,667 263,000 1,343,546 2,195,000 263,800 531,265 160,200 - 89,564 294,670 38,807 40,306 362,982 83,211 225,508 23,917 219,443 74,365 40,306 339,620 22,709 - 69,297 198,995 27,373 37,449 284,195 37,216 157,675 A / A1 Unrated Unrated Unrated Unrated A / A1 A- / A2 45,773 297,904 98,951 76,935 460,214 22,763 - A / A1 Unrated Unrated Unrated Unrated A / A1 Not Applicable Electricity K-Electric Limited* Hub Power Company Limited 11,850,000 2,612,190 10,800,000 3,096,690 88,351 163,225 80,981 172,167 74,774 237,709 AA / A1+ AA+ / A1+ 101,196 382,379 AA / A1+ AA+ / A1+ Oil and gas Attock Refinery Limited Hascol Petroleum Limited Hi-Tech Lubricants Limited Mari Petroleum Company Limited National Refinery Limited Oil and Gas Development Company Limited Pakistan State Oil Company Limited Pakistan Oilfields Limited Pakistan Petroleum Limited Sui Northern Gas Pipeline Limited 50,600 25,000 450,000 266,600 85,000 862,000 885,108 696,426 578,847 2,387,500 290,900 308,600 537,000 732,590 743,626 620,147 1,522,000 12,552 7,053 51,848 177,156 69,508 130,608 184,839 296,529 104,757 265,358 94,050 205,065 74,252 176,205 311,072 112,707 85,878 11,846 6,176 31,950 386,802 36,624 140,325 259,434 413,858 119,190 225,881 AA / A1+ AA- / A1 Unrated Unrated AA+ / A1+ AAA / A1+ AA / A1+ Unrated Unrated AA - / A1 123,720 424,297 88,793 318,098 397,557 116,699 124,150 AA / A1+ Not Applicable Not Applicable Unrated Not Applicable AAA / A1+ AA / A1+ Unrated Unrated AA - / A1 Chemicals Engro Corporation Limited Engro Fertilizers Limited Engro Polymers & Chemicals Limited ICI Pakistan Limited Sitara Chemical Industries Limited 635,800 5,370,000 1,050,000 121,145 25,000 535,800 5,900,000 104,965 - 176,325 349,411 35,493 50,618 14,147 143,653 386,752 34,026 - 174,686 363,656 29,988 93,033 7,525 AA / A1+ AA- / A1+ A / A1 Unrated A+ / A1 169,361 401,082 104,307 - AA / A1+ AA- / A1+ Not Applicable Unrated Not Applicable 99,800 198,625 108,900 523,479 496,349 - 95,000 175,000 566,879 324,976 60,000 80,287 56,999 28,039 223,947 116,748 - 72,634 54,046 242,513 83,181 51,022 69,621 39,526 18,282 266,885 156,280 - Unrated Unrated Unrated AA / A1+ Unrated Not Applicable 90,924 59,147 481,875 212,466 44,925 Unrated Unrated Not Applicable AA / A1+ Unrated Unrated 25,000 740,100 3,521 72,039 3,738 AA / A1+ 112,695 AA / A1+ 3,263 Unrated General Industries Abbot Laboratories (Pakistan) Limited Cherat Packaging Limited Glaxo Smithkline Pakistan Limited Packages Limited The Searle Company Limited Ferozsons Laboratories Limited Personal Goods (textile) Nishat Mills Limited Fixed line telecommunication Pakistan Telecommunication Company Limited (A) 250,000 Food Producers Al Shaheer Corporation Limited Engro Foods Limited 483,575 140,000 483,575 50,000 27,981 17,880 27,980 7,464 10,745 11,243 Unrated Unrated 27,757 9,597 Unrated Unrated 2,478,125 1,788,125 174,808 112,819 117,686 A+ / A1 127,458 A+ / A1 333,875 167,400 360,000 41,500 - 239,375 41,500 244,000 51,717 53,372 47,290 10,614 - 27,257 10,614 12,732 42,509 40,194 38,293 12,699 - A+ / A2 AA- / A1 A+ / A1 Unrated Not Applicable 36,907 16,942 16,248 A+ / A2 Not Applicable Not Applicable Unrated A / A1 79,999 Unrated 21 4,526,079 Unrated Electrical Goods Pak Elecktron Limited Engineering Crescent Steel & Allied Products Limited International Industries Limited International Steels Limited K.S.B. Pumps Company Limited Amreli Steels Limited Financial Institutions Orient Rental Modaraba Miscellaneous Shifa International Hospitals Limited 6,638,953 71 63,317,346 *The nominal value of these shares is Rs 3.5 each. 154 2017 2016 Cost MEEZAN BANK LIMITED - 91,771 35,304,830 3,229 66,390 23 4,367,016 - 29,705 3,519,788 - 28,211 5,368,665 Not Applicable Not Applicable Unrated
  139. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 Name of the investee Note 2017 2016 2017 Number of shares / units / certificates 2017 2016 Market value / Cost Cost 2016 Entity rating long term / short term Market value / Cost Rupees in ‘000 Ordinary shares - unlisted (others) Fatima Energy Limited * Sapphire Electric Company Limited - at cost ** Daewoo Pakistan Express Bus Service Limited *** Pak Kuwait Takaful Company Limited**** S.W.I.F.T. SCRL - at cost Units of open end funds Atlas Islamic Income Fund GoP Sukuk GoP Ijarah Sukuk GoP Ijarah Sukuk GoP Ijarah Sukuk GoP Ijarah Sukuk - GIS-16 - GISF-1 - GISF-2 - GISF-3 10.3.1 10.3.2 10.3.3 10.3.4 Sukuk Certificates Albaraka Bank Pakistan Limited I - at cost 10.3.5 Albaraka Bank Pakistan Limited II - at cost 10.3.6 Arzoo Textile Mills Limited - at cost 10.3.7 Dubai Islamic Bank Pakistan Limited - at cost 10.3.8 Engro Fertilizers Limited II - at cost 10.3.9 K-Electric Limited - at cost 10.3.10 Liberty Power Tech Ltd - at cost 10.3.11 Neelum Jehlum Private Limited - at cost 10.3.12 Pakistan International Airlines - at cost 10.3.13 Pakistan Mobile Communications Limited - at cost 10.3.14 Sui Southern Gas Company Limited II- at cost 10.3.15 Sui Southern Gas Company Limited III- at cost 10.3.16 Sui Southern Gas Company Limited IV- at cost 10.3.17 Sui Southern Gas Company Limited V- at cost***** 10.3.18 Quetta Textile Mills Limited - at cost 10.3.19 Sitara Peroxide Limited - at cost 10.3.20 WAPDA Dasu Sukuk - at cost 10.3.21 Sui Southern Gas Company Limited I- at cost WAPDA Second Sukuk - at cost Global Sukuk Bonds Hong Kong Sukuk 10.3.22 Luxembourg Sukuk 10.3.23 Republic of Indonesia Sukuk I 10.3.24 Republic of Indonesia Sukuk II 10.3.25 Republic of Indonesia Sukuk III 10.3.26 Saudi Electric Company Sukuk - 10 years 10.3.27 Sime Darby Berhad Global Sukuk - 5 years 10.3.28 Sime Darby Berhad Global Sukuk - 10 years 10.3.29 Qatar Islamic Bank II 10.3.30 State of Qatar Sukuk - 10 years 10.3.31 First Gulf Bank Sukuk Hazine M.V. Sukuk I Hazine M.V. Sukuk II Qatar Islamic Bank I Saudi Electric Company Sukuk - 5 years Entity rating long term / short term Rupees in ‘000 25,055,300 21,201,068 4,000,000 2,812,500 5 53,068,873 25,055,300 21,201,068 4,000,000 2,812,500 5 53,068,873 250,553 318,864 253,240 28,125 3,342 854,124 250,553 318,864 253,240 28,125 3,342 854,124 250,553 318,864 253,240 28,125 3,342 854,124 Unrated A+ / A1 A / A1 BBB Unrated 250,553 318,864 253,240 28,125 3,342 854,124 Unrated A+ / A1 A / A1 BBB Unrated 98,894 98,894 50,000 50,000 50,939 AA-(f) 51,150 AA-(f) 399,833 20,000 899 147,790 568,522 399,833 20,000 269,407 689,240 40,052,437 1,973,172 89,843 14,779,879 56,895,331 39,928,380 2,068,211 26,940,696 68,937,287 40,263,828 2,027,000 90,565 14,770,133 57,151,526 Govt. Guaranteed 40,962,774 Govt. Guaranteed Govt. Guaranteed 2,065,200 Govt. Guaranteed Govt. Guaranteed 27,482,208 Govt. Guaranteed Govt. Guaranteed Not Applicable 70,510,182 200 150 10,000 258 100,000 520,000 18,140,480 35,750 300,000 560,000 280,000 400,000 200,000 400,000 30,000 30,000 347,222 21,354,060 200 10,000 100,000 520,000 18,140,480 35,750 300,000 560,000 100,000 400,000 200,000 30,000 30,000 180,000 346,000 20,952,430 114,285 150,000 50,000 258,000 350,000 2,340,000 870,008 3,575,000 1,500,000 1,866,667 233,333 2,000,000 1,000,000 4,000,000 72,619 59,063 3,472,204 21,911,179 142,857 50,000 450,000 2,600,000 1,078,025 3,575,000 1,500,000 2,800,000 250,000 2,000,000 1,000,000 72,619 59,063 225,000 288,333 16,090,897 114,285 150,000 50,000 258,000 350,000 2,340,000 870,008 3,575,000 1,500,000 1,866,667 233,333 2,000,000 1,000,000 4,000,000 72,619 59,063 3,472,204 21,911,179 A A+ Unrated A+ AA- / A1+ AA / A1+ A+ / A1 AAA Govt. Guaranteed AA- / A1 AA- / A1+ AA- / A1+ AA- / A1+ AA- / A1+ Unrated Unrated AAA Not Applicable Not Applicable 5,000 250 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 45,250 5,000 250 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 1,500 10,000 5,000 71,750 552,010 33,063 552,086 554,118 552,413 572,920 552,094 555,240 549,888 559,514 5,033,346 522,879 27,649 522,993 525,205 523,345 547,367 523,095 526,568 520,173 531,422 523,381 522,016 156,898 1,046,419 524,109 7,543,519 548,724 33,554 558,926 581,093 576,709 577,140 551,871 542,336 538,295 547,056 5,055,704 AA+ AAA BAA3 BAA3 BAA3 A2 BAA1 BAA1 A+ AA2 Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable 89,110,996 96,995,615 89,549,551 142,857 A Not Applicable 50,000 Unrated Not Applicable 450,000 AA- / A1+ 2,600,000 AA / A1+ 1,078,025 A+ / A1 3,575,000 AAA 1,515,000 Govt. Guaranteed 2,800,000 AA- / A1 250,000 AA- / A1+ 2,000,000 AA- / A1+ 1,000,000 AA- / A1+ Not Applicable 72,619 Unrated 59,063 Unrated Not Applicable 225,000 AA- / A1+ 289,775 Govt. Guaranteed 16,107,339 523,819 28,083 516,073 526,413 521,811 554,288 519,007 498,522 521,821 534,828 524,169 518,359 152,293 1,050,012 524,807 7,514,305 AAA AAA BAA3 BAA3 BAA3 A2 BAA1 BAA1 A+ AA2 A2 BA1 BA1 A+ A2 100,405,765 * The Chief Executive of Fatima Energy Limited is Mr. Fazal Ahmed Sheikh. ** The Chief Executive of Sapphire Electric Company Limited is Mr. Shahid Abdullah. *** The Chief Executive of Daewoo Pakistan Express Bus Service Limited is Mr. Shaheryar Arshad Chishty. **** The Chief Executive of Pak Kuwait Takaful Company Limited is Mr. Shahnawaz Akhter. ***** These sukuk are in the process of being issued to the Bank. ANNUAL REPORT 2017 155
  140. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 Name of the security Profit rate Profit payment Face value per certificate Maturity date 10.3.1 GoP Ijarah Sukuk - GIS-16 Weighted average yield of 6 months treasury bills minus 50 basis points Semi-annually Rs 100,000 December 18, 2018 10.3.2 GoP Ijarah Sukuk - GISF-1 6.1 % p.a. Semi-annually Rs 100,000 February 15, 2019 10.3.3 GoP Ijarah Sukuk - GISF-2 5.59% p.a. Semi-annually Rs 100,000 March 29, 2019 10.3.4 GoP Ijarah Sukuk - GISF-3 5.24% p.a. Semi-annually Rs 100,000 June 30, 2020 10.3.5 Albaraka Bank Pakistan Limited I 6 months KIBOR plus 1.25% Semi-annually Rs 571,425 September 26, 2021 10.3.6 Albaraka Bank Pakistan Limited II 6 months KIBOR plus 0.75% Semi-annually Rs 1,000,000 August 22, 2024 10.3.7 Arzoo Textile Mills Limited Not applicable Semi-annually Rs 5,000 April 14, 2014 10.3.8 Dubai Islamic Bank Pakistan Limited 6 months KIBOR plus 0.5% Semi-annually Rs 1,000,000 August 14, 2027 10.3.9 Engro Fertilizers Limited II 6 months KIBOR plus 1.75% Semi-annually Rs 3,500 July 09, 2019 10.3.10 K-Electric Limited 3 months KIBOR plus 1.00% Quarterly Rs 4,750 June 17, 2022 10.3.11 Liberty Power Tech Limited 3 months KIBOR plus 3.00% Quarterly Rs 51 January 01, 2021 10.3.12 Neelum Jehlum Private Limited 6 months KIBOR plus 1.75% Semi-annually Rs 100,000 June 26, 2026 10.3.13 Pakistan International Airlines 6 months KIBOR plus 1.75% Semi-annually Rs 5,000 October 20, 2019 10.3.14 Pakistan Mobile Communications Limited 3 months KIBOR plus 0.88% Quarterly Rs 3,750 December 22, 2019 10.3.15 Sui Southern Gas Company Limited II 3 months KIBOR plus 0.70% Quarterly Rs 1,250 May 28, 2018 10.3.16 Sui Southern Gas Company Limited III 3 months KIBOR plus 0.40% Quarterly Rs 5,000 October 30, 2019 10.3.17 Sui Southern Gas Company Limited IV 6 months KIBOR plus 0.5% Semi-annually Rs 5,000 December 15, 2022 10.3.18 Sui Southern Gas Company Limited V 6 months KIBOR plus 1.10% Semi-annually Rs 10,000 April 02, 2027 10.3.19 Quetta Textile Mills Limited 3 months KIBOR plus 3.00% Quarterly Rs 2,421 March 26, 2020 10.3.20 Sitara Peroxide Limited 1 month KIBOR plus 1.00% Monthly Rs 1,969 August 19, 2016 10.3.21 WAPDA Dasu Sukuk 6 months KIBOR plus 1.45% Semi-annually Rs 10,000 May 08, 2032 10.3.22 Hong Kong Sukuk 2.005 % p.a. Semi-annually USD 1,000 September 18, 2019 10.3.23 Luxembourg Sukuk 0.44 % p.a. Annually EUR 1,000 October 07, 2019 10.3.24 Republic of Indonesia Sukuk I 3.30 % p.a. Semi-annually USD 1,000 November 21, 2022 10.3.25 Republic of Indonesia Sukuk II 4.35 % p.a. Semi-annually USD 1,000 September 10, 2024 10.3.26 Republic of Indonesia Sukuk III 4.325 % p.a. Semi-annually USD 1,000 May 28, 2025 10.3.27 Saudi Electric Company Sukuk - 10 years 4.211 % p.a. Semi-annually USD 1,000 April 03, 2022 10.3.28 Sime Darby Berhad Global Sukuk - 5 years 2.053 % p.a. Semi-annually USD 1,000 January 29, 2018 10.3.29 Sime Darby Berhad Global Sukuk - 10 years 3.29 % p.a. Semi-annually USD 1,000 January 29, 2023 10.3.30 Qatar Islamic Bank -II 2.754 % p.a. Semi-annually USD 1,000 October 27, 2020 10.3.31 State of Qatar Sukuk - 10 years 3.241 % p.a. Semi-annually USD 1,000 January 18, 2023 10.4 Held to Maturity Securities Name of the security 10.4.1 GoP Ijarah Sukuk - GISF-2 * Profit Rate 5.59% p.a. 2017 2016 Number of Certificates 280,000 280,000 2017 2016 Rupees in '000 28,000,000 28,000,000 * These Sukuk carry a fixed profit rate of 5.59% and will mature in 2019. These sukuk certificates are backed by the Government of Pakistan's sovereign guarantee. 156 MEEZAN BANK LIMITED
  141. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 10.5 Subsidiary (unlisted) Note Particulars 2017 2016 Number of Shares Al-Meezan Investment Management Limited (ordinary shares) 10.5.1 10.6 10.5.1 3,250,000 3,250,000 2017 2016 Percentage Break up of equity value per holding share Rupees in ‘000 % Rupees 63,050 63,050 65 686.23 63,050 63,050 Latest available audited financial statements June 30, 2017 Name of the chief executive Mr. Muhammad Shoaib The nominal value of these shares is Rs. 100 each. These shares are placed in custody account with the Central Depository Company of Pakistan Limited. These shares cannot be sold without the prior approval of SECP in accordance with SECP's circular No. 9 of 2006 dated June 15, 2006. Associates (listed) The Bank holds investments in units of Rs. 50 each, unless stated otherwise, in the following listed investee: Name of the investee Note 2017 2016 2017 Number of units Percentage of direct equity holding % Units of open end funds Meezan Balanced Fund Al-Meezan Mutual Fund Meezan Islamic Fund Meezan Gold Fund Meezan Cash Fund Meezan Islamic Income Fund KSE Meezan Index Fund Meezan Capital Preservation Plan II Meezan Sovereign Fund 10.6.1 10.6.2 10.6.3 10.7 10.6.1 10.6.1 18,886,746 22,232,228 12,475,050 1,000,000 10,303,266 10,155,202 2,113,224 - 18,886,746 16,850,414 12,475,050 1,000,000 2,113,224 3,964,321 21,593,102 Open end fund Open end fund Open end fund Open end fund Open end fund Open end fund Open end fund Open end fund Open end fund 2016 Cost Rupees in '000 161,345 302,366 221,050 50,000 530,000 530,000 100,000 1,894,761 161,345 170,433 221,050 50,000 100,000 200,000 999,292 1,902,120 The nominal value of open end fund units is Rs 10 each. The above associates are established in Pakistan. Investments in listed associates have a market value of Rs 2,720 million (2016: Rs 3,419 million). Provision against diminution in value of investments 2017 Associates Opening balance Charge / (reversal) for the year - on associates (unlisted) - on available for sale investments - charge for the year - reversal for the year - Others 380,712 - - 2016 Total Associates Rupees in ‘000 380,712 - Transfer - 605,434 (18,702) 586,732 - 605,434 (18,702) 586,732 - Closing balance - 967,444 967,444 10.7.1 Particulars of provision in respect of type and segment Available for sale investments Fully paid up-ordinary shares Sukuk 24,514 3,611 3,611 (28,125) - Others Total 420,871 445,385 - 3,611 33,840 (102,124) (68,284) 28,125 33,840 (102,124) (64,673) - 380,712 380,712 2017 2016 Rupees in ‘000 785,762 181,682 967,444 ANNUAL REPORT 2017 199,030 181,682 380,712 157
  142. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 Note 2017 2016 Rupees in ‘000 11 ISLAMIC FINANCING AND RELATED ASSETS In Pakistan Murabaha financing and related assets - Murabaha financing - Advances against Murabaha - Murabaha inventory - Financing under Islamic Export Refinance - Murabaha - Advance against Islamic Export Refinance - Murabaha 11.1 11.2 Running Musharakah financing - Running Musharakah financing - Financing under Islamic Export Refinance - Running Musharakah Istisna financing and related assets - Istisna financing - Istisna - advance - Istisna inventory - Financing under Islamic Export Refinance - Istisna - Advances under Islamic Export Refinance - Istisna - Financing under Islamic Export Refinance - Istisna - Inventory Tijarah financing and related assets - Tijarah financing - Tijarah inventory - Islamic Export Refinance - Tijarah - financing - Islamic Export Refinance - Tijarah - inventory Musawamah financing and related assets - Musawamah financing - Musawamah Inventory - Advances against Musawamah - Financing under Islamic Export Refinance - Musawamah - Advances under Islamic Export Refinance - Musawamah - Financing under Islamic Export Refinance - Musawamah - Inventory Ijarah financing and related assets - Net investment in Ijarah - Net book value of assets / investment in Ijarah under IFAS 2 11.3 11.4 11.5 - Advances against Ijarah Diminishing Musharakah financing and related assets - Diminishing Musharakah financing - Housing - Diminishing Musharakah financing - Others - Advances against Diminishing Musharakah Musharakah financing Wakalah Tul Istithmar financing Bai Muajjal financing Advance against Service Ijarah financing Labbaik (Qard for Hajj and Umrah) 11.6 Financing against bills - Financing against bills - Salam - Financing against bills - Murabaha - Advance Salam Financing and related assets - Salam Financing - Salam inventory - Advances against Salam 158 7,854,995 6,487,946 4,573,868 599,862 236,121 19,752,792 7,786,937 3,993,151 4,967,432 723,956 122,221 17,593,697 132,032,737 13,882,800 145,915,537 70,517,803 7,784,000 78,301,803 2,432,621 44,548,652 3,352,093 170,111 5,489,701 1,076,361 57,069,539 3,155,616 28,112,137 1,876,007 128,743 7,261,153 828,634 41,362,290 498,305 7,213,736 254,802 217,500 8,184,343 337,506 5,182,105 244,051 227,584 5,991,246 6,468,792 5,272,054 7,523,238 95,308 111,350 19,470,742 7,159,774 2,590,940 4,908,188 325,512 100,000 110,000 15,194,414 124,058 31,019,341 31,143,399 5,389,253 36,532,652 149,054 20,671,262 20,820,316 3,906,242 24,726,558 11,991,953 65,438,474 7,125,407 84,555,834 580,720 31,250,000 705,642 3,000,000 3,382 9,374,585 79,478,870 12,971,982 101,825,437 746,640 12,750,000 101,496 718,750 5,871 11,834,926 1,738 11,836,664 13,183,818 1,738 13,185,556 464,337 77,200 3,595,916 4,137,453 2,000,000 2,000,000 Staff financing Other financing Gross Islamic Financing and Related Assets 11.7 3,226,026 2,612,204 428,833,530 2,739,104 2,374,002 319,616,864 Less: Provision against non-performing financing Islamic financing and related assets - net of provision 11.10 11.8 (8,804,442) 420,029,088 (8,086,594) 311,530,270 MEEZAN BANK LIMITED
  143. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 Note 2017 2016 Rupees in ‘000 11.1 Murabaha receivable - Gross Less: Deferred income Profit receivable shown in other assets Murabaha financing 11.1.1 Murabaha Sale Price Murabaha Purchase Price 11.2 Financing under Islamic Export Refinance - Murabaha - Gross Less: Deferred income Profit receivable shown in other assets Financing under Islamic Export Refinance - Murabaha 11.3 Musawamah financing - Gross Less: Deferred income Profit receivable shown in other assets Musawamah financing 11.4 Financing under Islamic Export Refinance - Musawamah - Gross Less: Deferred income Profit receivable shown in other assets Financing under Islamic Export Refinance - Musawamah 11.1.1 8,222,190 (110,813) (256,382) 7,854,995 8,134,131 (119,342) (227,852) 7,786,937 8,222,190 (7,854,995) 367,195 8,134,131 (7,786,937) 347,194 613,210 (1,848) (11,500) 599,862 741,100 (4,616) (12,528) 723,956 6,688,479 (107,833) (111,854) 6,468,792 7,340,823 (107,675) (73,374) 7,159,774 96,526 (604) (614) 95,308 329,995 (2,973) (1,510) 325,512 11.5 Net book value of assets / investments in Ijarah under IFAS 2 is net of depreciation of Rs 16,118 million (2016: Rs 10,951 million). 2017 2016 Rupees in ‘000 11.6 Bai Muajjal financing - Gross Less: Deferred income Profit receivable shown in other assets Bai Muajjal financing 773,092 (33,689) (33,761) 705,642 133,325 (10,835) (20,994) 101,496 11.7 This includes Rs 434 million (2016 : Rs 314 million) representing profit free financing to staff advanced under the Bank's Human Resource Policies. 11.8 Particulars of financing - net 11.8.1 In - local currency - foreign currencies 11.8.2 Short-term (upto one year) Long-term (over one year) 2017 2016 Rupees in ‘000 407,711,820 12,317,268 420,029,088 288,487,503 23,042,767 311,530,270 281,562,020 138,467,068 420,029,088 173,362,097 138,168,173 311,530,270 ANNUAL REPORT 2017 159
  144. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 11.9 Islamic financing and related assets include Rs 6,606 million (2016: Rs 6,847 million) which have been placed under non-performing status as detailed below: 2017 Category of classification Domestic Overseas Total Provision required Provision held 40,636 6,068 6,380,027 6,426,731 40,636 6,068 6,380,027 6,426,731 Provision required Provision held 12 52,569 21,037 6,518,585 6,592,203 12 52,569 21,037 6,518,585 6,592,203 Rupees in ‘000 Other Assets Especially Mentioned Substandard Doubtful Loss 10,845 176,553 16,588 6,402,143 6,606,129 - 10,845 176,553 16,588 6,402,143 6,606,129 2016 Category of classification Domestic Overseas Total Rupees in ‘000 Other Assets Especially Mentioned Substandard Doubtful Loss 16,018 221,688 48,473 6,561,113 6,847,292 - 16,018 221,688 48,473 6,561,113 6,847,292 11.10 Particulars of provision against non-performing Islamic financing and related assets: 2017 Specific 2016 General Total Specific General Total Rupees in ‘000 Opening balance Charge for the year Less: Reversals Amount Written off Closing balance 6,592,203 1,494,391 8,086,594 6,840,068 1,366,772 8,206,840 116,422 (279,553) (163,131) 883,320 883,320 999,742 (279,553) 720,189 235,753 (483,618) (247,865) 127,619 127,619 363,372 (483,618) (120,246) (2,341) 6,426,731 2,377,711 (2,341) 8,804,442 6,592,203 1,494,391 8,086,594 11.10.1 The Bank maintains general reserve (provision) in accordance with the applicable requirements of the Prudential Regulations for Consumer Financing and Prudential Regulations for Small and Medium Enterprise Financing issued by the SBP. In addition, the Bank has also maintained a general provision of Rs 1,975 million (2016: Rs 1,125 million) against financing, made on prudent basis, in view of prevailing economic conditions. This general provision is in addition to the requirements of Prudential Regulations. 11.10.2 In accordance with BSD Circular No. 2 dated January 27, 2009 issued by the SBP, the Bank has availed the benefit of Forced Sales Value (FSV) of collaterals against the non-performing financing. The accumulated benefit availed as at December 31, 2017 amounts to Rs 8.3 million (2016: Rs 10.2 million). The additional profit arising from availing the FSV benefit - net of tax amounts to Rs 5.4 million as at December 31, 2017 (2016: Rs 6.6 million). The increase in profit, due to availing of the benefit, is not available for distribution of cash and stock dividend to share holders. 11.10.3 Particulars of provision against non-performing financing: 2016 2017 Specific General Total Specific Rupees in ‘000 In local currency In foreign currencies 160 MEEZAN BANK LIMITED 6,241,410 185,321 6,426,731 2,377,711 2,377,711 General Total Rupees in ‘000 8,619,121 185,321 8,804,442 6,390,778 201,425 6,592,203 1,494,391 1,494,391 7,885,169 201,425 8,086,594
  145. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 2017 Note 11.11 Particulars of write offs Against provisions Directly charged to profit and loss account 2016 Rupees in ‘000 11.10 Write offs Rs 500,000 and above Write offs below Rs 500,000 2,341 2,341 - 2,212 129 2,341 - 11.11.1 Details of financing written off of Rs 500,000 and above In term of sub-section(3) of section 33 A of the Banking Companies Ordinance, 1962, the statement in respect of written off financing or any other financial relief of five hundred thousand rupees or above allowed to any person during the year ended December 31, 2017 is given as Annexure 1. 11.12 Particulars of financing to directors, associated companies, etc. Debts due by directors, executives or officers of the Bank or any of them either severally or jointly with any other persons. Balance at the beginning of the year Disbursem*nts during the year Repayments during the year Balance at the end of the year Note 2017 11.12.1 2,851,665 1,137,325 (756,762) 3,232,228 Rupees in ‘000 2016 2,222,265 998,780 (369,380) 2,851,665 Debts due by companies or firms in which the directors of the Bank are interested as directors, partners or in the case of private companies as members. Note 2017 2016 Rupees in ‘000 Balance at the beginning of the year Additions / Disbursem*nts during the year Deletions / Repayments during the year Balance at the end of the year 2,484,365 6,613,113 (8,420,974) 676,504 11.12.2 944,387 7,562,436 (6,022,458) 2,484,365 Debts due by subsidiary companies, controlled firms, managed Modarabas and other related parties. Note 2017 Balance at the beginning of the year Additions / Disbursem*nts during the year Deletions / Repayments during the year Balance at the end of the year 11.12.3 Financing to Executives and Directors Executives 2017 Opening balance Financing disbursed during the year Financing repaid during the year Closing balance 1,831,807 Rupees in ‘000 2016 99,939 99,939 - Directors 2016 2017 Rupees in ‘000 1,501,231 - 2016 - 567,323 726,836 - - (342,340) (396,260) - - 2,056,790 1,831,807 - - ANNUAL REPORT 2017 161
  146. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 11.12.1 These include financing given by the Bank to its employees as per the terms of their employment. The maximum total amount of financing including temporary financing granted during the year was Rs 3,232 million (2016: Rs 2,852 million). The maximum amount has been calculated by reference to the month end balance. 11.12.2 This represents a Running Musharakah facility to an associated company (2016: Istisna, Diminishing Musharakah and Running Musharakah facilities to associated companies). 11.12.3 This represents a Bai Muajjal facility to the subsidiary company (2016: Nil) 12 Note 2017 Capital work-in-progress Property and equipment 12.1 12.2 Intangible assets 12.4 562,887 10,832,759 11,395,646 479,712 11,875,358 314,408 8,193,642 8,508,050 416,278 8,924,328 237,106 64,005 153,158 32,778 73,984 1,856 562,887 85,697 55,104 61,586 38,636 66,463 6,922 314,408 OPERATING FIXED ASSETS 12.1 2016 Capital work-in-progress - Advances to suppliers and contractors for civil works - Advances for computer hardware - Advances for purchase of vehicles - Advances for computer software - Advances for other office machines - Advances for furniture and fixtures 12.2 Rupees in ‘000 Property and equipment 2017 COST ACCUMULATED DEPRECIATION As at January 1, 2017 Additions / Adjustments / (Disposals) As at December 31, 2017 Leasehold Land 1,719,600 2,586,533 4,306,133 Buildings on leasehold land 1,330,757 1,363,692 370,289 Leasehold improvements 5,005,849 26,992 5,943 686,260 (2,626) (39,999) 5,649,484 1,829,972 As at January 1, 2017 Charge / Adjustments / (on Disposals) As at December 31, 2017 Net book value as at December 31, 2017 Rate of depreciation % 4,306,133 - Rupees in ‘000 Furniture and fixtures 162 - 61,572 9,751 484,616 10,626 (29,224) 441,612 922,080 5 2,295,990 3,353,494 10 10 555,923 77,048 930 (5,345) 628,556 282,754 50,703 (938) (2,839) 329,680 298,876 Electrical, office and computer equipments 4,175,135 472,566 12,203 (124,792) 4,535,112 2,728,081 650,355 12,267 (119,723) 3,270,980 1,264,132 Vehicles 1,087,524 319,822 21,164 (194,864) 1,233,646 470,050 218,645 3,869 (146,962) 545,602 688,044 13,874,788 4,169,221 37,614 (365,000) 17,716,623 5,681,146 1,465,891 35,575 (298,748) 6,883,864 10,832,759 MEEZAN BANK LIMITED 10, 20 and 33 20
  147. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 2016 Net book value as at December 31, 2016 Rate of depreciation % 1,719,600 - 370,289 960,468 5 451,931 (6,891) 1,829,972 3,175,877 10 241,372 46,796 (5,414) 282,754 273,169 10 4,175,135 2,184,096 615,018 (71,033) 2,728,081 256,638 (145,232) 1,087,524 373,646 207,223 (110,819) 470,050 617,474 2,445,636 (237,647) 13,874,788 4,488,884 1,386,419 (194,157) 5,681,146 8,193,642 COST ACCUMULATED DEPRECIATION Charge / (on Disposals) As at January 1, 2016 Additions / (Disposals) As at December 31, 2016 As at January 1, 2016 939,417 780,183 1,719,600 Buildings on leasehold land 1,308,951 21,806 1,330,757 304,838 65,451 Leasehold improvements 4,167,986 847,465 (9,602) 5,005,849 1,384,932 510,682 51,751 (6,510) 555,923 3,763,645 487,793 (76,303) 976,118 11,666,799 As at December 31, 2016 Rupees in ‘000 Leasehold land Furniture and fixtures Electrical, office and computer equipment Vehicles 12.3 - - - 1,447,054 10, 20 and 33 20 Property and equipment - Movement of net book value Leasehold Furniture Leasehold Buildings on leasehold improvements and fixtures land land Electrical, office and computer equipments Vehicles Total Rupees in ‘000 At January 1, 2016 Cost Accumulated depreciation Net book value 939,417 939,417 1,308,951 304,838 1,004,113 4,167,986 1,384,932 2,783,054 510,682 241,372 269,310 3,763,645 2,184,096 1,579,549 976,118 11,666,799 373,646 4,488,884 602,472 7,177,915 780,183 1,719,600 21,806 (65,451) 960,468 847,465 (2,711) (451,931) 3,175,877 51,751 (1,096) (46,796) 273,169 487,793 (5,270) (615,018) 1,447,054 256,638 2,445,636 (34,413) (43,490) (207,223) (1,386,419) 617,474 8,193,642 Additions Adjustments Net book value of disposals Depreciation charge 2,586,533 - 26,992 (3,808) (61,572) 686,260 (13,252) (10,775) (484,616) 77,048 1,868 (2,506) (50,703) 472,566 (64) (5,069) (650,355) 319,822 4,169,221 17,295 2,039 (47,902) (66,252) (218,645) (1,465,891) Net book value as at December 31, 2017 4,306,133 922,080 3,353,494 298,876 1,264,132 688,044 10,832,759 Year ended December 31, 2016 Additions Net book value of disposals Depreciation charge Net book value as at December 31, 2016 Year ended December 31, 2017 ANNUAL REPORT 2017 163
  148. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 12.3.1 Included in cost of operating fixed assets are fully depreciated / amortised items still in use aggregating Rs 2,867 million (2016: Rs 2,324 million). 12.3.2 Details of disposal of fixed assets are as follows: Description Cost Disposal under the Bank's staff policy Accumulated Net book depreciation value Rupees in ‘000 Sale proceeds Mode of disposal Particulars of purchaser Vehicles Honda Civic Honda Civic Honda Civic Honda Civic Honda Civic Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus 164 MEEZAN BANK LIMITED 2,418 2,071 2,067 1,985 1,930 1,748 1,726 1,706 1,692 1,691 1,673 1,673 1,608 1,608 1,608 1,607 1,581 1,568 1,546 1,497 1,671 1,510 1,507 1,506 1,506 1,505 1,502 1,495 1,411 1,411 1,411 1,402 1,391 1,359 1,359 1,359 1,357 1,357 1,347 1,263 1,018 975 975 972 959 959 959 959 959 959 958 955 939 919 919 919 1,209 2,036 2,067 1,985 1,930 1,078 1,381 1,223 1,466 1,635 1,645 1,673 1,608 1,608 1,608 1,607 1,581 1,568 1,546 1,497 1,225 654 628 1,506 1,305 1,505 1,502 1,420 1,411 1,411 1,411 1,402 1,391 1,359 1,359 1,359 1,357 1,357 1,347 1,263 730 894 959 956 959 943 943 959 959 959 958 955 939 919 919 919 1,209 35 670 345 483 226 56 28 446 856 879 201 75 288 81 16 16 16 16 - 1,631 677 620 596 579 1,036 806 894 693 537 502 502 482 482 482 482 474 470 464 449 874 1,168 1,102 452 651 452 451 529 423 423 423 421 417 408 408 408 407 407 404 379 528 341 293 291 288 288 288 288 288 288 287 286 282 276 276 276 Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Mr. Tariq Munir (Executive, Ex-Employee) Mr. Khurram Shaikh (Executive, Ex-Employee) Mr. Kamran Zafar (Executive, Employee) Mr. Mashkoor AG Khan (Executive, Employee) Mr. Mashkoor Hassan Siddiqui (Executive, Ex-Employee) Mr. Shoaib Malick (Executive, Ex-Employee) Mr. Muhammad Tufail (Executive, Employee) Mr. Muhammad Asim Ahsan (Executive, Employee) Mr. Muhammad Khushal (Executive, Ex-Employee) Mr. Alam Zeb (Executive, Ex-Employee) Ms. Naheed Ashfaq (Executive, Employee) Mr. Arif Aslam Khan (Executive, Employee) Mr. Hafeez Khaskheli (Executive, Employee) Mr. Ehmar Hamad (Executive, Employee) Mr. Babar Ali Pirzada (Executive, Employee) Mr. Muhammad Asadullah (Executive, Employee) Mr. Mian Nasir Mahmood (Executive, Employee) Mr. Adnan Masood (Executive, Employee) Mr. Kamran Mahmood (Executive, Employee) Mr. Fayyaz Hussain Madni (Executive, Ex-Employee) Mr. Muhammad Munir (Executive, Employee) Mr. Afzal Mujtaba (Executive, Ex-Employee) Mr. Muhammad Suhail (Executive, Ex-Employee) Mr. Haroon Khan (Executive, Employee) Mr. Mir Haider Khan (Executive, Ex-Employee) Mr. Waqas Ahmed Nizami (Executive, Employee) Mr. Faisal Anwar Malik (Executive, Employee) Syed Ahmar Sarosh (Executive, Ex-Employee) Mr. Shoaib Ghani Memon (Executive, Employee) Mr. Mirza Amir Iqbal (Executive, Employee) Mr. Riaz Ahmed Akbani (Executive, Employee) Mr. Jahangir Ahmed Nawabi (Executive, Employee) Mr. Asim Butt (Executive, Employee) Mr. Jaffar Ashraf (Executive, Employee) Mr. Zulfiqar Ali (Executive, Employee) Mr. Usman Ullah Cheema (Executive, Employee) Mr. Ahsan Sarfaraz (Executive, Employee) Mr. Asif Ehsan Sheikh (Executive, Employee) Mr. Ateeq Ur Rehman (Executive, Employee) Mr. Kashif Asghar Butt (Executive, Ex-Employee) Mr. Waqar Usman (Executive, Employee) Mr. Usman Sajjad (Executive, Employee) Mr. Saad Ikram (Executive, Employee) Mr. Jawad Rafique (Executive, Employee) Mr. Zia Ur Rehman (Executive, Employee) Mr. Noman Ahmed (Executive, Employee) Mr. Mirza Ayub Baig (Executive, Employee) Mr. Muhammad Waseem (Executive, Employee) Mr. Farooq Anwar (Executive, Employee) Mr. Habib Ur Rehman (Executive, Employee) Mr. Tauqeer Ahmed (Executive, Employee) Mr. Muhammad Qaiser (Executive, Employee) Late Syed Arshad Ali (Executive, Ex-Employee) Mr. Tariq Ibrar (Executive, Employee) Mr. Ghulam Shabbir (Executive, Employee) Mr. Ashfaq Ahmed (Executive, Employee)
  149. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 Description Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Swift Honda Civic (Quantity: 2) Toyota Corolla (Quantity: 1) Suzuki Cultus (Quantity: 3) Suzuki Wagon R (Quantity: 1) Cost Accumulated Net book depreciation value Rupees in ‘000 Sale proceeds Mode of disposal Particulars of purchaser Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Mr. Wazir Gul (Executive, Employee) Mr. Asif Sattar (Executive, Ex-Employee) Mr. Julabeeb ur Rehman (Executive, Employee) Mr. Haji Muhammad Afridi (Executive, Employee) Mr. Rana Muhammad Ashfaq (Executive, Employee) Mr. Hadi Usman Shah (Executive, Employee) Mr. Naveed Ur Rehman Khan (Executive, Employee) Mr. Qamar Shahzad (Executive, Employee) Mr. Anwar Mukhtar (Executive, Employee) Mr. Umer Ashfaq (Executive, Employee) Mr. Iftikhar Nasir (Executive, Employee) Mr. Javed Ahmed (Executive, Employee) Mr. Atta Ul Mustafa Jamil (Executive, Employee) Mr. Ahmed Shoeb Raza (Executive, Employee) Mr. Saleem Ahmed Abbasi (Executive, Ex-Employee) Mr. Junaid Alam (Executive, Employee) Mr. Zain ul Abideen (Executive, Employee) Mr. Zahid Hussain (Executive, Employee) Mr. Umer Farooq (Executive, Employee) Mr. Safdar Ameer Buzder (Executive, Employee) Mr. Abid Hussain (Executive, Employee) Non-executive employees Non-executive employee Non-executive employees Non-executive employee Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Mr. Arshad Majeed (Executive, Employee) Mr. Imran Asghar Khan (Executive, Employee) Mr. Muhammad Arsalan Mujeeb (Executive, Employee) Mr. Tariq Mehraj (Executive, Employee) Mr. Aasim Salim (Executive, Ex-Employee) Mr. Muhammad Munir (Executive, Employee) Mr. Muhammad Irfan (Executive, Employee) Mr. Muhammad Tariq Munir (Executive, Ex-Employee) Mr. Muhammad Asim Ahsan (Executive, Employee) Mr. Zaki Alam (Executive, Employee) Mr. Zia Ullah Khan (Executive, Employee) Mr. Atique Ahmed Siddiqui (Executive, Employee) Mr. Rashid Bilal Khan (Executive, Employee) Mr. Qamar Alam (Executive, Employee) Mr. Aneeq Ejaz Qureshi (Executive, Employee) Mr. Asad Amin (Executive, Employee) Mr. Faisal Iqbal (Executive, Employee) Mr. Humayun Mirza (Executive, Employee) Mr. Abrar Hussain (Executive, Employee) Mr. Omer Amir Ahmed (Executive, Employee) Mr. Muhammad Arif Rana (Executive, Employee) Syed Kaleem Ahmed Riaz (Executive, Employee) Mr. Faisal Saifullah (Executive, Employee) Mr. Mukarram Hasan (Executive, Employee) Mr. Sohail Akhter (Executive, Employee) Syed Fahd Azam (Executive, Employee) Mr. Umer Mansoor (Executive, Employee) Mr. Sajjad Nawaz (Executive, Employee) Mr. Aamer Rasheed Malik (Executive, Employee) Mr. Ghulam Samdani Bhatti (Executive, Employee) Mr. Arif Aslam Khan (Executive, Employee) Mr. Faisal Qamar (Executive, Employee) 919 919 919 919 899 899 899 899 879 879 879 879 879 879 878 859 843 843 798 779 959 4,724 1,688 2,816 982 107,650 919 919 919 888 899 899 899 899 879 879 879 879 879 879 878 859 843 843 798 779 959 1,731 1,125 2,395 229 96,947 31 2,993 563 421 753 10,703 276 276 276 276 270 270 270 270 264 264 264 264 264 264 263 258 253 253 239 234 288 3,473 921 1,177 924 40,380 115 93 86 71 64 60 60 60 60 60 59 54 54 54 54 54 54 53 53 53 53 53 53 53 53 53 53 53 53 53 53 53 115 93 86 71 19 60 60 59 60 60 59 54 54 54 54 54 54 53 53 53 53 53 53 53 53 53 53 53 53 53 53 53 45 1 - 11 4 9 7 48 6 5 12 5 6 6 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 6 Electrical, office and computer equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments ANNUAL REPORT 2017 165
  150. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 Description Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments (Quantity: 105) Other disposals Items having book value in aggregate more than Rs 250,000 or cost more than Rs 1,000,000 Vehicles Honda Civic Toyota Corolla Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus 166 MEEZAN BANK LIMITED Cost Accumulated Net book depreciation value Rupees in ‘000 Sale proceeds Mode of disposal Particulars of purchaser 53 53 53 53 51 51 51 50 50 50 50 49 46 44 44 44 44 44 42 40 40 40 40 39 33 33 33 33 29 24 12 11 11 11 53 53 53 53 51 51 51 50 50 50 50 38 45 44 43 44 44 44 42 40 40 40 40 39 33 33 33 33 29 24 12 11 11 11 11 1 1 - 5 5 5 5 6 6 5 5 5 5 5 5 4 4 4 4 4 4 4 4 4 4 4 3 3 3 3 3 3 2 1 1 1 1 Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Mr. Muhammad Fayyaz Ismail (Executive, Employee) Syed Tanveer Hussain (Executive, Employee) Mr. Muhammad Ali Hasan (Executive, Employee) Mr. Mohammad Sohail Khan (Executive, Employee) Syed Atif Hussain (Executive, Employee) Haji Muhammad Afridi (Executive, Employee) Mr. Khurram Masood (Executive, Employee) Syed Tariq Hassan (Executive, Employee) Mr. Shahbaz Ali (Executive, Employee) Mr. Muhammad Waseem (Executive, Employee) Mr. Mubasher Bukhari (Executive, Employee) Mr. Faizan Javed Khan (Executive, Employee) Mr. Usama Siddiqui (Executive, Ex-Employee) Mr. Naveed Ehsan Sheikh (Executive, Employee) Mr. Taha Shamim Siddiqui (Executive, Employee) Mr. Zafar Iqbal (Executive, Employee) Mr. Mehdi Abbas Nandwani (Executive, Employee) Mr. Hammad Pervez Khan (Executive, Employee) Mr. Altaf Hasan Khan (Executive, Employee) Mr. Imran Akhtar (Executive, Employee) Mr. Badar Munir (Executive, Employee) Mr. Kalb e Abbas (Executive, Employee) Mr. Asad Nouman (Executive, Employee) Mr. Rukhsar Ali (Executive, Employee) Mr. Muhammad Saleem (Executive, Employee) Syed Wajahat Ali (Executive, Employee) Syed Akbar hussain (Executive, Employee) Mr. Muhammad Faheem Tahir (Executive, Employee) Syed Mazhar Alam (Executive, Employee) Mr. Muhammad Shahzad (Executive, Employee) Mr. Ghulam Qadir (Executive, Employee) Mr. Iqbal Hussain Seyal (Executive, Employee) Mr. Muhammad Arif (Executive, Employee) Syed Akbar hussain (Executive, Employee) 2,817 6,075 2,817 6,016 59 287 642 Buyback Non-executive employees 1,323 1,753 1,648 1,643 1,636 1,562 1,545 1,540 1,522 1,507 1,505 1,502 1,498 1,075 1,052 1,052 1,052 1,044 1,044 1,042 1,042 1,323 468 385 520 1,227 937 1,082 1,206 837 628 1,354 375 1,148 520 666 561 666 574 592 799 625 1,285 1,263 1,123 409 625 463 334 685 879 151 1,127 350 555 386 491 386 470 452 243 417 1,056 1,594 1,423 1,464 1,254 1,286 1,223 1,233 968 1,321 1,157 1,328 1,140 743 792 758 756 783 788 680 825 Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Mr. Umer Sarwar Syed Riaz Ahmed Mr. Zahid Qadri Mr. Sajid Mehmood Siddiqi Mr. Waqar Ahmed Khan Mr. Waqar Ahmed Khan Mr. Mohsin Mumtaz Mr. Mohsin Mumtaz Mr. Waqar Ahmed Khan Syed Riaz Ahmed Mr. Adnan Naseer Ahmed Mr. Umer Sarwar Mr. Muhammad Ahmed Mr. Mohsin Mumtaz Mr. Sultan Hassan Mr. Naheed Arshad Butt Mr. Usman Shahid Mr. Mohsin Mumtaz M/s Suzuki North Motors Mr. Zeeshan Jamil Mr. Imtiaz Hussain
  151. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 Description Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Wagon R Suzuki Cultus (Quantity: 3) Cost Accumulated Net book depreciation value Rupees in ‘000 Sale proceeds Mode of disposal Particulars of purchaser 1,032 1,032 1,032 1,032 1,032 1,032 1,029 1,027 1,027 1,027 1,027 1,027 1,027 1,025 1,025 1,025 1,024 1,018 1,018 1,018 1,017 1,017 1,017 1,017 1,017 1,017 1,017 1,017 1,017 1,017 1,017 1,014 1,014 1,012 1,012 1,012 1,005 1,001 1,001 1,001 999 999 999 1,032 3,110 76,521 619 585 516 482 619 516 583 616 496 445 445 513 633 427 461 598 529 645 696 763 356 356 305 441 288 305 458 390 305 237 356 253 270 236 489 354 854 684 834 734 699 250 666 722 1,087 39,609 413 447 516 550 413 516 446 411 531 582 582 514 394 598 564 427 495 373 322 255 661 661 712 576 729 712 559 627 712 780 661 761 744 776 523 658 151 317 167 267 300 749 333 310 2,023 36,912 803 832 778 756 735 791 801 789 852 756 831 793 836 883 813 856 843 752 808 671 880 902 870 876 871 786 835 860 880 878 783 855 898 883 850 870 653 744 754 749 734 933 744 793 2,916 61,348 Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Takaful Claim Mr. Sultan Hassan Mr. Waqar Ahmed Khan Mr. Adnan Naseer Mr. Shahbaz Munawar Mr. Kashif Chema Mr. Khalil Ur Rehman Mr. Noman Hasan Khan Mr. Waqar Ahmed Khan Mr. Waqar Ahmed Khan Mr. Ibrar Hussain Mr. Ibrar Hussain Mr. Asif Raza Malik Mr. Naghman Nawaz Mr. Noman Hasan Khan Mr. Mohsin Mumtaz Mr. Naghman Nawaz Mr. Imtiaz Hussain Mr. Mohammad Ummar Mr. Waqar Ahmed Khan Mr. Naheed Arshad Butt Mr. Waqar Ahmed Khan Mr. Numeri Abrar Mr. Khurram Imtiaz Mr. Sultan Hassan M/s Suzuki North Motors Mr. Adnan Naseer Syed Yasir Hussain Shah Ms. Anwar Sultana Mr. Waqar Ahmed Khan M/s Suzuki North Motors Ms. Komal Amir Mr. Zeeshan Jamil Mr. Waqar Ahmed Khan Mr. Noman Hasan Khan Mr. Qaiser Iqbal Mr. Nasir Zahoor Mr. Zulfiqar Ali Mr. Noman Hasan Khan Mr. Nasir Iqbal Rana Mr. Farooq Taj Mr. Noman Hasan Khan Mr. Mohsin Mumtaz Mr. Noman Hasan Khan Mr. Ghulam Mustafa M/s EFU General Insurance Limited 4,396 1,075 4,396 358 717 1,142 708 Negotiation Takaful Claim M/s Nadeem Metal Works M/s Adamjee Insurance Company Limited 640 6,111 192 4,946 448 1,165 421 2,271 Takaful Claim M/s Adamjee Insurance Company Limited 10,136 1,800 11,936 1,206 1,800 3,006 8,930 8,930 6,670 6,670 Takaful Claim Discarded M/s Adamjee Insurance Company Limited 10,693 10,406 287 7,411 112,606 5,345 28,063 365,000 108,761 2,839 26,218 298,748 3,845 2,506 1,845 66,252 17,322 2,895 241 139,180 Electrical, office and computer equipments Generators (Quantity: 3) Generator Automated teller machine Leasehold improvements Civil works Civil works Items having book value in aggregate less than Rs 250,000 or cost less than Rs 1,000,000 Vehicles Electrical, office and computer equipments Furniture and Fixtures Leasehold improvements ANNUAL REPORT 2017 167
  152. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 12.4 Intangible assets Net book Rate of COST ACCUMULATED AMORTISATION value amortiCharge / As at Additions / As at As at As at as at sation January 1, adjustments / December 31, January 1, adjustments / December 31, December 31, 2017 (disposals) 2017 2017 (on disposals) 2017 2017 % Rupees in ‘000 Computer software 1,108,443 235,629 34,812 1,368,316 692,165 (10,568) 2016 12.5 979,036 129,407 170,156 36,851 888,604 479,712 10-20 692,165 416,278 10-20 (10,568) 1,108,443 525,768 166,397 Intangible assets - Movement of net book value Year ended December 31, 2016 Net book value as at January 1, 2016 Additons during the year Amortisation charge for the year Year ended December 31, 2017 Net book value as at December 31, 2016 Additions Amortisation charge for the during year the year Adjustments during the year Net book value as at December 31, 2017 Rupees in ‘000 Computer software 453,268 129,407 166,397 416,278 235,629 170,156 Note Provision against other assets 479,712 2017 2016 Rupees in ‘000 13 OTHER ASSETS Profit / return accrued in local currency Profit / return accrued in foreign currencies Advances, deposits, advance rent and other prepayments Dividends receivable Stamps Security deposits Unrealised gain on forward foreign exchange contracts - net Non-Banking assets acquired in satisfaction of claims Other (2,039) 13.1 13.2 13.3 10,686,348 35,639 1,563,448 21,836 10,815 101,510 1,063,795 246,201 206,488 13,936,080 (60,783) 13,875,297 7,891,922 117,863 1,137,423 9,736 8,335 100,123 264,383 284,255 264,391 10,078,431 (95,594) 9,982,837 13.1 This includes prepaid rent and prepaid takaful aggregating Rs 473 million (2016: Rs 453 million) and Rs 679 million (2016: Rs 455 million) respectively which are being amortised over a period of one year. 13.2 168 Market value of the non-banking asset acquired in satisfaction of claims is Rs 224.118 million (2016: Rs 221.877 million). Provision amounting to Rs 22.1 million in respect of non-banking assets is included in provision against other assets. MEEZAN BANK LIMITED
  153. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 13.3 Provision against other assets Note 2017 2016 Rupees in ‘000 Opening balance Charge for the year Reversals during the year Amount adjusted / written off Closing balance 95,594 25,166 (48,726) (11,251) 60,783 180,856 15,383 (99,426) (1,219) 95,594 14 BILLS PAYABLE In Pakistan Outside Pakistan 11,168,093 11,168,093 9,130,998 9,130,998 36,813,295 36,813,295 32,005,501 32,005,501 36,813,295 36,813,295 32,005,501 32,005,501 15 DUE TO FINANCIAL INSTITUTIONS In Pakistan Outside Pakistan 15.1 Particulars of due to financial institutions with respect to currencies In local currency In foreign currencies 15.2 Details of due to financial institutions secured / unsecured 15.3 Secured Musharakah from the State Bank of Pakistan under Islamic Export Refinance Scheme Other financial institution 15.2.1 15.2.2 21,141,464 329,008 16,841,788 168,506 Unsecured Overdrawn nostro accounts Other Musharakah / Modarabas 15.2.3 492,823 14,850,000 36,813,295 295,207 14,700,000 32,005,501 15.2.1 These Musharakah are on a profit and loss sharing basis maturing between January 03, 2018 to June 27, 2018 (2016: January 03, 2017 to June 27, 2017) and are secured against demand promissory notes executed in favor of SBP. A limit of Rs 25,700 million (December 31, 2016: Rs 19,200 million) has been allocated to the Bank by SBP under Islamic Export Refinance Scheme. 15.2.2 These Musharakah are on profit and loss sharing basis. A limit of USD 10 million has been allocated to the Meezan Bank Limited under the agreement with Karandaaz. 15.2.3 These Musharakah / Modarabas are on profit and loss sharing basis. The expected average return on these Musharakah / Modarabas is around 5.95% (2016: 5.71%) per annum. These balances are maturing latest by January 08, 2018 (2016: January 19, 2017). Particulars of due to financial institutions Short - term Long - term 2017 2016 Rupees in ‘000 36,484,287 329,008 36,813,295 31,836,995 168,506 32,005,501 ANNUAL REPORT 2017 169
  154. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 2017 2016 Rupees in ‘000 16 DEPOSITS AND OTHER ACCOUNTS Customers - Fixed deposits - Savings deposits - Current accounts - non-remunerative - Margin 167,981,117 258,421,153 236,032,293 5,513,350 667,947,913 141,796,085 220,228,372 195,597,883 2,118,269 559,740,609 4,870,558 369,336 5,239,894 673,187,807 3,331,027 952,217 4,283,244 564,023,853 410,860,146 224,691,236 635,551,382 347,393,435 187,682,783 535,076,218 24,802,602 12,833,823 37,636,425 673,187,807 20,045,839 8,901,796 28,947,635 564,023,853 Financial institutions - Remunerative deposits - Non-remunerative deposits 16.1 Particulars of deposits In - local currency Modaraba based deposits Qard based deposits - foreign currencies Modaraba based deposits Qard based deposits 17 SUB-ORDINATED SUKUK In 2016, the Bank issued regulatory Shariah compliant unsecured, subordinated privately placed Tier II Sukuk based on Modaraba of Rs 7,000 million as instrument of redeemable capital under section 66 of the Companies Act, 2017 (section 120 of the repealed Companies Ordinance, 1984). The brief description of sukuk is as follows: 170 Credit Rating AA- (Double A minus) by JCR-VIS Credit Rating Company Limited. Tenor 10 years from the issue date. Profit payment frequency Semi-annually in arrears. Redemption Bullet payment at the end of the tenth year. Expected Periodic Profit Amount (Modaraba Profit Amount) The Modaraba Profit is computed under General Pool on the basis of profit sharing ratio and monthly weightages announced by the Bank under the SBP guidelines of pool management. Last announced profit rate on the Sukuk is 6.68% per annum. Call Option The Bank may call Tier II Sukuk with prior approval of SBP on or after five years from the date of issue. Loss Absorbency The Tier II Sukuk, at the option of the SBP, will be fully and permanently converted into common shares upon the occurrence of a point of non-viability trigger event as determined by SBP or for any other reason as may be directed by SBP. Lock-in-Clause Profit and/or redemption amount can be held back in respect of the Tier II Sukuk, if such payment will result in a shortfall in the Issuer’s minimum capital or capital adequacy ratio requirement. MEEZAN BANK LIMITED
  155. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 18 DEFERRED TAX LIABILITIES Note 2016 Rupees in ‘000 Taxable temporary differences on: Excess of accounting book values over tax written down values of owned assets Surplus on revaluation of available for sale investments 498,700 397,910 Deductible temporary differences on: Provision for diminution in value of investments Income not accrued due to non-culmination of financing Provision against non-banking assets acquired in satisfaction of claims and other assets 19 2017 631,906 1,251,679 (302,905) (495,668) (97,319) (332,824) (89,855) 8,182 (90,533) 1,362,909 OTHER LIABILITIES Return on deposits and other dues - payable in local currency - payable in foreign currencies Unearned income Accrued expenses Current taxation (provision less payments) Unclaimed dividends Payable to defined benefit plan Provision against off-balance sheet obligations Security deposits against Ijarah Charity payable Payable on account of credit murabaha Advance against future Diminishing Musharakah Witholding taxes payable Workers Welfare Fund payable Others 19.1 19.2 34.2 & 34.15 19.3 19.4 19.5 2,268,390 42,913 22,146 2,440,405 1,733,294 6,761 715,883 68,651 9,211,429 139 11,566 55,320 114,410 924,911 828,208 18,444,426 2,023,164 29,709 23,605 2,512,594 1,196,305 6,294 370,283 55,169 6,078,190 1,509 117,092 121,773 130,997 683,534 420,000 13,770,218 19.1 This includes Rs 84 million (2016: Rs 56 million) in respect of return accrued on borrowings from SBP under the Islamic Export Refinance Scheme. 19.2 This includes Rs 3.1 million (2016: Rs 46.1 million) in respect of payable to Al Meezan Investment Management Limited (Subsidiary). 19.3 Provision against off-balance sheet obligations Note Opening balance Charge for the year Closing balance 19.4 2017 Rupees in ‘000 2016 55,169 13,482 68,651 55,169 55,169 1,509 31,439 4,903 28,198 (32,809) 139 (31,592) 1,509 Reconciliation of charity payable Balance as at January 1 Additions during the year Less: Transferred to charity savings account (included in deposits and other accounts) Balance as at December 31 19.4.1 ANNUAL REPORT 2017 171
  156. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 19.4.1 Charity paid through saving account during the year is Rs 31.1 million (2016: Rs 37.8 million). Charity in excess of Rs 100,000 was paid to the following organizations: 2017 2016 Rupees in ‘000 Ihsan Trust - Related Party Lahore Businessmen Association for Rehabilitation of the Disabled Patients' Behbud Society for Aga Khan University Hospital Fatimid Foundation Peshawar Centre Family Educational Services Foundation Sargodhian Spirit Trust Binoria Welfare Trust Care Foundation Creek General Hospital, Karachi Health Education and Livelihood Promoter Muhammad Shafi Trust Muslim Welfare Centre Pakistan Disabled Foundation Pakistan Association of Deaf SINA Health, Education & Welfare Trust Eye Donor Organization Nigheban Trust Burns Centre, Civil Hospital, Karachi Infaq Memorial Trust Karigar Training Institute Mercy Pak National Institute of Cardiovascular Disease Noor-e-Ali Trust Pakistan Association of Blind SOS Children Village Karachi Afzal Memorial Thelesimia Foundation Akhuwat Foundation Al Mustafa Trust Rawalpindi Centre For Development of Social Services Child Aid Association Disabled Welfare Association Fatimid Foundation Kidney Centre & General Hospital Garage School Hands Institute of Business Administration - National Talent Hunt Program Idara - Al Khair Jamal Noor Hospital Jinnah Foundation Kiran Foundation Karachi Education Initiative Medical Aid Foundation (Rahat Kada) Muhammadi Blood Bank Pakistan Eye Bank Patients Aid Foundation - Jinnah Hospital Preventation of Blindness Trust Rashid Memorial Walfare Organization Saylani Welfare Shafi Trust Society for Heart Care The Indus Hospital The Kidney Center Welfare Society for Patient Care 25,000 1,000 1,000 500 350 300 200 200 200 200 200 200 200 200 200 150 150 100 100 100 100 100 100 100 100 31,050 19.4.2 The balance in Charity's saving account is Rs 2.059 million (2016: Rs 0.128 million). 19.4.3 Charity was not paid to any organization in which a director or his spouse had any interest at any time during the year. 172 MEEZAN BANK LIMITED 17,000 500 100 200 200 100 250 200 100 150 200 100 100 150 300 100 12,770 500 100 100 500 1,297 200 100 100 200 200 500 100 100 1,000 100 100 100 37,817
  157. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 19.5 20 The Bank has made full provision for Workers Welfare Fund based on profit for the respective years (2008-2017). Last year, the Supreme Court of Pakistan vide its order dated November 10, 2016 has held that the amendments made in the law introduced by the Federal Government for the levy of Workers Welfare Fund were not lawful. The Federal Board of Revenue has filed review petitions against this order which are currently pending. Legal advice obtained on the matter indicates that consequent to filing of these review petitions the judgment may not currently be treated as conclusive. Accordingly, the Bank continues to maintain the provision in respect of WWF. SHARE CAPITAL 20.1 Authorised capital 2017 2017 2016 (Number of Shares) 2,000,000,000 2,000,000,000 Ordinary shares of Rs 10 each Rupees in ‘000 2016 20,000,000 20,000,000 5,165,179 5,463,843 10,629,022 4,563,536 5,463,843 10,027,379 Issued, subscribed and paid-up capital 2017 2016 (Number of Shares) 516,517,908 546,384,260 1,062,902,168 21 456,353,635 546,384,260 1,002,737,895 Ordinary shares Fully paid in cash Issued as bonus shares 20.2 The Board, in its meeting held on July 26, 2017, approved the issuance of 60,164,273 Right shares to existing shareholders in the ratio of 6 ordinary shares for every 100 existing ordinary shares held by them at issue price of Rs 50 per share including premium of Rs 40 per share. The right issue was successfully completed and Right shares were issued to shareholders in October 2017. 20.3 Shareholding held by associated companies as at December 31, 2017 are as follows: Name of shareholders Number of shares held Noor Financial Investment Company - Kuwait Pakistan Kuwait Investment Company (Private) Limited Islamic Development Bank - Saudi Arabia Meezan Islamic Fund Meezan Dedicated Equity Fund Meezan Balanced Fund Meezan Asset Allocation Fund 522,033,439 318,870,646 99,104,338 2,840,077 510,000 79,819 6,410 RESERVES Share Premium Statutory reserve Non Distributable Capital Reserve - Gain on Bargain Purchase General reserve 21.1 Note Percentage of shareholding 49.11% 30.00% 9.32% 0.27% 0.14% 0.01% 0.00% 2017 2016 Rupees in ‘000 20.2 21.1 2,406,571 7,777,925 3,117,547 66,766 13,368,809 6,515,372 3,117,547 66,766 9,699,685 Under section 21 of the Banking Companies Ordinance, 1962, an amount not less than 20% of the profit is to be transferred each year to a reserve fund till such time the reserve fund and the share premium account equal the amount of the paid up capital. 2017 22 SURPLUS ON REVALUATION OF INVESTMENTS Quoted shares / units of mutual fund Other securities Less: Deferred tax liability 2016 Rupees in ‘000 858,330 278,553 1,136,883 (397,910) 738,973 2,016,102 1,560,122 3,576,224 (1,251,679) 2,324,545 ANNUAL REPORT 2017 173
  158. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 23 2017 CONTINGENCIES AND COMMITMENTS 23.1 Direct credit substitutes Guarantees favoring - Banks 23.2 209,015 12,306,548 653,233 3,583,442 16,543,223 10,925,552 244,589 4,066,533 15,236,674 66,003,500 7,144,255 73,147,755 51,612,802 4,323,808 55,936,610 Trade related contingent liabilities Import letters of credit Acceptances 23.4 369,446 Transaction related contingent liabilities Guarantees favoring - Government - Banks - Others 23.3 2016 Rupees in ‘000 Other contingencies The Income Tax Department has amended the deemed assessment orders of the Bank for prior years including the tax year 2017. The additions / disallowances were mainly due to allocation of expenses relating to dividends and capital gain, allowability of provision against loans and advances, provision against investments and provision against other assets. In the amended order for tax year 2015, additional issues with respect to the taxability of gain on bargain purchase and non-adjustment of loss pertaining to HSBC Bank Middle East – Pakistan Branches have also been raised. The Bank has obtained stay order from the High Court of Sindh against the demands raised through the amended order for the tax year 2015. Both the Bank and the department have filed appeals with the Appellate Authorities in respect of the aforementioned matters. The management of the Bank, in consultation with its tax advisors, is confident that the decision in respect of the above matters would be in Bank’s favour and accordingly no provision has been made in these financial statements with respect thereto. The additional tax liability in respect of gain on bargain purchase and non-adjustment of loss pertaining to HSBC Bank Middle East – Pakistan Branches is Rs 1,096 million and Rs 706 million respectively. Note 23.5 2017 2016 Rupees in ‘000 Commitments in respect of forward exchange contracts Purchases 75,272,094 72,008,025 Sales 49,286,572 69,766,108 202,293 129,320 139,288,755 123,675,880 23.6 Commitments for the acquisition of operating fixed assets 23.7 Commitments in respect of financing 23.7.1 23.7.1 The Bank makes commitments to extend credit (including to related parties) in the normal course of business but these being revocable commitment do not attract any significant penalty or expense if the liability is unilaterally withdrawn. 2017 23.8 Other commitments Bills for collection (inland) Bills for collection (foreign) 174 MEEZAN BANK LIMITED 2016 Rupees in ‘000 125,354 144,063 38,774,344 30,342,514 38,899,698 30,486,577
  159. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 24 PROFIT / RETURN EARNED ON ISLAMIC FINANCING AND RELATED ASSETS, INVESTMENTS AND PLACEMENTS On financing to - Customers Note 24.1 On deposits with financial institutions 25 Deposits and other accounts Other Musharakahs / Modarabas / Murabaha 26 Note 14,930,665 4,413,411 1,565,200 8,260,849 5,547 1,192,125 8,612,593 36,087,203 6,372,190 30,761,376 2017 2016 Rupees in ‘000 25.1 13,387,027 1,885,765 15,272,792 11,869,056 1,003,788 12,872,844 This includes Rs 316 million (2016: Rs 263 million) paid / payable to SBP under Islamic Export Refinance Scheme. CAPITAL GAIN ON SALE OF INVESTMENTS - NET Note 2017 2016 Rupees in ‘000 Shares / units of mutual funds - listed Sukuks 27 21,495,999 This includes income on Ijarah under IFAS 2 which is net off takaful expense of Rs 914 million (2016: Rs 668 million) recovered from customers. PROFIT ON DEPOSITS AND OTHER DUES EXPENSED 25.1 2016 Rupees in ‘000 On investments in - Available for sale securities - Held for trading securities - Held to maturity securities 24.1 2017 527,890 297,036 870,445 7,235 824,926 877,680 144,206 108,327 19,767 13,857 72,928 50,600 OTHER INCOME Gain on termination of Ijarah financing Gain on termination of diminishing musharakah financing Gain on sale of operating fixed assets Others 27.1 27.1 32,693 35,433 269,594 208,217 This includes recoveries against loans written off by HSBC ME prior to its acquisition by the Bank amounting Rs 23.553 million (2016: Rs 33.409 million) ANNUAL REPORT 2017 175
  160. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 28 Note ADMINISTRATIVE EXPENSES Salaries, allowances and other employee benefits Charge for defined benefit plan Contribution to defined contribution plan Non - executive directors' fees Rent, electricity, taxes, insurance, etc. Depreciation Amortisation Communication Stationery and printing Repairs and maintenance Security charges including cash transportation charges Local transportation and car running Fees, subscription and clearing charges Entertainment Office supplies Hardware and software maintenance Advertisem*nt and publicity Travelling Brokerage, commission and bank charges Legal and professional charges Auditors' remuneration Donation Others 2017 2016 Rupees in ‘000 28.1 & 28.4 34.4 & 34.15 35 36 12.2 12.4 28.2 28.3 28.5 28.6 7,913,573 279,078 238,741 42,843 2,561,994 1,465,891 170,156 448,229 396,355 536,124 789,696 317,998 367,359 57,555 195,881 259,807 215,016 87,291 182,272 26,694 9,889 17,535 16,579,977 6,865,601 268,150 207,975 39,081 2,394,311 1,386,419 166,397 421,308 312,274 493,332 652,632 243,998 305,628 48,651 171,816 241,901 199,182 83,468 123,496 14,053 11,923 200 28,495 14,680,291 28.1 This includes remuneration to Shariah Advisor amounting to Rs 11.5 million (2016: Rs 10.7 million) 28.2 This includes portfolio management fee to Al-Meezan Investment Management Limited (related party) amounting to Rs 18.2 million (2016: Rs 57 million). 28.3 This includes remuneration to Shariah Board amounting to Rs 0.8 million (2016: Rs 0.6 million). 28.4 The Bank has performance bonus policy for all employees including the President & Chief Executive Officer and Deputy Chief Executive Officer. The aggregate amount determined for eligible employees in respect of the bonus relating to all Executives and for the President & CEO and Deputy CEO of the Bank amounted to Rs 665 million (2016: Rs 570.67 million), Rs 83.14 million (2016: Rs 78.44 million) and Rs 55.40 million (2016: Rs 52.27 million). 28.5 Auditors’ remuneration 2017 2016 Rupees in ‘000 Audit fee Fee for interim review Special certifications and sundry advisory services Tax services Sindh sales tax on services Out of pocket expenses 28.6 3,600 1,000 2,940 2,420 9,960 788 1,175 11,923 Donation National Medical Centre (Private) Limited None of the directors / CEO or their spouses had any interest in the donee. 176 3,600 690 3,751 8,041 643 1,205 9,889 MEEZAN BANK LIMITED - 200
  161. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 2017 29 OTHER CHARGES Penalties imposed by the State Bank of Pakistan 30 2016 Rupees in ‘000 10,824 3,600 4,096,185 344,016 4,440,201 2,996,908 240,647 3,237,555 (500,958) 3,939,243 143,670 3,381,225 TAXATION Current - for the year - for prior years Deferred - for the year During the current year, the Finance Act 2017 extended the application of super tax brought into effect through the Finance Act 2015 for rehabilitation of temporary displaced persons. Accordingly, the Bank has recognised prior year tax charge of Rs 344.016 million in the current year which is determined at the applicable tax rate of 4 percent on taxable income for the tax year 2017 (i.e year ended December 31, 2016). Note 2017 2016 Rupees in ‘000 30.1 Relationship between tax expense and accounting profit Profit before taxation Effects of: -Tax calculated at the applicable rate of 35% - Prior years charge - Items not deductible for tax purposes - Others Tax charge for the year 31 10,252,010 8,942,836 3,588,204 344,016 5,326 1,697 3,939,243 3,129,993 240,647 (11,739) 22,324 3,381,225 6,312,767 5,561,611 BASIC AND DILUTED EARNINGS PER SHARE Profit for the year Number Weighted average number of ordinary shares 1,029,187,450 1,021,328,339 Rupees Basic earnings per share 31.1 31.1 6.13 5.45 There were no convertible dilutive potential ordinary shares outstanding on December 31, 2017 and 2016. Note 32 Restated Cash and balances with treasury banks Balances with other banks 2017 2016 Rupees in ‘000 CASH AND CASH EQUIVALENTS 7 8 64,556,170 4,895,816 69,451,986 56,036,849 12,021,351 68,058,200 ANNUAL REPORT 2017 177
  162. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 2017 33 STAFF STRENGTH Permanent Contractual basis Bank's own staff strength at the end of the year Outsourced Total Staff Strength at the end of the year 34 2016 Number of Staff 6,895 1,257 8,152 1,399 9,551 6,416 1,408 7,824 1,344 9,168 DEFINED BENEFIT PLAN 34.1 General Description of gratuity scheme The activities of the gratuity scheme are governed by Meezan Bank Limited Staff Gratuity Fund established in 2000 under the provisions of a trust deed. Plan assets held in trust are governed by the Trust Deed as is the nature of the relationship between the Bank and the trustees and their composition. Responsibility for governance of the plan including the investment decisions lies with the Trustees. The Board of Trustees comprise of representatives of the Bank and scheme participants in accordance with the Fund's trust deed. 34.2 The amount recognised in the Statement of Financial Position (in respect of the gratuity scheme) is determined as follows: 2017 Present value of defined benefit obligations Fair value of plan assets 34.3 1,297,029 (855,904) 441,125 968,320 (844,964) 123,356 Plan assets (in respect of the gratuity scheme) consist of the following: 2017 Rupees in '000 Meezan Aamdan Certificates Al Meezan Mutual Fund Meezan Asset Allocation Plan Fatima Fertilizer Company Limited - Sukuk Savings account with Meezan Bank Limited 178 2016 Rupees in ‘000 MEEZAN BANK LIMITED 606,937 63,882 164,157 11,772 9,156 855,904 % 71% 8% 19% 1% 1% 100% 2016 Rupees in '000 533,224 250,178 60,000 1,562 844,964 % 63% 30% 7% 0% 100%
  163. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 34.4 The movement in the defined benefit obligation (in respect of the gratuity scheme) over the year is as follows: 2017 Present value of obligation Fair value of plan assets Total Rupees in ‘000 At January 1 968,320 Current service cost 237,847 Return expense / (income) (844,964) - 123,356 237,847 83,547 (77,996) 5,551 1,289,714 (922,960) 366,754 110,363 110,363 Remeasurements: - Return on plan assets, excluding amounts included in return expense / (income) - - (Gain) / loss from change in demographic assumptions - - - - (Gain) / loss from change in financial assumptions - - - - Experience losses / (gains) Contribution Benefit payments At December 31 87,364 - 87,364 87,364 110,363 197,727 1,377,078 (812,597) 564,481 (123,356) (123,356) (80,049) 80,049 1,297,029 (855,904) 441,125 2016 Present value of obligation Fair value of plan assets Total Rupees in ‘000 At January 1 817,468 Current service cost 224,443 Return expense / (income) (590,988) - 226,480 224,443 77,139 (68,315) 8,824 1,119,050 (659,303) 459,747 (1,340) (1,340) Remeasurements: - Return on plan assets, excluding amounts included in return expense / (income) - - (Gain) / loss from change in demographic assumptions - - - - (Gain) / loss from change in financial assumptions - - - - Experience losses / (gains) Contribution (58,571) - (58,571) (58,571) (1,340) (59,911) 1,060,479 (660,643) 399,836 (276,480) (276,480) - Benefit payments (92,159) 92,159 At December 31 968,320 (844,964) 123,356 ANNUAL REPORT 2017 179
  164. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 34.5 Charge for defined benefit plan (in respect of the gratuity scheme) 2017 Current service cost Net return cost 237,847 5,551 243,398 2016 Rupees in ‘000 224,443 8,824 233,267 Total expense recognized in Profit and Loss Account amounted to Rs 279.078 million (2016: Rs 268.150 million) of which Rs 243.398 million (2016: Rs 233.267 million) pertains to approved Gratuity funded Scheme and Rs 35.680 million (2016: Rs 34.883 million) pertains to End of Service unfunded Defined Benefit scheme. Total expense recognized in Other Comprehensive Income amounted to Rs 189.878 million (2016: credit / reversal of Rs 59.832 million) of which Rs 197.727 million (2016: credit / reversal of Rs 59.911 million) pertains to approved defined Benefit Gratuity Scheme and credit / reversal of Rs 7.849 million (2016: charge of Rs 0.079 million) pertains to End of Service unfunded Defined Benefit scheme. 34.6 The plan assets and defined benefit obligations (in respect of the gratuity scheme) are based in Pakistan. 34.7 Principal actuarial assumptions (in respect of the gratuity scheme) 2017 Discount rate Expected rate of increase in salaries Expected rate of return on investments Normal retirement age 34.8 34.9 2016 9.50% p.a 9.50% p.a 9.50% p.a 60 years 9.00% p.a 9.00% p.a 9.00% p.a 60 years Assumptions regarding future mortality are set based on actuarial advice in accordance with published statistics and experience in Pakistan. The rates assumed are based on the adjusted SLIC 2001 - 2005 mortality tables with one year age set back. The sensitivity of the defined benefit obligation (in respect of the gratuity scheme) to changes in the weighted principal assumptions are: Impact on defined benefit obligation - Increase / (Decrease) Change in assumption Discount rate Salary growth rate Increase in Decrease in assumption assumption Rupees in ‘000 1.0% (140,491) 168,203 1.0% 173,133 (146,889) Increase by 10% in assumption Life expectancy / Withdrawal rate Decrease by 10% in assumption (129,703) 129,703 Methodology followed for calculating sensitivities The above sensitivity analysis are based on a change in an assumption while holding all other assumptions constant. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the gratuity liability recognised within the Statement of Financial Position. 34.10 The weighted average duration of the defined benefit obligation is 11.75 years. 34.11 Expected maturity analysis of undiscounted defined benefit obligation for the gratuity scheme is as follows: At December 31, 2017 Less than a year Between 1-2 years Between 2-5 years Over 5 years Total 5,330,012 5,712,525 Rupees in ‘000 Gratuity 180 MEEZAN BANK LIMITED 120,675 60,846 200,992
  165. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 34.12 Historical information (in respect of the gratuity scheme) 2017 2016 2015 2014 2013 Rupees in ‘000 Defined benefit obligation Fair value of plan assets Deficit 1,297,029 968,320 817,468 574,550 410,819 (855,904) 441,125 (844,964) 123,356 (590,988) 226,480 (451,069) 123,481 (332,294) 78,525 (87,364) 58,571 (39,732) (35,521) (32,941) (110,363) 1,340 (789) 2,475 (25,763) Remeasurements of plan liabilities Remeasurements of plan assets 34.13 Funding levels are monitored on an annual basis and are based on actuarial recommendations. Contribution for the next year works out to Rs 274.647 million as per the actuarial valuation report of the Bank as of December 31, 2017. 34.14 34.15 Through its defined benefit gratuity scheme, the Fund is exposed to a number of risks, the most significant of which are detailed below: Asset volatility The plan liabilities are calculated using a discount rate set with reference to corporate bond yields; if plan assets underperform to the yield, this will create a deficit. The Fund believes that due to long-term nature of the plan liabilities and the strength of the Bank's support, the current investment strategy manages this risk adequately. Changes in Sukuk (bond) yields A decrease in corporate Sukuk yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans' sukuk holdings. Inflation risk The majority of the plans' benefit obligations are linked to inflation, and higher inflation will lead to higher liabilities. However, plan assets are variable rate instruments and are re-priced at regular intervals to off set inflationary impacts Life expectancy / Withdrawal rate The majority of the plans' obligations are to provide benefits on severance with the Bank on achieving retirement. Any change in life expectancy / withdrawal rate would impact plan liabilities. End of Service Unfunded Defined Benefit The Bank also operates an End of Service unfunded defined benefit for the founding President and Chief Executive Officer. The charge in respect of current service cost is recognised based on expected period of future service. The charge for the year of this benefit amounted to Rs 27.831 million out of which Rs 35.680 million has been recognized in the Profit and Loss Account and the credit / reversal of Rs 7.849 million in Other Comprehensive Income. The present value of defined benefit obligation recognised in respect of this benefit amounts to Rs 274.758 million The principal actuarial assumptions comprise of discount rate of 9.5 percent and salary increase rate of 9.5 percent. The retirement age used by the actuary is 63 years. The sensitivity of the defined benefit obligation due to a one percent change in discount rate would be Rs 5.573 million (in case the discount rate is increased) and Rs 5.749 million (in case the discount rate is decreased). The sensitivity of the defined benefit obligation due to change in life expectancy / withdrawal rates would be lower by Rs 0.275 million (in case of ten percent increase in assumption) and higher by Rs 0.275 million (in case of ten percent decrease in assumption). These sensitivities are calculated using the same methodology as explained in note 34.9. 34.16 The disclosure made in notes 34.1 to 34.15 are based on the information included in the actuarial valuation report of the Bank as of December 31, 2017. ANNUAL REPORT 2017 181
  166. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 35 DEFINED CONTRIBUTION PLAN The Bank also operates a recognized contributory provident fund for all permanent employees. Equal monthly contributions are made, both by the Bank and the employees, to the fund at a rate of 10% of basic salary. 2017 2016 Rupees in ‘000 Contribution from the Bank Contribution from the employees 36 238,741 238,741 477,482 207,975 207,975 415,950 COMPENSATION OF DIRECTORS AND EXECUTIVES President and Chief Executive Fees* Managerial remuneration Charge for gratuity scheme Contribution to defined contribution plan House rent Utilities Medical Conveyance Others Number of persons 2017 2016 42,717 16,476 3,661 7,758 1,706 1,536 73,854 1 40,298 15,544 3,454 3,854 1,412 1,349 65,911 1 Executives Directors 2017 2016 Rupees in ‘000 42,843 28,463 2,033 2,440 10,978 2,440 2,751 1,088 1,508 94,544 11 39,081 26,852 1,918 2,302 10,357 2,302 2,459 880 1,210 87,361 12 2017 1,613,496 93,198 114,958 552,252 122,728 122,728 2,619,360 1,220 2016 1,368,230 79,386 96,071 481,040 106,904 106,904 2,238,535 1,054 * This includes amounts charged in these financial statements as fees to ten (2016: eleven) non-executive directors. 37 36.1 Executives mean employees, other than Chief Executive Officer and Directors, whose basic salary exceeds five hundred thousand rupees in a financial year. 36.2 The Chief Executive Officer, the Deputy Chief Executive Officer (the Executive Director) and certain executives have been provided with free use of the Bank's cars. 36.3 In addition to the above, all Executives, including the President & Chief Executive Officer and Deputy Chief Executive Officer of the Bank are also entitled to bonus which is disclosed in note 28.4 to these financial statements. Further, End of Service unfunded defined Benefit for the founding President and Chief Executive Officer was approved during 2015 and the related expense is disclosed in note 34.15 to these financial statements. FAIR VALUE OF FINANCIAL INSTRUMENTS 37.1 The fair value of investments in listed securities, except investments categorised as ‘held to maturity’, investments in subsidiaries and associates is based on quoted market prices. The value of unquoted equity investments is reduced, if required, on the basis of break-up value of those investments based on the latest available audited financial statements. Fair value of Islamic financing and related assets, other assets, other liabilities and fixed term deposits and other accounts cannot be calculated with sufficient reliability due to absence of current and active market for such assets and liabilities and reliable data regarding market rates for similar instruments. The provision for impairment of Islamic financing and related assets has been calculated in accordance with the Bank’s accounting policy as stated in note 6.3.2. In the opinion of the management, the fair value of the remaining financial assets and liabilities are not significantly different from their carrying values since these assets and liabilities are short term in nature or in the case of financing and deposits are frequently repriced. 182 MEEZAN BANK LIMITED
  167. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 37.2 Off-balance sheet financial instruments 2017 Book value 2016 Fair value Book value Fair value Rupees in ‘000 37.3 Forward purchase of foreign exchange - net 72,953,918 75,547,124 73,222,495 72,555,307 Forward sale of foreign exchange - net 47,965,438 49,494,849 71,184,529 70,252,958 The table below analyses financial and non-financial assets carried at fair value, by valuation method. The different levels have been defined as follows: - Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1). - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2). - Inputs for the assets or liabilities that are not based on observable market data (i.e. unobservable inputs e.g. estimated future cash flows) (Level 3). 2017 Recurring Fair Value Measurements Level 1 Investments - Net Financial Assets Available for sale securities Ordinary shares - listed Units of open end fund GoP Sukuk PIA Sukuk Global Sukuk Bonds 4,526,079 50,939 5,055,704 - Forward purchase of foreign exchange contracts Forward sale of foreign exchange contracts Level 2 Rupees in ‘000 Level 3 Total 57,151,526 1,500,000 - - 4,526,079 50,939 57,151,526 1,500,000 5,055,704 75,547,124 49,494,849 - 75,547,124 49,494,849 2016 Recurring Fair Value Measurements Level 1 Investments - Net Financial Assets Available for sale securities Ordinary shares - listed Units of open end fund GoP Sukuk WAPDA Sukuk PIA Sukuk Global Sukuk Bonds 5,368,665 51,150 7,514,305 Forward purchase of foreign exchange contracts Forward sale of foreign exchange contracts - Level 2 Rupees in ‘000 Level 3 Total 70,510,182 289,775 1,515,000 - - 5,368,665 51,150 70,510,182 289,775 1,515,000 7,514,305 72,555,307 70,252,958 - 72,555,307 70,252,958 Investment in associates (listed - mutual funds) have market value of Rs 2,720 million which is being valued under level 2. These are carried at cost in the financial statements in accordance with the Bank's accounting policy. The Bank's policy is to recognise transfers into and out of the different fair value hierarchy levels at the date the event or change in circ*mstances that caused the transfer occurred. There were no transfers between levels 1 and 2 during the year. ANNUAL REPORT 2017 183
  168. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 (a) Financial instruments in level 1 Financial instruments included in level 1 comprise of investments in listed ordinary shares, units of open end mutual fund and global sukuk bonds classified as available for sale. (b) Financial instruments in level 2 Financial instruments included in level 2 comprise of GoP ijarah sukuk and PIA sukuk classified as available for sale. (c) Financial instruments in level 3 Currently, no financial instruments are classified in level 3. Valuation techniques used in determination of fair values within level 2 Valuation approach and input used Item 37.4 GoP Sukuk and PIA Sukuk The fair value of GoP Ijarah Sukuk and PIA Sukuk quoted are derived using PKISRV rates. The PKISRV rates are announced by FMA (Financial Market Association) through Reuters. The rates announced are simple average of quotes received from eight different pre-defined/ approved dealers / brokers. Forward foreign exchange contracts The valuation has been determined by interpolating the mid rates announced by State Bank of Pakistan. Non-banking assets acquired in satisfaction of claims have been carried at revalued amounts determined by professional valuers (level 3 measurement) based on their assessment of the market values as disclosed in note 13. The valuations are conducted by the valuation experts appointed by the Bank which are also on the panel of State Bank of Pakistan. The valuation experts used a market based approach to arrive at the fair value of the Bank’s properties. The market approach used prices and other relevant information generated by market transactions involving identical or comparable or similar properties. These values are adjusted to reflect the current condition of the properties. The effect of changes in the unobservable inputs used in the valuations cannot be determined with certainty, accordingly a qualitative disclosure of sensitivity has not been presented in these financial statements. Carrying Value 37.5 Financial assets not measured at fair value 2017 2016 Rupees in ‘000 Cash and balances with treasury banks Balances with other banks Due from financial institutions - net Investments - net Islamic financing and related assets - net Other assets - net 38 64,556,170 4,895,816 147,229,221 50,953,998 420,029,088 12,115,616 56,036,849 12,021,351 129,115,165 44,907,220 311,530,270 8,648,418 SEGMENT DETAILS WITH RESPECT TO BUSINESS ACTIVITIES The segment analysis with respect to business activity is as follows: 2017 Total income Total expenses Net income Segment Assets Segment Non Performing Assets Segment Provision held* Segment Liabilities Segment Return on Assets (ROA) (%) Segment Cost of funds (%) * Includes general provisions 184 MEEZAN BANK LIMITED Corporate finance Trading and sales 1,719,764 (1,420,428) 299,336 22,003,813 181,682 181,682 876,882 1.57% 2.45% 16,791,958 (14,678,214) 2,113,744 323,855,589 785,762 785,762 19,664,580 0.66% 2.45% Retail Commercial banking banking Rupees in ‘000 9,289,155 (7,382,983) 1,906,172 112,844,698 1,611,389 2,058,498 698,318,648 2.07% 2.45% 15,849,469 (13,864,737) 1,984,732 322,995,096 5,284,946 6,793,679 27,761,693 0.69% 2.45% Agency services 13,513 (4,730) 8,783 - Total 43,663,859 (37,351,092) 6,312,767 781,699,196 7,863,779 9,819,621 746,621,803 -
  169. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 Total income Total expenses Net income Segment Assets Segment Non Performing Assets Segment Provision Held* Segment Liabilities Segment Return on Assets (ROA) (%) Segment Cost of funds (%) Corporate finance Trading and sales Retail banking 1,234,543 (1,013,800) 220,743 16,080,705 181,682 181,682 787,348 1.45% 2.53% 17,987,936 (15,593,999) 2,393,937 319,481,447 768,307 199,030 5,616,271 0.78% 2.53% 6,668,393 (5,290,037) 1,378,356 84,269,176 1,795,188 1,937,795 584,164,963 2.13% 2.53% 2016 Commercial banking Agency services Rupees in ‘000 10,510,331 (8,953,126) 1,557,205 237,935,769 5,353,463 6,242,627 36,724,897 0.75% 2.53% Total 17,492 (6,122) 11,370 - 36,418,695 (30,857,084) 5,561,611 657,767,097 8,098,640 8,561,134 627,293,479 - * Includes general provisions 39 RELATED PARTY TRANSACTIONS 39.1 Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions and includes a subsidiary company, associated companies, retirement benefit funds, directors and key management personnel and their close family members. 39.2 Banking transactions with related parties are entered in the normal course of business. 39.3 Subsidiary company - Al Meezan Investment Management Limited 39.4 Key management personnel - President and Chief Executive Officer - Deputy Chief Executive Officer 39.5 Details of transactions with related parties and balances with them as at the year-end are as follows: Total 2017 Subsidiary 2016 2017 Associates 2016 2017 Key Management Personnel / Directors 2016 2017 2016 Other Related Parties 2017 2016 Rupees in ‘000 Islamic financing and related assets At January 1, Addition during the year Deletion during the year At December 31 2,484,365 944,387 6,713,052 7,562,436 (8,420,974) (6,022,458) 776,443 2,484,365 99,939 99,939 - 2,484,365 6,613,113 (8,420,974) 676,504 944,387 7,562,436 (6,022,458) 2,484,365 - - - - - - Investments - At December 31 1,957,811 3,022,967 63,050 63,050 1,894,761 2,959,917 Deposit At December 31 4,389,308 3,678,711 7,497 24,001 1,248,619 1,300,974 429,167 402,039 2,704,025 - 1,951,697 Balances pertaining to parties that were related at the beginning of the year but ceased to be related during any part of the current year are not reflected as part of the closing balance. However, new related parties have been added during the year. The same are accounted for through the movement presented above. ANNUAL REPORT 2017 185
  170. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 Total 2017 Subsidiary 2016 2017 Key Management Personnel / Directors Associates 2016 2017 2016 2017 2016 Other Related Parties 2017 2016 Rupees in ‘000 Balances Profit receivable on financing / investments Dividend receivable Fee Receivable Payable to defined benefit plan Accrued Expenses Advance against future Diminishing Musharakah Letters of credit (unfunded) Letters of Guarantee (unfunded) 11,044 24,907 715,883 3,135 26,418 4,286 27,984 370,282 46,129 816 23,407 3,135 19,989 46,129 10,228 1,500 - 26,418 4,286 7,995 - 52,994 29,851 938,923 100 1,201,101 100 100 29,851 - 52,994 938,923 1,201,001 - - 73,290 816 - 152,697 73,290 - - 153,847 440,940 576,879 183,688 1,243 695,500 - 32,964 212,612 1,243,264 145,245 29,875 173,140 576,879 183,688 Transactions, income and expenses Profit earned on financing / investments 153,513 Return on deposits / borrowing expensed 181,765 Dividend income earned 908,112 Investments made 1,243,264 Capital gain - net 145,245 Charge for diminution in value of investments Charge for defined benefit gratuity scheme 441,125 Contribution to defined contribution plan 238,741 Contribution to staff benevolent fund 20,000 Fees expensed 18,165 Fees and other income earned 269,517 Charity Paid 25,000 Remuneration to key management personnel: - Salaries and benefits (excluding end of service benefit) (notes 36 & 28.4) 264,095 - End of service benefit charge for the founder president (note 34.15) 27,831 Fees to non-executive directors (note 36) 42,843 39.6 9,814 173,356 207,975 19,347 57,032 222,351 17,000 18,165 115,366 - 1,055 267,800 57,032 85,983 - 154,151 - 11,301 - 441,125 - 123,356 - - - - 5,863 - - 136,257 - 117,054 - 9,814 - - - 441,125 173,356 136,368 - - - 238,741 20,000 25,000 207,975 19,347 17,000 244,901 - - - - 264,095 244,901 - - 34,962 39,081 - - - - 27,831 42,843 34,962 39,081 - - Associates - Key Information Assets Liabilities 2017* Mutual Funds Rupees in ‘000 78,887,742 2016** 77,872,108 2,339,469 1,738,990 Operating revenue (9,182,459) 18,217,977 (Loss) / Profit after tax (8,715,059) 17,501,144 * Information is based on reviewed financial information as at December 31, 2017. ** Information is based on reviewed financial information as at December 31, 2016. 186 274,758 246,926 - MEEZAN BANK LIMITED
  171. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 40 CAPITAL ASSESSMENT AND ADEQUACY BASEL SPECIFIC The State Bank of Pakistan (SBP) has introduced new guidelines with respect to disclosure of capital adequacy related information in the financial statements of banks vide its communication dated November 5, 2014. These guidelines are based on the requirements of Basel III which were introduced earlier by the SBP in August 2013 for implementation by banks in Pakistan. The SBP has specified a transitional period till 2018 for implementation of Basel III. The disclosures below have been prepared on the basis of these new guidelines. The comparative information is as per requirements which were applicable last year. 40.1 Capital structure Under Basel III framework, the Bank's regulatory capital has been analysed into two tiers as follows: - Tier 1 capital (going concern capital) which is sub divided into: a) Common Equity Tier 1 (CET1), which includes fully paid up capital, balance in share premium account, reserve for bonus issue, general reserves and un-appropriated profits (net of losses), etc after regulatory deductions for investments in the equity of subsidiary companies engaged in banking and financial activities reciprocal crossholdings and deficit on revaluation of available for sale investments and deduction for book value of intangibles. b) Additional Tier 1 capital (AT1), which includes instruments issued by the Bank which meet the specified criteria after regulatory deduction for investments in the equity of subsidiary companies engaged in banking and financial activities and other specified deductions. Presently the Bank does not have any AT1 capital. - Tier II capital, which includes sub-ordinated sukuk, general provisions for loan losses (upto a maximum of 1.25% of credit risk weighted assets), reserves on revaluation of fixed assets and available for sale investments after deduction of deficit on available for sale investments (upto a maximum of 89%). Banking operations are categorised in either the trading book or the banking book and risk weighted assets are determined according to the specified requirements that seek to reflect the varying levels of risk attached to assets and off balance sheet exposures. The required capital adequacy ratio is achieved by the Bank through: (a) (b) (c) (d) 40.2 Adequate level of paid up capital; Adequate risk profile of asset mix; Ensuring better recovery management; and Maintaining acceptable profit margins. Capital adequacy ratio The main objective of the capital management is to improve the financial position and strengthen the statement of financial position of the Bank to support the growth in business, provide protection to depositors and enhance shareholders' value. The Bank’s Board and the management is committed to maintaining a sound balance between depositors' liability and shareholders' funds so that optimal capital / debt ratio is maintained. The optimal capital / debt ratio will provide reasonable assurance to depositor's about safety and security of their funds and at the same time provide impetus to the management to invest their depositors’ funds into profitable ventures without compromising the risk profile of the Bank. The capital requirement of the Bank has been determined based on the projected growth plan to be achieved in the next 3 to 5 years in all areas of business operations. Further, it also takes into account a road map for capital enhancement as directed by the State Bank of Pakistan vide its various circulars issued from time to time. ANNUAL REPORT 2017 187
  172. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 The Bank prepares Annual Budget and Three Year Plan for purpose of the growth map and future direction. Bottom up approach is used to prepare annual budget and detailed deliberations are held while preparing Three Year Plan. The growth prospects takes into consideration prevailing economic and political factors in Pakistan and abroad. In implementing current capital requirements the State Bank of Pakistan requires banks to maintain minimum Capital Adequacy Ratio (CAR) of 11.275% as of December 31, 2017 whereas CAR stood at 12.89% at the year ended December 31, 2017. The Bank calculates capital adequacy ratio for credit risk, market risk and operational risk based upon requirements under Basel Accord as per guidelines issued by the State Bank of Pakistan from time to time in this regard. Sensitivity and stress testing of the Bank under different risk factors namely yield rate, forced sale value of collateral, non-performing financing and foreign exchange rate depicts that the Bank’s capital adequacy ratio is above the regulatory requirements. The Bank has taken into account credit risk, market risk and operational risk when planning its assets. 40.3 Capital Adequacy Ratio (CAR) disclosure Particulars Common Equity Tier 1 capital (CET1): Instruments and reserves Fully paid-up capital / capital deposited with the SBP Balance in share premium account Reserve for issue of bonus shares Discount on issue of shares General / Statutory Reserves Gain / (Losses) on derivatives held as Cash Flow Hedge Unappropriated profits Minority Interests arising from CET1 capital instruments issued to third party by consolidated bank subsidiaries (amount allowed in CET1 capital of the consolidation group) CET 1 before Regulatory Adjustments Total regulatory adjustments applied to CET1 (Note 40.3.1) Common Equity Tier 1 2016** Rupees in ‘000 10,629,022 2,406,571 10,962,238 10,340,589 10,027,379 9,699,685 8,422,009 34,338,420 (714,720) 33,623,700 28,149,073 (612,993) 27,536,080 Additional Tier 1 (AT 1) Capital Qualifying Additional Tier-1 capital instruments plus any related share premium of which: - classified as equity - classified as liabilities - - Additional Tier-1 capital instruments issued by consolidated subsidiaries and held by third parties - of which: instrument issued by subsidiaries subject to phase out - - AT1 before regulatory adjustments Total of Regulatory Adjustment applied to AT1 capital (Note 40.3.2) Additional Tier 1 capital after regulatory adjustments Tier 1 Capital (CET1 + admissible AT1) Tier 2 Capital Qualifying Tier 2 capital instruments under Basel III plus any related share premium Capital instruments subject to phase out arrangement issued Tier 2 capital instruments issued to third parties by consolidated subsidiaries - of which: instruments issued by subsidiaries subject to phase out General Provisions or general reserves for loan losses-up to maximum of 1.25% of Credit Risk Weighted Assets Revaluation Reserves (net of taxes) of which: - Revaluation reserves on fixed assets - Unrealized gains / losses on AFS Foreign Exchange Translation Reserves Undisclosed / Other Reserves (if any) T2 before regulatory adjustments Total regulatory adjustment applied to T2 capital (Note 40.3.3) Tier 2 capital (T2) after regulatory adjustments Tier 2 capital recognized for capital adequacy Portion of Additional Tier 1 capital recognized in Tier 2 capital Total Tier 2 capital admissible for capital adequacy TOTAL CAPITAL (T1 + admissible T2) Total Risk Weighted Assets (RWA) {for details refer Note 40.6} ** As reported in last year annual financial statements. 188 2017 MEEZAN BANK LIMITED (6,305) (12,610) 33,623,700 27,536,080 7,000,000 - 7,000,000 - 2,377,711 657,686 1,494,391 1,813,146 657,686 10,035,397 (56,305) 9,979,092 9,979,092 9,979,092 43,602,792 1,813,146 10,307,537 (62,610) 10,244,927 10,244,927 10,244,927 37,781,007 338,290,684 292,717,139
  173. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 2017 Particulars Capital Ratios and buffers (in percentage of risk weighted assets) CET1 to total RWA Tier-1 capital to total RWA Total capital to total RWA Bank specific buffer requirement (minimum CET1 requirement plus capital conservation buffer plus any other buffer requirement) of which: - capital conservation buffer requirement - countercyclical buffer requirement - D-SIB or G-SIB buffer requirement CET1 available to meet buffers (as a percentage of risk weighted assets) National minimum capital requirements prescribed by SBP CET1 minimum ratio Tier 1 minimum ratio Total capital minimum ratio CCB (Consisting of CET 1 only) Total Capital plus CCB 2016** 9.94% 9.94% 12.89% 9.41% 9.41% 12.91% 7.275% 1.275% 3.94% 6.65% 0.65% 3.41% 6.00% 7.50% 10.00% 1.275% 11.275% 6.00% 7.50% 10.00% 0.65% 10.65% ** As reported in last year annual financial statements. 2017 Particulars Amount Pre-Basel III treatment* Amount Pre-Basel III treatment* Rupees in ‘000 40.3.1 Common Equity Tier 1 capital: Regulatory adjustments Goodwill (net of related deferred tax liability) All other intangibles (net of any associated deferred tax liability) Shortfall of provisions against classified assets Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability) Defined-benefit pension fund net assets Reciprocal cross holdings in CET1 capital instruments Cash flow hedge reserve Investment in own shares / CET1 instruments Securitization gain on sale Capital shortfall of regulated subsidiaries Deficit on account of revaluation from bank's holdings of property / AFS Investments in the capital instruments of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold) Significant investments in the common stocks of banking, financial and insurance entities that are outside the scope of regulatory consolidation (amount above 10% threshold) Deferred Tax Assets arising from temporary differences (amount above 10% threshold, net of related tax liability) Amount exceeding 15% threshold of which: - significant investments in the common stocks of financial entities - deferred tax assets arising from temporary differences National specific regulatory adjustments applied to CET1 capital Investment in TFCs of other banks exceeding the prescribed limit Any other deduction specified by SBP Regulatory adjustment applied to CET1 due to insufficient AT1 and Tier 2 to cover deductions Total regulatory adjustments applied to CET1 2016** 512,490 - - 454,914 - - 195,925 - - 145,469 - - - - - - - - - - - - - - - - - - 6,305 714,720 31,525 31,525 12,610 612,993 31,525 31,525 40.3.2 Additional Tier 1 Capital: regulatory adjustments Investment in mutual funds exceeding the prescribed limit (SBP specific adjustment) Investment in own AT1 capital instruments Reciprocal cross holdings in Additional Tier 1 capital instruments - - - - * This column highlights items that are still subject to Pre Basel III treatment during the transitional period. ** As reported in last year annual financial statements. ANNUAL REPORT 2017 189
  174. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 2017 Particulars Amount 2016** Pre-Basel III treatment* Pre-Basel III treatment* Amount Rupees in ‘000 Investments in the capital instruments of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold) Significant investments in the capital instruments issued by banking, financial and insurance entities that are outside the scope of regulatory consolidation Portion of deduction applied 50:50 to core capital and supplementary capital based on pre-Basel III treatment which, during transitional period, remain subject to deduction from tier-1 capital Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover deductions Total of Regulatory Adjustment applied to AT1 capital - - - - - - - - 6,305 - 12,610 - 6,305 - 12,610 - 40.3.3 Tier 2 Capital: regulatory adjustments Portion of deduction applied 50:50 to core capital and supplementary capital based on pre-Basel III treatment which, during transitional period, remain subject to deduction from tier-2 capital Reciprocal cross holdings in Tier 2 instruments Investment in own Tier 2 capital instrument Investments in the capital instruments of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold) Significant investments in the capital instruments issued by banking, financial and insurance entities that are outside the scope of regulatory consolidation Amount of Regulatory Adjustment applied to T2 capital 6,305 50,000 - - 56,305 31,525 - 12,610 50,000 - - - 31,525 - 62,610 2017 40.3.4 Risk Weighted Assets subject to Pre-Basel III treatment Risk weighted assets in respect of deduction items (which during the transitional period will be risk weighted subject to Pre-Basel III Treatment) of which: deferred tax assets of which: Defined-benefit pension fund net assets of which: Recognized portion of investment in capital of banking, financial and insurance entities where holding is less than 10% of the issued common share capital of the entity of which: Recognized portion of investment in capital of banking, financial and insurance entities where holding is more than 10% of the issued common share capital of the entity 31,525 - 31,525 Rupees in ‘000 2016** - - - - 126,100 94,575 50,440 - 37,830 - Amounts below the thresholds for deduction (before risk weighting) Non-significant investments in the capital of other financial entities Significant investments in the common stock of financial entities Deferred tax assets arising from temporary differences (net of related tax liability) * This column highlights items that are still subject to Pre Basel III treatment during the transitional period. ** As reported in last year annual financial statements. 190 MEEZAN BANK LIMITED
  175. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 2017 Rupees in ‘000 Applicable caps on the inclusion of provisions in Tier 2 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to standardized approach (prior to application of cap) Cap on inclusion of provisions in Tier 2 under standardized approach Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internal ratings-based approach (prior to application of cap) Cap for inclusion of provisions in Tier 2 under internal ratings-based approach 2016** 2,377,711 3,520,851 1,494,391 3,007,957 - - 40.3.5 Leverage ratio According to Basel III instructions issued by the State Bank of Pakistan (BPRD circular no. 06 dated August 15, 2013), it is mandatory for all the banks to calculate and report the Leverage Ratio on a quarterly basis with the minimum benchmark of 3%. The reason for calculating leverage ratio is to avoid excessive On- and Off-balance sheet leverage in the banking system. A simple, transparent and non-risk based Ratio has been introduced with the following objectives: - Constrain the build-up of leverage in the banking sector which can damage the broader financial system and the economy; and - Reinforce the risk based requirements with an easy to understand and a non-risk based measure. 2017 Particulars 1 2 3 4 5 6 2016** Rupees in ‘000 On balance sheet exposures On-balance sheet items (excluding unrealised gain on forward contracts) Forward exchange commitments with positive fair values Total On balance sheet exposures 750,158,757 1,252,104 751,410,861 657,767,097 1,439,734 659,206,831 Off balance sheet exposures Off-balance sheet items Commitment in respect of forward exchange contracts Total Off balance sheet exposures 121,092,111 1,160,040 122,252,151 87,601,838 1,376,300 88,978,138 Capital and total exposures Tier 1 capital (Note 40.3) Total exposures 33,623,700 873,663,012 27,536,080 748,184,969 3.85% 3.68% Basel III leverage ratio The current year's leverage ratio is 3.85% (2016: 3.68%) whereas total tier 1 capital and total exposures are Rs 33,623.700 million (2016: Rs 27,536.080 million) and Rs 873,663.012 million (2016: Rs 748,184.969 million) respectively. ** As reported in last year annual financial statements. ANNUAL REPORT 2017 191
  176. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 40.4 Capital Structure Reconciliation 40.4.1 Reconciliation of each financial statement line item to item under regulatory scope of reporting - Step 1 Balance sheet as in published financial statements Particulars Under regulatory scope of reporting Rupees in ‘000 Assets Cash and balances with treasury banks Balances with other banks Due from financial institutions Investments Islamic financing and related assets Operating fixed assets Deferred tax assets Other assets Total assets 64,556,170 4,895,816 147,229,221 119,238,246 420,029,088 11,875,358 13,875,297 781,699,196 64,556,170 4,895,816 147,229,221 119,238,246 420,029,088 11,875,358 13,875,297 781,699,196 Bills payable Due to financial institutions Deposits and other accounts Sub-ordinated Sukuk Deferred tax liabilities Other liabilities Total liabilities 11,168,093 36,813,295 673,187,807 7,000,000 8,182 18,444,426 746,621,803 11,168,093 36,813,295 673,187,807 7,000,000 8,182 18,444,426 746,621,803 Share capital Reserves Unappropriated profit Minority Interest Surplus on revaluation of investments - net of tax Total liabilities and equity 10,629,022 13,368,809 10,340,589 738,973 781,699,196 10,629,022 13,368,809 10,340,589 738,973 781,699,196 Liabilities and Equity 40.4.2 Reconciliation of balance sheet to eligible regulatory capital - Step 2 Particulars Reference Under regulatory scope of reporting Rupees in ‘000 Assets 192 Balance sheet as in published financial statements Cash and balances with treasury banks Balances with other banks Due from financial institutions 64,556,170 4,895,816 147,229,221 64,556,170 4,895,816 147,229,221 Investments of which: - non-significant capital investments in capital of other financial institutions exceeding 10% threshold 119,238,246 119,238,246 MEEZAN BANK LIMITED a - -
  177. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 Particulars Reference - significant capital investments in financial sector entities exceeding regulatory threshold - mutual Funds exceeding regulatory threshold - reciprocal crossholding of capital instrument - others Islamic financing and related assets - shortfall in provisions / excess of total EL amount over eligible provisions under IRB - general provisions reflected in Tier 2 capital Operating fixed assets - of which: Intangibles Deferred tax assets of which: - DTAs that rely on future profitability excluding those arising from temporary differences - DTAs arising from temporary differences exceeding regulatory threshold Other assets of which: - goodwill - defined-benefit pension fund net assets Balance sheet as in published financial statements Under regulatory scope of reporting Rupees in ‘000 b c d e 195,925 420,029,088 195,925 420,029,088 f g 2,377,711 11,875,358 512,490 2,377,711 11,875,358 512,490 k h i j l - - - - 13,875,297 - 13,875,297 - Total assets 781,699,196 781,699,196 Liabilities and Equity Bills payable Due to financial institutions Deposits and other accounts Sub-ordinated Sukuk of which: - eligible for inclusion in AT1 - eligible for inclusion in Tier 2 Deferred tax liabilities of which: - DTLs related to goodwill - DTLs related to intangible assets - DTLs related to defined pension fund net assets - other deferred tax liabilities Other liabilities 11,168,093 36,813,295 673,187,807 7,000,000 7,000,000 8,182 8,182 18,444,426 11,168,093 36,813,295 673,187,807 7,000,000 7,000,000 8,182 8,182 18,444,426 746,621,803 746,621,803 10,629,022 10,629,022 13,368,809 2,406,571 7,777,925 3,117,547 66,766 10,340,589 10,629,022 10,629,022 13,368,809 2,406,571 7,777,925 3,117,547 66,766 10,340,589 738,973 738,973 - 738,973 738,973 - 781,699,196 781,699,196 m n o p q r Total liabilities Share capital - of which: amount eligible for CET1 - of which: amount eligible for AT1 Reserves of which: - portion eligible for inclusion in CET1 - Share premium - portion eligible for inclusion in CET1 - Statutory reserve - portion eligible for inclusion in CET1 - Gain on Bargain Purchase - portion eligible for inclusion in CET1 - General reserve - portion eligible for inclusion in Tier 2 General reserve Unappropriated profit Minority Interest of which: - portion eligible for inclusion in CET1 - portion eligible for inclusion in AT1 - portion eligible for inclusion in Tier 2 Surplus on revaluation of assets of which: - Revaluation reserves on Property - Unrealized Gains / Losses on AFS - In case of Deficit on revaluation (deduction from CET1) Total liabilities and Equity s t u v w x y z aa ab ANNUAL REPORT 2017 193
  178. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 40.4.3 Basel III Disclosure (with added column) - Step 3 Particulars Source based on reference number from step 2 Component of regulatory capital reported by the bank Rupees in ‘000 Common Equity Tier 1 capital (CET1): Instruments and reserves 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 194 Fully Paid-up Capital Balance in share premium account Reserve for issue of bonus shares General / Statutory Reserves Gain / (Losses) on derivatives held as Cash Flow Hedge Unappropriated / unremitted profits Minority Interests arising from CET1 capital instruments issued to third party by consolidated bank subsidiaries (amount allowed in CET1 capital of the consolidation group) CET 1 before Regulatory Adjustments Common Equity Tier 1 capital: Regulatory adjustments Goodwill (net of related deferred tax liability) All other intangibles (net of any associated deferred tax liability) Shortfall of provisions against classified assets Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability) Defined-benefit pension fund net assets Reciprocal cross holdings in CET1 capital instruments Cash flow hedge reserve Investment in own shares / CET1 instruments Securitization gain on sale Capital shortfall of regulated subsidiaries Deficit on account of revaluation from bank's holdings of property / AFS Investments in the capital instruments of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold) Significant investments in the capital instruments issued by banking, financial and insurance entities that are outside the scope of regulatory consolidation (amount above 10% threshold) Deferred Tax Assets arising from temporary differences (amount above 10% threshold, net of related tax liability) Amount exceeding 15% threshold of which: - significant investments in the common stocks of financial entities - deferred tax assets arising from temporary differences National specific regulatory adjustments applied to CET1 capital Investment in TFCs of other banks exceeding the prescribed limit Any other deduction specified by SBP (mention details) Regulatory adjustment applied to CET1 due to insufficient AT1 and Tier 2 to cover deductions Total regulatory adjustments applied to CET1 Common Equity Tier 1 Additional Tier 1 (AT 1) Capital Qualifying Additional Tier-1 instruments plus any related share premium of which: - Classified as equity - Classified as liabilities Additional Tier-1 capital instruments issued by consolidated subsidiaries and held by third parties of which: instrument issued by subsidiaries subject to phase out AT1 before regulatory adjustments MEEZAN BANK LIMITED (s) (u) (u) (w) (x) 10,629,022 2,406,571 10,962,238 10,340,589 34,338,420 (j) - (s) (k) - (p) (f) 512,490 - (h) - (r) * x% (l) - (q) * x% (d) 195,925 - (ab) (a) - (ac) - (ae) - (b) - (ad) - (af) - (i) 6,305 714,720 33,623,700 (t) (m) - (y) -
  179. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 Particulars Source based on reference number from step 2 Component of regulatory capital reported by the bank Rupees in ‘000 35 36 37 38 39 40 41 42 43 44 Additional Tier 1 Capital: regulatory adjustments Investment in mutual funds exceeding the prescribed limit (SBP specific adjustment) Investment in own AT1 capital instruments Reciprocal cross holdings in Additional Tier 1 capital instruments Investments in the capital instruments of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold) Significant investments in the capital instruments issued by banking, financial and insurance entities that are outside the scope of regulatory consolidation Portion of deduction applied 50:50 to core capital and supplementary capital based on pre-Basel III treatment which, during transitional period, remain subject to deduction from tier-1 capital Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover deductions Total of Regulatory Adjustment applied to AT1 capital Additional Tier 1 capital Additional Tier 1 capital recognised for capital adequacy - (ac) - (ad) - - Tier 1 Capital (CET1 + admissible AT1) Tier 2 Capital 45 Qualifying Tier 2 capital instruments under Basel III 46 Capital instruments subject to phase out arrangement from Tier 2 47 Tier 2 capital instruments issued to third party by consolidated subsidiaries of which: instruments issued by subsidiaries subject to phase out 48 General Provisions or general reserves for loan losses-up to maximum of 1.25% of Credit Risk Weighted Assets 49 Revaluation Reserves eligible for Tier 2 of which: 50 - portion pertaining to Property 51 - portion pertaining to AFS securities 52 Foreign Exchange Translation Reserves 53 Undisclosed / Other Reserves (if any) 54 T2 before regulatory adjustments 33,623,700 (n) (n) 7,000,000 - (z) - (g) 2,377,711 89% of (aa) (v) 657,686 657,686 10,035,397 Tier 2 Capital: regulatory adjustments 55 Portion of deduction applied 50:50 to core capital and supplementary capital based on pre-Basel III treatment which, during transitional period, remain subject to deduction from tier-2 capital 56 Reciprocal cross holdings in Tier 2 instruments 57 Investment in own Tier 2 capital instrument 58 Investments in the capital instruments of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold) 59 Significant investments in the capital instruments issued by banking, financial and insurance entities that are outside the scope of regulatory consolidation 60 Amount of Regulatory Adjustment applied to T2 capital 61 Tier 2 capital (T2) 62 Tier 2 capital recognised for capital adequacy 63 Excess Additional Tier 1 capital recognised in Tier 2 capital 64 Total Tier 2 capital admissible for capital adequacy TOTAL CAPITAL (T1 + admissible T2) 6,305 50,000 - (ae) - (af) 56,305 9,979,092 9,979,092 9,979,092 43,602,792 ANNUAL REPORT 2017 195
  180. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 40.5 Main features of regulatory capital instruments Main Features 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Regulatory treatment Transitional Basel III rules Post-transitional Basel III rules Eligible at solo / group / group & solo Instrument type Amount recognised in regulatory capital (Currency in PKR thousands, as of reporting date) Par value of instrument Accounting classification Original date of issuance Perpetual or dated Original maturity date Issuer call subject to prior supervisory approval Optional call date, contingent call dates and redemption amount Meezan Bank Limited MEBL Listing regulations of Pakistan Stock Exchange Limited Tier II Sukuk Meezan Bank Limited Meezan Bank Limited - Tier II Modaraba Sukuk Laws applicable in Pakistan Common Equity Tier 1 Common Equity Tier 1 Solo & Group Ordinary shares Tier 2 Tier 2 Solo & Group Subordinated debt Rs 10,629,022 Rs 7,000,000 Rs 10 Shareholders' equity August 16, 1997 Perpetual N/A No Rs 1,000,000 Liability - Subordinated Sukuk September 22, 2016 Dated September 21, 2026 Yes N/A Callable with prior approval of SBP on or after five years from the date of issue N/A 16 Subsequent call dates, if applicable N/A 17 18 Coupons / dividends Fixed or floating dividend / coupon coupon rate and any related index / benchmark N/A N/A 19 20 21 22 23 24 Existence of a dividend stopper Fully discretionary, partially discretionary or mandatory Existence of step up or other incentive to redeem Noncumulative or cumulative Convertible or non-convertible If convertible, conversion trigger (s) 25 26 If convertible, fully or partially If convertible, conversion rate N/A N/A 27 28 29 30 31 32 33 34 If convertible, mandatory or optional conversion If convertible, specify instrument type convertible into If convertible, specify issuer of instrument it converts into Write-down feature If write-down, write-down trigger(s) If write-down, full or partial If write-down, permanent or temporary If temporary write-down, description of write-up mechanism Position in subordination hierarchy in liquidation (specify instrument type immediately senior to instrument) N/A N/A N/A No N/A N/A N/A Option of SBP Common Shares Meezan Bank Limited No N/A N/A N/A N/A N/A Residual interest Residual interest No N/A No N/A 35 36 37 196 Issuer Unique identifier (eg PSX Symbol or Bloomberg identifier etc.) Governing law(s) of the instrument Common Shares Non-compliant transitioned features If yes, specify non-compliant features MEEZAN BANK LIMITED No Fully discretionary No Noncumulative Nonconvertible N/A Floating coupon It is expected that profit may be similar to 6 month KIBOR plus 50 bps N/A Partially discretionary No Cumulative Convertible Occurrence of a non-viability trigger event (the “PONV”) Fully The conversion pricing formula is linked to the market value of the Common Shares on the date of PONV trigger event and the fair value of the Sukuk determined by adding / deducting attributable profit / loss of the General Pool and any amount of profit held during the Loss Absorbency period
  181. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 Minimum capital requirements 40.6 Risk-weighted exposures 2017 2017 2016 ** Rupees in ‘000 Credit Risk Portfolios subject to on-balance sheet exposure (Simple Approach) Cash and cash equivalents Sovereign Public sector entities Banks Corporate Retail Residential mortgage Past due loans Operating fixed assets All other assets Risk weighted assets 2016 ** 97,567 516,923 776,740 19,171,080 2,698,514 513,916 18,591 1,136,287 676,156 156,723 434,818 1,078,324 16,957,024 1,663,258 404,127 24,485 846,941 491,145 975,672 5,169,232 7,767,404 191,710,799 26,985,140 5,139,157 185,913 11,362,868 6,761,559 1,567,232 4,348,180 10,783,235 169,570,236 16,632,575 4,041,268 244,852 8,469,414 4,911,454 104,247 1,890,061 165,692 542 80,772 1,559,958 58,377 57,868 1,042,470 18,900,613 1,656,922 5,423 807,717 15,599,580 583,766 578,681 Portfolios subject to off-balance sheet exposures market related (Current exposure method) Banks Customers 133,087 140,295 68,570 48,633 1,330,869 1,402,950 685,696 486,330 Equity Exposure Risk in the Banking Book Unlisted equity investments held in banking book Recognised portion of significant investment 114,502 12,610 123,175 9,458 1,145,022 126,100 1,231,754 94,575 Market Risk Capital Requirement for portfolios subject to Standardised Approach Interest rate risk Equity position risk Foreign Exchange risk 109,095 804,305 6,032 67,883 931,190 21,541 1,363,683 10,053,812 75,401 848,539 11,639,875 269,267 3,610,374 3,145,833 45,129,675 39,322,913 32,696,616 28,230,103 338,290,684 292,717,139 Required Actual Portfolios subject to off-balance sheet exposure non market related (Simple approach) Banks Corporate Retail Others Operational Risk Capital requirement for operational risk Total Capital Adequacy Ratio December 2017 CCET1 to total RWA Tier-1 capital to total RWA Total capital to total RWA 6.00% 7.50% 11.275%*** Required Actual ** December 2016 9.94% 9.94% 12.89% 6.00% 7.50% 10.65%*** 9.41% 9.41% 12.91% ** As reported in last year annual financial statements. *** Capital adequacy requirement inclusive of Capital Conservation Buffer requirement (CCB) ANNUAL REPORT 2017 197
  182. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 41 RISK MANAGEMENT The wide variety of the Bank’s business activities require the Bank to identify, assess, measure, aggregate and manage risks effectively which are constantly evolving as the business activities expand in response to the Bank's strategy and growth. The Bank manages the risk through a framework of risk management encompassing policies and procedures, organisational structures, risk measurement and monitoring processes and techniques that are closely aligned with business activities of the Bank. Risk management principles - The Board of Directors (the Board) provides overall risk management supervision. The Board Risk Management Committee regularly reviews the Bank’s risk profile. - The Bank has set up objectives and policies to manage the risks that arise in connection with the Bank’s activities. The risk management framework and policies of the Bank are guided by specific objectives to ensure that comprehensive and adequate risk management tools and techniques are established to mitigate the salient risk elements in the operations of the Bank." - The establishment of the overall financial risk management objectives is consistent and in tandem with the strategy to create and enhance shareholders’ value, whilst guided by a prudent risk management framework. - The structure of risk management function is closely aligned with the organisational structure of the Bank. - The risk management function is independent of the Bank’s operations. Risk management organisation The Risk Management Committee comprises of two non-executive directors and one executive director. One of the non-executive directors of the Bank chairs the Risk Management Committee. Specialized Committees comprising of Senior Management team members perform their functions in line with the strategic direction set by the Board while ensuring that there is optimal balance between risk reward trade-off. The Committees include: Name of the sub-committee Chaired by Credit Risk Management Committee (CRMC) Asset and Liability Management Committee (ALCO) Compliance and Operational Risk Management Committee (CORMC) President & CEO President & CEO President & CEO CRMC is responsible to oversee credit risk activities on bank wide basis while ensuring compliance with regulatory requirements & internal policies. Its responsibilities also include to provide support and guide front lines in managing their businesses, perform finance portfolio review, establish financing standards and benchmarks, maintain adequate industry diversification and decide upon provisioning. It is also required to delegate financing approving powers & prudential limits on large financing exposures. Credit Committee, a sub-committee of CRMC is the highest level body for approval of financing transactions. ALCO is responsible for reviewing the Asset and Liability structure of the Bank, monitoring the liquidity situation and overall changing market scenario. Market and Liquidity risks are examined based on stress testing exercises and gap analysis. ALCO is also responsible for monitoring policy rate movements and taking necessary steps across various products to ensure that the overall profitability of the Bank is maximized without compromising on risk appetite. ALCO also ensures that the Banks’ overall operations are fully compliant with regulatory framework for the business as provided by the State Bank of Pakistan. CORMC is responsible for overseeing compliance risk by reviewing the adequacy of controls in place to meet regulatory requirements. The Committee is responsible for promoting compliance culture in the Bank, facilitate in implementation of Compliance Program and oversee Money Laundering and Financing Terrorism risk. In addition, the Committee also oversees Operational Risk Framework by ensuring that policies and procedures are in place in all Key risk areas and by reviewing Key Risk Indicators. The Committee also monitors level of compliance of major unresolved and recurring issues pointed out in the Internal Audit, Shariah Audit and SBP Inspection Report. The Bank’s risk management, compliance, internal audit and legal departments support the risk management function. The role of the risk management department is to assess, measure, identify risks and established risk mitigants through a detailed policy and monitoring framework. The compliance department ensures that all the directives and guidelines issued by the SBP are being complied with in order to mitigate the compliance risk. The internal audit and BRR department reviews the compliance of internal control procedures with internal and regulatory standards. 41.1 Credit Risk Credit risk arises from the potential that an obligor is either unwilling to perform on an obligation or its ability to perform such obligations is impaired resulting in economic loss to the Bank. This credit risk arises mainly from both direct financing activities as well as contingent liabilities. Credit risk management and structure The Bank manages credit risk by effective credit appraisal mechanism, approving and reviewing authorities, limit structures, internal credit risk rating system, collateral management and post disbursem*nt monitoring so as to ensure prudent financing activities and sound financing portfolio under the umbrella of a comprehensive Credit Policy approved by the Board of Directors. A comprehensive financing procedural manual approved by the senior management is also in place. The Bank also ensures diversification of its portfolio into different business segments, products and sectors. Further, to avoid risk concentration; counterparty limits, counterparty group limits and industry concentration limits are also established, monitored and assessed in the light of changing counterparty and market conditions. 198 MEEZAN BANK LIMITED
  183. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 Watchlist procedure is also functioning which identifies financing with early warning indicators in respect of clients having the potential to become non performing. The risk management function also monitors the non-performing financing portfolio of the Bank and reports all significant matters to the Risk Management Committee. The Bank takes into account the risk mitigating effect of the eligible collaterals for the calculation of capital requirement for credit risk. Use of Credit Risk Mitigation (CRM) resulted in the total credit risk weighted amount of Rs 281,668.113 million (2016: Rs 240,636.545 million). Thus, use of CRM resulted in capital adequacy ratio of the Bank of 12.89%. 41.1.1 Segmental information 41.1.1.1 Segment by class of business Islamic financing and related assets (gross) Rupees in ‘000 Agriculture, food, forestry and fishing Automobile and transportation equipment Cement Chemical and pharmaceuticals Construction Electronics and electrical appliances Exports / imports Financial institutions Footwear and leather garments Individuals Insurance Paper, board and packaging Power (electricity), oil, gas and water Services Sugar Textile Transport, storage and communication Wholesale and retail trade Others 106,126,840 4,597,949 8,146,923 20,610,092 7,184,923 4,102,683 5,905,169 1,030,659 1,323,985 36,161,774 35,691 8,221,654 74,548,300 4,738,616 10,780,230 71,916,540 15,555,275 14,315,391 33,530,836 428,833,530 % 24.75 1.07 1.90 4.81 1.68 0.96 1.38 0.24 0.31 8.43 0.01 1.92 17.38 1.11 2.51 16.77 3.63 3.34 7.80 100.00 Islamic financing and related assets (gross) Rupees in ‘000 Agriculture, food, forestry and fishing Automobile and transportation equipment Cement Chemical and pharmaceuticals Construction Electronics and electrical appliances Exports / imports Financial institutions Footwear and leather garments Individuals Insurance Paper, board and packaging Power (electricity), oil, gas and water Services Sugar Textile Transport, storage and communication Wholesale and retail trade Others 38,214,308 3,399,534 4,367,795 21,655,927 3,760,827 3,823,221 4,770,044 946,640 1,461,597 25,886,649 52,731 8,227,027 71,780,654 4,609,756 7,416,929 62,367,983 11,916,863 22,040,382 22,917,997 319,616,864 % 11.96 1.06 1.37 6.78 1.18 1.20 1.49 0.30 0.46 8.10 0.00 2.57 22.46 1.44 2.32 19.51 3.73 6.90 7.17 100.00 2017 Contingencies and commitments Deposits Rupees in ‘000 2,070,960 3,442,964 9,193,802 5,504,669 9,396,335 2,379,991 5,566,639 2,448,317 1,169,170 467,572,907 2,818,368 1,097,194 1,365,603 18,261,817 1,116,362 19,441,515 12,885,241 20,273,782 87,182,171 673,187,807 % 0.31 0.51 1.37 0.82 1.40 0.35 0.83 0.36 0.17 69.46 0.42 0.16 0.20 2.71 0.17 2.89 1.91 3.01 12.95 100.00 2016 3,668,320 3,405,337 582,853 6,533,737 11,337,793 1,348,652 4,131,094 2,727,359 804,068 414,918,111 1,457,518 451,323 962,740 12,421,301 3,653,716 14,609,079 7,376,874 14,052,917 59,581,061 564,023,853 49,266,978 3,784,683 5,843,285 11,957,919 2,821,534 3,150,997 6,350,495 125,173,794 1,859,321 13,980,296 13,929 3,206,489 38,494,432 3,111,369 3,659,712 62,347,165 7,157,119 10,615,775 40,214,544 393,009,836 % 12.54 0.96 1.49 3.04 0.72 0.80 1.62 31.85 0.47 3.56 0.82 9.79 0.79 0.93 15.86 1.82 2.71 10.23 100.00 Contingencies and commitments Deposits Rupees in ‘000 Rupees in ‘000 % 0.65 0.60 0.10 1.16 2.01 0.24 0.73 0.48 0.14 73.56 0.28 0.08 0.17 2.20 0.65 2.59 1.31 2.49 10.56 100.00 Rupees in ‘000 15,555,943 2,698,799 3,859,895 15,159,607 2,017,653 4,041,332 8,157,751 142,226,631 1,644,692 15,260,443 12,368 3,535,658 29,078,247 5,776,871 3,646,547 54,361,246 6,091,954 12,362,220 41,960,352 367,448,209 % 4.23 0.73 1.05 4.13 0.55 1.10 2.22 38.71 0.45 4.15 0.02 0.96 7.91 1.57 0.99 14.79 1.66 3.36 11.42 100.00 ANNUAL REPORT 2017 199
  184. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 41.1.1.2 Segmental by sector 2017 Islamic financing and related assets (gross) Rupees in ‘000 Public / Government Private 134,951,330 293,882,200 428,833,530 % 31.47 68.53 100.00 Rupees in ‘000 Public / Government Private 77,879,272 241,737,592 319,616,864 Rupees in ‘000 3.61 96.39 100.00 19,646,280 373,363,556 393,009,836 2016 Rupees in ‘000 6,984,549 557,039,304 564,023,853 % 5.00 95.00 100.00 Contingencies and commitments Deposits % 24.37 75.63 100.00 % 24,306,266 648,881,541 673,187,807 Islamic financing and related assets (gross) Rupees in ‘000 Contingencies and commitments Deposits % Rupees in ‘000 1.24 98.76 100.00 16,665,076 350,783,133 367,448,209 % 4.54 95.46 100.00 41.1.1.3 Details of non-performing Islamic financing and related assets and specific provisions by class of business segment: 2017 Classified Islamic financing and related assets 2016 Specific provisions held Classified Islamic financing and related assets Specific provisions held Rupees in ‘000 Agriculture, forestry, hunting and fishing Textile Chemical and pharmaceuticals Sugar Footwear and leather garments Automobile and transportation equipment Electronics and electrical appliances Construction Power (electricity), gas, water Transport, storage and communication Wholesale and retail trade Paper, board and packaging Exports / imports Individuals Others 59,712 4,220,024 41,839 108,718 215,346 636,494 19,616 19,930 2,796 12,648 420,676 29,597 258,821 340,170 219,742 6,606,129 59,712 4,144,754 41,839 108,718 189,571 636,094 19,616 19,930 2,796 9,966 416,686 29,597 252,140 275,770 219,542 6,426,731 62,592 4,198,364 43,334 108,718 188,113 659,566 19,616 21,597 2,796 12,648 490,543 29,597 260,263 398,433 351,112 6,847,292 62,592 4,069,289 43,334 108,718 188,121 659,057 19,616 21,597 2,796 9,966 479,614 29,597 249,713 315,152 333,041 6,592,203 41.1.1.4 Details of non-performing Islamic financing and related assets and specific provisions by sector: 2017 Public / Government Private 200 MEEZAN BANK LIMITED 2016 Classified Islamic financing and related assets Specific provisions held 6,606,129 6,606,129 6,426,731 6,426,731 Classified Islamic financing and related assets Rupees in ‘000 6,847,292 6,847,292 Specific provisions held 6,592,203 6,592,203
  185. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 41.1.1.5 Geographical segment analysis 2017 Profit before taxation Total assets employed Net assets employed Rupees in ‘000 Pakistan 10,252,010 781,699,196 35,077,393 Contingencies and commitments 393,009,836 2016 Profit before taxation Total assets employed Net assets employed Rupees in ‘000 Pakistan 41.2 8,942,836 657,767,097 30,473,618 Contingencies and commitments 367,448,209 Credit Risk - General Disclosures The Bank has adopted Standardised Approach of Basel Accord for calculation of capital charge against credit risk. Therefore, risk weights for the credit risk related assets (on-balance sheet and off-balance sheet - market and non market related exposures) are assigned on the basis of standardised approach. The Bank is committed to further strengthen its risk management framework which will enable the Bank to move ahead for adopting Foundation Internal Ratings Based (IRB) approach of Basel II. Meanwhile, none of the Bank's assets class is subject to the Foundation IRB or advanced IRB approaches. 41.2.1 Credit Risk: Disclosures for portfolio subject to the Standardised Approach Under standardised approach the capital requirement is based on the credit rating assigned to the counterparties by the External Credit Assessment Institutions (ECAIs) duly recognised by the SBP for capital adequacy purposes. In this connection, the Bank utilises the credit ratings assigned by ECAIs and has recognised agencies such as PACRA (Pakistan Credit Rating Agency) and JCR-VIS (Japan Credit Rating Company - Vital Information System) which are also recognised by the SBP. In case of foreign currency exposures against banks, ratings assigned by S&P, Fitch and Moody’s have been applied. In case of exposure against banks, some banks have multiple ratings but those ratings do not result in mapping with different risk weights. Types of Exposure and ECAI’s used 2017 Exposures JCR-VIS PACRA Standard & Poors (S&P) Fitch Moody Corporate √ √ √ √ √ Banks √ √ √ √ √ Public Sector Entities √ √ - - - Use of ECAI Ratings The Bank prefers solicited ratings over unsolicited ratings at all times, owing to the greater degree of accuracy (in general) associated with solicited ratings. Unsolicited ratings may only be used in cases where a solicited rating is not available. Mapping to SBP Rating Grades The alignment of the Alphanumerical scale of each agency used with risk buckets is as per instructions laid down by SBP under Basel III requirements. ANNUAL REPORT 2017 201
  186. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 41.2.2 Credit exposures subject to standardised approach 2017 Exposures Amount Outstanding Deduction Credit Risk Management 2016 Net amount Amount Outstanding Deduction Credit Risk Management Net amount Rupees in ‘000 Banks 20% 50% 150% Unrated Sovereigns 0% 20% 50% 100% Public Sector entities 20% 50% Unrated (50%) Corporate 20% 50% 100% Unrated 1 Unrated 2 Retails 75% Total 41.2.3 151,721,981 1,172,485 48,780 242,370 120,907,869 - 30,814,112 1,172,485 48,780 242,370 111,679,500 2,484,952 268,957 64,244,659 - 47,434,841 2,484,952 268,957 171,965,434 1,728,346 111,499 42,036,396 - 129,929,038 1,728,346 111,499 185,057,759 1,564,297 775,286 15,000,000 - 170,057,759 1,564,297 775,286 25,954,044 50,058,614 8,191,220 46,848,981 17,762,824 3,209,633 15,879,273 3,475,000 38,804,775 2,931,000 38,798,333 12,948,273 3,475,000 6,442 46,789,540 33,480,160 3,515,549 91,598,854 95,068,947 5,342,857 2,046,356 2,485,245 36,561,120 41,446,683 31,433,804 3,515,549 89,113,609 58,507,827 43,160,828 23,652,800 2,915,500 79,361,441 69,607,453 3,575,000 3,047 2,103,389 14,016,685 39,585,828 23,649,753 2,915,500 77,258,052 55,590,768 43,943,059 717,399,662 7,962,873 272,382,917 35,980,186 445,016,745 27,348,238 606,036,059 5,171,471 145,843,584 22,176,767 460,192,475 Credit Risk: Disclosures with respect to Credit risk mitigation for Standardised approach and IRB The Bank obtains capital relief for both its on-balance and off-balance sheet non-market related exposures by using simple approach for credit risk mitigation (CRM). Off-balance sheet items under the simplified standardised approach are converted into credit exposure equivalents through the use of credit conversion factors. Under the standardised approach the Bank has taken advantage of the cash collaterals available with the Bank in the form of security deposits, cash margins, certificates of islamic investment, monthly Modaraba certificate, saving accounts, guarantees, shares and Government securities. Valuation and management of eligible collaterals for CRM is being done in accordance with the conditions laid down by the State Bank of Pakistan. Eligible collaterals for CRM purposes do not expose the Bank to price risk as they are in the form of cash collaterals. Since eligible collaterals for CRM purposes are all in the form of cash collaterals, they generally do not pose risk to the Bank in terms of change in their valuation due to changes in the market condition. The credit equivalent amount of an off-balance sheet market related foreign exchange contracts are determined by using the current exposure (mark to market) method. The Bank mainly takes the benefit of CRM against its claims on banks, corporate and retail portfolio. Under the standardized approach for on-balance sheet exposures, Rs 153,185.616 million of exposure on banks is subject to the CRM of Rs 120,907.869 million. The corporate portfolio of Rs 270,453.050 million is subject to the CRM of Rs 46,435.578 million whereas claims on retail portfolio of Rs 43,943.059 million is subject to CRM of Rs 7,962.873 million. The total benefit of Rs 272,382.917 million was availed through CRM against total on-balance sheet exposure of Rs 777,080.026 million. Under off-balance sheet, non-market related exposures; the corporate portfolio of Rs 244,326.462 million is subject to the CRM of Rs 6,138.398 million whereas claims on retail portfolio of Rs 8,351.027 million is subject to CRM of Rs 939.262 million. Total benefit of Rs 8,761.160 million was availed by the Bank through CRM against total off-balance sheet, non-market related exposure of Rs 270,619.078 million. In the year 2017, total CRM benefit was Rs 281,144.077 million as against amount of Rs 148,092.858 million in year 2016. 41.2.4 Credit concentration risk Credit concentration risk arises mainly due to concentration of exposures under various categories viz., industry, geography and single / group borrower obligor. Within credit portfolio, as a prudential measure aimed at better risk management and avoidance of concentration of risks, the SBP has prescribed regulatory limits on banks’ maximum exposure to single and group obligors. Within the SBP limits, the Bank has further defined limits to avoid excessive concentration of portfolio. 202 MEEZAN BANK LIMITED
  187. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 41.3 Equity position in the banking and trading book The Bank classifies and values its investment portfolio in accordance with the directives of SBP as stated in note 6.4 to these financial statements. Trading book Held for trading and available for sale securities with trading intent; - They are marked to market daily; and Any valuation difference is charged / credited to the profit and loss account in case of held for trading securities and to surplus on revaluation of investments - net of tax below equity in case of available for sale securities. Banking book Assets outside trading book are part of the banking book. These may include assets classified as available for sale and held to maturity investments 41.4 Market risk Market risk is the risk that the fair value or cash flows of a financial instrument will fluctuate due to changes in market prices. Market risk reflects yield rate risk, currency risk and other price risks. Banks could be adversely affected by movements in market rates or prices such as benchmark rates, deposit rates, foreign exchange rates, equity prices and market conditions resulting in a loss to earnings and capital. The Bank uses a number of methods to monitor and control market risk exposures. One of the major tools used by the Bank to monitor and limit market risk is Value at Risk (VaR). VaR is defined as the estimated loss that will arise on a position or a portfolio over a particular (holding) period of time from an adverse market movement with a specific probability (confidence level). The VaR model used by the Bank takes 99% confidence level and assumes a 1 to 10 days holding period whilst using the historical simulation taking the data of the last three years. Daily the VaR figures are circulated to the senior management and regular summaries are reported in ALCO meetings. The VaR reports are complemented by various other position and sensitivity limit structures, including stress, sensitivity gap and scenario analysis. The capital charge for market risk has been calculated by using Standardized Approach. 41.4.1 Foreign exchange risk The foreign exchange risk is defined as the current or prospective risk to earnings and capital arising from adverse movements in currency exchange rates. It refers to the impact of adverse movement in currency exchange rates on the value of open foreign currency position. The objectives of the foreign exchange risk management is to minimise the adverse impact of foreign exchange rate movements on the assets and liabilities mismatch (tenor and position) and maximise their earnings. Whenever a commercial bank deals in foreign currency, it is exposed to risk of exchange rate. The Bank's assets and liabilities in foreign currencies give rise to foreign exchange risk which has to be managed by the Bank; this risk is mitigated by using different hedging techniques. Hedging is a way used by a bank to eliminate or minimize its risk exposures. Hedging can be done using different ways like gap analysis, hedging (forwards), assigning limits in terms of amount, tenor, currency, product, countries, counterparties etc. The Bank limits its currency exposure to the extent of statutory net open position prescribed by the SBP except in the cases where exemption is provided by the SBP. Foreign exchange open and mismatch positions are controlled through close monitoring and are marked to market on a daily basis. The analysis below represents the concentration of the Bank's foreign currency risk for on and off balance sheet financial instruments: 2017 Assets Liabilities Off-balance Net foreign sheet items currency exposure Rupees in ‘000 Pakistan Rupees 756,111,458 695,071,461 (26,001,090) 35,038,907 United States Dollars Great Britain Pounds Japanese Yen Euro Singapore Dollars Australian Dollars Canadian Dollars United Arab Emirates Dirham Swiss Francs Saudi Riyal Swedish Korona Malaysian Ringgit Hongkong Dollar Thailand Bhat Norwegian Krone Chinese Offshore Spot Chinese Yuan Total foreign currency exposure 23,163,052 897,203 73,750 1,231,047 3,709 92,145 11,324 94,171 3,675 7,865 1,942 1,752 843 311 653 1,695 2,601 25,587,738 44,700,451 3,707,232 35 3,136,314 3 1,605 994 3,680 28 51,550,342 21,530,488 2,816,966 (73,560) 1,921,584 (119,868) (11,006) (60,120) (3,394) 26,001,090 (6,911) 6,937 155 16,317 3,706 (29,328) (676) 34,051 281 4,185 1,942 1,752 815 311 653 1,695 2,601 38,486 781,699,196 746,621,803 Total currency exposure - 35,077,393 ANNUAL REPORT 2017 203
  188. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 Assets Liabilities 2016 Off-balance sheet items Rupees in ‘000 Net foreign currency exposure Pakistan Rupees 620,742,039 587,790,208 (2,241,916) 30,709,915 United States Dollars Great Britain Pounds Japanese Yen Euro Singapore Dollars Australian Dollars Canadian Dollars United Arab Emirates Dirham Swiss Francs Saudi Riyal Swedish Korona Malaysian Ringgit Hongkong Dollar Thailand Bhat Norwegian Krone Chinese Offshore Spot Chinese Yuan Total foreign currency exposure 34,542,444 1,184,329 59,279 1,117,797 9,964 35,959 18,415 36,207 7,151 1,738 3,285 1,856 1,086 275 881 1,499 2,893 37,025,058 33,920,823 3,105,654 34 2,447,543 3 28,227 921 29 37 39,503,271 (888,393) 1,925,345 (54,613) 1,328,648 (7,242) (9,074) (17,072) (28,477) (7,206) 2,241,916 (266,772) 4,020 4,632 (1,098) 2,719 (1,342) 422 7,701 (55) 1,738 3,285 1,856 1,049 275 881 1,499 2,893 (236,297) Total currency exposure 657,767,097 627,293,479 - 30,473,618 41.4.2 Equity position risk Equity position risk is defined as the risk to earnings or capital arising from adverse changes in the value of equity portfolios of the Bank. The limits assigned to various individual scripts and total portfolio investments are fixed as per the guidelines issued by the SBP. The Bank invests in only Shariah compliant equities as advised by the Shariah advisor. 41.4.3 Yield / profit rate risk Yield risk occurs when there is a mismatch between positions, which are subject to profit rate alterations within a particular time period. The Bank’s financing, placement and investment activities give rise to profit rate risk. The effect of changes in profit rate is on the Bank’s income, and resultant impact is on the Bank’s net worth. Profit rate risk is primarily managed by monitoring the rate sensitive gaps and by having the pre-approved limits for repricing buckets. ALCO is the supervising body for adherence with these, complemented by the monitoring of sensitivity of the Bank’s financial assets and liabilities to various scenarios. The Bank estimates changes in the market value of equity due to changes in the yield rates on on-balance sheet positions and their impact on capital adequacy ratio by conducting stress tests. It also assesses risk on earnings of the Bank by various shocks. 204 MEEZAN BANK LIMITED
  189. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 41.4.4 Mismatch of yield rate sensitive assets and liabilities Effective yield rate % Total Upto 1 month Over 1 to 3 months Over 3 to 6 months 2017 Exposed to yield risk Over 6 months to 1 year Over 3 to 5 years Over 5 to 10 years Above 10 years Non-yield bearing financial instruments 0.18 5.77 5.39 6.57 - 64,556,170 4,895,816 147,229,221 119,238,246 420,029,088 12,115,616 768,064,157 111,905 23,868,925 6,926,424 41,964,180 72,871,434 49,716,251 6,988,489 152,729,213 209,433,953 4,376,876 48,745,895 83,255,059 136,377,830 69,267,169 16,726,426 85,993,595 30,698,206 3,679,676 34,377,882 15,126,496 6,921,316 22,047,812 1,124,924 13,278,112 14,403,036 2,221,122 1,016,739 3,237,861 2,690,280 2,690,280 64,556,170 4,783,911 7,406,690 97,768,087 12,115,616 186,630,474 4.10 2.30 6.73 - 11,168,093 36,813,295 673,187,807 7,000,000 9,086,880 737,256,075 30,808,082 16,390,656 435,662,748 452,053,404 (379,181,970) 8,731,443 7,000,000 15,731,443 193,702,510 10,869,365 10,869,365 125,508,465 85,993,595 34,377,882 22,047,812 14,403,036 3,237,861 2,690,280 11,168,093 821,831 237,525,059 9,086,880 258,601,863 (71,971,389) Liabilities Bills payable Due to financial institutions Deposits and other accounts Sub-ordinated Sukuk Other liabilities Over 2 to 3 years Rupees in ‘000 On-balance sheet financial instruments Assets Cash and balances with treasury banks Balances with other banks Due from financial institutions Investments Islamic financing and related assets Other assets Over 1 to 2 years On-balance sheet gap Non financial assets - Operating fixed assets - Other assets 11,875,358 1,759,681 13,635,039 Non financial liabilities - Other liabilities - Deferred tax liabilities 9,357,546 8,182 9,365,728 35,077,393 Total net assets Off-balance sheet financial instruments Forward Lending Forward borrowings Off-balance sheet gap - - - - - - - - - - - Total yield risk rate sensitivity gap (379,181,970) 193,702,510 125,508,465 85,993,595 34,377,882 22,047,812 14,403,036 3,237,861 2,690,280 (71,971,389) Cumulative yield risk rate sensitivity gap (379,181,970) (185,479,460) (59,970,995) 26,022,600 60,400,482 82,448,294 96,851,330 100,089,191 102,779,471 30,808,082 Effective yield rate % Total Upto 1 month Over 1 to 3 months Over 3 to 6 months 2016 Exposed to yield risk Over 6 months to 1 year Over 1 to 2 years Over 2 to 3 years Over 3 to 5 years Over 5 to 10 years Above 10 years Non-yield bearing financial instruments Rupees in ‘000 On-balance sheet financial instruments Assets Cash and balances with treasury banks Balances with other banks Due from financial institutions Investments Islamic financing and related assets Other assets 0.25 6.11 5.43 7.13 - 56,036,849 12,021,351 129,115,165 130,156,297 311,530,270 8,648,418 647,508,350 206,975 12,674,955 8,048,802 41,647,280 62,578,012 9,000,000 41,977,548 3,490,476 86,018,385 140,486,409 964,595 45,527,484 68,426,222 114,918,301 73,498,067 1,046,419 11,310,779 85,855,265 1,045,110 2,452,143 3,497,253 57,559,439 10,033,692 67,593,131 677,069 8,276,450 8,953,519 3,176,899 5,566,774 8,743,673 9,620,933 9,620,933 56,036,849 2,814,376 9,584,599 68,177,612 8,648,418 145,261,854 4.09 2.44 6.76 - 9,130,998 32,005,501 564,023,853 7,000,000 7,491,481 619,651,833 27,856,517 15,990,356 367,439,274 383,429,630 (320,851,618) 5,230,649 7,000,000 12,230,649 128,255,760 10,784,496 10,784,496 104,133,805 85,855,265 3,497,253 67,593,131 8,953,519 8,743,673 9,620,933 9,130,998 196,584,579 7,491,481 213,207,058 (67,945,204) Liabilities Bills payable Due to financial institutions Deposits and other accounts Sub-ordinated Sukuk Other liabilities On-balance sheet gap Non financial assets - Operating fixed assets - Other assets Non financial liabilities - Other liabilities - Deferred Tax liabilities Total net assets 8,924,328 1,334,419 10,258,747 6,278,737 1,362,909 7,641,646 30,473,618 Off-balance sheet financial instruments Forward Lending Forward borrowings Off-balance sheet gap - - - - - - - - - - Total yield risk rate sensitivity gap (320,851,618) 128,255,760 104,133,805 85,855,265 3,497,253 67,593,131 8,953,519 8,743,673 9,620,933 Cumulative yield risk rate sensitivity gap (320,851,618) (192,595,858) (88,462,053) (2,606,788) 890,465 68,483,596 77,437,115 86,180,788 95,801,721 (67,945,204) 27,856,517 ANNUAL REPORT 2017 205
  190. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 The Bank takes on exposure to the effects of fluctuations in the prevailing levels of market profit rates on both its fair value and cash flow risks. Profit margins may increase as a result of such changes but may reduce to losses in the event that unexpected movement arise. 41.5 Liquidity risk Liquidity risk is the potential for loss to the Bank arising from either its inability to meet its obligations or to fund increases in assets as they fall due without incurring an unacceptable cost. The Bank’s Board of Directors sets the Bank’s policy for managing liquidity risk and entrusts accountability for supervision of the implementation of this strategy to senior management. Senior management exercises its responsibilities for managing market & liquidity risk through various committees including the Asset & Liability Management Committee (ALCO). Treasury department manages the Bank’s liquidity position on a daily basis. The Bank’s main approach of managing the liquidity risk is to make certain that it will always have adequate liquidity to meet its liabilities when they are due in normal and stressed scenarios without incurring any untoward expenditure or risking reputational harm. ALCO monitors the maintenance of liquidity ratios, depositor's concentration both in terms of the overall funding mix and avoidance of undue reliance on large individual deposits. Regular liquidity stress testing is conducted under a variety of scenarios covering both normal and more severe market conditions. 41.5.1 Maturities of assets and liabilities 41.5.1.1 Maturities of assets and liabilities based on expected maturities 2017 Total Upto 1 Month Over 1 to 3 Months Over 3 to 6 Months Over 6 Months to 1 Year Over 1 to 2 Years Over 2 to 3 Years Over 3 to 5 Years 19,375,122 21,555,865 1,015,855 57,564 42,004,406 2,885,494 34,301,026 1,342,234 116,127 38,644,881 Over 5 to 10 Years Above 10 Years 4,202,907 50,660,205 1,435,563 56,298,675 3,535,013 14,480,333 4,554,086 22,569,432 Rupees in ‘000 Assets Cash and balances with treasury banks Balances with other banks Due from financial institutions Investments Islamic financing and related assets Operating fixed assets Deferred tax assets Other assets Liabilities Bills payable Due to financial institutions Deposits and other accounts - Current accounts - Savings deposits - Fixed deposits Sub-ordinated Sukuk Deferred Tax liabilities Other liabilities Net assets Share capital Reserves Unappropriated profit Surplus on revaluation of investments 206 MEEZAN BANK LIMITED 64,556,170 4,895,816 147,229,221 119,238,246 420,029,088 11,875,358 13,875,297 781,699,196 64,556,170 4,895,816 23,868,925 7,025,439 59,846,509 142,263 1,169,432 161,504,554 49,716,251 2,042,492 93,323,046 421,910 2,319,922 147,823,621 4,376,876 1,924,442 91,340,404 408,827 3,468,954 101,519,503 11,168,093 36,813,295 11,168,093 16,637,068 8,977,855 10,869,364 237,525,059 266,024,480 169,638,268 673,187,807 7,000,000 8,182 18,444,426 746,621,803 18,716,975 20,723,307 62,854,960 102,295,242 1,488,971 131,589,374 15,035,336 16,626,530 25,260,564 56,922,430 2,743,027 68,643,312 13,990,226 15,456,022 18,780,284 48,226,532 4,099,121 63,195,017 35,077,393 10,629,022 13,368,809 10,340,589 738,973 35,077,393 29,915,180 79,180,309 38,324,486 69,267,169 41,943,268 37,052,061 1,304,859 6,694,345 156,261,702 19,762,085 21,867,212 27,012,443 68,641,740 2,046 1,811,649 70,455,435 85,806,267 36,304,069 17,469,639 1,249,761 48,953 55,072,422 27,956,699 30,938,647 7,427,059 66,322,405 2,046 922,406 67,246,857 (12,174,435) 329,008 21,448,513 23,729,384 5,450,187 50,628,084 2,046 922,406 51,881,544 (9,877,138) 34,037,341 37,642,464 12,517,600 84,197,405 2,044 1,844,813 86,044,262 (47,399,381) 62,516,595 69,166,365 10,335,171 142,018,131 7,000,000 4,612,033 153,630,164 (97,331,489) 24,061,289 29,874,549 53,935,838 53,935,838 (31,366,406)
  191. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 2016 Total Over 1 to 3 Months Upto 1 Month Over 3 to 6 Months Over 6 Months to 1 Year Over 1 to 2 Years Over 2 to 3 Years Over 3 to 5 Years 63,511,215 25,498,221 990,382 89,999,818 4,551,978 34,400,971 1,474,297 40,427,246 Over 5 to 10 Years Above 10 Years 5,182,807 18,462,299 1,964,641 25,609,747 66,392 24,717,329 2,199,834 26,983,555 Rupees in ‘000 Assets Cash and balances with treasury banks Balances with other banks Due from financial institutions Investments Islamic financing and related assets Operating fixed assets Other assets Liabilities Bills payable Due to financial institutions Deposits and other accounts - Current accounts - Savings deposits - Fixed deposits Sub-ordinated Sukuk Deferred Tax liabilities Other liabilities Net assets Share capital Reserves Unappropriated profit Surplus on revaluation of investments 56,036,849 12,021,351 129,115,165 130,156,297 311,530,270 8,924,328 9,982,837 657,767,097 56,036,849 3,021,351 12,674,955 7,784,589 27,031,972 1,450,355 108,000,071 9,000,000 41,977,548 411,948 93,058,189 3,055,756 147,503,441 964,595 1,094,827 41,589,182 4,583,634 48,232,238 9,130,998 32,005,501 9,130,998 15,990,356 5,230,648 10,615,991 196,584,579 224,596,970 142,842,304 564,023,853 7,000,000 1,362,909 13,770,218 627,293,479 30,473,618 16,495,383 17,924,457 33,728,127 68,147,967 1,639,220 94,908,541 13,091,530 13,242,090 14,389,317 24,270,606 51,902,013 2,380,639 59,513,300 87,990,141 12,317,664 13,384,804 18,389,037 44,091,505 3,570,959 58,278,455 (10,046,217) 73,498,067 2,321,897 11,682,754 1,304,791 893,092 89,700,601 45,230,644 35,089,353 990,383 81,310,380 17,419,807 18,928,971 28,102,014 64,450,792 340,727 686,600 65,478,119 24,222,482 24,635,328 26,769,607 6,843,151 58,248,086 340,727 1,373,200 59,962,013 21,348,367 - 168,506 18,903,352 20,541,042 7,707,497 47,151,891 340,727 1,373,200 48,865,818 41,134,000 29,976,392 32,573,394 11,385,346 73,935,132 340,728 2,746,400 77,190,766 (36,763,520) - - 55,082,999 59,858,661 12,416,526 127,358,186 7,000,000 134,358,186 (108,748,439) 8,511,564 20,226,717 28,738,281 28,738,281 (1,754,726) 10,027,379 9,699,685 8,422,009 2,324,545 30,473,618 Regarding behaviour of non-maturity deposits (non-contractual deposits), the Bank has carried out a behavioural study using the Value at Risk (VaR) methodology based on 5 years data. On the basis of its findings, 28.4% of current accounts and 28.1% of saving accounts are bucketed into 'Upto 1-Year maturity' whereas, 71.6% of current accounts and 71.9% of savings accounts are bucketed into maturities of above 1-Year. 41.5.1.2 Maturities of assets and liabilities based on contractual maturities 2017 Total Upto 1 Month Over 1 to 3 Months Over 3 to 6 Months Over 6 Months to 1 Year Over 1 to 2 Years Over 2 to 3 Years Over 3 to 5 Years Over 5 to 10 Years 19,376,073 21,643,860 1,065,490 57,564 42,142,987 2,885,636 34,213,111 1,480,428 116,125 38,695,300 Above 10 Years Rupees in ‘000 Assets Cash and balances with treasury banks Balances with other banks Due from financial institutions Investments Islamic financing and related assets Operating fixed assets Deferred tax assets Other assets Liabilities Bills payable Due to financial institutions Deposits and other accounts - Current accounts - Savings deposits - Fixed deposits Sub-ordinated Sukuk Deferred Tax liabilities Other liabilities Net assets Share capital Reserves Unappropriated profit Surplus on revaluation of investments 64,556,170 4,895,816 147,229,221 119,238,246 420,029,088 11,875,358 13,875,297 781,699,196 64,556,170 4,895,816 23,868,925 7,025,782 150,597,009 144,833 1,169,433 252,257,968 49,716,250 2,042,593 60,150,104 433,945 2,319,763 114,662,655 4,376,876 1,924,537 60,483,260 422,048 3,468,639 70,675,360 11,168,093 36,813,295 11,168,093 16,883,479 8,731,443 10,869,365 237,525,059 266,024,480 169,638,268 673,187,807 7,000,000 8,182 18,444,426 746,621,803 35,077,393 237,525,059 266,024,480 62,854,959 566,404,498 1,488,971 595,945,041 (343,687,073) 25,260,564 25,260,564 2,743,027 36,735,034 77,927,621 18,780,284 18,780,284 4,099,121 33,748,770 36,926,590 69,267,170 41,948,167 10,331,446 771,197 6,694,345 129,012,325 27,012,443 27,012,443 2,046 1,811,649 28,826,138 100,186,187 36,297,159 17,469,665 1,301,938 49,428 55,118,190 7,427,059 7,427,059 2,046 922,406 8,351,511 46,766,679 329,008 5,450,187 5,450,187 2,046 922,406 6,703,647 35,439,340 12,517,600 12,517,600 2,044 1,844,813 14,364,457 24,330,843 4,203,029 50,660,278 1,568,857 56,432,164 10,335,172 10,335,172 7,000,000 4,612,033 21,947,205 34,484,959 3,535,270 14,480,355 4,686,622 22,702,247 22,702,247 10,629,022 13,368,809 10,340,589 738,973 35,077,393 ANNUAL REPORT 2017 207
  192. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 2016 Total Upto 1 Month Over 1 to 3 Months Over 3 to 6 Months Over 6 Months to 1 Year Over 1 to 2 Years Over 2 to 3 Years Over 3 to 5 Years 63,511,215 25,498,221 990,382 89,999,818 4,551,978 34,400,971 1,474,297 40,427,246 Over 5 to 10 Years Above 10 Years Rupees in ‘000 Assets Cash and balances with treasury banks Balances with other banks Due from financial institutions Investments Islamic financing and related assets Operating fixed assets Other assets 56,036,849 12,021,351 129,115,165 130,156,297 311,530,270 8,924,328 9,982,837 657,767,097 56,036,849 3,021,351 12,674,955 7,784,589 27,031,972 1,450,355 108,000,071 9,000,000 41,977,548 411,948 93,058,189 3,055,756 147,503,441 964,595 1,094,827 41,589,182 4,583,634 48,232,238 73,498,067 2,321,897 11,682,754 1,304,791 893,092 89,700,601 45,230,644 35,089,353 990,383 81,310,380 5,182,807 18,462,299 1,964,641 25,609,747 9,130,998 32,005,501 9,130,998 15,990,356 5,230,648 10,615,991 196,584,579 224,596,970 142,842,304 564,023,853 196,584,579 224,596,970 33,728,127 454,909,676 24,270,606 24,270,606 18,389,037 18,389,037 28,102,014 28,102,014 6,843,151 6,843,151 7,707,497 7,707,497 11,385,346 11,385,346 12,416,526 12,416,526 7,000,000 1,362,909 13,770,218 627,293,479 30,473,618 1,639,220 481,670,250 (373,670,179) 2,380,639 31,881,893 115,621,548 3,570,959 32,575,987 15,656,251 340,727 686,600 29,129,341 60,571,260 340,727 1,373,200 8,557,078 72,753,302 340,727 1,373,200 9,421,424 80,578,394 340,728 2,746,400 14,640,980 25,786,266 7,000,000 19,416,526 6,193,221 66,392 24,717,329 2,199,834 26,983,555 Liabilities Bills payable Due to financial institutions Deposits and other accounts - Current accounts - Savings deposits - Fixed deposits Sub-ordinated Sukuk Deferred tax liabilities Other liabilities Net assets Share capital Reserves Unappropriated profit Surplus on revaluation of investments - - - 168,506 - 26,983,555 10,027,379 9,699,685 8,422,009 2,324,545 30,473,618 Current and Savings deposits have been classified under maturity upto one month as these do not have any contractual maturity. 41.5.2 Disclosures under BASEL III Liquidity Standards The Bank calculates the Liquidity Coverage Ratio (LCR) on monthly basis as per SBP Basel III Liquidity Standards issued under BPRD Circular No. 08 dated June 23, 2016. The objective of LCR is to promote the short-term resilience of the liquidity risk profile of the banks and this standard requires the banks to maintain sufficient High Quality Liquid Assets (HQLAs) to meet stressed cash outflows over a prospective 30 calendar-days period. As of December 31, 2017, Bank’s LCR stood at 126% against the SBP’s minimum requirement of 90%. Overall responsibility of liquidity risk management rests with the Board of Directors which performs its duties through the Board Risk Management Committee. Asset-Liability Management Committee comprising of Senior Management is responsible for the supervision & management of liquidity risk. The Bank’s treasury function has the primary responsibility for assessing, monitoring and managing bank’s liquidity and funding strategy. Treasury Middle Office being part of Risk management group is responsible for the independent identification, monitoring & analysis of risks inherent in treasury operations. The Bank has in place duly approved liquidity risk policy and strategy along with liquidity risk tolerance/appetite levels. These are communicated at various levels so as to ensure effective liquidity management for the Bank. Liquidity and related risks are managed through standardized processes established in the Bank. Board and senior management are apprised about liquidity profile of the Bank on periodic basis so as to ensure proactive liquidity management and to avoid abrupt shocks. The Bank’s prime source of liquidity is the customer’s deposit base. Within deposits, the Bank strives to maintain a healthy core deposit base in form of current and saving deposits and avoid concentration in particular products, tenors and dependence on large fund providers. Further, the Bank relies on Interbank borrowing for stop gap funding minimize concentration. Usually Interbank borrowing is for short term. The Bank follows centralized funding strategy so as to ensure achievement of strategic and business objectives of the Bank. Various tools and techniques are used to measure and monitor the possible liquidity risk. These include monitoring of different liquidity ratios like cash to deposits, financing to deposit ratio, liquid assets to total deposits, Interbank borrowing to total deposits and large deposits to total deposits which are monitored on daily basis against different triggers levels and communicated to senior management and to ALCO forum regularly. Further, the Bank also prepares the maturity profile of assets and liabilities to monitor the liquidity gaps over different time buckets. For maturity analysis, behavioral study techniques are also used to determine the behavior of non-contractual assets and liabilities based on historic data and statistical techniques. The Bank also ensures to maintain statutory cash and liquidity requirements all times. 208 MEEZAN BANK LIMITED
  193. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 The Bank has in place the Board approved stress testing policy. Liquidity stress testing is being conducted under various stress scenarios. Shocks include the withdrawals of deposits and increase in assets, withdrawals of wholesale / large deposits and interbank borrowing and utilization of undrawn credit lines etc. Results of same are escalated at the senior level so as to enable the senior management to take proactive actions to avoid liquidity crunch for the Bank. Contingency funding plan is a part of liquidity management framework of the Bank which identifies the trigger events that could cause a liquidity crisis and describes the actions to be taken to manage the crisis. Comprehensive liquidity contingency funding plan is prepared on annual basis which highlights liquidity management chain that needs to be followed. Responsibilities and crisis management phases are also incorporated in order to tackle the liquidity crisis. Moreover, contingency funding plan highlights possible funding sources, in case of a liquidity crisis. Main drivers of LCR Results are High Quality Liquid Assets and Net cash outflows. Outflows are mainly deposit outflows net of cash inflows which consist of inflows from financing and money market placements up to 1 month. The inputs for calculation of LCR are as prescribed by the regulator. High Quality Liquid Assets composed of Level-1 Assets which can be included in the stock of liquid assets at 100% of their market value. Bank has taken cash & treasury balances, Investments in GoP Ijarah sukuk classified as available for sale category and foreign currency Sukuk issued by sovereigns. Bank does not have Level 2-A Assets which can meet the SBP criteria. Further, investment in listed common equity shares is taken in Level 2-B asset category at 50% of their market value. The Bank relies on funds provided by depositors. Current and Saving accounts consist of 75.05% of total deposits, term deposits are 24.95% and borrowing from SBP and financial institutions is 5.5% of total deposits. Moreover the Bank does not rely on top few depositors to ensure its funding sources are well diversified. Further, currency mismatch is minimal as PKR deposits are 94.4% of Bank’s total deposits. The objective of Net Stable Funding Ratio (NSFR) is to reduce funding risk over a longer time horizon by requiring banks to fund their activities with sufficiently stable sources of funding in order to mitigate the risk of future funding stress. Banks are expected to meet the NSFR requirement of at least 100% on an ongoing basis from December 31, 2017. 41.5.2.1 Disclosures on Liquidity Coverage Ratio 2017 Total Unweighted Total Weighted Value (Average) Value (Average) Rupees in ‘000 High Quality Liquid Assets High Quality Liquid Assets Total high quality liquid assets (HQLA) 1 2 3 4 5 6 7 8 2.1 2.2 3.1 3.2 3.3 5.1 5.2 5.3 Cash Outlflows Retail deposits and deposits from small business cusmtomers of which: Stable deposit Less stable deposit Unsecured wholesale funding of which: Operational deposits (all counterparties) Non-operational deposits (all counterparties) Unsecured debt Secured wholesale funding Additional requirements of which: Outflows related to derivative exposures and other collateral requirements Outflows related to loss of funding on debt products Credit and Liquidity facilities Other contractual funding obligations Other contingent funding obligations Total Cash Outflows 9 10 11 12 Cash Inflows Secured lending Inflows from fully performing exposures Other Cash inflows Total Cash Inflows 21 22 23 Total HQLA Total Net Cash Outflows Liquidity Coverage Ratio (%) 115,848,701 433,993,569 433,993,569 194,183,530 194,183,530 11,077,378 11,077,378 252,530,216 13,868,249 21,954,736 5,229,896 41,052,881 43,399,357 43,399,357 72,557,313 72,557,313 1,107,738 1,107,738 3,757,800 120,822,208 13,868,249 10,977,368 2,088,477 26,934,094 115,848,701 93,888,114 126% ANNUAL REPORT 2017 209
  194. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 41.5.2.2 Net Stability Funding Ratio No Maturity Available Stable Funding (ASF) 1 Capital: 2 Regulatory capital 3 Other capital instruments 4 Retail deposits and deposit from small business customers: 5 Stable deposits 6 Less stable deposits 7 Wholesale funding: 8 Operational deposits 9 Other wholesale funding 10 Other liabilities: 11 NSFR derivative liabilities 12 All other liabilities and equity not included in other categories 13 Total ASF 29 Total RSF Net Stable Funding Ratio (%) 41.6 ≥ 1 yr weighted value Rupees in '000 33,623,700 2,979,092 - - 7,000,000 33,623,700 9,979,092 400,636,914 102,523,602 21,568,284 - 472,255,919 102,912,625 26,335,499 5,540,300 - 67,394,212 33,756,418 Required Stable Funding (RSF) 14 Total NSFR high-quality liquid assets (HQLA) 15 Deposits held at other financial institutions for operational purposes 4,783,911 16 Performing loans and securities: 17 Performing loans to financial institutions secured by Level 1 HQLA 18 Performing loans to financial institutions secured by non-Level 1 HQLA and unsecured performing loans to financail institutions 19 Performing loans to non- financial corporate clients, loans to retail and small business customers, and loans to sovereigns, central banks and PSEs, of which: 20 With a risk weight of less than or equal to 35% under the Basel II Standardised Approach for credit risk 21 Securities that are not in default and do not qualify as HQLA including exchange-traded equities. 22 Other assets: 23 Physical traded commodities, including gold 24 Assets posted as initial margin for derivative contracts 25 NSFR derivative assets 26 NSFR derivative liabilities before deduction of variation margin posted 27 All other assets not included in the above categories 28 Off-balance sheet items 30 2017 unweighted value by residual maturity < 6 months 6 months to < 1 yr - 313,924,246 77,962,052 - 17,337 105,024,024 69,267,169 - 46,330,825 165,230,636 - 35,790,694 619,043,617 2,319,506 2,391,956 394,570,524 46,327,892 - 177,086,295 26,835,015 100,285,584 258,575,860 58,875,899 8,921,840 48,025,264 75,284,952 24,070,972 24,070,972 16,919,789 41,555,675 1,063,795 40,491,880 270,619,079 14,381,820 53,591,161 1,063,795 52,527,366 13,530,954 - 466,404,101 133% Operational risk The Bank uses Basic Indicator Approach (BIA) for assessing the capital charge for operational risk. Under BIA the capital charge is calculated by multiplying average positive annual gross income of the Bank over past three years with 15% as per guidelines issued by SBP under Basel II. To reduce losses arising from operational risk, the Bank has strengthened its risk management framework by developing polices, strategies, guidelines and manuals. It also includes set up of functions like operational risk management, prevention of fraud and forgery and information security function, defining responsibilities of individuals, implementing four-eyes principle, enhancing security measures, improving efficiency and effectiveness of operations, outsourcing and improving quality of human resources through trainings and development. 42 TRUST ACTIVITIES The Bank commonly act as trustee and in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions including on behalf of certain related parties. These are not assets of the Bank and, therefore, are not included in the Statement of Financial Position. The following is the list of assets held under trust: 210 MEEZAN BANK LIMITED
  195. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 Category Sukuk Insurance Companies Asset Management Companies Employee Funds / NGO's Individuals Others Related parties Associates Other related parties 43. Number of IPS account 2017 2016 Government Ijarah Government Ijarah Government Ijarah Government Ijarah Government Ijarah 5 11 13 19 4 Government Ijarah Government Ijarah 3 1 56 Face Value Rupees in '000 2017 2016 5 11 12 19 4 1,981,000 28,000 12,700 40,000 2,063,000 28,000 7,700 40,500 1 1 53 95,000 75,000 2,231,700 35,000 75,000 2,249,200 PROFIT / (LOSS) DISTRIBUTION TO DEPOSITORS' POOLS AND SPECIFIC POOLS 43.1 The Bank managed following general and specific pools during the year: 2017 General Remunerative (Savings and Fixed) Depositors' Pools Profit Rate and Profit rate weightage return earned announcement Average period Profit Sharing Ratio of Mudarib Mudarib Fee Amount of Profit rate return Percentage of Mudarib Share distributed to Mudarib Share remunerative transferred transferred deposits through Hiba (Savings and through Hiba to remunerative Fixed) - Average deposits Rupees in '000 PKR Pool USD Pool GBP Pool EUR Pool Monthly Monthly Monthly Monthly 6.42% 3.09% 1.32% 0.66% 50% 75% 90% 90% 10,872,732 424,879 19,505 5,885 Rupees in '000 3.65% 0.77% 0.13% 0.06% 14% - 1,491,157 - 2016 General Remunerative (Savings and Fixed) Depositors' Pools Profit Rate and Profit rate weightage return earned announcement Average period Profit Sharing Ratio of Mudarib Mudarib Fee Profit rate return distributed to remunerative deposits (Savings and Fixed) Average Amount of Percentage of Mudarib Share transferred Mudarib Share through Hiba transferred through Hiba to remunerative deposits Rupees in '000 PKR Pool USD Pool GBP Pool EUR Pool Monthly Monthly Monthly Monthly 6.78% 2.19% 1.44% 0.43% 45% to 50% 60% to 75% 60% to 90% 60% to 90% 9,912,320 266,573 18,232 3,222 Rupees in '000 3.87% 0.59% 0.19% 0.05% 10% - 976,328 - ANNUAL REPORT 2017 211
  196. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 2017 Specific Pools Profit Rate and weightage announcement period Profit rate return earned Profit Sharing Ratio Investment Ratio Amount of Percentage of Mudarib Share transferred Mudarib Share through Hiba transferred through Hiba to remunerative deposits Profit rate return distributed Islamic Export Refinance (IERS) Musharaka Pool Monthly 4.48% * * 2.06% N/A N/A Inter Bank Musharaka / Modaraba borrowing Pool As required 7.63% - 5.24% * * 6.35% - 4.50% N/A N/A Special Sharikah Certificate Musharaka / Modaraba borrowing Pool As required 7.91% - 5.24% * * 6.50% - 2.40% N/A N/A * The profit sharing ratio and the investment ratio varies on case to case basis. 2016 Specific Pools Profit Rate and weightage announcement period Profit rate return earned Profit Sharing Ratio Investment Ratio Amount of Percentage of Mudarib Share transferred Mudarib Share through Hiba transferred through Hiba to remunerative deposits Profit rate return distributed Islamic Export Refinance (IERS) Musharaka Pool Monthly 5.31% * * 2.63% N/A N/A Inter Bank Musharaka / Modaraba borrowing Pool As required 9.01% - 5.55% * * 6.75% - 3.85% N/A N/A Special Sharikah Certificate Musharaka / Modaraba borrowing Pool As required 6.15% - 5.45% * * 6.50% - 4.00% N/A N/A * The profit sharing ratio and the investment ratio varies on case to case basis. 43.2 Following weightages have been assigned to different major products under the General pools duirng the year: Maximum Weightage Minimum Weightage Maximum Weightage Minimum Weightage 2016 2017 2017 2016 2016 23.37% 18.57 % 10.83 % 12.46 % 8.71 % 23.47 % 18.88 % 11.86 % 14.74 % 10.41 % 0.67 0.88 1.34 1.49 1.67 0.66 0.66 0.66 1.16 1.57 0.67 0.89 1.34 1.50 1.89 0.62 0.62 0.66 1.12 1.58 USD Pool Saving Accounts Certificate of Islamic Investment 3.73 % 1.71 % 3.39 % 1.58 % 0.45 1.35 0.45 0.77 0.45 1.35 0.45 0.77 GBP Pool Saving Accounts 0.46 % 0.43 % 0.27 0.27 0.27 0.27 EUR Pool Saving Accounts 0.29% 0.29 % 0.27 0.27 0.27 0.27 Percentage to Total Modaraba based Deposits PKR Pool Saving Accounts Meezan Bachat Account Karobari Munafa Account Certificate of Islamic Investment Plus Meezan Aamdan Certificate 212 MEEZAN BANK LIMITED 2017
  197. Notes to and forming part of the Unconsolidated Financial Statements For the year ended December 31 , 2017 43.3 Allocation of Income and Expenses to Depositors' Pools Following are material items of revenues, expenses, gains and losses 2017 2016 Rupees in ‘000 Profit / return earned on islamic financing and related assets, investments and placements Other Income (including other charges) Directly related costs attributable to pool 44 35,375,577 2,209,095 (959,646) 30,716,493 1,262,613 (650,841) GENERAL Comparative information has been re-classified, re-arranged or additionally incorporated in these financial statements, wherever necessary to facilitate comparison and better presentation. There were no significant reclassification during the current year except as follows: Reclassified Description 45 From To Takaful and tracker expenses on Ijarah (668,218) Administrative expenses Profit / return earned on Islamic financing and related assets, investments and placements Fee, subscription and clearing charges (124,518) Administrative expenses Fee, commission and brokerage income NON-ADJUSTING EVENT 45.1 46 Rupees in '000 The Board of Directors in its meeting held on February 14, 2018 has announced final cash dividend of Rs 1.25 per share (12.5%). The financial statements for the year ended December 31, 2017, do not include the effect of this appropriation which will be accounted for in the financial statements for the year ending December 31, 2018. DATE OF AUTHORISATION These financial statements were authorised for issue on February 14, 2018 by the Board of Directors of the Bank. Riyadh S. A. A. Edrees Chairman Irfan Siddiqui President & CEO Faisal A. A. A. Al-Nassar Director Mansur Khan Director Shabbir Hamza Khandwala Chief Financial Officer ANNUAL REPORT 2017 213
  198. Statement Showing Written-Off Loans or Any Other Financial Relief of Rupees 500 ,000 or Above (Annexure 1) During the year ended December 31, 2017 Annexure 1 Statement showing written-off loans or any other financial relief of rupees 500,000 and above during the year ended December 31, 2017. S. Name and No. address of the borrower 1 2 Name of individuals / partners / directors (with CNIC No.) 3 Father's / Husband's Name 4 Outstanding liabilities as at January 1, 2017 Principal Profit Others 5 6 7 Total (5+6+7) 8 Principal written-off Profit written-off 9 10 Other Financial Relief provided 11 Total (9+10+11) 12 Rupees in ‘000 1 Amir Majeed Kaludi Flat No. A-104, 4th Floor, West Wind Estates, Plot No. FL-11, Block-2, Clifton, Karachi. 42301-6831572-5 2 Gulzar Oil Industries House No C-15 Memon Cooperative Housing Society, Hyderabad Mrs. Razia Gulzar Muhammad 41303-1435631-6 Hussain Gulzar 3,484 - - 3,055 105 3,589 2,184 - - 2,184 - 3,055 - 3,055 - 3,055 3 Vital Chicks and Feeds 55 G- II, Johar Town, Lahore Chaudhary Nasir Ahmed 35202-4426237-1 Chaudhary Muhammad Rafiq 8,090 633 255 8,978 - 633 255 888 4 Muhammad Hashim Sher House # 21-22, Hamza Town, Moza Dhana Singh Wala, Tehsil & District, Lahore 38402-3118132-5 Muhammad Nawaz 812 708 219 1,739 - 649 219 868 5 Balqees Mustafa 35201-5955768-6 304-J, Phase I DHA, Lahore Major Waseem Mehdi 1,963 1,988 249 4,200 - 1,905 249 2,154 Hadayat Ali 13,079 4,356 290 17,725 - 4,246 290 4,536 6 214 Abdul Majeed Kaludi Hi-Tech CNG Station 248 G / 4, Johar Town, Lahore Bashir Ahmed 35202-5441458-1 Zia Ahmed Arshad 35201-1298303-7 Rais Haider 35202-3623279-3 MEEZAN BANK LIMITED Chaudhary Alaf Din Sheikh Ilyas Hussain
  199. Statement Showing Written-Off Loans or Any Other Financial Relief of Rupees 500 ,000 or Above (Annexure 1) During the year ended December 31, 2017 Annexure 1 Statement showing written-off loans or any other financial relief of rupees 500,000 and above during the year ended December 31, 2017. S. Name and No. address of the borrower 1 2 Name of partners / directors (with CNIC No.) 3 Father's / Husband's Name 4 Outstanding liabilities as at January 1, 2017 Principal Profit Others 5 6 7 Total (5+6+7) 8 Principal written-off Profit written-off 9 10 Other Financial Relief provided 11 Total (9+10+11) 12 Rupees in ‘000 7 Munawar Hussain 33101-4363065-9 Javed P-782, St # 9/15, 66 Foota Bazar, Mansoorabad, Faisalabad Muhammad Ishaq 656 785 83 1,524 - 429 83 512 8 Fareeha Nauman 35202-9014729-0 Plot # 323, Block-D, Phase-V, DHA, Lahore Nauman Yousuf 7,500 9,678 348 17,526 - 10,413 348 10,761 9 Merkolink Shehnaz Haider Distributors 61101-1812779-4 21/2 Altaf Town, Abdul Rasheed Multan 36302-9081117-9 Raja Gayoor Ali 37405-0560388-7 Shahid Ahmad Qureshi 36302-7710110-9 Mueen ud din Haider Saeed Ahmed Qurashi Raja Zafar Ali Khan Faqeer Ahmad Qureshi 1,495 434 70 1,999 28 434 70 532 10 Syed Wajeeh 36302-5671622-5 Haider Kazmi House No. 36-D, Tipu Sultan Road, Multan Cantt, Multan Syed Ajmal Hussain Kazmi 3,114 2,862 58 6,034 - 2,523 238 2,761 11 Rubass Rafiq 35202-7643671-9 House # 27, Block-B-III, Punjab Government Cooperative Society, Lahore Muhammad Rafique 9,533 8,141 516 18,190 - 9,146 516 9,662 49,726 32,640 2,193 84,559 2,212 33,433 2,268 37,913 ANNUAL REPORT 2017 215
  200. 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) 218 219 220 221 222 223 224 302
  201. Consolidated Statement of Financial Position As at December 31 , 2017 Note 2017 2016 Rupees in ‘000 ASSETS Cash and balances with treasury banks Balances with other banks Due from financial institutions - net Investments - net Islamic financing and related assets - net Operating fixed assets Deferred tax asset Other assets - net 7 8 9 10 11 12 64,556,409 4,940,090 147,229,221 123,160,901 419,929,149 11,994,586 14,156,973 785,967,329 56,037,043 12,067,855 129,115,165 134,796,574 311,530,270 9,031,686 10,689,082 663,267,675 14 15 16 17 18 19 11,168,093 36,813,295 673,180,310 7,000,000 230,787 19,165,271 747,557,756 38,409,573 9,130,998 32,005,501 563,999,852 7,000,000 1,955,203 14,403,557 628,495,111 34,772,564 Share capital Reserves Unappropriated profit 20 21 NON-CONTROLLING INTEREST 22 Surplus on revaluation of investments (including amount relating to share of profit from associates) - net of tax 10,629,022 13,393,125 12,563,156 36,585,303 1,007,975 37,593,278 10,027,379 9,724,001 11,340,678 31,092,058 1,221,989 32,314,047 23 816,295 38,409,573 2,458,517 34,772,564 CONTINGENCIES AND COMMITMENTS 24 13 LIABILITIES Bills payable Due to financial institutions Deposits and other accounts Sub-ordinated Sukuk Deferred tax liabilities Other liabilities NET ASSETS REPRESENTED BY The annexed notes 1 to 49 and Annexure 1 form an integral part of these consolidated financial statements. Riyadh S. A. A. Edrees Chairman Irfan Siddiqui President & CEO Faisal A. A. A. Al-Nassar Director Mansur Khan Director Shabbir Hamza Khandwala Chief Financial Officer ANNUAL REPORT 2017 219
  202. Consolidated Profit and Loss Account For the year ended December 31 , 2017 Note 2017 2016 Rupees in ‘000 Profit / return earned on Islamic financing and related assets, investments and placements Profit on deposits and other dues expensed Net spread earned Provision / (reversal of provision) against non-performing Islamic financing and related assets - net Provision / (reversal of provision) against diminution in the value of investments Provision against off balance sheet obligations Bad debts written off directly 25 26 36,094,934 15,270,733 20,824,201 30,761,424 12,871,789 17,889,635 11.10 720,189 (120,246) 10.7 19.2 586,732 13,482 1,320,403 19,503,798 (64,673) (184,919) 18,074,554 6,030,008 287,977 1,139,648 939,266 (1,708) 411,013 8,806,204 28,310,002 3,817,718 345,288 1,207,563 1,012,424 341,676 6,724,669 24,799,223 17,125,835 (13,524) 10,824 290,837 17,413,972 10,896,030 (963,186) 9,932,844 9,932,844 15,307,097 (74,038) 3,600 211,940 15,448,599 9,350,624 1,166,467 10,517,091 10,517,091 4,599,996 373,600 (820,745) 4,152,851 5,779,993 3,283,846 268,219 362,603 3,914,668 6,602,423 5,618,512 161,481 5,779,993 6,181,901 420,522 6,602,423 Net spread after provisions OTHER INCOME Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Capital gain on sale of investments - net Unrealised loss on held for trading investments Other income Total other income 27 28 OTHER EXPENSES Administrative expenses Other reversals of provisions Other charges Workers Welfare Fund Total other expenses 29 30 Share of results of associates before taxation 10.8 Extraordinary / unusual items Profit before taxation Taxation - Current - Prior years - Deferred 31 Profit after taxation Attributable to: Shareholders of the Holding company Non-controlling interest 22 Rupees Basic and diluted earnings per share of the Holding company for the year 32 5.46 Restated 6.05 The annexed notes 1 to 49 and Annexure 1 form an integral part of these consolidated financial statements. Riyadh S. A. A. Edrees Chairman 220 Irfan Siddiqui President & CEO MEEZAN BANK LIMITED Faisal A. A. A. Al-Nassar Director Mansur Khan Director Shabbir Hamza Khandwala Chief Financial Officer
  203. Consolidated Statement of Comprehensive Income For the year ended December 31 , 2017 Note 2017 2016 Rupees in ‘000 Profit after tax for the year attributable to: Shareholders of the Holding company Non-controlling interest 22 Other Comprehensive income 5,618,512 161,481 5,779,993 6,181,901 420,522 6,602,423 (193,715) 67,452 (126,263) 63,864 (21,987) 41,877 5,653,730 6,644,300 5,493,244 160,486 5,653,730 6,222,734 421,566 6,644,300 (106,552) 49,902 (2,439,341) 853,769 (1,642,222) 101,599 (35,560) 2,360,337 (826,118) 1,600,258 Items that may not be reclassified to profit and loss account Remeasurements of defined benefit plan Tax on remeasurements of defined benefit plan Comprehensive income transferred to statement of changes in equity Attributable to: Shareholders of the Holding company Non-controlling interest Components of comprehensive income not reflected in equity Share in results of associates relating to investment classified as 'available for sale' Deferred tax on share of results of associates (Deficit) / surplus on revaluation of investments Deferred tax on revaluation of investments The annexed notes 1 to 49 and Annexure 1 form an integral part of these consolidated financial statements. Riyadh S. A. A. Edrees Chairman Irfan Siddiqui President & CEO Faisal A. A. A. Al-Nassar Director Mansur Khan Director Shabbir Hamza Khandwala Chief Financial Officer ANNUAL REPORT 2017 221
  204. Consolidated Statement of Changes in Equity For the year ended December 31 , 2017 Share capital Share Premium Capital reserves Statutory reserve* Revenue reserves Non General Unappropriated NonDistributable reserve profit controlling Capital interest Reserve - Gain on Bargain Purchase Total Rupees in ‘000 10,027,379 Balance as at January 1, 2016 Profit after taxation for the year - 5,403,050 3,117,547 91,082 9,238,479 944,623 28,822,160 - - - - - 6,181,901 420,522 6,602,423 Remeasurements of defined benefit plan - net of tax - - - - - 40,833 1,044 41,877 Other appropriations Transfer to statutory reserve - - - - (1,112,322) Dividend payout by Subsidiary - - - - - Final cash dividend for the year 2015 - - - - - (1,253,422) - (1,253,422) Interim cash dividend for the year 2016 - - - - - (1,754,791) (3,008,213) - (1,754,791) (3,008,213) Other comprehensive income for the year 1,112,322 - - Transactions with owners recognised directly in equity Balance as at December 31, 2016 10,027,379 Profit after taxation for the year - 6,515,372 3,117,547 91,082 - (144,200) (144,200) 11,340,678 1,221,989 32,314,047 - - - - - 5,618,512 161,481 5,779,993 Remeasurements of defined benefit plan - net of tax - - - - - (125,268) (995) (126,263) Other appropriations Transfer to statutory reserve - - - - (1,262,553) - - - - - - - - - - Other comprehensive income for the year 1,262,553 - - Transactions with owners recognised directly in equity Dividend payout by Subsidiary Issue of right shares (note 20.2) 601,643 2,406,571 (374,500) (374,500) - 3,008,214 Final cash dividend for the year 2016 - - - - - (1,253,422) - (1,253,422) Interim cash dividend for the year 2017 - - - - - (1,754,791) - (1,754,791) - - - - - (3,008,213) - (3,008,213) Balance as at December 31, 2017 10,629,022 2,406,571 7,777,925 3,117,547 91,082 12,563,156 1,007,975 37,593,278 * This represents reserve created under section 21(i) (a) of the Banking Companies Ordinance, 1962. The annexed notes 1 to 49 and Annexure 1 form an integral part of these consolidated financial statements. Riyadh S. A. A. Edrees Chairman 222 Irfan Siddiqui President & CEO MEEZAN BANK LIMITED Faisal A. A. A. Al-Nassar Director Mansur Khan Director Shabbir Hamza Khandwala Chief Financial Officer
  205. Consolidated Cash Flow Statement For the year ended December 31 , 2017 Note 2017 2016 Rupees in ‘000 CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation Less: Dividend income 9,932,844 (287,977) 9,644,867 10,517,091 (345,288) 10,171,803 1,510,979 177,508 1,424,562 178,529 720,189 586,732 286,498 1,708 (73,554) 963,186 4,173,246 13,818,113 (120,246) (64,673) 274,330 (53,681) (1,166,467) 472,354 10,644,157 (18,114,056) (109,119,068) (3,841,870) (131,074,994) (28,035,689) (103,841,201) 3,210,925 (128,665,965) 2,037,095 4,807,794 109,180,458 3,731,828 119,757,175 2,500,294 (128,975) (4,227,963) (1,856,644) 2,570,674 18,395,950 92,200,379 93,109 113,260,112 (4,761,696) (283,163) (2,761,382) (7,806,241) CASH FLOWS FROM INVESTING ACTIVITIES Net investment in securities Dividend received Investments in operating fixed assets Proceeds from sale of fixed assets Net cash generated from investing activities 7,538,154 661,956 (4,719,204) 141,371 3,622,277 19,033,714 556,770 (2,518,774) 99,113 17,170,823 CASH FLOWS FROM FINANCING ACTIVITIES Issuance of Right Shares Issuance of Sub-ordinated Sukuk Dividend paid to Equity shareholders of the Bank Dividend paid to Non-controlling interest Net cash (used in) / generated from financing activities 3,008,214 (3,007,746) (374,500) (374,032) 7,000,000 (3,006,982) (144,200) 3,848,818 Adjustments for non-cash charges and other items: Depreciation Amortisation Provision / (reversal of provision) against non-performing Islamic financing and related assets - net Provision / (reversal of provision) against diminution in value of investments Charge for defined benefit plan Unrealised loss on held for trading investments Gain on sale of operating fixed assets Share of results of associates (Increase) / decrease in operating assets Due from financial institutions Islamic financing and related assets Other assets Increase in operating liabilities Bills payable Due to financial institutions Deposits and other accounts Other liabilities Contribution to defined benefit plan Income tax paid Net cash used in operating activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year 33 1,391,601 68,104,898 13,213,400 54,891,498 Cash and cash equivalents at the end of the year 33 69,496,499 68,104,898 The annexed notes 1 to 49 and Annexure 1 form an integral part of these consolidated financial statements. Riyadh S. A. A. Edrees Chairman Irfan Siddiqui President & CEO Faisal A. A. A. Al-Nassar Director Mansur Khan Director Shabbir Hamza Khandwala Chief Financial Officer ANNUAL REPORT 2017 223
  206. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 1 THE GROUP AND ITS OPERATIONS 1.1 The "Group" consists of: Holding Company - Meezan Bank Limited Subsidiary Company - Al Meezan Investment Management Limited 1.2 Meezan Bank Limited (MBL / the Bank) ('Holding company') was incorporated in Pakistan on January 27, 1997, as a public limited company under the Companies Act, 2017 (previously 'Companies Ordinance, 1984), and its shares are quoted on the Pakistan Stock Exchange Limited. The Bank was registered as an ‘Investment Finance Company’ on August 8, 1997, and carried on the business of investment banking as permitted under SRO 585(I)/87 dated July 13, 1987, in accordance and in conformity with the principles of Islamic Shariah. A ‘Certificate of Commencement of Business' was issued to the Bank on September 29, 1997. 1.3 The Bank was granted a ‘Scheduled Islamic Commercial Bank’ license on January 31, 2002 and formally commenced operations as a Scheduled Islamic Commercial Bank with effect from March 20, 2002 on receiving notification in this regard from the State Bank of Pakistan (the SBP) under section 37 of the State Bank of Pakistan Act, 1956. Currently, the Bank is engaged in corporate, commercial, consumer, investment and retail banking activities. 1.4 The Bank was operating through six hundred and one branches as at December 31, 2017 (2016: five hundred and seventy one). Its registered office is situated at Meezan House, C-25, Estate Avenue, SITE, Karachi, Pakistan. 1.5 Al Meezan Investment Management Limited (AMIML) ('the Subsidiary company') is involved in asset management, investment advisory, portfolio management, equity research, underwriting and corporate finance. MBL holds 65% of the share capital of AMIML. 1.6 The Group’s associates are as follows: The Group considers the following open end funds managed by AMIML as its associates: - Meezan Islamic Fund - Meezan Balanced Fund - Meezan Islamic Income Fund - Al Meezan Mutual Fund - KSE Meezan Index Fund - Meezan Sovereign Fund - Meezan Tahaffuz Pension Fund - Meezan Energy Fund - Meezan Gold Fund - Meezan Cash Fund - Meezan Dedicated Equity Fund - Meezan Strategic Allocation Fund - Meezan Asset Allocation Fund - Meezan Financial Planning Fund of Funds The country of establishment in respect of all of the above funds is Pakistan. Further, all the above funds are individual open end schemes and have been established by execution of trust deeds between AMIML and the Central Depository Company of Pakistan Limited (CDC) as the trustee. 224 MEEZAN BANK LIMITED
  207. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 2 BASIS OF PRESENTATION AND CONSOLIDATION 2.1 Basis of presentation These consolidated financial statements have been prepared from the information available in the audited financial statements of the Meezan Bank Limited (Holding company) for the year ended December 31, 2017 and the condensed interim financial statements of Al Meezan Investment Management Limited (AMIML) for the six months period ended December 31, 2017 which have only been subjected to review but are not audited. AMIML prepares its annual financial statements up to June 30 each year. In preparing the consolidated profit and loss account for the year ended December 31, 2017 the results for the period from January 1, 2017 to June 30, 2017 have been calculated from the audited financial statements of AMIML for the year ended June 30, 2017 after eliminating the results for the six months period ended December 31, 2016. The accounting policies used by AMIML and associates in preparation of their respective financial statements are consistent with that of the holding company except where specified. These consolidated financial statements comprise of the consolidated statement of financial position as at December 31, 2017 and the consolidated profit and loss account, the consolidated statement of comprehensive income, the consolidated cash flow statement and the consolidated statement of changes in equity together with the notes forming part thereof for the year ended December 31, 2017. The associates have been accounted for in these consolidated financial statements under the equity method of accounting on the respective basis as follows: Entity Source of information Meezan Balanced Fund Financial statements for the half years ended December 31, 2017 and 2016 (unaudited but subject to a limited review by its statutory auditors) and audited financial statements for the year ended June 30, 2017. Al Meezan Mutual Fund Limited Financial statements for the half years ended December 31, 2017 and 2016 (unaudited but subject to a limited review by its statutory auditors) and audited financial statements for the year ended June 30, 2017. Meezan Islamic Fund Financial statements for the half years ended December 31, 2017 and 2016 (unaudited but subject to a limited review by its statutory auditors) and audited financial statements for the year ended June 30, 2017. Meezan Islamic Income Fund Financial statements for the half years ended December 31, 2017 and 2016 (unaudited but subject to a limited review by its statutory auditors) and audited financial statements for the year ended June 30, 2017. Meezan Sovereign Fund Financial statements for the half years ended December 31, 2017 and 2016 (unaudited but subject to a limited review by its statutory auditors) and audited financial statements for the year ended June 30, 2017. KSE Meezan Index Fund Financial statements for the half years ended December 31, 2017 and 2016 (unaudited but subject to a limited review by its statutory auditors) and audited financial statements for the year ended June 30, 2017. Meezan Cash Fund Financial statements for the half years ended December 31, 2017 and 2016 (unaudited but subject to a limited review by its statutory auditors) and audited financial statements for the year ended June 30, 2017. Meezan Tahaffuz Pension Fund - Equity Sub Fund Financial statements for the half years ended December 31, 2017 and 2016 (unaudited but subject to a limited review by its statutory auditors) and audited financial statements for the year ended June 30, 2017. Meezan Financial Planning Fund of Funds - Conservative Financial statements for the half years ended December 31, 2017 and 2016 (unaudited but subject to a limited review by its statutory auditors) and audited financial statements for the year ended June 30, 2017. Meezan Gold Fund Financial statements for the half years ended December 31, 2017 and 2016 (unaudited but subject to a limited review by its statutory auditors) and audited financial statements for the year ended June 30, 2017. ANNUAL REPORT 2017 225
  208. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 2.2 Entity Source of information Meezan Financial Planning Fund of Funds - MAAP II Financial statements for the half years ended December 31, 2017 and 2016 (unaudited but subject to a limited review by its statutory auditors) and audited financial statements for the year ended June 30, 2017. Meezan Tahaffuz Pension Fund - Gold Sub Fund Financial statements for the half year ended December 31, 2017 and for the period from August 4, 2016 to December 31, 2016 (unaudited but subject to a limited review by its statutory auditors) and audited financial statements for the period from August 4, 2016 to June 30, 2017. Meezan Energy Fund Financial statements for the the half year ended December 31, 2017 and for the period from November 29, 2016 to December 31, 2016 (unaudited but subject to a limited review by its statutory auditors) and audited financial statements for the period from November 29, 2016 to June 30, 2017. Meezan Strategic Allocation Fund - MSAP II Financial statements for the half year ended December 31, 2017 and for the period from December 21, 2016 to December 31, 2016 (unaudited but subject to a limited review by its statutory auditors) and audited financial statements for the period from December 21, 2016 to June 30, 2017. Meezan Financial Planning Fund of Funds - MAAP III Financial statements for the half years ended December 31, 2017 and 2016 (unaudited but subject to a limited review by its statutory auditors) and audited financial statements for the year ended June 30, 2017. Basis of consolidation Subsidiaries are those enterprises in which the Holding company directly or indirectly exercises control over the financial and operating policies, and / or beneficially owns or holds more than 50 percent of the voting securities or otherwise, has power to elect and appoint more than 50 percent of its directors. The financial statements of the subsidiary are included in these consolidated financial statements from the date when the control commenced. The financial statements of AMIML have been consolidated on a line-by-line basis. The Group applies uniform accounting policies for similar transactions and events in similar circ*mstances except where specified otherwise. Associates are entities over which the Group has a significant influence but not control over the financial and operating policies. The Group's share in an associate is the aggregate of the holding in that associate by the Holding company and by the Subsidiary. Investments in associates are accounted for under the equity method of accounting and are initially recognised at cost, thereafter for the post acquisition change in the Group's share of net assets of the associates. These consolidated financial statements include the Group's share of income and expenses of associates from the date that significant influence commences until the date that such influence ceases. Non-controlling interest is that part of the net results of operations and of net assets of the subsidiary attributable to interests which are not owned by MBL. All material inter-group balances, transactions and resulting profits / losses have been eliminated. 3 STATEMENT OF COMPLIANCE 3.1 Basis of preparation These consolidated financial statements (here-in-after referred to as "financial statements") have been prepared in accordance with the approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board and Islamic Financial Accounting Standards (IFASs) issued by the Institute of Chartered Accountants of Pakistan, as are notified by Securities & Exchange Commission of Pakistan (SECP), provisions of the Companies Ordinance, 1984 (repealed - note 3.1.1), the Banking Companies Ordinance, 1962, and the directives issued by the SECP and SBP. Wherever the requirements of provisions of the Companies Ordinance, 1984 (repealed - note 3.1.1), the Banking Companies Ordinance, 1962, the IFAS notified by the SECP and directives issued by the SECP and the SBP differ from the requirements of IFRS, the provisions of the Companies Ordinance, 1984 (repealed - note 3.1.1) and the Banking Companies Ordinance, 1962, IFAS notified by the SECP and the directives issued by the SECP and the SBP shall prevail 3.1.1 226 The Companies Ordinance, 1984 has been repealed after the enactment of Companies Act, 2017. However, as allowed by the SECP vide its circular dated October 04, 2017, these consolidated financial statements have been prepared in accordance with the provisions of the repealed Companies Ordinance, 1984. MEEZAN BANK LIMITED
  209. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 3.2 The SBP, through its BSD Circular No. 10 dated August 26, 2002, has deferred the implementation of International Accounting Standard (IAS) 39 - "Financial Instruments: Recognition and Measurement" and IAS 40 - "Investment Property" for Banking Companies in Pakistan, till further instructions. Accordingly, the requirements of these Standards have not been considered in the preparation of these financial statements. Further, the SECP has deferred the applicability of International Financial Reporting Standard (IFRS) 7 "Financial Instruments: Disclosures" through its S.R.O. 411(I)/2008 dated April 28, 2008. Accordingly, the requirements of this standard have also not been considered in the preparation of these financial statements. However, investments and non-banking assets have been classified and valued in accordance with the requirements prescribed by the SBP through various circulars. 3.3 IFRS 8 "Operating Segments" is effective for the Group’s accounting period beginning on or after January 1, 2009. All Banking Companies in Pakistan are required to prepare their annual financial statements in line with the format prescribed under BSD Circular No. 4 dated February 17, 2006, ‘Revised Forms of Annual Financial Statements’, effective from the accounting year ended December 31, 2006. The management believes that as the SBP has defined the segment categorisation in the above mentioned circular, the SBP requirements prevail over the requirements specified in IFRS 8. Accordingly, segment information disclosed in these financial statements is based on the requirements laid down by the SBP. 3.4 The SBP vide its BSD Circular No. 07 dated April 20, 2010 has clarified that for the purpose of preparation of financial statements in accordance with International Accounting Standard - 1 (Revised), 'Presentation of Financial Statements', two statement approach shall be adopted i.e. separate 'Profit and Loss Account' and 'Statement of Comprehensive Income' shall be presented and Balance Sheet shall be renamed as 'Statement of Financial Position'. The surplus / (deficit) on revaluation of available for sale (AFS) securities is required to be included in the 'Statement of Comprehensive Income'. However, it should continue to be shown separately in the Statement of Financial Position below equity. Accordingly, the above requirements have been adopted in the preparation of these financial statements. 3.5 The SECP vide its notification SRO 56(1)/2016 dated January 28, 2016 has notified that the requirements of IFRS 10 (Consolidated Financial Statements) and section 237 of the repealed Companies Ordinance, 1984, will not be applicable with respect to the investment in mutual funds established under Trust structure. 3.6 Standards, interpretations and amendments to published approved accounting standards that are effective in the current year: The accounting policies adopted in the preparation of these financial statements are consistent with those of the previous financial year except as describe below: New Standards, Interpretations and Amendments The Group has adopted the following accounting standards, amendments and interpretation of IFRSs which became effective for the current year: Standards or Interpretations - IAS 7 Statement of Cash Flow – Disclosure Initiative - (Amendments) - IAS 12 Income Taxes – Recognition of Deferred Tax Assets for Unrealized losses (Amendments) Improvements to Accounting Standards Issued by the IASB in September 2014 - IFRS 12 Disclosure of Interests in Other Entities - Clarification of the scope of the disclosure requirements in IFRS 12 The adoption of the above amendments, improvements to accounting standards and interpretations did not have any effect on the financial statements. 3.7 Standards, interpretations and amendments to published approved accounting standards that are not yet effective: 3.7.1 The following standards, amendments and interpretations with respect to the approved accounting standards as applicable in Pakistan would be effective from the dates mentioned below against the respective standard or interpretation. Standards, Interpretations and Amendments Effective date (accounting periods beginning on or after) - IFRS 2 – Share-based Payments – Classification and Measurement of Share-based Payments Transactions (Amendments) January 01, 2018 - IFRS 10 – Consolidated Financial Statements and IAS 28 - Investment in Associates and Joint Ventures - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendment) Not yet finalized - IFRS 4 – Insurance Contracts: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts – (Amendments) January 01, 2018 - IFRS 9 – Financial Instruments: Classification and Measurement July 01, 2018 ANNUAL REPORT 2017 227
  210. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 Standards, Interpretations and Amendments Effective date (accounting periods beginning on or after) - IFRS 9 – Prepayment Features with Negative Compensation – (Amendments) January 01, 2018 - IFRS 15 – Revenue from Contracts with Customers January 01, 2018 - IFRIC Interpretation 22 – Foreign Currency Transactions and Advance Consideration January 01, 2018 - IFRIC 23 – Uncertainty over Income Tax Treatments January 01, 2019 The above standards, amendments and interpretations are not expected to have any material impact on the Group’s financial statements in the period of initial application. With regard to IFRS 9, the Group considers that as the Prudential Regulations and other SBP directives currently provide the accounting framework for the measurement and valuation of investments and provision against non performing financing, the implementation of IFRS 9 may require changes in the regulatory regime. Therefore, the Group expects that the SBP would issue suitable guidance and instruction on the application of IFRS 9 for the banking sector of Pakistan. In addition to the above standards and amendments, improvements to various accounting standards have also been issued by the IASB. Such improvements are generally effective for accounting periods beginning on or after January 01, 2018 and January 01, 2019. The Group expects that such improvements to the standards will not have any impact on it's financial statements in the period of initial application. Further, following new standards have been issued by IASB which are yet to be notified by the SECP for the purpose of applicability in Pakistan. Standards IFRS 14 – Regulatory Deferral Accounts IFRS 16 – Leases IFRS 17 – Insurance Contracts 4 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS 4.1 The preparation of these consolidated financial statements in conformity with the approved accounting standards as applicable in Pakistan requires the use of certain critical accounting estimates. It also requires management to exercise judgments in the process of applying the Group’s accounting policies. The significant accounting areas where various assumptions and estimates are significant to the Group's financial statements or where judgment was exercised in the application of the accounting policies are as follows: (a) Classification of investments in accordance with the Group's policy (notes 6.4 and 10); (b) Provision against non-performing Islamic financing and related assets (notes 6.3.2 and 11); (c) Impairment of investments in equity instruments of subsidiary, associates and non associate entities (notes 6.4.5 and 10) (d) Accounting for defined benefit plan (notes 6.12 and 35); (e) Depreciation / amortisation of fixed assets and intangible assets (notes 6.5 and 12); and (f) Assumption and estimation in recognition of provision for taxation (current and prior years) and deferred taxation (notes 6.7,18, 19 and 31). Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectation of future events that are believed to be reasonable under the circ*mstances. Actual results may differ from these estimates. 5 BASIS OF MEASUREMENT 5.1 228 These consolidated financial statements have been prepared under the historical cost convention except that certain investments and commitments in respect of foreign exchange contracts have been marked to market and are carried at fair value. In addition, obligations in respect of staff retirement benefits, end of service benefits and employees compensated leave absences are carried at present value. MEEZAN BANK LIMITED
  211. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 5.2 Functional and Presentation Currency Items included in the consolidated financial statements are measured using the currency of the primary economic environment in which the Group operates. These financial statements are presented in Pakistani Rupees, which is the Group's functional and presentation currency. 5.3 Rounding off Figures have been rounded off to the nearest thousand rupees unless otherwise stated. 6 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. 6.1 Cash and cash equivalents Cash and cash equivalents comprise of cash and balances with treasury banks and balances with other banks in current and deposit accounts. 6.2 Due to / from financial institutions Bai Muajjal In Bai Muajjal, the Group sells sukuk on credit to other financial institutions. The credit price is agreed at the time of sale and such proceeds are received at the end of the credit period. Musharaka / Modaraba In Musharaka / Modaraba, the Group invests in the Shariah compliant business pools of the financial institutions at the agreed profit and loss sharing ratio. Musharaka from State Bank of Pakistan under IERS Under IERS, the Group accepts funds from the SBP under Shirkat-ul-Aqd to constitute a pool for investment in export refinance portfolio of the Group under the guidelines issued by the SBP. The profit of the pool is shared as per the agreed weightages between the partners. 6.3 Islamic financing and related assets Murabaha In Murabaha transactions, the Group purchases the goods and after taking the possession, sells them to the customer on cost plus profit basis either in a spot or credit transaction. Ijarah In Ijarah financing, the Group provides the asset on pre-agreed rentals for specific tenors to the customers. Istisna In Istisna financing, the Group places an order to purchase some specific goods / commodities from its customers to be delivered to the Group within an agreed time. The goods are then sold by the customer on behalf of the Group and the amount hence financed alongwith profit is paid back to the Group. Tijarah In Tijarah financing, the Group purchases specific goods / commodities on cash basis from its customers for onward sale by the customer on behalf of the Group and on subsequent sale, the financed amount alongwith profit is paid back by the customer to the Group. Diminishing Musharakah In Diminishing Musharakah financing, the Group enters into Musharakah based on Shirkat-ul-milk for financing an agreed share of fixed asset (e.g. house, land, plant or machinery) with its customers. The customers pay periodic profit as per the agreement for the utilisation of the Group's Musharakah share and also periodically purchase the Group's share over the tenure of the transaction. ANNUAL REPORT 2017 229
  212. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 Running Musharakah In Running Musharakah financing, the Group enters into financing with the customer based on Shirkat-ul-Aqd or Business Partnership in the customer's operating business. Under this mechanism the customer can withdraw and return funds to the Group subject to his Running Musharakah Financing limit during the Musharakah Period. At the end of each quarter / half year the customer pays the provisional profit as per the desired profit rate which is subject to final settlement based on the relevant quarterly / half yearly / annual accounts of the customer. Bai Muajjal In Bai Muajjal financing, the Group sells Shariah compliant sukuk on credit to customers. The credit price is agreed at the time of sale and such proceeds are received at the end of the credit period. Service Ijarah In Service Ijarah financing, the Group provides financing by acquiring certain agreed services from the customer. After the purchase of services, the Group appoints the customer to sell these services in the market over a period and provide a sale confirmation of such sale. The profit is only accrued from the date of receipt of such confirmation. Wakalah tul Istithmar In Wakalah tul Istithmar financing, the Group enters into investment agency transaction with customer acting as an agent of the Group. Under this mechanism, the funds disbursed are invested by the customer on behalf of the Group and are recorded as financing upon their investment in the business. At the end of each quarter / half year / other defined period, the customer pays the provisional profit which is subject to adjustment upon actual declaration of wakalah business performance by the agent. Musawamah In Musawamah financing, the Group purchases the goods and after taking the possession, sells them to the customer either in spot or credit transaction, without disclosing the cost. 6.3.1 Islamic financing and related assets are stated net of specific and general provisions against non-performing Islamic financing and related assets which are charged to the profit and loss account. Funds disbursed, under financing arrangements for purchase of goods / assets are recorded as advance. On culmination, financings are recorded at the deferred sale price net of profit. Goods purchased but remaining unsold at the statement of financial position date are recorded as inventories. 6.3.2 Provision against non-performing Islamic financing and related assets Specific provision The Group determines provisions against Islamic financing and related assets on a prudent basis in accordance with the requirements of the Prudential Regulations issued by the SBP. General provision In accordance with Prudential Regulations issued by the SBP, general provision against consumer financing should be maintained at varying percentages based on the non-performing loan ratio present in the portfolio. These percentages range from 1% to 2.5% for secured and 4% to 7% for unsecured portfolio. In addition to the above mentioned requirements, the Group has also created a general provision in respect of financing against potential losses present in the portfolio. This provision is based on management's best estimate and is approved by the Board of Directors of the Holding company. The net provisions made / reversed during the year is charged to the profit and loss account and accumulated provision is netted off against Islamic financing and related assets. Islamic financing and related assets are written off when there are no realistic prospects of recovery. 230 MEEZAN BANK LIMITED
  213. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 6.3.3 Inventories The Group values its inventories at the lower of cost and net realisable value. The net realisable value is the estimated selling price in the ordinary course of business less the estimated cost necessary to make the sale. Cost of inventories represents actual purchases made by the Group / customers as an agent of the Group for subsequent sale. 6.4 Investments 6.4.1 Classification The Group classifies its investments as follows: - Held for trading These are investments which are either acquired for generating profits from short-term fluctuations in market prices or are securities included in a portfolio for which there is evidence of a recent actual pattern of short-term profit taking. - Held to maturity These are investments with fixed or determinable payments and maturity that the Group has the positive intent and ability to hold till maturity. - Available for sale These are investments, which do not fall under 'held for trading' or 'held to maturity' categories. 6.4.2 Regular way contracts All purchases and sales of investments that require delivery within the time frame established by regulation or market convention are recognised at the trade date, which is the date on which the Group commits to purchase or sell the investments. 6.4.3 Initial recognition and measurement Investments other than those categorised as 'held for trading' are initially recognised at fair value which includes transaction costs associated with the investments. Investments classified as 'held for trading' are initially recognised at fair value and transaction costs are expensed in the profit and loss account. 6.4.4 Subsequent measurement Subsequent to initial recognition investments are valued as follows: - Held for trading These are measured at subsequent reporting dates at fair value. Gains and losses on remeasurement are included in the net profit and loss for the year. - Held to maturity These are measured at amortised cost using the effective profit rate method, less any impairment loss recognised to reflect irrecoverable amount. - Available for sale In accordance with the requirements specified by the SBP, quoted securities (other than those classified as 'held to maturity' and 'investments in associates and subsidiary'), are subsequently re-measured to market value. Unquoted equity securities are valued at the lower of cost and break-up value. Break-up value of unquoted equity securities is calculated with reference to the net assets of the investee company as per the latest available audited financial statements. Investment in other unquoted securities are valued at cost less impairment losses, if any. Surplus / deficit arising on revaluation of quoted securities which are classified as 'available for sale', is included in the Consolidated Statement of Comprehensive Income but is kept in a separate account which is shown in the Consolidated Statement of Financial Position below equity. ANNUAL REPORT 2017 231
  214. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 6.4.5 Impairment Available for sale and Held to maturity investments Impairment loss in respect of investments classified as available for sale and held to maturity (except sukuk certificates) is recognised based on management's assessment of objective evidence of impairment as a result of one or more events that may have an impact on the estimated future cash flows of the investments. A significant or prolonged decline in fair value of an equity investment below its cost is also considered an objective evidence of impairment. Provision for diminution in the value of sukuk certificates is made as per the Prudential Regulations issued by the SBP. In case of impairment of available for sale securities, the cumulative loss that has been recognised directly in surplus / (deficit) on revaluation of securities on the statement of financial position below equity is removed there from and is recognised in the profit and loss account. For investments classified as held to maturity, the impairment loss is recognised in the profit and loss account. 6.4.6 6.5 Cost of investment is determined on moving average basis. Operating fixed assets 6.5.1 Tangible assets Tangible operating fixed assets are stated at cost less accumulated depreciation and any identified impairment loss. Items of fixed assets costing Rs 20,000 or less are not capitalised and are charged off in the month of purchase. Profit or loss on disposal of fixed assets is included in the profit and loss account currently. 6.5.2 Intangible assets Intangible assets comprise of computer software. Intangible assets with definite useful lives are stated at cost less accumulated amortisation and impairment losses (if any). 6.5.3 Subsequent costs Subsequent costs are included in the asset's carrying amounts or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance expenditure are charged to the profit and loss account as and when incurred. 6.5.4 Depreciation / amortisation Depreciation / amortisation is charged to the profit and loss account by applying the straight line method in accordance with the rates specified in notes 12.2 and 12.4 whereby the depreciable value of an asset is written off over its estimated service life. The Group charges depreciation / amortisation from the month of acquisition and upto the month preceding the disposal. 6.5.5 Capital work-in-progress Capital work-in-progress is stated at cost less accumulated impairment losses, if any. 6.5.6 Useful lives and residual values Useful lives and residual values are reviewed at each Consolidated Statement of Financial Position date and adjusted if impact on depreciation / amortisation is significant. 6.5.7 Impairment The Group assesses at each Consolidated Statement of Financial Position date whether there is any indication that the operating fixed assets may be impaired. If such indication exists, the carrying amounts of such assets are reviewed to assess whether they are recorded in excess of their recoverable amounts. Where carrying values exceed the respective recoverable amounts, assets are written down to their recoverable amounts and the resulting impairment charge is recognised in the profit and loss account. 6.6 Ijarah Assets (IFAS 2) Ijarah assets are stated at cost less accumulated depreciation and are disclosed as part of 'Islamic financing and related assets'. The rental received / receivable on Ijarah under Islamic Financial Accounting Standard - 2 ‘Ijarah’ (IFAS 2) are recorded as income / revenue. 232 MEEZAN BANK LIMITED
  215. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 - Depreciation The Group charges depreciation from the date of recognition of Ijarah of respective assets to mustajir. Ijarah assets are depreciated over the period of Ijarah using the straight line method. - Ijarah Rentals Ijarah rentals outstanding are disclosed in 'other assets' on the Consolidated Statement of Financial Position at amortized cost. - Impairment Impairment of Ijarah assets is determined in accordance with the Prudential Regulations issued by the SBP. The provision for impairment of Ijarah assets is shown as part of 'Islamic financing and related assets'. 6.7 Taxation Income tax expense comprises of current and deferred tax. Income tax expense is recognised in the profit and loss account except to the extent that it relates to items recognised directly in equity or below equity, in which case it is recognised in equity or below equity. Current The charge for current taxation is based on expected taxable income for the year at the current rates of taxation, after taking into consideration available tax credits, rebates, tax losses, etc. The charge for current tax also includes adjustments to tax payable in respect of previous years including those arising from assessments finalised during the year and are separately disclosed. Deferred Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for taxation purposes. Deferred tax is not recognised for the temporary differences relating to initial recognition of goodwill, initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profits and differences relating to investments in subsidiaries to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the assets can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefits will be realised. 6.8 Non-banking assets acquired in satisfaction of claims The non-banking assets acquired in satisfaction of claims are carried at revalued amounts less accumulated depreciation. These assets are revalued by professionally qualified valuers with sufficient regularity to ensure their net carrying value does not differ materially from their fair value. Surplus arising on revaluation of property, if any, is credited to the 'surplus on revaluation of assets' account which is shown in the Consolidated Statement of Financial Position below equity. Any deficit arising on revaluation is taken to consolidated profit and loss account directly. Legal fees, transfer cost and direct cost of acquiring title to property is charged to the consolidated profit and loss account. 6.9 Deposits Deposits are generated on the basis of two modes i.e. Qard and Modaraba. Deposits taken on Qard basis are classified as 'Current accounts' and Deposits generated on Modaraba basis are classified as 'Savings deposits' and 'Fixed deposits'. No profit or loss is passed on to current account depositors, however the funds of current accounts are treated as equity for the purpose of profit calculation and any profit earned / loss incurred on those funds are allocated to the equity of the Group. While the product features of each product differ, there is usually no restriction on withdrawals or number of transactions in current and saving accounts. In case of fixed deposits, pre-mature withdrawals can be made as per approved terms only. ANNUAL REPORT 2017 233
  216. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 Profits realised in investment pools are distributed in pre-agreed profit sharing ratio. Rab-ul-Maal share is distributed among depositors according to weightages assigned at the inception of profit calculation period. Mudarib can distribute its share of profit to Rab-ul-Maal upto a maximum of 50% of their profit as Incentive profits (Hiba). Profits are distributed from the pool such that the depositors (remunerative) only bear the risk of assets in the pool during the profit calculation period. In case of loss in a pool during the profit calculation period, the loss is distributed among the depositors (remunerative) according to their ratio of Investments. Asset pools are created at the Group’s discretion and the Group can add, amend, transfer an asset to any other pool in the interests of the deposit holders. 6.10 Sub-ordinated Sukuk The Group records sub-ordinated Sukuk initially at the amount of proceeds received. Profit accrued on sub-ordinated sukuk is charged to the profit and loss account. 6.11 Pool Management The Group operates general and specific pools for deposits and inter-bank funds accepted / acquired under Modaraba and Musharakah modes. Under the general deposits pools, the Group accepts funds on Modaraba basis from depositors (Rab-ul-Maal) where the Group acts as Manager (Mudarib) and invests the funds in the Shariah Compliant modes of financing, investments and placements. When investing funds, the Group prioritizes the funds received from depositors over the funds generated from own sources after meeting the regulatory requirement relating to such deposits. Specific pools are operated for funds acquired / accepted from the State Bank of Pakistan and other banks for Islamic Export Refinance to the Group's customers and liquidity management respectively under the Musharakah / Modaraba modes. The profit of each deposit pool is calculated on all the remunerative assets booked by utilising the funds from the pool after deduction of expenses directly incurred in earning the income of such pool along with related fee income, if any. The directly related costs comprise of depreciation on ijarah assets, takaful premium, documentation charges etc. No expense of general or administrative nature is charged to the pools. No provisions against any non-performing asset of the pool is passed on to the pool except on the actual loss / write-off of such non-performing asset. The profit of the pool is shared between equity and other members of the pool on the basis of Musharakah at gross level (before charging of mudarib fee) as per the investment ratio of the equity. The profit of the pool is shared among the members of the pool on pre-defined mechanism based on the weightages announced before the profit calculation period after charging of mudarib fee. During the year, the Group has given General Hiba to the depositors of PKR General Pool, keeping in view the prescribed guidelines of Pool Management provided by the SBP and with the approval of the Group's Shariah Advisor. However, Hiba are given at the sole discretion of the Group without any contractual commitment and can be withdrawn or reduced by the Group at its sole discretion. The risk characteristic of each pool mainly depends on the assets and liability profile of each pool. As per the Group's policy, relatively low risk / secured financing transactions and assets are allocated to general depositors pool of PKR, USD, GBP and Euro. The Group maintains General Pools (PKR, USD, EUR, GBP), FI Pools, IERS pool and Equity pool. The general pools are exposed to general credit risk, asset ownership risk and profit rate risk of the underlying assets involved. General Pools For General Pools (PKR, USD, EUR, GBP), the Group allocates PKR financing to Corporate, SME and Consumer Finance customers in diversified sectors and avenues of the economy / business as mentioned in note 42.1.1.1. Investments in Sovereign Guarantee Sukuk, Bai Muajjal with State Bank of Pakistan, Bai Muajjal with Government of Pakistan are also done through General Pools. All remunerative deposits are tagged to these general pools and their funds generated from the depositors are invested on priority basis. Due to limited investment options in USD, GBP and EURO pool, funds from FCY pools are invested in available International Sukuks, Shariah Compliant Nostro accounts and the remaining funds are taken out and invested in PKR general pool as part of equity. In such cases return from PKR General Pool is given back to FCY pools, so that returns can be passed on to FCY pool customers accordingly. IERS Pools The IERS pool assets comprise of Sovereign Guarantee Sukuks, and financing to / sukuks of blue chip companies and exporters as allowed under the applicable laws and regulations, and as such are exposed to lower credit risk. The Musharakah with SBP under IERS is tagged to the IERS pool. 234 MEEZAN BANK LIMITED
  217. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 FI Pools The FI pool assets generally comprise of Sovereign Guarantee Sukuks only and the related liability of the FI pool comprise of Musharakah / Modarabah from other banks and financial institutions. These pools are created to meet the liquidity requirements of the Group. Equity Pools All other assets including fixed assets, exposure in shares, PKR bai-salam financing and subsidized financing to the Group's employees are tagged to equity pool. To safeguard the interest of customers, all high risk investments are done through equity pool. The Group as Mudarib in the general pools is responsible for financing costs / assets such as land, building, furniture, fixtures, computers and IT system from its own sources / equity. 6.12 Staff retirement benefits Defined benefit plan of MBL The liability recognised in the Consolidated Statement of Financial Position in respect of defined benefit gratuity scheme is the present value of the defined benefit obligation at the Consolidated Statement of Financial Position date less the fair value of plan assets. Contributions to the fund are made on the basis of actuarial recommendations. The defined benefit obligation is calculated periodically by an independent actuary using the projected unit credit method. Last valuation was conducted as on December 31, 2017 by the Holding company. The Holding company also operates End of Service unfunded defined benefit scheme as approved by the Board of Directors for the benefit of the founding President and Chief Executive Officer of the Holding company. The defined benefit obligation for this benefit has been calculated by an independent actuary using the projected unit credit method. The valuation has been carried out on December 31, 2017 by the Holding company. Amounts arising as a result of "Remeasurements", representing the actuarial gains and losses and the difference between the actual investment returns and the return implied by the net interest cost are recognised in the Statement of Financial Position immediately, with a charge or credit to "Other Comprehensive Income" in the periods in which they occur. Defined contribution plan The Group also operates a recognised contributory provident fund for all permanent employees. Equal monthly contributions are made, both by the Group and the employees, to the fund at a rate of 10% of basic salary. 6.13 Compensated absences The Group recognises liability in respect of employees compensated absences in the period in which these are earned upto the date of Consolidated Statement of Financial Position. The provision has been recognised on the basis of actuarial valuation conducted as at December 31, 2017 on the basis of projected unit credit method. 6.14 Dividend and reserves Dividend declared and appropriations, except for transfer to statutory reserve, made subsequent to the date of Consolidated Statement of Financial Position are considered as non adjusting events and are recorded in the financial statements in the year in which these are approved by the directors / shareholders as appropriate. 6.15 Foreign currency transactions Transactions and balances Foreign currency transactions are recorded in rupees at exchange rates prevailing on the date of transaction. Monetary assets, monetary liabilities and contingencies and commitments in foreign currencies except forward contracts are reported in Rupees at exchange rates prevalent on the Consolidated Statement of Financial Position date. Forward contracts other than contracts with the SBP relating to the foreign currency deposits are valued at forward rates applicable to the respective maturities of the relevant foreign exchange contracts. Forward contracts with the SBP relating to foreign currency deposit, are valued at spot rate prevailing at the Consolidated Statement of Financial Position date. Exchange gains and losses are included in the consolidated profit and loss account currently. ANNUAL REPORT 2017 235
  218. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 Commitments Commitments for outstanding forward foreign exchange contracts are disclosed at the rates applicable at the reporting date. Contingent liabilities / commitments for letters of credit, acceptances and letters of guarantee denominated in foreign currencies are expressed in rupee terms at the exchange rates ruling on the reporting date. Translation gains and losses are included in the consolidated profit and loss account. 6.16 Provisions and contingent assets and liabilities Provisions are recognised when the Group has a present legal or constructive obligation arising as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. Provisions are reviewed at each date of Consolidated Statement of Financial Position and are adjusted to reflect the current best estimate. Contingent assets are not recognised, and are also not disclosed unless an inflow of economic benefits is probable. Contingent liabilities are not recognised and are disclosed unless the probability of an outflow of resources embodying economic benefits are remote. 6.17 Acceptances Acceptances comprise undertakings by the Group to pay bills of exchange drawn on customers. The Group expects most acceptances to be settled simultaneously with the reimbursem*nt from the customers. Acceptances are accounted for as off-balance sheet transactions and are disclosed as contingent liabilities and commitments. 6.18 Offsetting Financial assets and financial liabilities are offset and the net amount is reported in the Consolidated Statement of Financial Position when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only when permitted by the approved accounting standards as applicable in Pakistan. 6.19 Revenue recognition i) Profit on Murabaha and Commodity Murabaha is recognised on an accrual basis. Profit on murabaha transactions for the period from the date of disbursem*nt to the date of culmination of murabaha is recognised immediately upon the later date. ii) Rental on ijarah contracts under Islamic Financial Accounting Standard - 2 Ijarah (IFAS 2) are recognised as income on an accrual basis. iii) Profit on Bai Muajjal transaction is recognised on an accrual basis. iv) Profit on Diminishing Musharakah financing is recognised on an accrual basis. v) Profit on Running Musharakah financing is booked on an accrual basis and is adjusted upon declaration of profit by Musharakah partners. vi) Profit on Tijarah and Istisna financing is recognised on an accrual basis commencing from time of sale of goods till the realisation of sale proceeds by the Group. vii) Profit on Service Ijarah is recognised on an accrual basis commencing from the date of confirmation of sale. viii) Profit on Wakalah tul Istithmar is recognized on accrual basis and is adjusted upon actual declaration of wakalah business performance by the agent. ix) Profit on Sukuk is recognised on an accrual basis. Where Sukuk (excluding held for trading securities) are purchased at a premium or discount, those premiums / discounts are amortised through the profit and loss account over the remaining maturity, using the effective yield / profit method. x) Commission on letters of credit, acceptances and guarantees is recognised on receipt basis, except for commission on guarantees in excess of Rs 200,000 which is recognised over the period of the guarantee. Fee and brokerage income are recognised when earned. xi) Dividend income is recognised when the Group’s right to receive dividend is established. xii) Gain or loss on sale of investments is included in the consolidated profit and loss account. xiii) Gain or loss on disposal of operating fixed assets, ijarah assets and musharakah assets, if any, is taken to the consolidated profit and loss account in the period in which they arise. 236 MEEZAN BANK LIMITED
  219. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 xiv) Profit suspended in compliance with the Prudential Regulations issued by the SBP is recorded on receipt basis. Profit on rescheduled / restructured financing and investments are recognised as permitted by the SBP, except where, in the opinion of the management, it would not be prudent to do so. xv) Remuneration from funds (management fee) is recognised based on the net asset value of the funds calculated on a daily basis. xvi) Advisory fee and other commissions are recognised as and when services are provided. Performance fee related to advisory services are recorded on confirmation. 6.20 Segment reporting A segment is a distinguishable component of the Group that is engaged in providing products or services (business segment) or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. The Group's primary format of reporting is based on business segments. 6.20.1 Business segments Corporate Finance Corporate Finance includes investment banking, syndications, IPO related activities (excluding investments), secondary private placements, underwriting and securitisation. Trading and Sales It includes equity, foreign exchanges, commodities, own securities and placements. Retail Banking It includes retail financings, deposits and banking services offered to its retail customers and small and medium enterprises. Corporate and Commercial Banking It includes project finance, export finance, trade finance, Ijarah, guarantees and bills of exchange relating to its Corporate and Commercial customers. Agency Services It includes depository receipts, custody, issuer and paying agents. Asset Management It includes asset management, investment advisory, portfolio management, etc. 6.20.2 Geographical segments The Group operates only in Pakistan. 6.21 Impairment The carrying amount of the assets are reviewed at each Consolidated Statement of Financial Position date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of the relevant asset is estimated. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in the consolidated profit and loss account. An impairment loss is reversed if the reversal can be objectively related to an event occurring after the impairment loss was recognised. ANNUAL REPORT 2017 237
  220. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 Note 7 With the State Bank of Pakistan in - local currency current accounts - foreign currency current accounts 7.1 7.1 With the National Bank of Pakistan in - local currency current accounts 7.1 Note Outside Pakistan - in current accounts - in deposit accounts Bai Muajjal: With Scheduled Banks - Secured With State Bank of Pakistan With Scheduled / Other Banks Musharakah - Secured Commodity Murabaha Provision against non-performing amounts due from financial institutions 238 25,011,106 4,100,803 20,323,435 3,138,134 16,684,185 64,556,409 15,690,741 56,037,043 2017 2016 8.1 3,742,824 827 2,046,545 9,000,000 1,084,534 111,905 4,940,090 814,335 206,975 12,067,855 The return on these balances is around 0.58% (2016: 0.28%) per annum. DUE FROM FINANCIAL INSTITUTIONS 9.1 14,725,216 2,159,517 Rupees in ‘000 In Pakistan - in current accounts - in deposit accounts / term deposit receipts 9 16,244,570 2,515,745 These include local and foreign currency amounts required to be maintained by the Holding company with the SBP as stipulated by the SBP. These accounts are non-remunerative in nature. BALANCES WITH OTHER BANKS 8.1 2016 Rupees in ‘000 In hand - local currency - foreign currencies 8 2017 CASH AND BALANCES WITH TREASURY BANKS Note 2017 2016 Rupees in ‘000 9.1 9.2 9.3 9.5 142,229,221 15,500 142,244,721 5,000,000 26,066 147,270,787 77,829,747 31,413,175 19,887,743 129,130,665 26,066 129,156,731 (41,566) 147,229,221 (41,566) 129,115,165 The average return on this product is 5.80% (2016: 5.75%) per annum. The balances have maturities ranging between January 2018 to November 2018 (2016: January 2017 to December 2017). These Bai Muajjal are secured against Federal Government securities received as collateral and having market value of Rs 146,067 million as at December 31, 2017 (2016: Rs 80,305 million). MEEZAN BANK LIMITED
  221. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 2017 2016 Rupees in ‘000 150,162,125 (3,440,686) (4,476,718) 142,244,721 136,298,219 (3,631,432) (3,536,122) 129,130,665 9.2 Bai Muajjal Placements Less: Deferred Income Profit Receivable shown in other assets Bai Muajjal Placements 9.3 The average return on this product is 5.83% (2016: Nil) per annum and are due to mature in November 2018 (2016: Nil). These Musharakahs are secured against Federal Government securities received as collateral and having market value of Rs 5,068 million as at December 31, 2017 (2016: Nil). 2017 2016 Rupees in ‘000 9.4 Particulars of due from financial institutions In local currency In foreign currencies 9.5 Provision against non-performing amounts due from financial institutions Opening balance Less: charge / reversal Closing balance 147,229,221 147,229,221 129,115,165 129,115,165 41,566 41,566 41,566 41,566 10 INVESTMENTS 10.1 Investments by types 2017 Note Held by the Group Given as collateral 2016 Total Held by the Group Given as collateral Total Rupees in ‘000 Available for sale securities - Sukuk - Share / units 10.3 83,842,156 5,271,140 89,113,296 - 83,842,156 5,271,140 89,113,296 92,574,003 4,423,912 96,997,915 - 92,574,003 4,423,912 96,997,915 Held to maturity securities - Sukuk 10.4 28,000,000 - 28,000,000 28,000,000 - 28,000,000 Held for trading securities - Sukuk 10.5 102,474 - 102,474 Associates (listed) - Related parties - Certificates / units of funds 10.6 5,779,700 - 5,779,700 6,605,447 - 6,605,447 122,995,470 - 122,995,470 131,603,362 - 131,603,362 (969,744) 122,025,726 - (969,744) 122,025,726 (383,012) 131,220,350 - (383,012) 131,220,350 1,136,883 - 1,136,883 3,576,224 - 3,576,224 (1,708) - (1,708) 123,160,901 - 123,160,901 Investment at cost / carrying value Less: Provision for diminution in value of investments Investments (net of provision) Surplus on revaluation of investment classified as "available for sale" Deficit on revaluation of investments classified as "held for trading" Investments at market value 10.7 - 134,796,574 - - - 134,796,574 ANNUAL REPORT 2017 239
  222. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 10.2 Investments by segments 2017 2016 Rupees in ‘000 Federal Government Securities GoP Ijarah Sukuk 10.3 & 10.4 84,895,331 96,937,287 Sukuk certificates / bonds Sukuk Certificates Global Sukuk Bonds 10.3 & 10.5 10.3 22,015,953 5,033,346 16,093,197 7,543,519 10.3 10.3 4,367,016 854,124 3,519,788 854,124 10.6 10.3 5,779,700 50,000 122,995,470 (969,744) 122,025,726 6,605,447 50,000 131,603,362 (383,012) 131,220,350 1,136,883 3,576,224 (1,708) 123,160,901 134,796,574 Fully paid up ordinary shares Listed companies Unlisted companies Units of open end funds - associates - others Investments at cost / carrying value Less: Provision for diminution in value of investments Investments net of provision Surplus on revaluation of investments classified as 'available for sale' Deficit on revaluation of investments classified as 'held for trading' Investments at market value 240 Note MEEZAN BANK LIMITED 10.7
  223. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 10.3 Quality of available for sale securities The Group holds investments in ordinary shares (nominal value of Rs 10 each, unless stated otherwise), sukuk certificates and other securities in the following investees: 2017 Name of the investee 2016 2017 Market value / Cost Cost Number of shares / units / certificates 2016 2017 2016 Entity rating long term / short term Rupees in ‘000 Ordinary shares Automobile parts and accessories Honda Atlas Cars (Pakistan) Limited Indus Motor Company Limited Entity rating long term / short term Market value / Cost Rupees in ‘000 369,700 - 408,000 47,400 91,345 - 75,930 42,684 189,438 - Unrated Not Applicable 272,805 76,529 Unrated Unrated Construction and materials (cement) Cherat Cement Company Limited D.G. Khan Cement Company Limited Fauji Cement Company Limited Kohat Cement Limited Lucky Cement Company Limited Pioneer Cement Limited Power Cement Limited 624,800 1,488,146 1,094,500 263,800 549,265 589,600 18,040,667 263,000 1,343,546 2,195,000 263,800 531,265 160,200 - 89,564 294,670 38,807 40,306 362,982 83,211 225,508 23,917 219,443 74,365 40,306 339,620 22,709 - 69,297 198,995 27,373 37,449 284,195 37,216 157,675 A / A1 Unrated Unrated Unrated Unrated A / A1 A- / A2 45,773 297,904 98,951 76,935 460,214 22,763 - A / A1 Unrated Unrated Unrated Unrated A / A1 Not Applicable Electricity K - Electric Limited* Hub Power Company Limited 11,850,000 2,612,190 10,800,000 3,096,690 88,351 163,225 80,981 172,167 74,774 237,709 AA / A1+ AA+ / A1+ 101,196 382,379 AA / A1+ AA+ / A1+ Oil and gas Attock Refinery Limited Hascol Petroleum Limited Hi-Tech Lubricants Limited Mari Petroleum Company Limited National Refinery Limited Oil and Gas Development Company Limited Pakistan State Oil Company Limited Pakistan Oilfields Limited Pakistan Petroleum Limited Sui Northern Gas Pipeline Limited 50,600 25,000 450,000 266,600 85,000 862,000 885,108 696,426 578,847 2,387,500 290,900 308,600 537,000 732,590 743,626 620,147 1,522,000 12,552 7,053 51,848 177,156 69,508 130,608 184,839 296,529 104,757 265,358 94,050 205,065 74,252 176,205 311,072 112,707 85,878 11,846 6,176 31,950 386,802 36,624 140,325 259,434 413,858 119,190 225,881 AA / A1+ AA- / A1 Unrated Unrated AA+ / A1+ AAA / A1+ AA / A1+ Unrated Unrated AA - / A1 123,720 424,297 88,793 318,098 397,557 116,699 124,150 AA / A1+ Not Applicable Not Applicable Unrated Not Applicable AAA / A1+ AA / A1+ Unrated Unrated AA - / A1 Chemicals Engro Corporation Limited Engro Fertilizers Limited Engro Polymers & Chemicals Limited ICI Pakistan Limited Sitara Chemical Industries Limited 635,800 5,370,000 1,050,000 121,145 25,000 535,800 5,900,000 104,965 - 176,325 349,411 35,493 50,618 14,147 143,653 386,752 34,026 - 174,686 363,656 29,988 93,033 7,525 AA / A1+ AA- / A1+ A / A1 Unrated A+ / A1 169,361 401,082 104,307 - AA / A1+ AA- / A1+ Not Applicable Unrated Not Applicable General Industries Abbot Laboratories (Pakistan) Limited Cherat Packaging Limited Glaxo Smithkline Pakistan Limited Packages Limited The Searle Company Limited Ferozsons Laboratories Limited 99,800 198,625 108,900 523,479 496,349 - 95,000 175,000 566,879 324,976 60,000 80,287 56,999 28,039 223,947 116,748 - 72,634 54,046 242,513 83,181 51,022 69,621 39,526 18,282 266,885 156,280 - Unrated Unrated Unrated AA / A1+ Unrated Not Applicable 90,924 59,147 481,875 212,466 44,925 Unrated Unrated Not Applicable AA / A1+ Unrated Unrated 25,000 740,100 3,521 72,039 3,738 AA / A1+ 112,695 AA / A1+ 3,263 Unrated Personal Goods (textile) Nishat Mills Limited Fixed line telecommunication Pakistan Telecommunication Company Limited (A) 250,000 Food Producers Al Shaheer Corporation Limited Engro Foods Limited 483,575 140,000 483,575 50,000 27,981 17,880 27,980 7,464 10,745 11,243 Unrated Unrated 27,757 9,597 Unrated Unrated 2,478,125 1,788,125 174,808 112,819 117,686 A+ / A1 127,458 A+ / A1 333,875 167,400 360,000 41,500 - 239,375 41,500 244,000 51,717 53,372 47,290 10,614 - 27,257 10,614 12,732 42,509 40,194 38,293 12,699 - A+ / A2 AA- / A1 A+ / A1 Unrated Not Applicable 36,907 16,942 16,248 A+ / A2 Not Applicable Not Applicable Unrated A / A1 79,999 Unrated Unrated Electrical Goods Pak Elecktron Limited Engineering Crescent Steel & Allied Products Limited International Industries Limited International Steels Limited K.S.B. Pumps Company Limited Amreli Steels Limited Financial Institutions Orient Rental Modaraba 6,638,953 Miscellaneous Shifa International Hospitals Limited - - 3,229 66,390 - - 71 91,771 23 29,705 21 63,317,346 35,304,830 4,367,016 3,519,788 4,526,079 - 28,211 Not Applicable Not Applicable Unrated 5,368,665 * The nominal value of these shares is Rs 3.5 each. ANNUAL REPORT 2017 241
  224. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 Name of the investee Note 2017 2016 2017 Number of shares / units / certificates 2017 2016 Market value / Cost Cost 2016 Entity rating long term / short term Market value Entity rating / Cost long term / short term Rupees in ‘000 Rupees in ‘000 Ordinary shares - unlisted (others) Fatima Energy Limited * Sapphire Electric Company Limited - at cost ** Daewoo Pakistan Express Bus Service Limited *** Pak Kuwait Takaful Company Limited**** S.W.I.F.T. SCRL - at cost 25,055,300 21,201,068 4,000,000 2,812,500 5 53,068,873 25,055,300 21,201,068 4,000,000 2,812,500 5 53,068,873 250,553 318,864 253,240 28,125 3,342 854,124 250,553 318,864 253,240 28,125 3,342 854,124 250,553 318,864 253,240 28,125 3,342 854,124 Unrated A+ / A1 A / A1 BBB Unrated 250,553 318,864 253,240 28,125 3,342 854,124 Unrated A+ / A1 A / A1 BBB Unrated 98,894 98,894 50,000 50,000 50,939 AA-(f) 51,150 AA-(f) 10.3.1 10.3.2 10.3.3 10.3.4 399,833 20,000 899 147,790 568,522 399,833 20,000 269,407 689,240 40,052,437 1,973,172 89,843 14,779,879 56,895,331 39,928,380 2,068,211 26,940,696 68,937,287 40,263,828 2,027,000 90,565 14,770,133 57,151,526 10.3.5 10.3.6 10.3.7 10.3.8 10.3.9 10.3.10 10.3.11 10.3.12 10.3.13 10.3.14 10.3.15 10.3.16 10.3.17 10.3.18 10.3.19 10.3.20 10.3.21 200 150 11,000 258 100,000 520,000 18,140,480 35,750 300,000 560,000 280,000 400,000 200,000 400,000 30,000 30,000 347,222 21,355,060 200 11,000 100,000 520,000 18,140,480 35,750 300,000 560,000 100,000 400,000 200,000 30,000 30,000 180,000 346,000 20,953,430 114,285 150,000 52,300 258,000 350,000 2,340,000 870,008 3,575,000 1,500,000 1,866,667 233,333 2,000,000 1,000,000 4,000,000 72,619 59,063 3,472,204 21,913,479 142,857 52,300 450,000 2,600,000 1,078,025 3,575,000 1,500,000 2,800,000 250,000 2,000,000 1,000,000 72,619 59,063 225,000 288,333 16,093,197 114,285 150,000 52,300 258,000 350,000 2,340,000 870,008 3,575,000 1,500,000 1,866,667 233,333 2,000,000 1,000,000 4,000,000 72,619 59,063 3,472,204 21,913,479 5,000 250 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 - 5,000 250 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 1,500 10,000 5,000 552,010 33,063 552,086 554,118 552,413 572,920 552,094 555,240 549,888 559,514 - 522,879 27,649 522,993 525,205 523,345 547,367 523,095 526,568 520,173 531,422 523,381 522,016 156,898 1,046,419 524,109 548,724 33,554 558,926 581,093 576,709 577,140 551,871 542,336 538,295 547,056 - 45,250 71,750 5,033,346 7,543,519 5,055,704 7,514,305 89,113,296 96,997,915 89,551,851 100,408,065 Units of open end funds Atlas Islamic Income Fund GoP Sukuk GoP Ijarah Sukuk GoP Ijarah Sukuk GoP Ijarah Sukuk GoP Ijarah Sukuk - GIS-16 - GISF-1 - GISF-2 - GISF-3 Sukuk Certificates Albaraka Bank Pakistan Limited I - at cost Albaraka Bank Pakistan Limited II - at cost Arzoo Textile Mills Limited - at cost Dubai Islamic Bank Pakistan Limited - at cost Engro Fertilizers Limited II - at cost K-Electric Limited - at cost Liberty Power Tech Limited - at cost Neelum Jehlum Private Limited - at cost Pakistan International Airlines - at cost Pakistan Mobile Communications Limited - at cost Sui Southern Gas Company Limited II- at cost Sui Southern Gas Company Limited III- at cost Sui Southern Gas Company Limited IV- at cost Sui Southern Gas Company Limited V- at cost***** Quetta Textile Mills Limited - at cost Sitara Peroxide Limited - at cost WAPDA Dasu Sukuk - at cost Sui Southern Gas Company Limited I- at cost WAPDA Second Sukuk - at cost Global Sukuk Bonds Hong Kong Sukuk 10.3.22 Luxembourg Sukuk 10.3.23 Republic of Indonesia Sukuk I 10.3.24 Republic of Indonesia Sukuk II 10.3.25 Republic of Indonesia Sukuk III 10.3.26 Saudi Electric Company Sukuk - 10 years 10.3.27 Sime Darby Berhad Global Sukuk - 5 years 10.3.28 Sime Darby Berhad Global Sukuk - 10 years 10.3.29 Qatar Islamic Bank II 10.3.30 State of Qatar Sukuk - 10 years 10.3.31 First Gulf Bank Sukuk Hazine M.V. Sukuk I Hazine M.V. Sukuk II Qatar Islamic Bank I Saudi Electric Company Sukuk - 5 years * The Chief Executive of Fatima Energy Limited is Mr. Fazal Ahmed Sheikh. ** The Chief Executive of Sapphire Electric Company Limited is Mr. Shahid Abdullah. *** The Chief Executive of Daewoo Pakistan Express Bus Service Limited is Mr. Shaheryar Arshad Chishty. **** The Chief Executive of Pak Kuwait Takaful Company Limited is Mr. Shahnawaz Akhter. ***** These sukuk are in the process of being issued to the Bank. 242 MEEZAN BANK LIMITED Govt. Guaranteed 40,962,774 Govt. Guaranteed Govt. Guaranteed 2,065,200 Govt. Guaranteed Govt. Guaranteed 27,482,208 Govt. Guaranteed Govt. Guaranteed Not Applicable 70,510,182 A A+ Unrated A+ AA- / A1+ AA / A1+ A+ / A1 AAA Govt. Guaranteed AA- / A1 AA- / A1+ AA- / A1+ AA- / A1+ AA- / A1+ Unrated Unrated AAA Not Applicable Not Applicable AA+ AAA BAA3 BAA3 BAA3 A2 BAA1 BAA1 A+ AA2 Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable 142,857 A Not Applicable 52,300 Unrated Not Applicable 450,000 AA- / A1+ 2,600,000 AA / A1+ 1,078,025 A+ / A1 3,575,000 AAA 1,515,000 Govt. Guaranteed 2,800,000 AA- / A1 250,000 AA- / A1+ 2,000,000 AA- / A1+ 1,000,000 AA- / A1+ Not Applicable 72,619 Unrated 59,063 Unrated Not Applicable 225,000 AA- / A1+ 289,775 Govt. Guaranteed 16,109,639 523,819 28,083 516,073 526,413 521,811 554,288 519,007 498,522 521,821 534,828 524,169 518,359 152,293 1,050,012 524,807 AAA AAA BAA3 BAA3 BAA3 A2 BAA1 BAA1 A+ AA2 A2 BA1 BA1 A+ A2
  225. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 Name of the security Profit rate Profit payment Face value per certificate Maturity date Weighted average yield of 6 months treasury bills minus 50 basis points Semi-annually Rs 100,000 December 18, 2018 10.3.1 GoP Ijarah Sukuk - GIS-16 10.3.2 GoP Ijarah Sukuk - GISF-1 6.1 % p.a. Semi-annually Rs 100,000 February 15, 2019 10.3.3 GoP Ijarah Sukuk - GISF-2 5.59% p.a. Semi-annually Rs 100,000 March 29, 2019 10.3.4 GoP Ijarah Sukuk - GISF-3 5.24% p.a. Semi-annually Rs 100,000 June 30, 2020 10.3.5 Albaraka Bank Pakistan Limited I 6 months KIBOR plus 1.25% Semi-annually Rs 571,425 September 26, 2021 10.3.6 Albaraka Bank Pakistan Limited II 6 months KIBOR plus 0.75% Semi-annually Rs 1,000,000 August 22, 2024 10.3.7 Arzoo Textile Mills Limited Not applicable Semi-annually Rs 5,000 10.3.8 Dubai Islamic Bank Pakistan Limited 6 months KIBOR plus 0.5% Semi-annually Rs 1,000,000 10.3.9 Engro Fertilizers Limited II 6 months KIBOR plus 1.75% Semi-annually Rs 3,500 10.3.10 K-Electric Limited 3 months KIBOR plus 1.00% Quarterly Rs 4,750 10.3.11 Liberty Power Tech Limited 3 months KIBOR plus 3.00% Quarterly Rs. 51 10.3.12 Neelum Jehlum Private Limited 6 months KIBOR plus 1.75% Semi-annually Rs 100,000 10.3.13 Pakistan International Airlines 6 months KIBOR plus 1.75% Semi-annually Rs 5,000 October 20, 2019 10.3.14 Pakistan Mobile Communications Limited 3 months KIBOR plus 0.88% Quarterly Rs 3,750 December 22, 2019 10.3.15 Sui Southern Gas Company Limited II 3 months KIBOR plus 0.70% Quarterly Rs 1,250 May 28, 2018 10.3.16 Sui Southern Gas Company Limited III 3 months KIBOR plus 0.40% Quarterly Rs 5,000 October 30, 2019 10.3.17 Sui Southern Gas Company Limited IV 6 months KIBOR plus 0.5% Semi-annually Rs 5,000 December 15, 2022 10.3.18 Sui Southern Gas Company Limited V 6 months KIBOR plus 1.10% Semi-annually Rs 10,000 April 02, 2027 10.3.19 Quetta Textile Mills Limited 3 months KIBOR plus 3.00% Quarterly Rs 2,421 March 26, 2020 10.3.20 Sitara Peroxide Limited 1 month KIBOR plus 1.00% Monthly Rs 1,969 August 19, 2016 10.3.21 WAPDA Dasu Sukuk 6 months KIBOR plus 1.45% Semi-annually Rs 10,000 May 08, 2032 10.3.22 Hong Kong Sukuk 2.005 % p.a. Semi-annually USD 1,000 September 18, 2019 10.3.23 Luxembourg Sukuk 0.44 % p.a. Annually EUR 1,000 October 07, 2019 10.3.24 Republic of Indonesia Sukuk I 3.30 % p.a. Semi-annually USD 1,000 November 21, 2022 10.3.25 Republic of Indonesia Sukuk II 4.35 % p.a. Semi-annually USD 1,000 September 10, 2024 10.3.26 Republic of Indonesia Sukuk III 4.325 % p.a. Semi-annually USD 1,000 May 28, 2025 10.3.27 Saudi Electric Company Sukuk - 10 years 4.211 % p.a. Semi-annually USD 1,000 April 03, 2022 10.3.28 Sime Darby Berhad Global Sukuk - 5 years 2.053 % p.a. Semi-annually USD 1,000 January 29, 2018 10.3.29 Sime Darby Berhad Global Sukuk - 10 years 3.29 % p.a. Semi-annually USD 1,000 January 29, 2023 10.3.30 Qatar Islamic Bank -II 2.754 % p.a. Semi-annually USD 1,000 October 27, 2020 10.3.31 State of Qatar Sukuk - 10 years 3.241 % p.a. Semi-annually USD 1,000 January 18, 2023 10.4 Held to Maturity Securities Name of the security 10.4.1 GoP Ijarah Sukuk - GISF-2 * Profit Rate 5.59% p.a. 2017 2016 Number of Certificates 280,000 280,000 2017 28,000,000 April 14, 2014 August 14, 2027 July 09, 2019 June 17, 2022 January 01, 2021 June 26, 2026 Rupees in '000 2016 28,000,000 * These Sukuk carry a fixed profit rate of 5.59% and will mature in 2019. These sukuk certificates are backed by the Government of Pakistan's sovereign guarantee. 10.5 Held for Trading securities Name of the security 10.5.1 Fatima Fertilizer Company Limited Profit Rate 6 months KIBOR plus 0.2% 2017 2016 Number of Certificates 19,614 - 2017 Cost 102,474 2016 2017 2016 Market Value Rupees in '000 - 100,766 - ANNUAL REPORT 2017 243
  226. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 10.6 Associates (listed) The Group holds investments in units / certificates of Rs 50 each, unless stated otherwise, in the following listed investee entities: 2017 2016 Number of units Name of the investee 2017 Units of open end funds Meezan Balanced Fund * Al Meezan Mutual Fund * Meezan Islamic Fund Meezan Islamic Income Fund KSE Meezan Index Fund Meezan Tahaffuz Pension - Equity sub-fund ** Meezan Financial Planning Fund - Conservative Meezan Cash Fund Meezan Gold Fund Meezan Financial Planning Fund of Funds - MAAP II Meezan Tahaffuz Pension - Gold sub-fund ** Meezan Energy Fund Meezan Strategic Allocation Fund - MSAP II Meezan Financial Planning Fund of Funds - MAAP III Meezan Sovereign Fund Meezan Financial Planning Fund of Funds - MCPP II 19,787,384 71,976,823 22,865,955 19,704,135 6,072,694 260,077 105,971 10,303,266 1,000,000 507,341 300,000 7,103,076 1,999,600 2,626,733 - 19,740,417 57,406,055 17,899,779 14,640,389 5,579,218 260,077 105,614 1,702,462 494,071 300,000 4,000,000 1,999,600 2,568,004 21,593,102 3,964,321 300,966 1,259,594 1,441,241 1,029,738 417,255 126,530 6,790 530,206 52,270 27,117 28,152 336,118 85,163 138,560 5,779,700 * The nominal value is Rs 10 each ** The nominal value is Rs 100 each 10.7 360,263 1,293,932 1,490,515 770,231 538,506 159,162 6,962 83,455 32,609 26,430 216,080 100,620 167,460 1,136,229 222,993 6,605,447 Provision for diminution in value of investments 2017 Associates Opening balance Charge / (reversal) for the year - on associates (unlisted) - on available for sale investments - charge for the year - reversal for the year - Others Total Associates Rupees in ‘000 383,012 - 2016 - 383,012 - Transfer - 605,434 (18,702) 586,732 - 605,434 (18,702) 586,732 - Closing balance - 969,744 969,744 10.7.1 Particulars of provision in respect of type and segment Available for sale securities Fully paid up-ordinary shares Sukuk 244 2016 Carrying amount Rupees in '000 MEEZAN BANK LIMITED 24,514 Others 423,171 3,611 3,611 (28,125) - Total - 447,685 3,611 33,840 (102,124) (68,284) 28,125 33,840 (102,124) (64,673) - 383,012 383,012 2017 2016 Rupees in ‘000 785,762 183,982 969,744 199,030 183,982 383,012
  227. (70,045) Dividend received 1,259,594 (61,509) Share of (loss) in associates - OCI Closing balance - December 31, 2017 (244,600) Share of profit / (loss) in associates - P&L (42,175) Dividend received 341,816 74,385 Share of profit in associates - OCI Investment / (redemption) during the year 318,586 Share of profit / (loss) in associates - P&L 1,293,932 299,499 Investment / (redemption) during the year Closing balance - December 31, 2016 643,637 Opening balance - January 1, 2016 Al Meezan Mutual Fund 1,441,241 (117,977) (39,460) (388,338) 496,501 1,490,515 (68,990) 26,777 344,863 (336,610) 1,524,475 Meezan Islamic Fund 300,966 (24,675) (5,583) (29,839) 800 360,263 (11,830) 437 77,493 374 293,789 Meezan Balanced Fund 28,152 - - 1,722 - 26,430 - - (3,570) 30,000 - 126,530 - - (32,632) - 159,162 - - 45,066 (2) 114,098 - - (7,809) 267,316 770,231 - - 28,026 24,590 717,615 Meezan Islamic Income Fund 417,255 1,029,738 (66,951) - (93,732) 39,432 538,506 (11,562) - 163,840 100,736 285,492 Meezan Meezan KSE Tahaffuz Tahaffuz Meezan Pension Fund Pension - Gold Fund- Equity Index Fund Sub Sub Fund Fund - (59,381) - (77,556) (999,292) 1,136,229 (48,584) - 59,581 (281,895) 1,407,127 Meezan Sovereign Fund - - - - - - - - 17,283 (200,092) 182,809 - - - - - - - - (1,538) (123,098) 124,636 Meezan Meezan Capital Capital Preservative Preservative Fund - II Fund - III 530,206 - - 206 530,000 - - - (19) (1,039) 1,058 Meezan Cash Fund 52,270 - - 4,360 (35,545) 83,455 (1,443) - (270) 27,771 57,397 Meezan Gold Fund 336,118 (13,001) - (23,459) 156,498 216,080 - - 16,080 200,000 - Meezan Energy Fund 85,163 - - (15,457) - 100,620 - - 620 100,000 - Meezan Strategic Allocation Fund MSAP II 6,790 (6,023) - 5,827 24 6,962 (581) - 674 633 6,236 - - - - - - (10,343) - 11,876 (147,555) 146,022 Meezan Meezan Financial Financial Planning Planning Fund of Fund Funds of Funds Conservative MCPP I - - - (22,993) (200,000) 222,993 (10,704) - 31,748 - 201,949 Meezan Financial Planning Fund of Funds MCPP II 27,117 - - (6,326) 834 32,609 (1,263) - 8,925 947 24,000 Meezan Financial Planning Fund of Funds MAAP II 138,560 - - (32,560) 3,660 167,460 (6,683) - 47,203 126,940 - Meezan Financial Planning Fund of Funds MAAP III 5,779,700 (358,053) (106,552) (963,186) 602,044 6,605,447 (214,158) 101,599 1,166,467 (178,801) 5,730,340 Total Notes to and forming part of the Consolidated Financial Statements For the year ended December 31, 2017 ANNUAL REPORT 2017 245
  228. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 11 ISLAMIC FINANCING AND RELATED ASSETS In Pakistan Murabaha financing and related assets - Murabaha financing - Advances against Murabaha - Murabaha inventory - Financing under Islamic Export Refinance - Murabaha - Advance against Islamic Export Refinance - Murabaha Note 11.1 11.2 Istisna financing and related assets - Istisna financing - Istisna - advance - Istisna inventory - Financing under Islamic Export Refinance - Istisna - Advances under Islamic Export Refinance - Istisna - Financing under Islamic Export Refinance - Istisna - Inventory Tijarah financing and related assets - Tijarah financing - Tijarah inventory - Islamic Export Refinance - Tijarah - financing - Islamic Export Refinance - Tijarah - Inventory Ijarah financing and related assets - Net investment in Ijarah - Net book value of assets/investment in Ijarah under IFAS 2 11.3 11.4 11.5 Advances against Ijarah Diminishing Musharakah financing and related assets - Diminishing Musharakah financing - Housing - Diminishing Musharakah financing - Others - Advances against Diminishing Musharakah Musharakah financing Wakalah Tul Istithmar financing Bai Muajjal financing Advance against Service Ijarah financing Labbaik (Qard for Hajj and Umrah) 11.6 Financing against bills - Financing against bills - Salam - Financing against bills - Murabaha - Advance Salam Financing and related assets - Salam Financing - Salam inventory - Advances against Salam financing Staff financing Other financing 246 2016 Rupees in ‘000 Running Musharakah financing - Running Musharakah financing - Financing under Islamic Export Refinance - Running Musharakah Musawamah financing and related assets - Musawamah financing - Musawamah Inventory - Advances against Musawamah - Financing under Islamic Export Refinance - Musawamah - Advances under Islamic Export Refinance - Musawamah - Financing under Islamic Export Refinance - Musawamah - Inventory 2017 11.7 7,854,995 6,487,946 4,573,868 599,862 236,121 19,752,792 7,786,937 3,993,151 4,967,432 723,956 122,221 17,593,697 132,032,737 13,882,800 145,915,537 70,517,803 7,784,000 78,301,803 2,432,621 44,548,652 3,352,093 170,111 5,489,701 1,076,361 57,069,539 3,155,616 28,112,137 1,876,007 128,743 7,261,153 828,634 41,362,290 498,305 7,213,736 254,802 217,500 8,184,343 337,506 5,182,105 244,051 227,584 5,991,246 6,468,792 5,272,054 7,523,238 95,308 111,350 19,470,742 7,159,774 2,590,940 4,908,188 325,512 100,000 110,000 15,194,414 124,058 31,019,341 31,143,399 5,389,253 36,532,652 149,054 20,671,262 20,820,316 3,906,242 24,726,558 11,991,953 65,438,474 7,125,407 84,555,834 9,374,585 79,478,870 12,971,982 101,825,437 580,720 31,250,000 605,703 3,000,000 3,382 746,640 12,750,000 101,496 718,750 5,871 11,834,926 1,738 11,836,664 13,183,818 1,738 13,185,556 464,337 77,200 3,595,916 4,137,453 2,000,000 2,000,000 3,226,026 2,612,204 2,739,104 2,374,002 Gross Islamic Financing and Related Assets Less: Provision against non-performing financing 11.10 428,733,591 (8,804,442) 319,616,864 (8,086,594) Islamic financing and related assets - net of provision 11.8 419,929,149 311,530,270 MEEZAN BANK LIMITED
  229. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 Note 11.1 Murabaha receivable - Gross Less: Deferred income Profit receivable shown in other assets Murabaha financing 11.1.1 11.1.1 Murabaha Sale Price Murabaha Purchase Price 11.2 Financing under Islamic Export Refinance - Murabaha - Gross Less: Deferred income Profit receivable shown in other assets Financing under Islamic Export Refinance - Murabaha 11.3 Musawamah financing - Gross Less: Deferred income Profit receivable shown in other assets Musawamah financing 2017 Rupees in ‘000 8,222,190 (110,813) (256,382) 7,854,995 8,134,131 (119,342) (227,852) 7,786,937 8,222,190 (7,854,995) 367,195 8,134,131 (7,786,937) 347,194 613,210 (1,848) (11,500) 599,862 741,100 (4,616) (12,528) 723,956 6,688,479 (107,833) (111,854) 6,468,792 7,340,823 (107,675) (73,374) 7,159,774 96,526 (604) (614) 95,308 329,995 (2,973) (1,510) 325,512 11.4 Financing under Islamic Export Refinance - Musawamah - Gross Less: Deferred income Profit receivable shown in other assets Financing under Islamic Export Refinance - Musawamah 11.5 2016 Net book value of assets / investments in Ijarah under IFAS 2 is net of depreciation of Rs 16,118 million (2016: Rs 10,951 million). 2017 2016 Rupees in ‘000 11.6 Bai Muajjal financing - gross Less: Deferred income Profit receivable shown in other assets Bai Muajjal financing 673,153 (33,689) (33,761) 605,703 133,325 (10,835) (20,994) 101,496 11.7 This includes Rs. 434 million (2016 : Rs. 314 million) representing profit free financings to staff advanced under the Bank's Human Resource Policies. 11.8 Particulars of financing - net 2017 2016 Rupees in ‘000 11.8.1 In - local currency - foreign currencies 11.8.2 Short-term (upto one year) Long-term (over one year) 407,611,881 12,317,268 419,929,149 288,487,503 23,042,767 311,530,270 281,462,081 138,467,068 419,929,149 173,362,097 138,168,173 311,530,270 11.9 Islamic financing and related assets include Rs 6,606 million (2016: Rs 6,847 million) which have been placed under non-performing status as detailed below: 2017 Category of classification Domestic Overseas Total Provision required Provision held 40,636 6,068 6,380,027 6,426,731 40,636 6,068 6,380,027 6,426,731 Rupees in ‘000 Other Assets Especially Mentioned Substandard Doubtful Loss 10,845 176,553 16,588 6,402,143 6,606,129 - 10,845 176,553 16,588 6,402,143 6,606,129 ANNUAL REPORT 2017 247
  230. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 2016 Category of classification Domestic Overseas Total Provision required Provision held 12 52,569 21,037 6,518,585 6,592,203 12 52,569 21,037 6,518,585 6,592,203 Rupees in ‘000 Other Assets Especially Mentioned Substandard Doubtful Loss 16,018 221,688 48,473 6,561,113 6,847,292 - 16,018 221,688 48,473 6,561,113 6,847,292 11.10 Particulars of provision against non-performing Islamic financing and related assets: 2017 General Specific 2016 Total Specific General Total Rupees in ‘000 Opening balance Charge for the year Less: Reversals Amount Written off Closing balance 6,592,203 1,494,391 8,086,594 6,840,068 1,366,772 8,206,840 116,422 (279,553) (163,131) 883,320 883,320 999,742 (279,553) 720,189 235,753 (483,618) (247,865) 127,619 127,619 363,372 (483,618) (120,246) (2,341) - 6,426,731 2,377,711 (2,341) - 8,804,442 6,592,203 1,494,391 8,086,594 11.10.1 The Group maintains general reserve (provision) in accordance with the applicable requirements of the Prudential Regulations for Consumer Financing issued by the SBP. 3030 In addition, the Group has also maintain a general provision of Rs 1,975 million (2016: Rs 1,125 million) against financing, made on prudent basis, in view of prevailing economic conditions. This general provision is in addition to the requirements of Prudential Regulations. 11.10.2 In accordance with BSD Circular No. 2 dated January 27, 2009 issued by the SBP, the Group has availed the benefit of Forced Sales Value (FSV) of collaterals against the non-performing financing. The accumulated benefit availed as at December 31, 2017 amounts to Rs 8.4 million (2016: Rs 10.2 million). The additional profit arising from availing the FSV benefit - net of tax amounts to Rs 5.4 million as at December 31, 2017 (2016: Rs 6.6 million). The increase in profit, due to availing of the benefit, is not available for distribution of cash and stock dividend to share holders. 11.10.3 Particulars of provision against non-performing financing: 2017 Specific General 2016 Total Specific Rupees in ‘000 In local currency In foreign currencies 6,241,410 185,321 6,426,731 2,377,711 2,377,711 8,619,121 185,321 8,804,442 6,390,778 201,425 6,592,203 11.11 Particulars of write offs Write offs Rs 500,000 and above - Domestic Write offs below Rs 500,000 - Domestic 248 MEEZAN BANK LIMITED Total Rupees in ‘000 Note Against provisions Directly charged to profit and loss account General 1,494,391 1,494,391 7,885,169 201,425 8,086,594 2017 2016 Rupees in ‘000 11.10 2,341 2,341 - 2,212 129 2,341 -
  231. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 11.11.1 Details of financing written off of Rs 500,000 and above In term of sub-section(3) of section 33 A of the Banking Companies Ordinance, 1962, the Statement in respect of written off financing or any other financial relief of five hundred thousand rupees or above allowed to any person during the year ended December 31, 2017 is given as Annexure 1. 11.12 Particulars of financing to directors, associated companies etc. Debts due by directors, executives or officers of the Holding company or any of them either severally or jointly with any other persons. Balance at the beginning of the year Disbursem*nts during the year Repayments during the year Balance at the end of the year Note 2017 11.12.1 2,851,665 1,137,325 (756,762) 3,232,228 Rupees in ‘000 2016 2,222,265 998,780 (369,380) 2,851,665 Debts due by companies or firms in which the directors of the Holding company are interested as directors, partners or in the case of private companies as members. Note 2017 2016 Rupees in ‘000 Balance at the beginning of the year Additions / disbursem*nts during the year Deletions / repayments during the year Balance at the end of the year 2,484,365 6,613,113 (8,420,974) 676,504 11.12.2 944,387 7,562,436 (6,022,458) 2,484,365 Financing to Executives and Directors Executives 2017 Opening balance Financing disbursed during the year Financing repaid during the year Closing balance 1,831,807 Directors 2016 2017 Rupees in ‘000 2016 1,501,231 - - 567,323 726,836 - - (342,340) (396,260) - - 2,056,790 1,831,807 - - 11.12.1 These include financing given by the Holding company to its employees as per the terms of their employment. The maximum total amount of financing including temporary financing granted during the year was Rs 3,232 million (2016: Rs 2,852 million). The maximum amount has been calculated by reference to the month end balance. 11.12.2 This represents a Running Musharaka facility to an associated company (2016: Istisna, Diminishing Musharakah and Running Musharakah facilities to associated companies). ANNUAL REPORT 2017 249
  232. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 12 Note 2017 Capital work-in-progress Property and equipment 12.1 12.2 Intangible assets 12.4 562,887 10,934,864 11,497,751 496,835 11,994,586 314,408 8,288,994 8,603,402 428,284 9,031,686 237,106 64,005 153,158 32,778 73,984 1,856 562,887 85,697 55,104 61,586 38,636 66,463 6,922 314,408 OPERATING FIXED ASSETS 12.1 2016 Capital work-in-progress - Advances to suppliers and contractors for civil works - Advances for computer hardware - Advances for purchase of vehicles - Advances for computer software - Advances for other office machines - Advances for furniture and fixtures 12.2 Rupees in ‘000 Property and equipment 2017 COST ACCUMULATED DEPRECIATION Net book value as at December 31, 2017 Rate of depreciation % 4,306,133 - As at January 1, 2017 Additions / Adjustments / (Disposals) As at December 31, 2017 Leasehold Land 1,719,600 2,586,533 4,306,133 Buildings on leasehold land 1,330,757 26,992 5,943 - 1,363,692 370,289 61,572 9,751 - 441,612 922,080 5 Leasehold improvements 5,005,849 686,260 (2,626) (39,999) 5,649,484 1,829,972 484,616 10,626 (29,224) 2,295,990 3,353,494 10 607,718 84,102 930 (5,345) 687,405 317,447 58,665 (938) (2,839) 372,335 315,070 10 Electrical, office and computer equipments 4,286,270 499,798 12,203 (124,792) 4,673,479 2,789,311 676,051 12,267 (119,723) 3,357,906 1,315,573 Vehicles 1,142,028 338,942 21,164 (205,737) 1,296,397 496,209 230,075 3,869 (156,270) 573,883 722,514 14,092,222 4,222,627 37,614 (375,873) 17,976,590 5,803,228 1,510,979 35,575 (308,056) 7,041,726 10,934,864 As at January 1, 2017 Charge / Adjustments / (On disposals) As at December 31, 2017 Rupees in ‘000 Furniture and fixtures 250 MEEZAN BANK LIMITED - - - 10, 20 and 33 20
  233. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 2016 COST ACCUMULATED DEPRECIATION Charge / (Disposals) As at January 1, 2016 Additions / (Disposals) As at December 31, 2016 As at January 1, 2016 939,417 780,183 1,719,600 Buildings on leasehold land 1,308,951 21,806 1,330,757 304,838 65,451 Leasehold improvements 4,167,986 847,465 (9,602) 5,005,849 1,384,932 559,156 55,087 (6,525) 607,718 Electrical, office and computer equipment 3,844,570 519,766 (78,066) Vehicles 1,031,314 11,851,394 As at December 31, 2016 Net book value as at December 31, 2016 Rate of depreciation % Rupees in ‘000 Leasehold lands Furniture and fixtures 12.3 - - - 1,719,600 - 370,289 960,468 5 451,931 (6,891) 1,829,972 3,175,877 10 268,404 54,472 (5,429) 317,447 290,271 10 4,286,270 2,227,441 634,666 (72,796) 2,789,311 1,496,959 265,085 (154,371) 1,142,028 396,183 218,042 (118,016) 496,209 645,819 2,489,392 (248,564) 14,092,222 4,581,798 1,424,562 (203,132) 5,803,228 8,288,994 10, 20 and 33 20 Property and equipment - Movement of net book value Leasehold Furniture Leasehold Buildings on leasehold improvements and fixtures land land Electrical, office and computer equipments Vehicles Total Rupees in ‘000 At January 1, 2016 Cost Accumulated depreciation Net book value 939,417 939,417 1,308,951 304,838 1,004,113 4,167,986 1,384,932 2,783,054 559,156 268,404 290,752 3,844,570 2,227,441 1,617,129 1,031,314 11,851,394 396,183 4,581,798 635,131 7,269,596 780,183 - 21,806 (65,451) 847,465 (2,711) (451,931) 55,087 (1,096) (54,472) 519,766 (5,270) (634,666) 265,085 2,489,392 (36,355) (45,432) (218,042) (1,424,562) 1,719,600 960,468 3,175,877 290,271 1,496,959 Additions Adjustments Net book value of disposals Depreciation charge 2,586,533 - 26,992 (3,808) (61,572) 686,260 (13,252) (10,775) (484,616) 84,102 1,868 (2,506) (58,665) 499,798 (64) (5,069) (676,051) 338,942 4,222,627 17,295 2,039 (49,467) (67,817) (230,075) (1,510,979) Net book value as at December 31, 2017 4,306,133 922,080 3,353,494 315,070 1,315,573 722,514 10,934,864 Year ended December 31, 2016 Additions Net book value of disposals Depreciation charge Net book value as at December 31, 2016 645,819 8,288,994 Year ended December 31, 2017 12.3.1 Included in cost of operating fixed assets are fully depreciated / amortised items still in use aggregating Rs 2,867 million (2016: Rs 2,324 million). ANNUAL REPORT 2017 251
  234. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 12.3.2 Details of disposal of fixed assets are as follows: Description Cost Disposal under the Group’s staff policy Accumulated Net book depreciation value Rupees in ‘000 Sale proceeds Mode of disposal Particulars of purchaser Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Mr. Tariq Munir (Executive, Ex-Employee) Mr. Khurram Shaikh (Executive, Ex-Employee) Mr. Kamran Zafar (Executive, Employee) Mr. Mashkoor AG Khan (Executive, Employee) Mr. Mashkoor Hassan Siddiqui (Executive, Ex-Employee) Mr. Muhammad Shoaib (CEO - AMIML) Mr. Owais Wasti (CFO - AMIML) Mr. Shoaib Malick (Executive, Ex-Employee) Mr. Muhammad Tufail (Executive, Employee) Mr. Muhammad Asim Ahsan (Executive, Employee) Mr. Muhammad Khushal (Executive, Ex-Employee) Mr. Alam Zeb (Executive, Ex-Employee) Ms. Naheed Ashfaq (Executive, Employee) Mr. Arif Aslam Khan (Executive, Employee) Mr. Hafeez Khaskheli (Executive, Employee) Mr. Ehmar Hamad (Executive, Employee) Mr. Babar Ali Pirzada (Executive, Employee) Mr. Muhammad Asadullah (Executive, Employee) Mr. Mian Nasir Mahmood (Executive, Employee) Mr. Adnan Masood (Executive, Employee) Mr. Kamran Mahmood (Executive, Employee) Mr. Fayyaz Hussain Madni (Executive, Ex-Employee) Mr. Muhammad Munir (Executive, Employee) Mr. Afzal Mujtaba (Executive, Ex-Employee) Mr. Muhammad Suhail (Executive, Ex-Employee) Mr. Haroon Khan (Executive, Employee) Mr. Mir Haider Khan (Executive, Ex-Employee) Mr. Waqas Ahmed Nizami (Executive, Employee) Mr. Faisal Anwar Malik (Executive, Employee) Syed Ahmar Sarosh (Executive, Ex-Employee) Mr. Shoaib Ghani Memon (Executive, Employee) Mr. Mirza Amir Iqbal (Executive, Employee) Mr. Riaz Ahmed Akbani (Executive, Employee) Mr. Jahangir Ahmed Nawabi (Executive, Employee) Mr. Asim Butt (Executive, Employee) Mr. Jaffar Ashraf (Executive, Employee) Mr. Zulfiqar Ali (Executive, Employee) Mr. Usman Ullah Cheema (Executive, Employee) Mr. Ahsan Sarfaraz (Executive, Employee) Mr. Asif Ehsan Sheikh (Executive, Employee) Mr. Ateeq Ur Rehman (Executive, Employee) Mr. Kashif Asghar Butt (Executive, Ex-Employee) Mr. Waqar Usman (Executive, Employee) Mr. Usman Sajjad (Executive, Employee) Mr. Saad Ikram (Executive, Employee) Mr. Jawad Rafique (Executive, Employee) Mr. ZiaUr Rehman (Executive, Employee) Mr. Noman Ahmed (Executive, Employee) Mr. Mirza Ayub Baig (Executive, Employee) Mr. Muhammad Waseem (Executive, Employee) Mr. Farooq Anwar (Executive, Employee) Mr. Habib Ur Rehman (Executive, Employee) Mr. Tauqeer Ahmed (Executive, Employee) Mr. Muhammad Qaiser (Executive, Employee) Late Syed Arshad Ali (Executive, Ex-Employee) Mr. Tariq Ibrar (Executive, Employee) Mr. Ghulam Shabbir (Executive, Employee) Mr. Ashfaq Ahmed (Executive, Employee) Mr. Wazir Gul (Executive, Employee) Mr. Asif Sattar (Executive, Ex-Employee) Mr. Julabeeb ur Rehman (Executive, Employee) Mr. Haji Muhammad Afridi (Executive, Employee) Mr. Rana Muhammad Ashfaq (Executive, Employee) Vehicles Honda Civic Honda Civic Honda Civic Honda Civic Honda Civic Honda Civic Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Toyota Corolla Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus 252 MEEZAN BANK LIMITED 2,418 2,071 2,067 1,985 1,930 2,080 2,023 1,748 1,726 1,706 1,692 1,691 1,673 1,673 1,608 1,608 1,608 1,607 1,581 1,568 1,546 1,497 1,671 1,510 1,507 1,506 1,506 1,505 1,502 1,495 1,411 1,411 1,411 1,402 1,391 1,359 1,359 1,359 1,357 1,357 1,347 1,263 1,018 975 975 972 959 959 959 959 959 959 958 955 939 919 919 919 919 919 919 919 899 1,209 2,036 2,067 1,985 1,930 2,080 2,023 1,078 1,381 1,223 1,466 1,635 1,645 1,673 1,608 1,608 1,608 1,607 1,581 1,568 1,546 1,497 1,225 654 628 1,506 1,305 1,505 1,502 1,420 1,411 1,411 1,411 1,402 1,391 1,359 1,359 1,359 1,357 1,357 1,347 1,263 730 894 959 956 959 943 943 959 959 959 958 955 939 919 919 919 919 919 919 888 899 1,209 35 670 345 483 226 56 28 446 856 879 201 75 288 81 16 16 16 16 31 - 1,631 677 620 596 579 1,036 806 894 693 537 502 502 482 482 482 482 474 470 464 449 874 1,168 1,102 452 651 452 451 529 423 423 423 421 417 408 408 408 407 407 404 379 528 341 293 291 288 288 288 288 288 288 287 286 282 276 276 276 276 276 276 276 270
  235. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 Description Cost Accumulated Net book depreciation value Rupees in ‘000 Sale proceeds Mode of disposal Particulars of purchaser Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Swift Suzuki Swift Honda Civic (Quantity: 2) Toyota Corolla (Quantity: 1) Suzuki Cultus (Quantity: 3) Suzuki Wagon R (Quantity: 1) 899 899 899 879 879 879 879 879 1,022 1,050 1,054 879 843 843 798 1,053 1,001 878 859 779 959 1,020 4,724 1,688 2,816 982 899 899 899 879 879 879 879 879 783 648 580 879 843 843 798 825 1,001 878 859 779 959 799 1,731 1,125 2,395 229 239 402 474 228 221 2,993 563 421 753 270 270 270 264 264 264 264 264 238 403 900 264 253 253 239 228 263 258 234 288 221 3,473 921 1,177 924 Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Mr. Hadi Usman Shah (Executive, Employee) Mr. Naveed Ur Rehman Khan (Executive, Employee) Mr. Qamar Shahzad (Executive, Employee) Mr. Anwar Mukhtar (Executive, Employee) Mr. Umer Ashfaq (Executive, Employee) Mr. Iftikhar Nasir (Executive, Employee) Mr. Javed Ahmed (Executive, Employee) Mr. Atta Ul Mustafa Jamil (Executive, Employee) Mr. Ali Hassan Khan (Executive, AMIML) Mr. Ahmed Hassan (Executive, AMIML) Mr. Owais Wasti (CFO, AMIML) Mr. Ahmed Shoeb Raza (Executive, Employee) Mr. Zain ul Abideen (Executive, Employee) Mr. Zahid Hussain (Executive, Employee) Mr. Umer Farooq (Executive, Employee) Mr. Usman Iqbal (Executive, AMIML) Mr. Salman Masood (Executive, AMIML) Mr. Saleem Ahmed Abbasi (Executive, Ex-Employee) Mr. Junaid Alam (Executive, Employee) Mr. Safdar Ameer Buzder (Executive, Employee) Mr. Abid Hussain (Executive, Employee) Mr. Anwer Arshad (Executive, AMIML) Non-executive employees Non-executive employee Non-executive employees Non-executive employee 117,953 105,686 12,267 42,370 115 93 86 71 64 60 60 60 60 60 59 54 54 54 54 54 54 53 53 53 53 53 53 53 53 53 53 53 53 53 53 53 115 93 86 71 19 60 60 59 60 60 59 54 54 54 54 54 54 53 53 53 53 53 53 53 53 53 53 53 53 53 53 53 45 1 - 11 4 9 7 48 6 5 12 5 6 6 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 6 Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Mr. Arshad Majeed (Executive, Employee) Mr. Imran Asghar Khan (Executive, Employee) Mr. Muhammad Arsalan Mujeeb (Executive, Employee) Mr. Tariq Mehraj (Executive, Employee) Mr. Aasim Salim (Executive, Ex-Employee) Mr. Muhammad Munir (Executive, Employee) Mr. Muhammad Irfan (Executive, Employee) Mr. Muhammad Tariq Munir (Executive, Ex-Employee) Mr. Muhammad Asim Ahsan (Executive, Employee) Mr. Zaki Alam (Executive, Employee) Mr. Zia Ullah Khan (Executive, Employee) Mr. Atique Ahmed Siddiqui (Executive, Employee) Mr. Rashid Bilal Khan (Executive, Employee) Mr. Qamar Alam (Executive, Employee) Mr. Aneeq Ejaz Qureshi (Executive, Employee) Mr. Asad Amin (Executive, Employee) Mr. Faisal Iqbal (Executive, Employee) Mr. Humayun Mirza (Executive, Employee) Mr. Abrar Hussain (Executive, Employee) Mr. Omer Amir Ahmed (Executive, Employee) Mr. Muhammad Arif Rana (Executive, Employee) Syed Kaleem Ahmed Riaz (Executive, Employee) Mr. Faisal Saifullah (Executive, Employee) Mr. Mukarram Hasan (Executive, Employee) Mr. Sohail Akhter (Executive, Employee) Syed Fahd Azam (Executive, Employee) Mr. Umer Mansoor (Executive, Employee) Mr. Sajjad Nawaz (Executive, Employee) Mr. Aamer Rasheed Malik (Executive, Employee) Mr. Ghulam Samdani Bhatti (Executive, Employee) Mr. Arif Aslam Khan (Executive, Employee) Mr. Faisal Qamar (Executive, Employee) Electrical, office and Computer equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments ANNUAL REPORT 2017 253
  236. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 Description Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments Computer related equipments (Quantity: 105) Cost Accumulated Net book depreciation value Rupees in ‘000 Sale Mode of proceeds disposal Particulars of purchaser 53 53 53 53 51 51 51 50 50 50 50 49 46 44 44 44 44 44 42 40 40 40 40 39 33 33 33 33 29 24 12 11 11 11 53 53 53 53 51 51 51 50 50 50 50 38 45 44 43 44 44 44 42 40 40 40 40 39 33 33 33 33 29 24 12 11 11 11 11 1 1 - 5 5 5 5 6 6 5 5 5 5 5 5 4 4 4 4 4 4 4 4 4 4 4 3 3 3 3 3 3 2 1 1 1 1 Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Buyback Mr. Muhammad Fayyaz Ismail (Executive, Employee) Syed Tanveer Hussain (Executive, Employee) Mr. Muhammad Ali Hasan (Executive, Employee) Mr. Mohammad Sohail Khan (Executive, Employee) Syed Atif Hussain (Executive, Employee) Mr. Haji Muhammad Afridi (Executive, Employee) Mr. Khurram Masood (Executive, Employee) Syed Tariq Hassan (Executive, Employee) Mr. Shahbaz Ali (Executive, Employee) Mr. Muhammad Waseem (Executive, Employee) Mr. Mubasher Bukhari (Executive, Employee) Mr. Faizan Javed Khan (Executive, Employee) Mr. Usama Siddiqui (Executive, Ex-Employee) Mr. Naveed Ehsan Sheikh (Executive, Employee) Mr. Taha Shamim Siddiqui (Executive, Employee) Mr. Zafar Iqbal (Executive, Employee) Mr. Mehdi Abbas Nandwani (Executive, Employee) Mr. Hammad Pervez Khan (Executive, Employee) Mr. Altaf Hasan Khan (Executive, Employee) Mr. Imran Akhtar (Executive, Employee) Mr. Badar Munir (Executive, Employee) Mr. Kalb E Abbas (Executive, Employee) Mr. Asad Nouman (Executive, Employee) Mr. Rukhsar Ali (Executive, Employee) Mr. Muhammad Saleem (Executive, Employee) Syed Wajahat Ali (Executive, Employee) Syed Akbar hussain (Executive, Employee) Mr. Muhammad Faheem Tahir (Executive, Employee) Syed Mazhar Alam (Executive, Employee) Mr. Muhammad Shahzad (Executive, Employee) Mr. Ghulam Qadir (Executive, Employee) Mr. Iqbal Hussain Seyal (Executive, Employee) Mr. Muhammad Arif (Executive, Employee) Syed Akbar hussain (Executive, Employee) 2,817 6,075 2,817 6,016 59 287 642 Buyback Non-executive employees 1,323 468 385 520 1,227 937 1,082 1,206 837 628 1,354 375 1,148 520 666 561 666 574 592 799 625 619 1,285 1,263 1,123 409 625 463 334 685 879 151 1,127 350 555 386 491 386 470 452 243 417 413 1,056 1,594 1,423 1,464 1,254 1,286 1,223 1,233 968 1,321 1,157 1,328 1,140 743 792 758 756 783 788 680 825 803 Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Mr. Umer Sarwar Syed Riaz Ahmed Mr. Zahid Qadri Mr. Sajid Mehmood Siddiqi Mr. Waqar Ahmed Khan Mr. Waqar Ahmed Khan Mr. Mohsin Mumtaz Mr. Mohsin Mumtaz Mr. Waqar Ahmed Khan Syed Riaz Ahmed Mr. Adnan Naseer Ahmed Mr. Umer Sarwar Mr. Muhammad Ahmed Mr. Mohsin Mumtaz Mr. Sultan Hassan Mr. Naheed Arshad Butt Mr. Usman Shahid Mr. Mohsin Mumtaz M/s Suzuki North Motors Mr. Zeeshan Jamil Mr. Imtiaz Hussain Mr. Sultan Hassan Other disposals Items having book value in aggregate more than Rs 250,000 or cost more than Rs 1,000,000 Vehicles Honda Civic Toyota Corolla Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Honda City Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus 254 MEEZAN BANK LIMITED 1,323 1,753 1,648 1,643 1,636 1,562 1,545 1,540 1,522 1,507 1,505 1,502 1,498 1,075 1,052 1,052 1,052 1,044 1,044 1,042 1,042 1,032
  237. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 Description Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Cultus Suzuki Wagon R Suzuki Cultus (Quantity: 3) Cost Accumulated Net book Sale depreciation value proceeds Rupees in ‘000 1,032 1,032 1,032 1,032 1,032 1,029 1,027 1,027 1,027 1,027 1,027 1,027 1,025 1,025 1,025 1,024 1,018 1,018 1,018 1,017 1,017 1,017 1,017 1,017 1,017 1,017 1,017 1,017 1,017 1,017 1,014 1,014 1,012 1,012 1,012 1,005 1,001 1,001 1,001 999 999 999 571 1,032 3,110 77,092 585 516 482 619 516 583 616 496 445 445 513 633 427 461 598 529 645 696 763 356 356 305 441 288 305 458 390 305 237 356 253 270 236 489 354 854 684 834 734 699 250 666 571 722 1,087 40,180 447 516 550 413 516 446 411 531 582 582 514 394 598 564 427 495 373 322 255 661 661 712 576 729 712 559 627 712 780 661 761 744 776 523 658 151 317 167 267 300 749 333 310 2,023 36,912 Generator (Quantity: 3) 4,396 4,396 - Generator 1,075 358 717 640 192 6,111 Civil works Civil works 832 778 756 735 791 801 789 852 756 831 793 836 883 813 856 843 752 808 671 880 902 870 876 871 786 835 860 880 878 783 855 898 883 850 870 653 744 754 749 734 933 744 200 793 2,916 61,548 Mode of disposal Particulars of purchaser Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Negotiation Takaful Claim Mr. Waqar Ahmed Khan Mr. Adnan Naseer Mr. Shahbaz Munawar Mr. Kashif Chema Mr. Khalil Ur Rehman Mr. Noman Hasan Khan Mr. Waqar Ahmed Khan Mr. Waqar Ahmed Khan Mr. Ibrar Hussain Mr. Ibrar Hussain Mr. Asif Raza Malik Mr. Naghman Nawaz Mr. Noman Hasan Khan Mr. Mohsin Mumtaz Mr. Naghman Nawaz Mr. Imtiaz Hussain Mr. Mohammad Ummar Mr. Waqar Ahmed Khan Mr. Naheed Arshad Butt Mr. Waqar Ahmed Khan Mr. Numeri Abrar Mr. Khurram Imtiaz Mr. Sultan Hassan M/s Suzuki North Motors Mr. Adnan Naseer Syed Yasir Hussain Shah Ms. Anwar Sultana Mr. Waqar Ahmed Khan M/s Suzuki North Motors Ms. Komal Amir Mr. Zeeshan Jamil Mr. Waqar Ahmed Khan Mr. Noman Hasan Khan Mr. Qaiser Iqbal Mr. Nasir Zahoor Mr. Zulfiqar Ali Mr. Noman Hasan Khan Mr. Nasir Iqbal Rana Mr. Farooq Taj Mr. Noman Hasan Khan Mr. Mohsin Mumtaz Mr. Noman Hasan Khan Mr. Faisal Jiwani Mr. Ghulam Mustafa M/s EFU General Insurance Limited Negotiation M/s Nadeem Metal Works 708 Takaful Claim M/s Adamjee Insurance Company Limited 448 421 Takaful Claim 4,946 1,165 2,271 M/s Adamjee Insurance Company Limited 10,136 1,206 8,930 6,670 Takaful Claim M/s Adamjee Insurance Company Limited 1,800 1,800 11,936 3,006 Electrical, office and Computer equipments Automated Teller Machine 1,142 Leasehold improvements 8,930 - Discarded 6,670 ANNUAL REPORT 2017 255
  238. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 Description Cost Accumulated Net book depreciation value Rupees in ‘000 Sale proceeds Items having book value in aggregate less than Rs 250,000 or cost less than Rs 1,000,000 Vehicles 10,692 10,404 288 7,412 112,606 108,761 3,845 17,322 5,345 2,839 2,506 2,895 Leasehold improvements 28,063 26,218 1,845 241 375,873 308,056 67,817 141,371 Electrical, office and Computer equipments Furniture and Fixtures 12.4 Intangible assets Net book Rate of COST AMORTISATION value amortiCharge/ As at Additions/ As at As at As at as at sation January 1, adjustments/ December 31, January 1, adjustments/ December 31, December 31, (disposals) 2017 (disposals) 2017 2017 2017 2017 % Rupees in ‘000 Computer software 2016 12.5 1,150,670 1,010,136 248,098 1,423,012 722,386 177,508 34,812 36,851 (10,568) (10,568) 140,534 1,150,670 543,857 178,529 926,177 496,835 10-20 722,386 428,284 10-20 Intangible assets - Movement of net book value Year ended December 31, 2016 Net book value as at January 1, 2016 Additons during the year Amortisation charge for the year Year ended December 31, 2017 Net book value as at December 31, 2016 Additions Amortisation charge for the during year the year Adjustment during the year Net book value as at December 31, 2017 Rupees in ‘000 Computer software 256 466,279 MEEZAN BANK LIMITED 140,534 178,529 428,284 248,098 177,508 (2,039) 496,835
  239. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 13 OTHER ASSETS Profit / return accrued in local currency Profit / return accrued in foreign currency Advances, deposits, advance rent and other prepayments Dividends receivable Stamps Security deposits Unrealised gain on forward foreign exchange contracts - net Advance for Investments Non-banking assets acquired in satisfaction of claims Others Provision against other assets 14 2017 2016 Rupees in ‘000 13.1 13.2 13.3 10,686,197 35,639 1,603,846 21,836 10,815 104,889 1,063,795 246,201 604,766 14,377,984 (221,011) 14,156,973 7,891,923 117,863 1,157,256 9,736 8,335 103,322 264,383 500,000 284,255 607,831 10,944,904 (255,822) 10,689,082 13.1 This includes prepaid rent and prepaid takaful aggregating Rs 473 million (2016: Rs 453 million) and Rs 679 million (2016: Rs 455 million) respectively which are being amortised over a period of one year. 13.2 Market value of the non-banking assets acquired in satisfaction of claims is Rs 224.118 million (2016: Rs 221.877 million). Provision amounting to Rs 22.1 million in respect of non-banking assets is included in provision against other assets. 13.3 Provision against other assets 2017 2016 Rupees in ‘000 Opening balance Charge for the year Reversals during the year Amount adjusted / written off 255,822 25,166 (48,726) (11,251) 341,084 15,383 (99,426) (1,219) Closing balance 221,011 255,822 11,168,093 11,168,093 9,130,998 9,130,998 36,813,295 36,813,295 32,005,501 32,005,501 BILLS PAYABLE In Pakistan Outside Pakistan 15 Note DUE TO FINANCIAL INSTITUTIONS In Pakistan Outside Pakistan ANNUAL REPORT 2017 257
  240. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 Note 2017 2016 Rupees in ‘000 15.1 Particulars of due to financial institutions with respect to currencies In local currency In foreign currencies 15.2 15.3 Details of due to financial institutions secured / unsecured 32,005,501 32,005,501 Secured Musharakah from the State Bank of Pakistan under Islamic Export Refinance Scheme Other financial institution 15.2.1 15.2.2 21,141,464 329,008 16,841,788 168,506 Unsecured Overdrawn nostro accounts Other Musharakah / Modarabas 15.2.3 492,823 14,850,000 36,813,295 295,207 14,700,000 32,005,501 15.2.1 These Musharakah are on a profit and loss sharing basis maturing between January 03, 2018 to June 27, 2018 and are secured against demand promissory notes executed in favor of SBP. A limit of Rs 25,700 million (December 31, 2016: Rs 19,200 million) has been allocated to the Group by SBP under Islamic Export Refinance Scheme. 15.2.2 These Musharakah are on profit and loss sharing basis. A limit of USD 10 million has been allocated to the Group under the agreement with Karandaaz. 15.2.3 These Musharakahs / Modarabas are on profit and loss sharing basis. The expected average return on these Musharakah/ Modarabas is around 5.95% (2016: 5.71%) per annum. These balances are maturing latest by January 08, 2018 (2016: January 19, 2017). Particulars of due to financial institutions Short - term Long - term 16 36,813,295 36,813,295 2017 2016 Rupees in ‘000 36,484,287 329,008 36,813,295 31,836,995 168,506 32,005,501 167,981,117 258,421,153 236,032,293 5,513,350 667,947,913 141,796,085 220,228,372 195,597,883 2,118,269 559,740,609 4,863,061 369,336 5,232,397 673,180,310 3,307,614 951,629 4,259,243 563,999,852 DEPOSITS AND OTHER ACCOUNTS Customers - Fixed deposits - Savings deposits - Current accounts - non-remunerative - Margin Financial institutions - Remunerative deposits - Non-remunerative deposits 258 MEEZAN BANK LIMITED
  241. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 16.1 2017 Particulars of deposits In - local currency Modaraba based deposits Qard based deposits - foreign currencies Modaraba based deposits Qard based deposits 17 2016 Rupees in ‘000 410,852,749 224,691,136 635,543,885 347,370,022 187,682,195 535,052,217 24,802,602 12,833,823 37,636,425 673,180,310 20,045,839 8,901,796 28,947,635 563,999,852 SUB-ORDINATED SUKUK In 2016, the Holding company issued regulatory Shariah compliant unsecured, subordinated privately placed Tier II Sukuk based on Modaraba of Rs 7,000 million as instrument of redeemable capital under section 66 of the Companies Act, 2017 (Section 120 of the repealed Companies Ordinance, 1984). The brief description of sukuk is as follows: 18 Credit Rating AA- (Double A minus) by JCR-VIS Credit Rating Company Limited. Tenor 10 years from the issue date. Profit payment frequency Semi-annually in arrears. Redemption Bullet payment at the end of the tenth year. Expected Periodic Profit Amount (Modaraba Profit Amount) The Modaraba Profit is computed under General Pool on the basis of profit sharing ratio and monthly weightages announced by the Holding company under the SBP guidelines of pool management. Last announced profit rate on the Sukuk is 6.68% per annum. Call Option The Holding company may call Tier II Sukuk with prior approval of SBP on or after five years from the date of issue. Loss Absorbency The Tier II Sukuk, at the option of the SBP, will be fully and permanently converted into common shares upon the occurrence of a point of non-viability trigger event as determined by SBP or for any other reason as may be directed by SBP. Lock-in-Clause Profit and/or redemption amount can be held back in respect of the Tier II Sukuk, if such payment will result in a shortfall in the Issuer’s minimum capital or capital adequacy ratio requirement. DEFERRED TAX LIABILITIES 2017 Taxable temporary differences on: Excess of accounting book values over tax written down values of owned assets Surplus on revaluation of available for sale investments Tax on accumulated profit on associates Others 495,002 419,953 288,914 - 632,001 1,251,679 530,837 67,416 (351,664) (495,668) (21,061) (146,078) (332,824) (29,241) (89,855) (14,834) 230,787 (18,587) 1,955,203 Deductible temporary differences on: Provision for diminution in value of investments Income not accrued due to non-culmination of islamic financing Provision against Workers' Welfare Fund Provision against non-banking assets acquired in satisfaction of claims and other assets Others Rupees in ‘000 2016 ANNUAL REPORT 2017 259
  242. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 19 OTHER LIABILITIES Return on deposits and other dues - payable in local currency - payable in foreign currency Unearned income Accrued expenses Current taxation (provision less payments) Unclaimed dividends Payable to defined benefit plan Provision against off-balance sheet obligations Security deposits against Ijarah Charity payable Payable on account of credit murabaha Advance against future Diminishing Musharakah Witholding taxes payable Workers Welfare Fund payable Others Note 2017 2016 Rupees in ‘000 19.1 35.2 19.2 19.3 19.4 2,268,390 42,913 22,146 2,445,960 1,919,085 6,761 726,369 118,880 9,211,429 139 11,566 55,320 129,473 994,865 1,211,975 19,165,271 2,023,164 29,709 23,605 2,931,137 1,260,356 6,294 374,847 105,398 6,078,190 1,509 117,092 121,773 130,997 834,456 365,030 14,403,557 19.1 This includes Rs 84 million (2016: Rs 56 million) in respect of return accrued on borrowings from SBP under the Islamic Export Refinance Scheme. 19.2 Provision against off-balance sheet obligations Note 2017 2016 Rupees in ‘000 Opening balance Charge for the year Closing balance 19.3 105,398 105,398 1,509 31,439 4,903 28,198 (32,809) (31,592) 139 1,509 Reconciliation of charity payable Balance as at January 1 Additions during the year Less: Transferred to charity savings account (included in deposits and other accounts) Balance as at December 31 260 105,398 13,482 118,880 MEEZAN BANK LIMITED 19.3.1
  243. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 19.3.1 Charity paid through saving account during the year is Rs 31.1 million (2016: Rs 37.8 million). Charity in excess of Rs 100,000 was paid to the following organizations: 2017 2016 Rupees in ‘000 Ihsan Trust - Related Party Lahore Businessmen Association for Rehabilitation of the Disabled Patients' Behbud Society for Aga Khan University Hospital Fatimid Foundation Peshawar Centre Family Educational Services Foundation Sargodhian Spirit Trust Binoria Welfare Trust Care Foundation Creek General Hospital Karachi Health Education and Livelihood Promoter Muhammad Shafi Trust Muslim Welfare Centre Pakistan Disabled Foundation Pakistan Association of Deaf SINA Health, Education & Welfare Trust Eye Donor Organization Nigheban Trust Burns Centre Civil Hospital, Karachi Infaq Memorial Trust Karigar Training Institute Mercy Pak National Institute of Cardiovascular Disease Noor-e-Ali Trust Pakistan Association of Blind SOS Children Village Karachi Afzal Memorial Thelesimia Foundation Akhuwat Foundation Al Mustafa Trust Rawalpindi Centre For Development of Social Services Child Aid Association Disabled Welfare Association Fatimid Foundation Kidney Centre & General Hospital Garage School Hands Institute of Business Administration - National Talent Hunt Program Idara - Al Khair Jamal Noor Hospital Jinnah Foundation Kiran Foundation Karachi Education Initiative Medical Aid Foundation (Rahat Kada) Muhammadi Blood Bank Pakistan Eye Bank Patients Aid Foundation - Jinnah Hospital Preventation of Blindness Trust Rashid Memorial Walfare Organization Saylani Welfare Shafi Trust Society for Heart Care The Indus Hospital The Kidney Center Welfare Society for Patient Care 25,000 1,000 1,000 500 350 300 200 200 200 200 200 200 200 200 200 150 150 100 100 100 100 100 100 100 100 31,050 17,000 500 100 200 200 100 250 200 100 150 200 100 100 150 300 100 12,770 500 100 100 500 1,297 200 100 100 200 200 500 100 100 1,000 100 100 100 37,817 19.3.2 The balance in Charity's saving account is Rs 2.059 million (2016: Rs 0.128 million). 19.3.3 Charity was not paid to any organization in which a director or his spouse had any interest at any time during the year. ANNUAL REPORT 2017 261
  244. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 19.4 20 The Group has made full provision for Workers Welfare Fund based on profit for the respective years (2008-2017). Last year, the Supreme Court of Pakistan vide its order dated November 10, 2016 has held that the amendments made in the law introduced by the Federal Government for the levy of Workers Welfare Fund were not lawful. The Federal Board of Revenue has filed review petitions against this order which are currently pending. Legal advice obtained on the matter indicates that consequent to filing of these review petitions the judgment may not currently be treated as conclusive. Accordingly, the Group continues to maintain the provision in respect of WWF. SHARE CAPITAL 20.1 Authorised capital 2017 2017 2016 (Number of Shares) 2,000,000,000 2,000,000,000 Ordinary shares of Rs 10 each Rupees in ‘000 2016 20,000,000 20,000,000 2017 2016 Issued, subscribed and paid-up capital 2017 2016 (Number of Shares) Ordinary shares 516,517,908 546,384,260 1,062,902,168 456,353,635 546,384,260 1,002,737,895 Fully paid in cash Issued as bonus shares Rupees in ‘000 5,165,179 5,463,843 10,629,022 20. 2 The Board of the Directors of the Holding company, in its meeting held on July 26, 2017 approved the issuance of 60,164,273 Right Shares to existing shareholders in the ratio of 6 ordinary shares for every 100 existing ordinary shares held by them at issue price of Rs 50 per share including premium of Rs 40 per share. The right issue was successfully completed and Right Shares were issued to shareholders in October, 2017. 20. 3 Shareholding held by associated companies as at December 31, 2017 are as follows: Number of shares held Noor Financial Investment Company - Kuwait Pakistan Kuwait Investment Company (Private) Limited Islamic Development Bank - Saudi Arabia Meezan Islamic Fund Meezan Dedicated Equity Fund Meezan Balanced Fund Meezan Asset Allocation Fund 21 RESERVES Share Premium Statutory reserve Non Distributable Capital Reserve - Gain on Bargain Purchase General reserve 21.1 262 4,563,536 5,463,843 10,027,379 Percentage of shareholding 522,033,439 318,870,646 99,104,338 2,840,077 510,000 79,819 6,410 Note 2017 20.2 21.1 2,406,571 7,777,925 3,117,547 91,082 13,393,125 Rupees in ‘000 49.11% 30.00% 9.32% 0.27% 0.14% 0.01% 0.00% 2016 6,515,372 3,117,547 91,082 9,724,001 Under section 21 of the Banking Companies Ordinance, 1962, an amount not less than 20% of the profit is to be transferred each year to a reserve fund till such time the reserve fund and the share premium account equal the amount of the paid up capital. MEEZAN BANK LIMITED
  245. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 22 NON-CONTROLLING INTEREST Opening balance Share of profit for the year Remeasurements of defined benefit plan net of tax (directly recognised in equity) Dividend payout by Subsidiary Closing balance 23 SURPLUS ON REVALUATION OF INVESTMENTS Quoted shares / units of mutual fund * Other securities Less: Deferred tax liability 2017 Rupees in ‘000 2016 1,221,989 161,481 944,623 420,522 (995) (374,500) 1,007,975 1,044 (144,200) 1,221,989 2017 Rupees in ‘000 885,750 278,553 1,164,303 (348,008) 816,295 2016 2,185,634 1,560,122 3,745,756 (1,287,239) 2,458,517 *This includes surplus on revaluation of “available for sale” securities of associates. 24 CONTINGENCIES AND COMMITMENTS 24.1 Direct credit substitutes Guarantees favoring - Banks 24.2 2016 369,446 209,015 12,306,548 653,233 3,583,442 16,543,223 10,925,552 244,589 4,066,533 15,236,674 66,003,500 7,144,255 73,147,755 51,612,802 4,323,808 55,936,610 Trade related contingent liabilities Import letters of credit Acceptances 24.4 Rupees in ‘000 Transaction related contingent liabilities Guarantees favoring - Government - Banks - Others 24.3 2017 Other contingencies The Income Tax Department has amended the deemed assessment orders of the Holding company for prior years including the tax year 2017. The additions / disallowances were mainly due to allocation of expenses relating to dividends and capital gains, allowability of provision against loans and advances, provision against investments and provision against other assets. In the amended order for tax year 2015, additional issues with respect to the taxability of gain on bargain purchase and non-adjustment of loss pertaining to HSBC Bank Middle East – Pakistan Branches have also been raised. The Holding company has obtained stay order from the High Court of Sindh against the demands raised through the amended order for the tax year 2015. Both the Holding company and the department have filed appeals with the Appellate Authorities in respect of the aforementioned matters. The management of the Holding company, in consultation with its tax advisors, is confident that the decision in respect of the above matters would be in Holding Company’s favour and accordingly no provision has been made in these financial statements with respect thereto. The additional tax liability in respect of gain on bargain purchase and non-adjustment of loss pertaining to HSBC Bank Middle East – Pakistan Branches is Rs 1,096 million and Rs 706 million respectively. ANNUAL REPORT 2017 263
  246. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 Note 24.5 2017 Commitments in respect of forward exchange contracts Purchases 75,272,094 72,008,025 Sales 49,286,572 69,766,108 202,293 129,320 139,288,755 123,675,880 24.6 Commitments for the acquisition of operating fixed assets 24.7 Commitments in respect of Islamic financing and related assets 24.7.1 24.7.1 The Group makes commitments to extend credit (including to related parties) in the normal course of business but these being revocable commitment do not attract any significant penalty or expense if the liability is unilaterally withdrawn. 2017 24.8 Other commitments Bills for collection (inland) Bills for collection (foreign) 25 PROFIT / RETURN EARNED ON ISLAMIC FINANCING AND RELATED ASSETS, INVESTMENTS AND PLACEMENTS On financing to - Customers Note 25.1 On investments in - Available for sale securities - Held for trading securities - Held to maturity securities On deposits with financial institutions 25.1 2016 Rupees in ‘000 2016 Rupees in ‘000 125,354 38,774,344 38,899,698 144,063 30,342,514 30,486,577 2017 2016 Rupees in ‘000 21,495,183 14,930,713 4,413,411 8,324 1,565,200 8,260,849 5,547 1,192,125 8,612,816 36,094,934 6,372,190 30,761,424 This includes income on Ijarah under IFAS 2 which is net off takaful expense of Rs 914 million (2016: Rs 668 million) recovered from customers. 26 PROFIT ON DEPOSITS AND OTHER DUES EXPENSED Deposits and other accounts Other Musharakahs / Modarabas / Murabaha Note 26.1 2017 Rupees in ‘000 13,385,784 1,884,949 15,270,733 2016 11,868,001 1,003,788 12,871,789 26.1 This includes Rs 316 million (2016: Rs 263 million) paid / payable to SBP under Islamic Export Refinance Scheme. 27 CAPITAL GAIN ON SALE OF INVESTMENTS - NET Shares / units of mutual funds - listed Sukuks 264 MEEZAN BANK LIMITED 2017 Rupees in ‘000 642,230 297,036 939,266 2016 1,005,189 7,235 1,012,424
  247. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 28 Note OTHER INCOME Gain on termination of Ijarah financing Gain on termination of diminishing musharakah financing Gain on sale of operating fixed assets Others 28.1 29 2017 2016 Rupees in ‘000 144,206 19,767 73,554 173,486 411,013 28.1 108,327 13,857 53,681 165,811 341,676 This includes recoveries against loans written off by HSBC ME prior to its acquisition by the Group amounting Rs 23.553 million (2016: Rs 33.409 million). Note ADMINISTRATIVE EXPENSES Salaries, allowances and other employee benefits Charge for defined benefit plan Contribution to defined contribution plan Non - executive directors' fees Rent, electricity, taxes, insurance, etc. Depreciation Amortisation Communication Stationery and printing Repairs and maintenance Security charges including cash transportation charges Local transportation and car running Fees, subscription and clearing charges Entertainment Office supplies Hardware and software maintenance Advertisem*nt and publicity Travelling Brokerage, commission and bank charges Legal and professional charges Auditors' remuneration Donation Others 29.1 & 29.3 12.2 12.4 29.2 29.4 29.5 2017 2016 Rupees in ‘000 8,279,263 286,498 249,853 42,843 2,601,550 1,510,979 177,508 459,052 402,584 549,898 789,696 328,067 359,710 58,444 201,948 259,807 215,016 89,664 183,656 32,503 10,882 36,414 17,125,835 7,332,157 274,330 217,400 39,081 2,434,834 1,424,562 178,529 430,687 319,535 499,565 652,632 250,939 176,581 50,078 176,410 245,533 279,630 86,774 123,496 23,220 13,100 200 77,824 15,307,097 29.1 This includes remuneration to Shariah Advisor amounting to Rs 11.5 million (2016: Rs 10.7 million). 29.2 This includes remuneration to Shariah Board amounting to Rs 0.8 million (2016: Rs 0.6 million). 29.3 The Holding company has performance bonus policy for all employees including the President & Chief Executive Officer and Deputy Chief Executive Officer. The aggregate amount determined for eligible employees in respect of the bonus relating to all Executives and for the President & CEO and Deputy CEO of the Holding company amounted to Rs 665 million (2016: Rs 570.67 million), Rs 83.14 million (2016: Rs 78.44 million) and Rs 55.40 million (2016: Rs 52.27 million). 29.4 Auditors’ remuneration Audit fee Fee for interim review Special certifications and sundry advisory services Tax services Sindh sales tax on services Out of pocket expenses 29.5 2017 Rupees in ‘000 3,985 872 3,776 210 8,843 643 1,396 10,882 2016 3,900 1,182 2,965 2,930 10,977 788 1,335 13,100 Donation National Medical Centre (Private) Limited - 200 None of the directors / CEO or their spouses had any interest in the donee. ANNUAL REPORT 2017 265
  248. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 Note 30 Penalties imposed by the State Bank of Pakistan 31 Rupees in ‘000 2016 10,824 3,600 4,599,996 373,600 4,973,596 3,283,846 268,219 3,552,065 (820,745) 4,152,851 362,603 3,914,668 TAXATION Current - for the year - for prior years 31.1 Deferred - for the year 32 2017 OTHER CHARGES 31.1 During the current year, the Finance Act 2017 extended the application of super tax brought into effect through the Finance Act 2015 for rehabilitation of temporary displaced persons. Accordingly, the Group has recognised prior year tax charge of Rs 373.6 million in the current year which is determined at the applicable tax rate of 4 percent on taxable income for the tax year 2017 (i.e year ended December 31, 2016). 31.2 Relationship between tax expense and accounting profit Note 2017 Rupees in ‘000 2016 Profit before taxation 9,932,844 10,517,091 Effects of: -Tax calculated at the applicable rate of 35% - Income chargeable to tax at reduced rate - Prior years charge - Permanent differences - Others Tax charge for the year 3,476,495 105,031 373,600 5,326 192,399 4,152,851 3,853,036 (217,172) 268,219 (11,739) 22,324 3,914,668 5,618,512 6,181,901 BASIC AND DILUTED EARNINGS PER SHARE Profit for the year Number Weighted average number of ordinary shares 1,029,187,450 1,021,328,339 Rupees Restated Basic earnings per share of the Holding company for the year 32.1 5.46 6.05 32.1 There were no convertible dilutive potential ordinary shares outstanding on December 31, 2017 and 2016. Note 33 Rupees in ‘000 2016 CASH AND CASH EQUIVALENTS Cash and balances with treasury banks Balances with other banks 266 2017 MEEZAN BANK LIMITED 7 8 64,556,409 4,940,090 56,037,043 12,067,855 69,496,499 68,104,898
  249. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 34 2017 Number of Staff STAFF STRENGTH Permanent Contractual basis Group's own staff strength at the end of the year Outsourced Total staff strength at the end of the year 35 2016 7,142 1,489 8,631 1,399 10,030 6,601 1,504 8,105 1,388 9,493 DEFINED BENEFIT PLAN 35.1 General description - Defined Benefit Plan (Gratuity Scheme) of MBL The activities of the gratuity scheme are governed by Meezan Bank Limited Staff Gratuity Fund established in 2000 under the provisions of a trust deed. Plan assets held in trust are governed by the Trust Deed as is the nature of the relationship between the MBL and the trustees and their composition. Responsibility for governance of the plan including the investment decisions lies with the Trustees. The Board of Trustees comprise of representatives of the MBL and scheme participants in accordance with the Fund's trust deed. The disclosures from notes 35.2 to 35.14 pertain to defined benefit plan of MBL. 35.2 The amount recognised in the Consolidated Statement of Financial Position (in respect of the gratuity scheme) is determined as follows: 2017 Rupees in ‘000 Present value of defined benefit obligations Fair value of plan assets 35.3 1,297,029 (855,904) 441,125 2016 968,320 (844,964) 123,356 Plan assets (in respect of the gratuity scheme) consist of the following: 2017 Rupees in '000 Meezan Aamdan Certificates Al Meezan Mutual Fund Meezan Asset Allocation Plan Fatima Fertilizer Company Limited - Sukuk Savings account with Meezan Bank Limited 606,937 63,882 164,157 11,772 9,156 855,904 % 71% 8% 19% 1% 1% 100% 2016 Rupees in '000 533,224 250,178 60,000 1,562 844,964 % 63% 30% 7% 0% 100% ANNUAL REPORT 2017 267
  250. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 35.4 The movement in the defined benefit obligation (in respect of the gratuity scheme) over the year is as follows: 2017 Present value of obligation Fair value of plan assets Total Rupees in ‘000 At January 1 968,320 Current service cost 237,847 Return expense / (income) (844,964) - 123,356 237,847 83,547 (77,996) 5,551 1,289,714 (922,960) 366,754 110,363 110,363 Remeasurements: - Return on plan assets, excluding amounts included in return expense / (income) - - (Gain) / loss from change in demographic assumptions - - - (Gain) / loss from change in financial assumptions - - - Experience losses / (gains) Contribution Benefit payments At December 31 87,364 - 87,364 87,364 110,363 197,727 1,377,078 (812,597) 564,481 (123,356) (123,356) (80,049) 80,049 1,297,029 (855,904) 441,125 2016 Present value of obligation Fair value of plan assets Total Rupees in ‘000 At January 1 817,468 Current service cost 224,443 Return expense / (income) (590,988) - 226,480 224,443 77,139 (68,315) 8,824 1,119,050 (659,303) 459,747 (1,340) (1,340) Remeasurements: - Return on plan assets, excluding amounts included in return expense / (income) - (Gain) / loss from change in demographic assumptions - - - (Gain) / loss from change in financial assumptions - - - Experience losses / (gains) Contribution 268 - (58,571) - (58,571) (58,571) (1,340) (59,911) 1,060,479 (660,643) 399,836 (276,480) (276,480) - Benefit payments (92,159) 92,159 At December 31 968,320 (844,964) MEEZAN BANK LIMITED - 123,356
  251. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 35.5 Charge for defined benefit plan (in respect of the gratuity scheme) 2017 Current service cost Net return cost 237,847 5,551 243,398 Rupees in ‘000 2016 224,443 8,824 233,267 Total expense recognized in Profit and Loss Account amounted to Rs 279.078 million (2016: Rs 268.150 million) of which Rs 243.398 million (2016: Rs 233.267 million) pertains to approved Gratuity funded Scheme and Rs 35.680 million (2016: Rs 34.883 million) pertains to End of Service unfunded Defined Benefit scheme. Total expense recognized in Other Comprehensive Income amounted to Rs 189.878 million (2016: credit / reversal of Rs 59.832 million) of which Rs 197.727 million (2016: credit / reversal of Rs 59.911 million) pertains to approved defined Benefit Gratuity Scheme and credit / reversal of Rs 7.849 million (2016: charge of 0.079 million) pertains to End of Service unfunded Defined Benefit scheme. 35.6 The plan assets and defined benefit obligations (in respect of the gratuity scheme) are based in Pakistan. 35.7 Principal actuarial assumptions (in respect of gratuity scheme) Discount rate Expected rate of increase in salaries Expected rate of return on investments Normal retirement age 2017 2016 9.50% p.a 9.50% p.a 9.50% p.a 60 years 9.00% p.a 9.00% p.a 9.00% p.a 60 years 35.8 Assumptions regarding future mortality are set based on actuarial advice in accordance with published statistics and experience in Pakistan. The rates assumed are based on the adjusted SLIC 2001 - 2005 mortality tables with one year age set back. 35.9 The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is: Impact on defined benefit obligation - Increase / (Decrease) Change in assumption Increase in Decrease in assumption assumption Rupees in ‘000 Discount rate 1.0% (140,491) 168,203 Salary growth rate 1.0% 173,133 (146,889) Increase by 1 year in assumption Life expectancy / Withdrawal rate Decrease by 1 year in assumption (129,703) 129,703 Methodology followed for calculating sensitivities The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the gratuity liability recognised within the Consolidated Statement of Financial Position. 35.10 The weighted average duration of the defined benefit obligation is 11.75 years. 35.11 Expected maturity analysis of undiscounted defined benefit obligation for the gratuity scheme is as follows: At December 31, 2017 Less than a year Between 1-2 years Between 2-5 years Over 5 years Total 5,330,012 5,712,525 Rupees in ‘000 Gratuity 120,675 60,846 200,992 ANNUAL REPORT 2017 269
  252. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 35.12 Historical information 2017 2016 2015 2014 2013 Rupees in ‘000 Defined benefit obligation Fair value of plan assets Deficit Remeasurements of plan liabilities Remeasurements of plan assets 35.13 1,297,029 (855,904) 441,125 968,320 (844,964) 123,356 817,468 (590,988) 226,480 574,550 (451,069) 123,481 410,819 (332,294) 78,525 (87,364) 58,571 (39,732) (35,521) (32,941) (110,363) 1,340 (789) 2,475 (25,763) Funding levels are monitored on an annual basis and are based on actuarial recommendations. Contribution for the next year works out to Rs 274.647 million as per the actuarial valuation report of the Bank as of December 31, 2017. 35.14 Through its defined benefit gratuity plan, the Fund is exposed to a number of risks, the most significant of which are detailed below: 35.15 Asset volatility The plan liabilities are calculated using a discount rate set with reference to corporate bond yields; if plan assets underperform to the yield, this will create a deficit. The Fund believes that due to long-term nature of the plan liabilities and the strength of the MBL's support, the current investment strategy manages this risk adequately. Changes in Sukuk (bond) yields A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans' sukuk holdings. Inflation risk The majority of the plans' benefit obligations are linked to inflation, and higher inflation will lead to higher liabilities. However plan assets are variable rate instruments and are re-priced at regular intervals to off set inflationary impacts. Life expectancy / Withdrawal rate The majority of the plans' obligations are to provide benefits on severance with the MBL on achieving retirement. Any change in life expectancy / withdrawal rate would impact plan liabilities. End of Service Unfunded Defined Benefit of MBL The Holding company also operates an End of Service unfunded defined benefit for the founding President and Chief Executive Officer. The charge in respect of current service cost is recognised based on expected period of future service. The charge for the year of this benefit amounted to Rs 27.831 million out of which Rs 35.680 million has been recognized in the Consolidated Profit and Loss Account and the credit / reversal of Rs 7.849 million in Consolidated Other Comprehensive Income. The present value of defined benefit obligation recognised in respect of this benefit amounts to Rs 274.758 million. The principal actuarial assumptions comprise of discount rate of 9.5 percent and salary increase rate of 9.5 percent. The retirement age used by the actuary is 63 years. The sensitivity of the defined benefit obligation due to a one percent change in discount rate would be Rs 5.573 million (in case the discount rate is increased) and Rs 5.749 million (in case the discount rate is decreased). The sensitivity of the defined benefit obligation due to change in life expectancy / withdrawal rates would be Lower by Rs 0.275 million (in case of ten percent increase in assumption) and higher by Rs 0.275 million (in case of ten percent decrease in assumption). These sensitivities are calculated using the same methodology as explained in note 35.9. 35.16 270 The disclosure made in notes 35.1 to 35.15 are based on the information included in the actuarial valuation report as of December 31, 2017. MEEZAN BANK LIMITED
  253. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 36 DEFINED CONTRIBUTION PLAN The Group also operates a recognized contributory provident fund for all permanent employees. Equal monthly contributions are made, both by the Group and the employees, to the fund at a rate of 10% of basic salary. 2017 2016 Rupees in ‘000 Contribution from the Group Contribution from the employees 37 249,853 249,853 499,706 217,400 217,400 434,800 COMPENSATION OF DIRECTORS AND EXECUTIVES President and Chief Executive Fees* Managerial remuneration Charge for gratuity scheme Contribution to defined contribution plan House Rent Utilities Medical Conveyance Others Number of persons 2017 2016 42,717 16,476 3,661 7,758 1,706 1,536 73,854 1 40,298 15,544 3,454 3,854 1,412 1,349 65,911 1 Executives Directors 2017 2016 Rupees in ‘000 42,843 28,463 2,033 2,440 10,978 2,440 2,751 1,088 1,508 94,544 11 39,081 26,852 1,918 2,302 10,357 2,302 2,459 880 1,210 87,361 12 2017 1,710,271 98,279 122,786 587,476 130,556 127,958 3,251 2,780,577 1,270 2016 1,511,121 86,110 102,743 511,135 113,592 111,371 6,457 2,442,529 1,089 * This includes amounts charged in these financial statements as fees to ten (2016: eleven) non-executive directors. 38 37.1 Executives mean employees, other than Chief Executive and Directors of the Holding company, whose basic salary exceeds five hundred thousand rupees in a financial year. Further, the Chief Executive Officer of the subsidiary company has also been included under the head “Executives”. 37.2 The Chief Executive, the Deputy Chief Executive Officer (the Executive Director) and certain executives have been provided with free use of the Group cars. 37.3 In addition to the above, all Executives of the Holding company, including the President & Chief Executive Officer and Deputy Chief Executive Officer of the Holding company are also entitled to bonus which is disclosed in note 29.3 to these financial statements. Further, End of Service Benefit for the founding President and Chief Executive Officer of the Holding company was approved during last year and the related expense is disclosed in note 35.15 to these financial statements. FAIR VALUE OF FINANCIAL INSTRUMENT 38.1 The fair value of investments in listed securities, except investments categorised as ‘held to maturity’, investments in subsidiaries and associates is based on quoted market prices. The value of unquoted equity investments is reduced, if required, on the basis of break-up value of those investments based on the latest available audited financial statements. Fair value of Islamic financing and related assets, other assets, other liabilities and fixed term deposits and other accounts cannot be calculated with sufficient reliability due to absence of current and active market for such assets and liabilities and reliable data regarding market rates for similar instruments. The provision for impairment of Islamic financing and related assets has been calculated in accordance with the Group’s accounting policy as stated in note 6.3.2. In the opinion of the management, the fair value of the remaining financial assets and liabilities are not significantly different from their carrying values since these assets and liabilities are short term in nature or in the case of financings and deposits are frequently repriced. ANNUAL REPORT 2017 271
  254. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 2017 38.2 Off-balance sheet financial instruments Book value 2016 Fair value Book value Fair value Rupees in ‘000 38.3 Forward purchase of foreign exchange - net 72,953,918 75,547,124 73,222,495 72,555,307 Forward sale of foreign exchange - net 47,965,438 49,494,849 71,184,529 70,252,958 The table below analyses financial and non-financial assets carried at fair value, by valuation method. The different levels have been defined as follows: - Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1). - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2). - Inputs for the assets or liabilities that are not based on observable market data (i.e. unobservable inputs e.g. estimated future cash flows) (Level 3). 2017 Recurring Fair Value Measurements Level 1 Level 3 Total Rupees in ‘000 Investments - Net Financial Assets Available for sale securities Ordinary shares - listed Units of open end fund GoP Sukuk PIA Sukuk Global Sukuk Bonds Level 2 4,526,079 50,939 5,055,704 - Forward purchase of foreign exchange contracts Forward sale of foreign exchange contracts Held for trading securities Sukuk 100,766 Recurring Fair Value Measurements Level 1 57,151,526 1,500,000 - - 4,526,079 50,939 57,151,526 1,500,000 5,055,704 75,547,124 49,494,849 - 75,547,124 49,494,849 - 100,766 2016 Level 3 Total Rupees in ‘000 Investments - Net Financial Assets Available for sale securities Ordinary shares - listed Units of open end fund GoP Sukuk WAPDA Sukuk PIA Sukuk Global Sukuk Bonds Level 2 5,368,665 51,150 7,514,305 Forward purchase of foreign exchange contracts Forward sale of foreign exchange contracts - 70,510,182 289,775 1,515,000 - - 5,368,665 51,150 70,510,182 289,775 1,515,000 7,514,305 72,555,307 70,252,958 - 72,555,307 70,252,958 Investment in associates (listed - mutual funds) have market value of Rs 5,780 million (2016: Rs 6,605 million) as disclosed in note 10.6 to these financial statements which is being valued under level 1. The Group's policy is to recognise transfers into and out of the different fair value hierarchy levels at the date the event or change in circ*mstances that caused the transfer occurred. There were no transfers between levels 1 and 2 during the year. 272 MEEZAN BANK LIMITED
  255. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 (a) Financial instruments in level 1 Financial instruments included in level 1 comprise of investments in listed ordinary shares, units of open end mutual fund, Fatima Fertilizer Sukuk and global sukuk bonds classified as available for sale or held for trading instruments. (b) Financial instruments in level 2 Financial instruments included in level 2 comprise of GoP ijarah sukuk and PIA sukuk classified as “available for sale”. (c) Financial instruments in level 3 Currently, no financial instruments are classified in level 3. Valuation techniques used in determination of fair values within level 2 Valuation approach and input used Item 38.4 GoP Sukuk and PIA Sukuk The fair value of GoP Ijarah Sukuk and PIA Sukuk quoted are derived using PKISRV rates. The PKISRV rates are announced by FMA (Financial Market Association) through Reuters. The rates announced are simple average of quotes received from eight different pre-defined/ approved dealers / brokers. Forward foreign exchange contracts The valuation has been determined by interpolating the mid rates announced by State Bank of Pakistan. Non-banking assets acquired in satisfaction of claims have been carried at revalued amounts determined by professional valuers (level 3 measurement) based on their assessment of the market values as disclosed in note 13. The valuations are conducted by the valuation experts appointed by the holding company which are also on the panel of State Bank of Pakistan. The valuation experts used a market based approach to arrive at the fair value of the Holding company’s properties. The market approach used prices and other relevant information generated by market transactions involving identical or comparable or similar properties. These values are adjusted to reflect the current condition of the properties. The effect of changes in the unobservable inputs used in the valuations cannot be determined with certainty, accordingly a qualitative disclosure of sensitivity has not been presented in these consolidated financial statements. Carrying Value 38.5 Financial assets not measured at fair value 2017 2016 Rupees in ‘000 Cash and balances with treasury banks Balances with other banks Due from financial institutions Investments - net Islamic financing and related assets - net Other assets - net 64,556,409 4,940,090 147,229,221 48,996,187 419,929,149 12,397,292 56,037,043 12,067,855 129,115,165 43,231,825 311,530,270 8,826,890 ANNUAL REPORT 2017 273
  256. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 39 SEGMENT DETAILS WITH RESPECT TO BUSINESS ACTIVITIES The segment analysis with respect to business activity is as follows: 2017 Corporate finance Trading and sales Retail banking Commercial banking Agency services Asset Management Total 1,086,668 (924,292) 162,376 4,268,133 162,528 162,528 935,953 3.80% - 43,937,952 (38,157,959) 5,779,993 785,967,329 8,026,307 9,982,149 747,557,756 - Asset Management Total 2,587,648 (1,280,091) 1,307,557 5,500,578 162,528 162,528 1,201,632 23.77% - 38,652,560 (32,050,137) 6,602,423 663,267,675 8,261,168 8,723,662 628,495,111 - Rupees in ‘000 Total income Total expenses Net income Segment assets Segment non performing assets Segment provision held* Segment liabilities Segment return on assets (ROA) (%) Segment cost of funds (%) 1,719,764 (1,420,428) 299,336 22,003,813 181,682 181,682 876,882 1.57% 2.45% 16,094,750 (14,678,214) 1,416,536 323,855,589 785,762 785,762 19,664,580 0.66% 2.45% 9,173,788 (7,265,558) 1,908,230 112,844,698 1,611,389 2,058,498 698,318,648 2.07% 2.45% Corporate finance Trading and sales Retail banking 15,849,469 (13,864,737) 1,984,732 322,995,096 5,284,946 6,793,679 27,761,693 0.69% 2.45% 13,513 (4,730) 8,783 - 2016 Commercial banking Agency services Rupees in ‘000 Total income Total expenses Net income Segment assets Segment non performing assets Segment provision held* Segment liabilities Segment return on assets (ROA) (%) Segment cost of funds (%) 1,234,543 (1,013,800) 220,743 16,080,705 181,682 181,682 787,348 1.45% 2.53% 17,720,136 (15,593,999) 2,126,137 319,481,447 768,307 199,030 5,616,271 0.88% 2.53% 6,582,410 (5,202,999) 1,379,411 84,269,176 1,795,188 1,937,795 584,164,963 1.99% 2.53% 10,510,331 (8,953,126) 1,557,205 237,935,769 5,353,463 6,242,627 36,724,897 0.75% 2.53% 17,492 (6,122) 11,370 - *Includes general provision 40 RELATED PARTY TRANSACTIONS 40.1 Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions and includes major shareholders, associated companies, retirement benefit funds, directors and key management personnel and their close family members. 40.2 Transactions with related parties are entered in the normal course of business. 40.3 Key management personnel - President and Chief Executive Officer - Holding Company - Deputy Chief Executive Officer - Holding Company 40.4 Details of transactions with related parties and balances with them as at the year-end are as follows: Total 2017 Islamic financing and related assets At January 1 Addition during the year Repayment during the year At December 31 274 Associates 2016 2,484,365 944,387 6,613,113 7,562,436 (8,420,974) (6,022,458) 676,504 2,484,365 2017 2016 2017 Rupees in ‘000 2,484,365 944,387 6,613,113 7,562,436 (8,420,974) (6,022,458) 676,504 2,484,365 Investments - At December 31 5,779,700 7,055,447 5,779,700 7,055,447 Deposits At December 31 4,381,811 3,654,710 1,248,619 1,300,974 MEEZAN BANK LIMITED Key management personal / Directors 2016 Other related parties 2017 2016 - - - - - - - - 429,167 402,039 2,704,025 1,951,697
  257. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 Balances pertaining to parties that were related at the beginning of the year but ceased to be related during any part of the current year are not reflected as part of the closing balance. However, new related parties have been added during the year. The same are accounted for through the movement presented above. Total 2017 Key Management Personnel / Directors Associates 2016 2017 2016 2017 Other Related Parties 2016 2017 2016 Rupees in ‘000 Balances Profit receivable on financing / investments Dividend receivable Fee receivable Payable to defined benefit plan Advance against future Diminishing Musharakah Letters of guarantee (unfunded) Letters of credit (unfunded) Transactions, income and expenses Profit earned on financing / investments Return on deposits / borrowing expensed Dividend income earned Investments made Capital gain (net) Charge for diminution in value of investments Charge for defined benefit gratuity scheme Contribution to defined contribution plan Contribution to staff benevolent fund Fees and other income earned Charity paid Remuneration to key management personnel: - Salaries and benefits (excluding end of service benefit) (notes 37 & 29.3) - End of service benefit charge for the founder president (note 35.15) Fees to non-executive directors (note 37) 40.5 Associates - Key Information 10,228 26,418 4,286 4,688 7,995 726,369 374,847 52,994 - 1,201,001 29,851 938,923 10,228 4,688 29,851 26,418 4,286 7,995 52,994 1,201,001 938,923 274,758 - 246,926 - 451,611 - 127,921 - 152,697 73,290 180,522 152,792 377,626 256,296 1,243,264 1,364,874 252,766 318,432 9,814 480,213 210,466 249,853 217,400 20,000 19,347 2,010,154 1,480,525 25,000 17,000 152,697 32,964 377,626 1,243,264 252,766 2,010,154 - 73,290 29,875 256,296 1,364,874 318,432 9,814 1,480,525 - 11,301 - 5,863 - 136,257 480,213 249,853 20,000 25,000 117,054 210,466 217,400 19,347 17,000 264,095 244,901 - - 264,095 244,901 - - 27,831 42,843 34,962 39,081 - - 27,831 42,843 34,962 39,081 - - 2017 2016 (Unaudited) Mutual Funds* Rupees in ‘000 Assets 104,297,210 114,348,475 2,718,908 2,402,357 Operating revenue (12,051,032) 23,436,427 (Loss) / Profit after tax (12,067,539) 22,201,119 Liabilities * Information is based on reviewed financial information as at December 31, 2017 and December 31, 2016. ANNUAL REPORT Annual Report 2015 2017 171 275
  258. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 41 CAPITAL ASSESSMENT AND ADEQUACY BASEL SPECIFIC The State Bank of Pakistan (SBP) has introduced new guidelines with respect to disclosure of capital adequacy related information in the financial statements of banks vide its communication dated November 5, 2014. These guidelines are based on the requirements of Basel III which were introduced earlier by the SBP in August 2013 for implementation by banks in Pakistan. The SBP has specified a transitional period till 2018 for implementation of Basel III. The disclosures below have been prepared on the basis of these new guidelines. The comparative information is as per the requirements which were applicable last year. 41.1 Capital structure Under Basel III framework, the Group's regulatory capital has been analysed into two tiers as follows: - Tier 1 capital (going concern capital) which is sub divided into: a) Common Equity Tier 1 (CET1), which includes fully paid up capital, balance in share premium account, reserve for bonus issue, minority interest, general reserves and unappropriated profit (net of losses), etc after regulatory deductions for reciprocal crossholdings, deficit on revaluation of available for sale investments and deduction for book value of intangibles; and b) Additional Tier 1 capital (AT1), which includes instruments issued by the Group which meet the specified criteria after certain regulatory deductions. - Tier II capital, which includes Sub-ordinated Sukuk, general provisions for loan losses (upto a maximum of 1.25% of credit risk weighted assets), reserves on revaluation of fixed assets and available for sale investments after deduction of deficit on available for sale investments (upto a maximum of 89%). Banking operations are categorised in either the trading book or the banking book and risk weighted assets are determined according to the specified requirements that seek to reflect the varying levels of risk attached to assets and off balance sheet exposures. The required capital adequacy ratio is achieved by the Group through: (a) (b) (c) (d) 41.2 Adequate level of paid up capital; Adequate risk profile of asset mix; Ensuring better recovery management; and Maintaining acceptable profit margins. Capital adequacy ratio The main objective of the capital management is to improve the financial position and strengthen the statement of financial position of the Group to support the growth in business, provide protection to depositors and enhance shareholders' value. The Holding company's Board and the management is committed to maintaining a sound balance between depositors' liability and shareholders' funds so that optimal capital / debt ratio is maintained. The optimal capital / debt ratio will provide reasonable assurance to depositor's about safety and security of their funds and at the same time provide impetus to the management to invest their depositors’ funds into profitable ventures without compromising the risk profile of the holding company. The capital requirement of the holding company has been determined based on the projected growth plan to be achieved in the next 3 to 5 years in all areas of business operations. Further, it also takes into account a road map for capital enhancement as directed by the State Bank of Pakistan vide its various circulars issued from time to time. The Holding company prepares an Annual Budget and Three Year Plan for the purpose of the growth map and future direction. Bottom up approach is used to prepare annual budget and detailed deliberations are held while preparing Three Year Plan. The growth prospects take into consideration prevailing economic and political factors in Pakistan and abroad. In implementing current capital requirements the State Bank of Pakistan requires banks to maintain minimum Capital Adequacy Ratio (CAR) of 11.275% as of December 31, 2017 whereas the Consolidated CAR stood at 13.36% at the year ended December 31, 2017. The Group calculates capital adequacy ratio for credit risk, market risk and operational risk based upon requirements under Basel Accord as per the guidelines issued by the State Bank of Pakistan from time to time in this regard. Sensitivity and stress testing of the Group under different risk factors namely yield rate, forced sale value of collateral, non-performing financings and foreign exchange rate depicts that the Group's capital adequacy ratio is above the regulatory requirements. The Group has taken into account credit risk, market risk and operational risk when planning its assets. 276 MEEZAN BANK LIMITED
  259. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 41.3 Capital Adequacy Ratio (CAR) disclosure Particulars Common Equity Tier 1 capital (CET1): Instruments and reserves Fully paid-up capital / capital deposited with the SBP Balance in share premium account Reserve for issue of bonus shares General / Statutory Reserves Gain / (Losses) on derivatives held as Cash Flow Hedge Unappropriated profits Minority Interests arising from CET1 capital instruments issued to third party by consolidated bank subsidiaries (amount allowed in CET1 capital of the consolidation group) CET 1 before Regulatory Adjustments Total regulatory adjustments applied to CET1 (Note 41.3.1) Common Equity Tier 1 Additional Tier 1 (AT 1) Capital Qualifying Additional Tier-1 capital instruments plus any related share premium of which: - classified as equity - classified as liabilities 2017 2016** Rupees in ‘000 10,629,022 2,406,571 10,986,554 12,563,156 10,027,379 9,724,001 11,340,678 412,930 36,998,233 (725,538) 36,272,695 635,145 31,727,203 (636,634) 31,090,569 - - Additional Tier-1 capital instruments issued by consolidated subsidiaries and held by third parties - of which: instrument issued by subsidiaries subject to phase out 37,294 37,294 25,826 25,826 AT1 before regulatory adjustments Total of Regulatory Adjustment applied to AT1 capital (Note 41.3.2) Additional Tier 1 capital after regulatory adjustments Tier 1 Capital (CET1 + admissible AT1) 37,294 (15,000) 22,294 36,294,989 25,826 (13,694) 12,132 31,102,701 Tier 2 Capital Qualifying Tier 2 capital instruments under Basel III plus any related share premium Capital instruments subject to phase out arrangement issued Tier 2 capital instruments issued to third parties by consolidated subsidiaries - of which: instruments issued by subsidiaries subject to phase out General Provisions or general reserves for loan losses-up to maximum of 1.25% of Credit Risk Weighted Assets Revaluation Reserves (net of taxes) of which: - Revaluation reserves on fixed assets - Unrealized gains/losses on AFS Foreign Exchange Translation Reserves Undisclosed / Other Reserves (if any) T2 before regulatory adjustments Total regulatory adjustment applied to T2 capital (Note 41.3.3) Tier 2 capital (T2) after regulatory adjustments Tier 2 capital recognized for capital adequacy Portion of Additional Tier 1 capital recognized in Tier 2 capital Total Tier 2 capital admissible for capital adequacy TOTAL CAPITAL (T1 + admissible T2) Total Risk Weighted Assets (RWA) {for details refer Note 41.6} 7,000,000 62,157 - 7,000,000 43,044 - 2,377,711 726,503 1,494,391 1,917,644 726,503 10,166,371 (50,000) 10,116,371 10,116,371 10,116,371 46,411,360 1,917,644 10,455,079 (50,000) 10,405,079 10,405,079 10,405,079 41,507,780 347,270,256 303,202,895 **As reported in last year annual financial statements. ANNUAL REPORT 2017 277
  260. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 2017 Particulars Capital Ratios and buffers (in percentage of risk weighted assets) CET1 to total RWA Tier-1 capital to total RWA Total capital to total RWA Bank specific buffer requirement (minimum CET1 requirement plus capital conservation buffer plus any other buffer requirement) of which: - capital conservation buffer requirement - countercyclical buffer requirement - D-SIB or G-SIB buffer requirement CET1 available to meet buffers (as a percentage of risk weighted assets) National minimum capital requirements prescribed by SBP CET1 minimum ratio Tier 1 minimum ratio Total capital minimum ratio CCB (Consisting of CET 1 only) Total Capital plus CCB 2016 10.45% 10.45% 13.36% 10.25% 10.26% 13.69% 7.275% 1.275% 4.45% 6.65% 0.65% 4.25% 6.00% 7.50% 10.00% 1.275% 11.275% 6.00% 7.50% 10.00% 0.65% 10.65% 2017 Particulars Amount Total regulatory adjustments applied to CET1 Pre-Basel III treatment* Amount Pre-Basel III treatment* Rupees in ‘000 41.3.1 Common Equity Tier 1 capital: Regulatory adjustments Goodwill (net of related deferred tax liability) All other intangibles (net of any associated deferred tax liability) Shortfall of provisions against classified assets Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability) Defined-benefit pension fund net assets Reciprocal cross holdings in CET1 capital instruments Cash flow hedge reserve Investment in own shares / CET1 instruments Securitization gain on sale Capital shortfall of regulated subsidiaries Deficit on account of revaluation from bank's holdings of property / AFS Investments in the capital instruments of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold) Significant investments in the common stocks of banking, financial and insurance entities that are outside the scope of regulatory consolidation (amount above 10% threshold) Deferred Tax Assets arising from temporary differences (amount above 10% threshold, net of related tax liability) Amount exceeding 15% threshold of which: - significant investments in the common stocks of financial entities - deferred tax assets arising from temporary differences National specific regulatory adjustments applied to CET1 capital Investment in TFCs of other banks exceeding the prescribed limit Any other deduction specified by SBP Regulatory adjustment applied to CET1 due to insufficient AT1 and Tier 2 to cover deductions 2016** 529,613 - - 466,920 - - 195,925 - - 169,714 - - - - - - - - - - - - - - - - - - 725,538 - 636,634 - 15,000 - - 13,694 - - 41.3.2 Additional Tier 1 Capital: regulatory adjustments Investment in mutual funds exceeding the prescribed limit (SBP specific adjustment) Investment in own AT1 capital instruments Reciprocal cross holdings in Additional Tier 1 capital instruments *This column highlights items that are still subject to Pre Basel III treatment during the transitional period **As reported in last year annual financial statements. 278 MEEZAN BANK LIMITED
  261. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 2017 Particulars Amount 2016** Pre-Basel III treatment* Pre-Basel III treatment* Amount Rupees in ‘000 Investments in the capital instruments of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold) Significant investments in the capital instruments issued by banking, financial and insurance entities that are outside the scope of regulatory consolidation Portion of deduction applied 50:50 to core capital and supplementary capital based on pre-Basel III treatment which, during transitional period, remain subject to deduction from tier-1 capital Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover deductions Total of Regulatory Adjustment applied to AT1 capital - - - - - - - - - - - - - - - - 15,000 - 13,694 - 50,000 - - *This column highlights items that are still subject to Pre Basel III treatment during the transitional period 41.3.3 Tier 2 Capital: regulatory adjustments Portion of deduction applied 50:50 to core capital and supplementary capital based on pre-Basel III treatment which, during transitional period, remain subject to deduction from tier-2 capital Reciprocal cross holdings in Tier 2 instruments Investment in own Tier 2 capital instrument Investments in the capital instruments of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold) Significant investments in the capital instruments issued by banking, financial and insurance entities that are outside the scope of regulatory consolidation Amount of Regulatory Adjustment applied to T2 capital 50,000 - - - - - - 50,000 - - - - 50,000 2017 - 2016** Rupees in ‘000 41.3.4 Risk Weighted Assets subject to Pre-Basel III treatment Risk weighted assets in respect of deduction items (which during the transitional period will be risk weighted subject to Pre-Basel III Treatment) of which: deferred tax assets of which: Defined-benefit pension fund net assets of which: Recognized portion of investment in capital of banking, financial and insurance entities where holding is less than 10% of the issued common share capital of the entity of which: Recognized portion of investment in capital of banking, financial and insurance entities where holding is more than 10% of the issued common share capital of the entity - - - - - - - - - - - Amounts below the thresholds for deduction (before risk weighting) Non-significant investments in the capital of other financial entities Significant investments in the common stock of financial entities Deferred tax assets arising from temporary differences (net of related tax liability) *This column highlights items that are still subject to Pre Basel III treatment during the transitional period **As reported in last year annual financial statements. ANNUAL REPORT 2017 279
  262. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 2017 2016** Rupees in ‘000 Applicable caps on the inclusion of provisions in Tier 2 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to standardized approach (prior to application of cap) Cap on inclusion of provisions in Tier 2 under standardized approach Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internal ratings-based approach (prior to application of cap) Cap for inclusion of provisions in Tier 2 under internal ratings-based approach 2,377,711 3,523,148 1,494,391 3,016,910 - - 41.3.5 Leverage ratio According to Basel III instructions issued by the State Bank of Pakistan (BPRD circular no. 06 dated August 15, 2013), it is mandatory for all the banks to calculate and report the Leverage ratio on a quarterly basis with the minimum benchmark of 3%. The reason for calculating leverage ratio is to avoid excessive On- and Off-balance sheet leverage in the banking system. A simple, transparent and non-risk based Ratio has been introduced with the following objectives: - Constrain the build-up of leverage in the banking sector which can damage the broader financial system and the economy; and - Reinforce the risk based requirements with an easy to understand and a non-risk based measure. Particulars 2017 2016** Rupees in ‘000 On balance sheet exposures On-balance sheet items (excluding unrealised gain on forward contracts) Forward exchange commitments with positive fair values Total On balance sheet exposures 785,241,791 1,252,104 786,493,895 663,267,675 1,439,734 664,707,409 3 4 Off-balance sheet items Off-balance sheet items Commitment in respect of forward exchange contracts Total Off balance sheet exposures 121,092,111 1,160,040 122,252,151 87,731,058 1,376,300 89,107,358 5 Capital and total exposures Tier 1 capital (Note 41.3) Total exposures 36,294,989 908,746,046 31,102,701 753,814,767 3.99% 4.13% 1 2 Basel III leverage ratio The current year's leverage ratio is 3.99% (2016: 4.13%) whereas total tier 1 capital and total exposures are Rs 36,294.989 milllion (2016: Rs 31,102.701 milllion) and Rs 908,746.046 million (2016: Rs 753,814.767 million) respectively. **As reported in last year annual financial statements. 280 MEEZAN BANK LIMITED
  263. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 41.4 Capital Structure Reconciliation 41.4.1 Reconciliation of each financial statement line item to item under regulatory scope of reporting - Step 1 Balance sheet as in published financial statements Particulars Under regulatory scope of reporting Rupees in ‘000 Assets Cash and balances with treasury banks Balances with other banks Due from financial institutions Investments Islamic financing and related assets Operating fixed assets Deferred tax assets Other assets 64,556,409 4,940,090 147,229,221 123,160,901 419,929,149 11,994,586 14,156,973 64,556,409 4,940,090 147,229,221 123,160,901 419,929,149 11,994,586 14,156,973 Total assets 785,967,329 785,967,329 Bills payable Due to financial institutions Deposits and other accounts Sub-ordinated sukuk Deferred tax liabilities Other liabilities 11,168,093 36,813,295 673,180,310 7,000,000 230,787 19,165,271 11,168,093 36,813,295 673,180,310 7,000,000 230,787 19,165,271 Total liabilities 747,557,756 747,557,756 10,629,022 13,393,125 12,563,156 1,007,975 816,295 10,629,022 13,393,125 12,563,156 1,007,975 816,295 785,967,329 785,967,329 Balance sheet as in published financial statements Under regulatory scope of reporting Liabilities and Equity Share capital Reserves Unappropriated profit Minority Interest Surplus on revaluation of investments - net of tax Total liabilities and equity 41.4.2 Reconciliation of balance sheet to eligible regulatory capital - Step 2 Particulars Reference Rupees in ‘000 Assets Cash and balances with treasury banks Balances with other banks Due from financial institutions 64,556,409 4,940,090 147,229,221 64,556,409 4,940,090 147,229,221 Investments of which: - non-significant capital investments in capital of other financial institutions exceeding 10% threshold 123,160,901 123,160,901 a - - ANNUAL REPORT 2017 281
  264. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 Particulars Reference Balance sheet as in published financial statements Under regulatory scope of reporting Rupees in ‘000 - significant capital investments in financial sector entities exceeding regulatory threshold - mutual funds exceeding regulatory threshold - reciprocal crossholding of capital instrument - others Islamic financing and related assets - shortfall in provisions / excess of total EL amount over eligible provisions under IRB - general provisions reflected in Tier 2 capital Operating fixed assets - of which: Intangibles Deferred tax assets of which: - DTAs that rely on future profitability excluding those arising from temporary differences - DTAs arising from temporary differences exceeding regulatory threshold Other assets of which: - goodwill - defined-benefit pension fund net assets Total assets b c d e 195,925 419,929,149 195,925 419,929,149 f g 2,377,711 11,994,586 529,613 2,377,711 11,994,586 529,613 k h - - - i 14,156,973 14,156,973 j l 785,967,329 785,967,329 11,168,093 36,813,295 673,180,310 7,000,000 7,000,000 230,787 230,787 11,168,093 36,813,295 673,180,310 7,000,000 7,000,000 230,787 230,787 Other liabilities 19,165,271 19,165,271 Total liabilities 747,557,756 747,557,756 10,629,022 10,629,022 13,393,125 2,406,571 7,777,925 3,117,547 91,082 12,563,156 1,007,975 412,930 37,294 62,157 816,295 816,295 - 10,629,022 10,629,022 13,393,125 2,406,571 7,777,925 3,117,547 91,082 12,563,156 1,007,975 412,930 37,294 62,157 816,295 816,295 - 785,967,329 785,967,329 Liabilities and Equity Bills payable Due from financial institutions Deposits and other accounts Sub-ordinated sukuk of which: - eligible for inclusion in AT1 - eligible for inclusion in Tier 2 Deferred tax liabilities of which: - DTLs related to goodwill - DTLs related to intangible assets - DTLs related to defined pension fund net assets - other deferred tax liabilities m n o p q r Share capital - of which: amount eligible for CET1 s - of which: amount eligible for AT1 t Reserves of which: u - portion eligible for inclusion in CET1 - Share Premium - portion eligible for inclusion in CET1 - Statutory reserve - portion eligible for inclusion in CET1 - Gain on Bargain Purchase - portion eligible for inclusion in CET1 - General reserve - portion eligible for inclusion in Tier 2 General reserve v Unappropriated profit w Minority Interest of which: - portion eligible for inclusion in CET1 x - portion eligible for inclusion in AT1 y - portion eligible for inclusion in Tier 2 z Surplus on revaluation of assets of which: - Revaluation reserves on Property - Unrealized Gains/Losses on AFS aa - In case of Deficit on revaluation (deduction from CET1) ab Total liabilities and Equity 282 - MEEZAN BANK LIMITED
  265. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 41.4.3 Basel III Disclosure (with added column) - Step 3 Particulars Source based on reference number from step 2 Component of regulatory capital reported by the group Rupees in ‘000 Common Equity Tier 1 capital (CET1): Instruments and reserves 1 2 3 4 5 6 7 8 Fully Paid-up Capital Balance in share premium account Reserve for issue of bonus shares General / Statutory Reserves Gain / (Losses) on derivatives held as Cash Flow Hedge Unappropriated / unremitted profits Minority Interests arising from CET1 capital instruments issued to third party by consolidated bank subsidiaries (amount allowed in CET1 capital of the consolidation group) CET 1 before Regulatory Adjustments (s) (u) (u) (w) (x) 10,629,022 2,406,571 10,986,554 12,563,156 412,930 36,998,233 Common Equity Tier 1 capital: Regulatory adjustments 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 Goodwill (net of related deferred tax liability) All other intangibles (net of any associated deferred tax liability) Shortfall of provisions against classified assets Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability) Defined-benefit pension fund net assets Reciprocal cross holdings in CET1 capital instruments Cash flow hedge reserve Investment in own shares / CET1 instruments Securitization gain on sale Capital shortfall of regulated subsidiaries Deficit on account of revaluation from bank's holdings of property / AFS Investments in the capital instruments of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold) Significant investments in the capital instruments issued by banking, financial and insurance entities that are outside the scope of regulatory consolidation (amount above 10% threshold) Deferred Tax Assets arising from temporary differences (amount above 10% threshold, net of related tax liability) Amount exceeding 15% threshold of which: - significant investments in the common stocks of financial entities - deferred tax assets arising from temporary differences National specific regulatory adjustments applied to CET1 capital Investment in TFCs of other banks exceeding the prescribed limit Any other deduction specified by SBP (mention details) Regulatory adjustment applied to CET1 due to insufficient AT1 and Tier 2 to cover deductions Total regulatory adjustments applied to CET1 Common Equity Tier 1 Additional Tier 1 (AT 1) Capital Qualifying Additional Tier-1 instruments plus any related share premium of which: - Classified as equity - Classified as liabilities Additional Tier-1 capital instruments issued by consolidated subsidiaries and held by third parties - of which: instrument issued by subsidiaries subject to phase out AT1 before regulatory adjustments (j) - (s) (k) - (p) (f) 529,613 - (h) - (r) * x% (l) - (q) * x% (d) 195,925 - (ab) (a) - (ac) - (ae) - (b) - (ad) - (af) - (i) 725,538 36,272,695 (t) (m) (y) 37,294 37,294 37,294 ANNUAL REPORT 2017 283
  266. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 Particulars Source based on reference number from step 2 Component of regulatory capital reported by group Rupees in ‘000 Additional Tier 1 Capital: regulatory adjustments 35 36 37 38 39 40 41 42 43 44 Investment in mutual funds exceeding the prescribed limit (SBP specific adjustment) Investment in own AT1 capital instruments Reciprocal cross holdings in Additional Tier 1 capital instruments Investments in the capital instruments of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold) Significant investments in the capital instruments issued by banking, financial and insurance entities that are outside the scope of regulatory consolidation Portion of deduction applied 50:50 to core capital and supplementary capital based on pre-Basel III treatment which, during transitional period, remain subject to deduction from tier-1 capital Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover deductions Total of Regulatory Adjustment applied to AT1 capital Additional Tier 1 capital Additional Tier 1 capital recognised for capital adequacy 15,000 - (ac) - (ad) - 15,000 22,294 22,294 Tier 1 Capital (CET1 + admissible AT1) Tier 2 Capital 45 Qualifying Tier 2 capital instruments under Basel III 46 Capital instruments subject to phase out arrangement from Tier 2 47 Tier 2 capital instruments issued to third party by consolidated subsidiaries - of which: instruments issued by subsidiaries subject to phase out 48 General Provisions or general reserves for loan losses-up to maximum of 1.25% of Credit Risk Weighted Assets 49 Revaluation Reserves eligible for Tier 2 of which: 50 - portion pertaining to Property 51 - portion pertaining to AFS securities 52 Foreign Exchange Translation Reserves 53 Undisclosed / Other Reserves (if any) 54 T2 before regulatory adjustments Tier 2 Capital: regulatory adjustments 55 Portion of deduction applied 50:50 to core capital and supplementary capital based on pre-Basel III treatment which, during transitional period, remain subject to deduction from tier-2 capital 56 Reciprocal cross holdings in Tier 2 instruments 57 Investment in own Tier 2 capital instrument 58 Investments in the capital instruments of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold) 59 Significant investments in the capital instruments issued by banking, financial and insurance entities that are outside the scope of regulatory consolidation 60 Amount of Regulatory Adjustment applied to T2 capital 61 Tier 2 capital (T2) 62 Tier 2 capital recognised for capital adequacy 63 Excess Additional Tier 1 capital recognised in Tier 2 capital 64 Total Tier 2 capital admissible for capital adequacy TOTAL CAPITAL (T1 + admissible T2) 284 MEEZAN BANK LIMITED 36,294,989 (n) (z) (g) 89% of (aa) (v) 7,000,000 62,157 2,377,711 726,503 726,503 10,166,371 50,000 - (ae) (af) 50,000 10,116,371 10,116,371 10,116,371 46,411,360
  267. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 41.5 Main features of regulatory capital instruments of the Holding Company Main Features 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Issuer Unique identifier (eg PSX Symbol or Bloomberg identifier etc.) Governing law(s) of the instrument Regulatory treatment Transitional Basel III rules Post-transitional Basel III rules Eligible at solo/ group/ group & solo Instrument type Amount recognised in regulatory capital (Currency in PKR thousands, as of reporting date) Par value of instrument Accounting classification Original date of issuance Perpetual or dated Original maturity date Issuer call subject to prior supervisory approval Optional call date, contingent call dates and redemption amount 17 18 Subsequent call dates, if applicable Coupons / dividends Fixed or floating dividend/ coupon Coupon rate and any related index/ benchmark 19 20 21 22 23 24 Existence of a dividend stopper Fully discretionary, partially discretionary or mandatory Existence of step up or other incentive to redeem Noncumulative or cumulative Convertible or non-convertible If convertible, conversion trigger (s) 25 26 If convertible, fully or partially If convertible, conversion rate 27 28 29 30 31 32 33 34 If convertible, mandatory or optional conversion If convertible, specify instrument type convertible into If convertible, specify issuer of instrument it converts into Write-down feature If write-down, write-down trigger(s) If write-down, full or partial If write-down, permanent or temporary If temporary write-down, description of write-up mechanism Position in subordination hierarchy in liquidation (specify instrument type immediately senior to instrument) 35 36 37 Non-compliant transitioned features If yes, specify non-compliant features Common Shares Tier II Sukuk Meezan Bank Limited MEBL Listing regulations of Pakistan Stock Exchange Limited Meezan Bank Limited Meezan Bank Limited - Tier II Modaraba Sukuk Laws applicable in Pakistan Common Equity Tier 1 Common Equity Tier 1 Solo & Group Ordinary shares Tier 2 Tier 2 Solo & Group Subordinated debt Rs 10,629,022 Rs 10 Shareholders equity August 16, 1997 Perpetual N/A No Rs 7,000,000 Rs 1,000,000 Liability - Sub-ordinated Sukuk September 22, 2016 Dated September 21, 2026 Yes N/A Callable with prior approval of SBP on or after five years from the date of issue N/A N/A N/A N/A N/A N/A N/A No N/A N/A N/A Floating coupon It is expected that profit may be similar to 6 month KIBOR plus 50 bps N/A Partially discretionary No Cumulative Convertible Occurrence of a non-viability trigger event (the “PONV”) Fully The conversion pricing formula is linked to the market value of the Common Shares on the date of PONV trigger event and the fair value of the Sukuk determined by adding / deducting attributable profit /loss of the General Pool and any amount of profit held during the Loss Absorbency period Option of SBP Common Shares Meezan Bank Limited No N/A N/A N/A N/A N/A Residual interest Residual interest No N/A No N/A No Fully discretionary No Noncumulative Nonconvertible N/A N/A N/A ANNUAL REPORT 2017 285
  268. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 Minimum capital requirements 41.6 Risk-weighted exposures 2017 2016** 2017 2016** Rupees in ‘000 Credit Risk Portfolios subject to on-balance sheet exposure (Simple Approach) Cash and cash equivalents Sovereign Public sector entities Banks Corporate Retail Residential mortgage Past due loans Operating fixed assets All other assets Risk weighted assets 97,567 516,923 777,626 19,161,086 2,698,514 513,916 18,591 1,148,210 704,323 156,723 434,818 1,079,254 16,957,024 1,663,258 404,127 24,485 856,477 561,770 975,672 5,169,232 7,776,259 191,610,860 26,985,140 5,139,157 185,913 11,482,096 7,043,235 1,567,232 4,348,180 10,792,536 169,570,236 16,632,575 4,041,268 244,852 8,564,766 5,617,699 104,247 1,890,061 165,692 542 80,772 1,559,953 58,377 57,868 1,042,470 18,900,613 1,656,922 5,423 807,717 15,599,530 583,766 578,681 Portfolios subject to off-balance sheet exposures market related (Current exposure method) Banks Customers 133,087 140,295 68,570 48,633 1,330,869 1,402,950 685,696 486,330 Equity Exposure Risk in the Banking Book Unlisted equity investments held in banking book 114,502 123,175 1,145,022 1,231,754 137,423 1,281,666 6,032 114,157 1,452,958 21,541 1,717,789 16,020,830 75,401 1,426,960 18,161,975 269,267 3,808,352 33,418,655 3,359,350 29,083,290 47,604,403 347,270,256 41,991,875 303,202,895 Required Actual Required Actual** Portfolios subject to off-balance sheet exposure non market related (Simple approach) Banks Corporate Retail Others Market Risk Capital Requirement for portfolios subject to Standardised Approach Interest rate risk Equity position risk Foreign Exchange risk Operational Risk Capital requirement for operational risk Total Capital Adequacy Ratio December 2017 CET1 to total RWA Tier-1 capital to total RWA Total capital to total RWA 6.00% 7.50% 11.275%*** 10.45% 10.45% 13.36% **As reported in last year annual financial statements. *** Capital adequacy requirement inclusive of Capital Conservation Buffer requirement (CCB) 286 MEEZAN BANK LIMITED December 2016 6.00% 7.50% 10.65%*** 10.25% 10.26% 13.69%
  269. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 42 RISK MANAGEMENT The wide variety of the Group’s business activities require the Group to identify, assess, measure, aggregate and manage risks effectively which are constantly evolving as the business activities expand in response to the Group's strategy and growth. The Group manages the risk through a framework of risk management encompassing policies and procedures, organisational structures, risk measurement and monitoring processes and techniques that are closely aligned with business activities of the Group. Risk management principles - The Board of Directors (the Board) of the Holding company provides overall risk management supervision. The Board Risk Management Committee regularly reviews the Group’s risk profile. - The Group has set up objectives and policies to manage the risks that arise in connection with the Group’s activities. The risk management framework and policies of the Group are guided by specific objectives to ensure that comprehensive and adequate risk management tools and techniques are established to mitigate the salient risk elements in the operations of the Group. - The establishment of the overall financial risk management objectives is consistent and in tandem with the strategy to create and enhance shareholders’ value, whilst guided by a prudent risk management framework. - The structure of risk management function is closely aligned with the organisational structure of the Group. - The risk management function is independent of the Group’s operations. Risk management organisation The Risk Management Committee comprises of two non-executive directors and one executive director of MBL. One of the non-executive directors of MBL chairs the Risk Management Committee. Specialized Committees comprising of Senior Management team members perform their functions in line with the strategic direction set by the Board while ensuring that there is optimal balance between risk reward trade-off. The Committees include: Name of the sub-committee Chaired by Credit Risk Management Committee (CRMC) Asset and Liability Management Committee (ALCO) Compliance and Operational Risk Management Committee (CORMC) President & CEO of the Holding Company President & CEO of the Holding Company President & CEO of the Holding Company CRMC is responsible to oversee credit risk activities on bank wide basis while ensuring compliance with regulatory requirements & internal policies. Its responsibilities also include to provide support and guide front lines in managing their businesses, perform finance portfolio review, establish financing standards and benchmarks, maintain adequate industry diversification and decide upon provisioning. It is also required to delegate financing approving powers & prudential limits on large financing exposures. Credit Committee, a sub-committee of CRMC is the highest level body for approval of financing transactions. ALCO is responsible for reviewing the Asset and Liability structure of MBL, monitoring the liquidity situation and overall changing market scenario. Market and Liquidity risks are examined based on stress testing exercises and gap analysis. ALCO is also responsible for monitoring policy rate movements and taking necessary steps across various products to ensure that the overall profitability of MBL is maximized without compromising on risk appetite. ALCO also ensures that MBL’s overall operations are fully compliant with regulatory framework for the business as provided by the State Bank of Pakistan. CORMC is responsible for overseeing compliance risk by reviewing the adequacy of controls in place to meet regulatory requirements. The Committee is responsible for promoting compliance culture in MBL, facilitate in implementation of Compliance Program and oversee Money Laundering and Financing Terrorism risk. In addition, the Committee also oversees Operational Risk Framework by ensuring that policies and procedures are in place in all Key risk areas and by reviewing Key Risk Indicators. The Committee also monitors level of compliance of major unresolved and recurring issues pointed out in the Internal Audit, Shariah Audit and SBP Inspection Report. The Group’s risk management, compliance, internal audit and legal departments support the risk management function. The role of the risk management department is to assess, measure, identify risks and established risk mitigants through a detailed policy and monitoring framework. The compliance department ensures that all the directives and guidelines issued by the SBP are being complied with in order to mitigate the compliance risk. The internal audit and BRR department reviews the compliance of internal control procedures with internal and regulatory standards. 42.1 Credit Risk Credit risk arises from the potential that an obligor is either unwilling to perform on an obligation or its ability to perform such obligations is impaired resulting in economic loss to the Group. This credit risk arises mainly from both direct financing activities as well as contingent liabilities. Credit risk management and structure The Group manages credit risk by effective credit appraisal mechanism, approving and reviewing authorities, limit structures, internal credit risk rating system, collateral management and post disbursem*nt monitoring so as to ensure prudent financing activities and sound financing portfolio under the umbrella of a comprehensive Credit Policy approved by the Board of Directors of the Holding company. A comprehensive financing procedural manual approved by the senior management is also in place. The Group also ensures diversification of its portfolio into different business segments, products and sectors. Further, to avoid risk concentration; counterparty limits, counterparty limits and industry concentration limits are also established, monitored and assessed in the light of changing counterparty and market conditions. ANNUAL REPORT 2017 287
  270. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 Watchlist procedure is also functioning which identifies financing with early warning indicators in respect of clients having the potential to become non performing. The risk management function also monitors the non-performing financing portfolio of the Group and reports all significant matters to the Risk Management Committee. The Group takes into account the risk mitigating effect of the eligible collaterals for the calculation of capital requirement for credit risk. Use of Credit Risk Mitigation (CRM) resulted in the total credit risk weighted amount of Rs 281,851.833 million (2016: Rs 241,352.818 million). Thus, use of CRM resulted in capital adequacy ratio of the Bank of 13.36%. 42.1.1 Segmental information 42.1.1.1 Segment by class of business Islamic financing and related assets (gross) Rupees in ‘000 Agriculture, food, forestry and fishing 106,126,840 Automobile and transportation equipment 4,597,949 Cement 8,146,923 Chemical and pharmaceuticals 20,610,092 Construction 7,184,923 Electronics and electrical appliances 4,102,683 Exports / imports 5,905,169 Financial institutions 930,720 Footwear and leather garments 1,323,985 Individuals 36,161,774 Insurance 35,691 Paper, board and packaging 8,221,654 Power (electricity), oil, gas and water 74,548,300 Services 4,738,616 Sugar 10,780,230 Textile 71,916,540 Transport, storage and communication 15,555,275 Wholesale and retail trade 14,315,391 Others 33,530,836 428,733,591 % 24.75 1.07 1.90 4.81 1.68 0.96 1.38 0.22 0.31 8.43 0.01 1.92 17.39 1.11 2.50 16.77 3.63 3.34 7.82 100.00 Islamic financing and related assets (gross) Rupees in ‘000 Agriculture, food, forestry and fishing Automobile and transportation equipment Cement Chemical and pharmaceuticals Construction Electronics and electrical appliances Exports / imports Financial institutions Footwear and leather garments Individuals Insurance Paper, board and packaging Power (electricity), oil, gas and water Services Sugar Textile Transport, storage and communication Wholesale and retail trade Others 288 MEEZAN BANK LIMITED 38,214,308 3,399,534 4,367,795 21,655,927 3,760,827 3,823,221 4,770,044 946,640 1,461,597 25,886,649 52,731 8,227,027 71,780,654 4,609,756 7,416,929 62,367,983 11,916,863 22,040,382 22,917,997 319,616,864 % 11.96 1.06 1.37 6.78 1.18 1.20 1.49 0.30 0.46 8.10 0.00 2.57 22.46 1.44 2.32 19.51 3.73 6.90 7.17 100.00 2017 Contingencies and commitments Deposits Rupees in ‘000 2,070,960 3,442,964 9,193,802 5,504,669 9,396,335 2,379,991 5,566,639 2,440,820 1,169,170 467,572,907 2,818,368 1,097,194 1,365,603 18,261,817 1,116,362 19,441,515 12,885,241 20,273,782 87,182,171 673,180,310 % 0.31 0.51 1.37 0.82 1.40 0.35 0.83 0.36 0.17 69.46 0.42 0.16 0.20 2.71 0.17 2.89 1.91 3.01 12.95 100.00 2016 3,668,320 3,405,337 582,853 6,533,737 11,337,793 1,348,652 4,131,094 2,703,358 804,068 414,918,111 1,457,518 451,323 962,740 12,421,301 3,653,716 14,609,079 7,376,874 14,052,917 59,581,061 563,999,852 49,266,978 3,784,683 5,843,285 11,957,919 2,821,534 3,150,997 6,350,495 125,173,794 1,859,321 13,980,296 13,929 3,206,489 38,494,432 3,111,369 3,659,712 62,347,165 7,157,119 10,615,775 40,214,544 393,009,836 % 12.54 0.96 1.49 3.04 0.72 0.80 1.62 31.85 0.47 3.56 0.82 9.79 0.79 0.93 15.86 1.82 2.70 10.24 100.00 Contingencies and commitments Deposits Rupees in ‘000 Rupees in ‘000 % 0.65 0.60 0.10 1.16 2.01 0.24 0.73 0.48 0.14 73.57 0.26 0.08 0.17 2.21 0.65 2.59 1.31 2.49 10.56 100.00 Rupees in ‘000 15,555,943 2,698,799 3,859,895 15,159,607 2,017,653 4,041,332 8,157,751 142,226,631 1,644,692 15,260,443 12,368 3,535,658 29,078,247 5,776,871 3,646,547 54,361,246 6,091,954 12,362,220 41,960,352 367,448,209 % 4.23 0.73 1.05 4.13 0.55 1.10 2.22 38.71 0.45 4.15 0.02 0.96 7.91 1.57 0.99 14.79 1.66 3.36 11.42 100.00
  271. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 42.1.1.2 Segmental by sector 2017 Islamic financing and related assets (gross) Rupees in ‘000 Public / Government Private 134,951,330 293,782,261 428,733,591 % 31.48 68.52 100.00 Rupees in ‘000 Public / Government Private % 24,306,266 648,874,044 673,180,310 Rupees in ‘000 3.61 96.39 100.00 19,646,280 373,363,556 393,009,836 2016 Islamic financing and related assets (gross) Rupees in ‘000 Contingencies and commitments Deposits 5.00 95.00 100.00 Contingencies and commitments Deposits % % Rupees in ‘000 % Rupees in ‘000 % 77,879,272 241,737,592 24.37 75.63 6,984,549 557,015,303 1.24 98.76 16,665,076 350,783,133 4.54 95.46 319,616,864 100.00 563,999,852 100.00 367,448,209 100.00 42.1.1.3 Details of non-performing Islamic financing and related assets and specific provisions by class of business segment: 2017 Classified Islamic financing and related assets 2016 Specific provisions held Classified Islamic financing and related assets Specific provisions held Rupees in ‘000 Agriculture, forestry, hunting and fishing Textile Chemical and pharmaceuticals Sugar Footwear and leather garments Automobile and transportation equipment Electronics and electrical appliances Construction Power (electricity), gas, water Transport, storage and communication Wholesale and retail trade Paper, board and packaging Exports / imports Individuals Others 59,712 4,220,024 41,839 108,718 215,346 636,494 19,616 19,930 2,796 12,648 420,676 29,597 258,821 340,170 219,742 6,606,129 59,712 4,144,754 41,839 108,718 189,571 636,094 19,616 19,930 2,796 9,966 416,686 29,597 252,140 275,770 219,542 6,426,731 62,592 4,198,364 43,334 108,718 188,113 659,566 19,616 21,597 2,796 12,648 490,543 29,597 260,263 398,433 351,112 6,847,292 62,592 4,069,289 43,334 108,718 188,121 659,057 19,616 21,597 2,796 9,966 479,614 29,597 249,713 315,152 333,041 6,592,203 42.1.1.4 Details of non-performing Islamic financing and related assets and specific provisions by sector: 2017 Classified Islamic financing and related assets Public / Government Private 6,606,129 6,606,129 2016 Specific provisions held Classified Islamic financing and related assets Rupees in ‘000 6,426,731 6,426,731 6,847,292 6,847,292 Specific provisions held 6,592,203 6,592,203 ANNUAL REPORT 2017 289
  272. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 42.1.1.5 Geographical segment analysis 2017 Profit before taxation Total assets employed Net assets employed Rupees in ‘000 Pakistan 9,932,844 785,967,329 Profit before taxation Total assets employed 38,409,573 Contingencies and commitments 393,009,836 2016 Net assets employed Rupees in ‘000 Pakistan 42.2 10,517,091 663,267,675 34,772,564 Contingencies and commitments 367,448,209 Credit Risk - General Disclosures The Group has adopted Standardised Approach of Basel Accord for calculation of capital charge against credit risk. Therefore, risk weights for the credit risk related assets (on-balance sheet and off-balance sheet - market and non market related exposures) are assigned on the basis of standardised approach. The Group is committed to further strengthen its risk management framework which will enable the Group to move ahead for adopting Foundation Internal Ratings Based (IRB) approach of Basel II. Meanwhile, none of the Group's assets class is subject to the Foundation IRB or advanced IRB approaches. 42.2.1 Credit Risk: Disclosures for portfolio subject to the Standardised Approach Under standardised approach the capital requirement is based on the credit rating assigned to the counterparties by the External Credit Assessment Institutions (ECAIs) duly recognised by the SBP for capital adequacy purposes. In this connection, the Group utilises the credit ratings assigned by ECAIs and has recognised agencies such as PACRA (Pakistan Credit Rating Agency) and JCR-VIS (Japan Credit Rating Company - Vital Information System) which are also recognised by the SBP. In case of foreign currency exposures against banks, ratings assigned by S&P, Fitch and Moody’s have been applied. In case of exposure against banks, some banks have multiple ratings but those ratings do not result in mapping with different risk weights. Types of Exposure and ECAI’s used 2017 Exposures JCR-VIS PACRA Standard & Poors (S&P) Fitch Moody Corporate √ √ √ √ √ Banks √ √ √ √ √ Public Sector Entities √ √ - - - Use of ECAI Ratings The Group prefers solicited ratings over unsolicited ratings at all times, owing to the greater degree of accuracy (in general) associated with solicited ratings. Unsolicited ratings may only be used in cases where a solicited rating is not available. Mapping to SBP Rating Grades The alignment of the Alphanumerical scale of each agency used with risk buckets is as per instructions laid down by SBP under Basel III requirements. 290 MEEZAN BANK LIMITED
  273. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 42.2.2 Credit exposures subject to standardised approach 2017 Exposures Amount Outstanding Deduction Credit Risk Management 2016 Net amount Amount Outstanding Deduction Credit Risk Management Net amount Rupees in ‘000 Banks 20% 50% 150% Unrated Sovereigns 0% 20% 50% 100% Public Sector entities 20% 50% Unrated (50%) Corporate 20% 50% 100% Unrated 1 Unrated 2 Retails 75% Total 42.2.3 151,721,981 1,172,485 48,780 286,644 120,907,869 - 30,814,112 1,172,485 48,780 286,644 111,726,004 2,484,952 268,957 64,244,659 - 47,481,345 2,484,952 268,957 171,965,673 1,728,346 111,499 42,036,396 - 129,929,277 1,728,346 111,499 185,057,759 1,564,297 775,286 15,000,000 - 170,057,759 1,564,297 775,286 25,954,044 50,058,614 8,191,220 46,848,981 17,762,824 3,209,633 15,879,273 3,475,000 38,804,775 2,931,000 38,798,333 12,948,273 3,475,000 6,442 46,789,540 33,480,160 3,515,549 91,498,915 95,068,947 5,342,857 2,046,356 2,485,245 36,561,120 41,446,683 31,433,804 3,515,549 89,013,670 58,507,827 43,160,828 23,652,800 2,915,500 79,361,441 69,607,453 3,575,000 3,047 2,103,389 14,016,685 39,585,828 23,649,753 2,915,500 77,258,052 55,590,768 43,943,059 717,344,236 7,962,873 272,382,917 35,980,186 444,961,319 27,348,238 606,082,563 5,171,471 145,843,584 22,176,767 460,238,979 Credit Risk: Disclosures with respect to Credit risk mitigation for Standardised approach and IRB The Group obtains capital relief for both its on-balance and off-balance sheet non-market related exposures by using simple approach for credit risk mitigation (CRM). Off-balance sheet items under the simplified standardised approach are converted into credit exposure equivalents through the use of credit conversion factors. Under the standardised approach the Group has taken advantage of the cash collaterals available with the Group in the form of security deposits, cash margins, certificates of islamic investment, monthly Modaraba certificate, saving accounts, guarantees, shares and Government securities. Valuation and management of eligible collaterals for CRM is being done in accordance with the conditions laid down by the State Bank of Pakistan. Eligible collaterals for CRM purposes do not expose the Group to price risk as they are in the form of cash collaterals. Since eligible collaterals for CRM purposes are all in the form of cash collaterals, they generally do not pose risk to the Group in terms of change in their valuation due to changes in the market condition. The credit equivalent amount of an off-balance sheet market related foreign exchange contracts are determined by using the current exposure (mark to market) method. The Group mainly takes the benefit of CRM against its claims on banks, corporate and retail portfolio. Under the standardized approach for on-balance sheet exposures, Rs 153,229.890 million of exposure on banks is subject to the CRM of Rs 120,907.869 million. The corporate portfolio of Rs 270,353.111 million is subject to the CRM of Rs 46,435.578 million whereas claims on retail portfolio of Rs 43,943.059 million is subject to CRM of Rs 7,962.873 million. The total benefit of Rs 272,382.917 million was availed through CRM against total on-balance sheet exposure of Rs 777,438.114 million. Under off-balance sheet, non-market related exposures; the corporate portfolio of Rs 244,326.462 million is subject to the CRM of Rs 6,138.398 million whereas claims on retail portfolio of Rs 8,351.027 million is subject to CRM of Rs 939.262 million. Total benefit of Rs 8,761.160 million was availed by the Bank through CRM against total off-balance sheet, non-market related exposure of Rs 270,619.078 million. In the year 2017, total CRM benefit was Rs 281,144.077 million as against amount of Rs 148,092.858 million in year 2016. 42.2.4 42.3 Credit concentration risk Credit concentration risk arises mainly due to concentration of exposures under various categories viz., industry, geography, and single / group borrower obligor. Within credit portfolio, as a prudential measure aimed at better risk management and avoidance of concentration of risks, the SBP has prescribed regulatory limits on banks’ maximum exposure to single and group obligors. Within the SBP limits, the holding company has further defined limits to avoid excessive concentration of portfolio. . Equity position in the banking and trading book The Group classifies and values its investment portfolio in accordance with the directives of SBP as stated in note 6.4 to these consolidated financial statements. ANNUAL REPORT 2017 291
  274. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 Trading book Held for trading and available for sale securities with trading intent; - They are marked to market daily; Any valuation difference is charged / credited to the profit and loss account in case of held for trading securities and to surplus on revaluation of investments - net of tax below equity in case of available for sale securities. Banking book Assets outside trading book are part of the banking book. These may include assets classified as available for sale and held to maturity investments. 42.4 Market risk Market risk is the risk that the fair value or cash flows of a financial instrument will fluctuate due to changes in market prices. Market risk reflects yield rate risk, currency risk and other price risks. Banks could be adversely affected by movements in market rates or prices such as benchmark rates, deposit rates, foreign exchange rates, equity prices and market conditions resulting in a loss to earnings and capital. The Group uses a number of methods to monitor and control market risk exposures. One of the major tools used by the Group to monitor and limit market risk is Value at Risk (VaR). VaR is defined as the estimated loss that will arise on a position or a portfolio over a particular (holding) period of time from an adverse market movement with a specific probability (confidence level). The VaR model used by the Group takes 99% confidence level and assumes a 1 to 10 days holding period whilst using the historical simulation taking the data of the last three years. Daily the VaR figures are circulated to the senior management and regular summaries are reported in ALCO meetings. The VaR reports are complemented by various other position and sensitivity limit structures, including stress, sensitivity gap and scenario analysis. The capital charge for market risk has been calculated by using Standardized Approach. 42.4.1 Foreign exchange risk The foreign exchange risk is defined as the current or prospective risk to earnings and capital arising from adverse movements in currency exchange rates. It refers to the impact of adverse movement in currency exchange rates on the value of open foreign currency position. The objectives of the foreign exchange risk management is to minimise the adverse impact of foreign exchange rate movements on the assets and liabilities mismatch (tenor and position) and maximise their earnings. Whenever a commercial bank deals in foreign currency, it is exposed to risk of exchange rate. The Group's assets and liabilities in foreign currencies give rise to foreign exchange risk which has to be managed by the Group; this risk is mitigated by using different hedging techniques. Hedging is a way used by a bank to eliminate or minimize its risk exposures. Hedging can be done using different ways like gap analysis, hedging (forwards), assigning limits in terms of amount, tenor, currency, product, countries, counterparties etc. The Group limits its currency exposure to the extent of statutory net open position prescribed by the SBP except in the cases where exemption is provided by the SBP. Foreign exchange open and mismatch positions are controlled through close monitoring and are marked to market on a daily basis. The analysis below represents the concentration of the Group's foreign currency risk for on and off balance sheet financial instruments: 2017 Assets Liabilities Off-balance sheet items Pakistan Rupees 760,379,591 696,007,414 (26,001,090) 38,371,087 United States Dollars Great Britain Pounds Japanese Yen Euro Singapore Dollars Australian Dollars Canadian Dollars United Arab Emirates Dirham Swiss Francs Saudi Riyal Swedish Korona Malaysian Ringgit Hongkong Dollar Thailand Bhat Norwegian Krone Chinese Offshore Spot Chinese Yuan Total foreign currency exposure Total currency exposure 23,163,052 897,203 73,750 1,231,047 3,709 92,145 11,324 94,171 3,675 7,865 1,942 1,752 843 311 653 1,695 2,601 25,587,738 785,967,329 44,700,451 3,707,232 35 3,136,314 3 1,605 994 3,680 28 51,550,342 747,557,756 21,530,488 2,816,966 (73,560) 1,921,584 (119,868) (11,006) (60,120) (3,394) 26,001,090 - (6,911) 6,937 155 16,317 3,706 (29,328) (676) 34,051 281 4,185 1,942 1,752 815 311 653 1,695 2,601 38,486 38,409,573 Rupees in ‘000 292 MEEZAN BANK LIMITED Net foreign currency exposure
  275. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 Assets Liabilities 2016 Off-balance sheet items Rupees in ‘000 Net foreign currency exposure Pakistan Rupees 626,242,617 588,991,840 (2,241,916) 35,008,861 United States Dollars Great Britain Pounds Japanese Yen Euro Singapore Dollars Australian Dollars Canadian Dollars United Arab Emirates Dirham Swiss Francs Saudi Riyal Swedish Korona Malaysian Ringgit Hong Kong Dollar Thailand Bhat Norwegian Krone Chinese Offshore Spot Chinese Yuan Total foreign currency exposure Total currency exposure 34,542,444 1,184,329 59,279 1,117,797 9,964 35,959 18,415 36,207 7,151 1,738 3,285 1,856 1,086 275 881 1,499 2,893 37,025,058 663,267,675 33,920,823 3,105,654 34 2,447,543 3 28,227 921 29 37 39,503,271 628,495,111 (888,393) 1,925,345 (54,613) 1,328,648 (7,242) (9,074) (17,072) (28,477) (7,206) 2,241,916 - (266,772) 4,020 4,632 (1,098) 2,719 (1,342) 422 7,701 (55) 1,738 3,285 1,856 1,049 275 881 1,499 2,893 (236,297) 34,772,564 42.4.2 Equity position risk Equity position risk is defined as the risk to earnings or capital arising from adverse changes in the value of equity portfolios of the Group. The limits assigned to various individual scripts and total portfolio investments are fixed as per the guidelines issued by the SBP. The Group invests in only Shariah compliant equities as advised by the Shariah advisor. 42.4.3 Yield / profit rate risk Yield risk occurs when there is a mismatch between positions, which are subject to profit rate alterations within a particular time period. The Group’s financing, placement and investment activities give rise to profit rate risk. The effect of changes in profit rate is on the Group’s income, and resultant impact is on the Group’s net worth. Profit rate risk is primarily managed by monitoring the rate sensitive gaps and by having the pre-approved limits for repricing buckets. ALCO is the supervising body for adherence with these, complemented by the monitoring of sensitivity of the Group’s financial assets and liabilities to various scenarios. The Group estimates changes in the market value of equity due to changes in the yield rates on on-balance sheet positions and their impact on capital adequacy ratio by conducting stress tests. It also assesses risk on earnings of the Group by various shocks. ANNUAL REPORT 2017 293
  276. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 42.4.4 Mismatch of yield rate sensitive assets and liabilities Effective yield rate % Total Over 1 to 3 months Upto 1 month 2017 Exposed to yield risk Over 3 to 6 months Over 6 months to 1 year Over 1 to 2 years Over 2 to 3 years Over 3 to 5 years Over 5 to 10 years Above 10 years Non-yield bearing financial instruments Rupees in ‘000 On-balance sheet financial instruments Assets Cash and balances with treasury banks Balances with other banks Due from financial institutions Investments Islamic financing and related assets Other assets 0.18 5.77 5.39 6.57 - 64,556,409 4,940,090 147,229,221 123,160,901 419,929,149 12,397,292 772,213,062 4.10 2.30 6.73 - 11,168,093 36,813,295 673,180,310 7,000,000 9,807,725 737,969,423 34,243,639 111,905 23,868,925 7,027,190 41,964,180 72,972,200 49,716,251 6,988,489 152,729,213 209,433,953 4,376,876 48,745,895 83,155,120 136,277,891 69,267,169 16,726,426 85,993,595 30,698,206 3,679,676 34,377,882 15,126,496 6,921,316 22,047,812 1,124,924 13,278,112 14,403,036 2,221,122 1,016,739 3,237,861 2,690,280 2,690,280 64,556,409 4,828,185 11,228,579 97,768,087 12,397,292 190,778,552 8,731,443 7,000,000 15,731,443 193,702,510 10,869,365 10,869,365 125,408,526 85,993,595 34,377,882 22,047,812 14,403,036 3,237,861 2,690,280 11,168,093 821,831 237,525,059 9,807,725 259,322,708 (68,544,156) Liabilities Bills payable Due to financial institutions Deposits and other accounts Sub-ordinated Sukuk Other liabilities On-balance sheet gap Non financial assets - Operating fixed assets - Other assets 16,390,656 435,655,251 452,045,907 (379,073,707) 11,994,586 1,759,681 13,754,267 Non financial liabilities - Other liabilities - Deferred tax liabilities 9,357,546 230,787 9,588,333 38,409,573 Total net assets Off-balance sheet financial instruments Forward Lending Forward borrowings - Off-balance sheet gap - - - - - - - - - - - - - - - - - - - - - Total yield risk rate sensitivity gap (379,073,707) 193,702,510 125,408,526 85,993,595 34,377,882 22,047,812 14,403,036 3,237,861 2,690,280 (68,544,156) Cumulative yield risk rate sensitivity gap (379,073,707) (185,371,197) (59,962,671) 26,030,924 60,408,806 82,456,618 96,859,654 100,097,515 102,787,795 34,243,639 Above 10 years Non-yield bearing financial instruments 3,176,899 5,566,774 8,743,673 9,620,933 9,620,933 56,037,043 2,860,880 14,158,053 68,177,612 8,826,890 150,060,478 8,743,673 9,620,933 9,130,998 196,549,512 8,074,591 213,755,101 (63,694,623) 2016 Effective yield rate % Total Over 1 to 3 months Upto 1 month Exposed to yield risk Over 6 Over 1 months to 1 to 2 year years Over 3 to 6 months Over 2 to 3 years Over 3 to 5 years Over 5 to 10 years Rupees in ‘000 On-balance sheet financial instruments Assets Cash and balances with treasury banks Balances with other banks Due from financial institutions Investments Islamic financing and related assets Other assets 0.25 6.11 5.43 7.13 - Liabilities Bills payable Due to financial institutions Deposits and other accounts Sub-ordinated Sukuk Other liabilities 56,037,043 12,067,855 129,115,165 134,796,574 311,530,270 8,826,890 652,373,797 206,975 12,674,955 8,048,802 41,647,280 62,578,012 9,000,000 41,977,548 3,490,476 86,018,385 140,486,409 964,595 45,527,484 68,426,222 114,918,301 73,498,067 1,113,242 11,310,779 85,922,088 1,045,110 2,452,143 3,497,253 57,559,439 10,033,692 67,593,131 4.09 2.44 6.76 - 9,130,998 32,005,501 563,999,852 7,000,000 8,074,591 620,210,942 32,162,855 15,990,356 367,450,340 383,440,696 (320,862,684) 5,230,649 7,000,000 12,230,649 128,255,760 10,784,496 10,784,496 104,133,805 85,922,088 3,497,253 67,593,131 On-balance sheet gap Non financial assets - Operating fixed assets - Other assets Non financial liabilities - Other liabilities - Deferred tax liabilities Total net assets 677,069 8,276,450 8,953,519 8,953,519 9,031,686 1,862,192 10,893,878 6,328,966 1,955,203 8,284,169 34,772,564 Off-balance sheet financial instruments Forward Lending Forward borrowings - Off-balance sheet gap - - - - - - - - - - - - - Total yield risk rate sensitivity gap (320,862,684) 128,255,760 104,133,805 85,922,088 3,497,253 67,593,131 8,953,519 8,743,673 9,620,933 (63,694,623) Cumulative yield risk rate sensitivity gap (320,862,684) (192,606,924) (88,473,119) (2,551,031) 946,222 68,539,353 77,492,872 86,236,545 95,857,478 32,162,855 The Group takes on exposure to the effects of fluctuations in the prevailing levels of market profit rates on both its fair value and cash flow risks. Profit margins may increase as a result of such changes but may reduce to losses in the event that unexpected movement arise. 294 MEEZAN BANK LIMITED
  277. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 42.5 Liquidity risk Liquidity risk is the potential for loss to the Group arising from either its inability to meet its obligations or to fund increases in assets as they fall due without incurring an unacceptable cost. The Holding company’s Board of Directors sets the policy for managing liquidity risk and entrusts accountability for supervision of the implementation of this strategy to senior management. Senior management exercises its responsibilities for managing market & liquidity risk through various committees including the Asset & Liability Management Committee (ALCO). Treasury department manages the liquidity position on a daily basis. The main approach of managing the liquidity risk is to make certain that it will always have adequate liquidity to meet its liabilities when they are due in normal and stressed scenarios without incurring any untoward expenditure or risking reputational harm. ALCO monitors the maintenance of liquidity ratios, depositor's concentration both in terms of the overall funding mix and avoidance of undue reliance on large individual deposits. Regular liquidity stress testing is conducted under a variety of scenarios covering both normal and more severe market conditions. 43. Maturities of assets and liabilities 43.1 Maturities of assets and liabilities based on expected maturities 2017 Total Upto 1 Month Over 1 to 3 Months Over 3 to 6 Months Over 6 Months to 1 Year Over 1 to 2 Years Over 2 to 3 Years Over 3 to 5 Years Over 5 to 10 Years Above 10 Years 19,375,122 21,555,865 1,015,855 57,564 42,004,406 2,885,494 34,301,026 1,342,234 116,127 38,644,881 4,202,907 50,660,205 1,435,563 56,298,675 3,535,013 14,480,333 4,554,086 22,569,432 Rupees in ‘000 Assets Cash and balances with treasury banks Balances with other banks Due from financial institutions Investments Islamic financing and related assets Operating fixed assets Deferred tax assets Other assets Liabilities Bills payable Due to financial institutions Deposits and other accounts - Current accounts - Savings deposits - Fixed deposits Sub-ordinated Sukuk Deferred Tax liabilities Other liabilities 64,556,409 4,940,090 147,229,221 123,160,901 419,929,149 11,994,586 14,156,973 785,967,329 64,556,409 4,940,090 23,868,925 10,948,094 59,846,509 261,491 1,451,108 165,872,626 49,716,251 2,042,492 93,323,046 421,910 2,319,922 147,823,621 4,376,876 1,924,442 91,240,465 408,827 3,468,954 101,419,564 11,168,093 36,813,295 11,168,093 16,637,068 8,977,855 10,869,364 237,525,059 266,016,983 169,638,268 673,180,310 7,000,000 230,787 19,165,271 747,557,756 18,716,975 20,715,810 62,854,960 102,287,745 2,209,816 132,302,722 15,035,336 16,626,530 25,260,564 56,922,430 2,743,027 68,643,312 13,990,226 15,456,022 18,780,284 48,226,532 4,099,121 63,195,017 Net assets 38,409,573 Share capital Reserves Unappropriated profit Non-controlling Interest Surplus on revaluation of investments 10,629,022 13,393,125 12,563,156 1,007,975 816,295 38,409,573 33,569,904 79,180,309 38,224,547 69,267,169 41,943,268 37,052,061 1,304,859 6,694,345 156,261,702 19,762,085 21,867,212 27,012,443 68,641,740 57,697 1,811,649 70,511,086 85,750,616 36,304,069 17,469,639 1,249,761 48,953 55,072,422 27,956,699 30,938,647 7,427,059 66,322,405 57,697 922,406 67,302,508 (12,230,086) 329,008 21,448,513 23,729,384 5,450,187 50,628,084 57,697 922,406 51,937,195 (9,932,789) 34,037,341 37,642,464 12,517,600 84,197,405 57,696 1,844,813 86,099,914 (47,455,033) 62,516,595 69,166,365 10,335,171 142,018,131 7,000,000 4,612,033 153,630,164 (97,331,489) 24,061,289 29,874,549 53,935,838 53,935,838 (31,366,406) ANNUAL REPORT 2017 295
  278. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 2016 Total Upto 1 Month Over 1 to 3 Months Over 3 to 6 Months Over 6 Months to 1 Year Over 1 to 2 Years Over 2 to 3 Years Over 3 to 5 Years 63,511,215 25,498,221 988,056 89,997,492 4,551,978 34,400,971 1,588,582 40,541,531 Over 5 to 10 Years Above 10 Years 5,182,807 18,462,299 1,966,578 25,611,684 66,392 24,717,329 2,197,950 26,981,671 Rupees in ‘000 Assets Cash and balances with treasury banks Balances with other banks Due from financial institutions Investments Islamic financing and related assets Operating fixed assets Deferred tax assets Other assets Liabilities Bills payable Due to financial institutions Deposits and other accounts - Current accounts - Savings deposits - Fixed deposits Sub-ordinated Sukuk Deferred tax liabilities Other liabilities 56,037,043 12,067,855 129,115,165 134,796,574 311,530,270 9,031,686 10,689,082 663,267,675 56,037,043 3,067,855 12,674,955 12,358,043 27,031,972 1,523,815 112,693,683 9,000,000 41,977,548 411,948 93,058,189 3,202,676 147,650,361 964,595 1,094,827 41,589,182 4,804,013 48,452,617 9,130,998 32,005,501 9,130,998 15,990,356 5,230,648 10,615,991 196,584,577 224,572,971 142,842,304 563,999,852 7,000,000 1,955,203 14,403,557 628,495,111 16,495,382 17,922,541 33,728,127 68,146,050 1,763,996 95,031,400 13,242,090 14,387,780 24,270,606 51,900,476 2,529,732 59,660,856 12,317,664 13,383,373 18,389,037 44,090,074 3,794,600 58,500,665 Net assets 34,772,564 Share capital Reserves Unappropriated profit Non-controlling Interest Surplus on revaluation of investments 10,027,379 9,724,001 11,340,678 1,221,989 2,458,517 34,772,564 17,662,283 87,989,505 (10,048,048) 73,498,067 2,388,720 11,682,754 1,302,464 1,158,578 90,030,583 45,230,644 35,089,353 988,056 81,308,053 - - 17,419,807 18,926,948 28,102,014 64,448,769 488,800 701,690 65,639,259 24,635,327 26,766,747 6,843,151 58,245,225 488,801 1,403,385 60,137,411 24,391,324 21,170,642 18,903,352 20,538,847 7,707,497 47,149,696 488,801 1,403,385 49,041,882 40,955,610 168,506 29,976,392 32,569,914 11,385,346 73,931,652 488,801 2,806,769 77,395,728 (36,854,197) 55,082,999 59,852,265 12,416,526 127,351,790 7,000,000 134,351,790 (108,740,106) 8,511,564 20,224,556 28,736,120 28,736,120 (1,754,449) Regarding behaviour of non-maturity deposits (non-contractual deposits), the Holding company has carried out a behavioural study using the Value at Risk (VaR) methodology based on 5 years data. On the basis of its findings, 28.4% of current accounts and 28.1% of saving accounts are bucketed into 'Upto 1-Year maturity' whereas, 71.6% of current accounts and 71.9% of savings accounts are bucketed into maturities of above 1-Year. 43.2 Maturities of assets and liabilities based on contractual maturities 2017 Total Upto 1 Month Over 1 to 3 Months Over 3 to 6 Months Over 6 Months to 1 Year Over 1 to 2 Years Over 2 to 3 Years Over 3 to 5 Years Over 5 to 10 Years 19,376,073 21,643,860 1,065,490 57,564 42,142,987 2,885,636 34,213,111 1,480,428 116,125 38,695,300 Above 10 Years Rupees in ‘000 Assets Cash and balances with treasury banks Balances with other banks Due from financial institutions Investments Islamic financing and related assets Operating fixed assets Deferred tax assets Other assets 64,556,409 4,940,090 147,229,221 123,160,901 419,929,149 11,994,586 14,156,973 785,967,329 64,556,409 4,940,090 23,868,925 10,948,437 150,597,009 264,061 1,451,109 256,626,040 49,716,250 2,042,593 60,150,104 433,945 2,319,763 114,662,655 4,376,876 1,924,537 60,383,321 422,048 3,468,639 70,575,421 11,168,093 36,813,295 11,168,093 16,883,479 8,731,443 10,869,365 237,525,059 266,016,983 169,638,268 673,180,310 7,000,000 230,787 19,165,271 747,557,756 237,525,059 266,016,983 62,854,959 566,397,001 2,209,816 596,658,389 25,260,564 25,260,564 2,743,027 36,735,034 18,780,284 18,780,284 4,099,121 33,748,770 27,012,443 27,012,443 57,697 1,811,649 28,881,789 7,427,059 7,427,059 57,697 922,406 8,407,162 5,450,187 5,450,187 57,697 922,406 6,759,298 12,517,600 12,517,600 57,696 1,844,813 14,420,109 10,335,172 10,335,172 7,000,000 4,612,033 21,947,205 Net assets 38,409,573 (340,032,349) 77,927,621 36,826,651 100,130,536 46,711,028 35,383,689 24,275,191 34,484,959 Share capital Reserves Unappropriated profit Non-controlling Interest Surplus on revaluation of investments 10,629,022 13,393,125 12,563,156 1,007,975 816,295 38,409,573 Liabilities Bills payable Due to financial institutions Deposits and other accounts - Current accounts - Savings deposits - Fixed deposits Sub-ordinated Sukuk Deferred tax liabilities Other liabilities 296 292 MEEZANBANK BANKLIMITED LIMITED MEEZAN 69,267,170 41,948,167 10,331,446 771,197 6,694,345 129,012,325 - 36,297,159 17,469,665 1,301,938 49,428 55,118,190 - 329,008 - 4,203,029 50,660,278 1,568,857 56,432,164 - 3,535,270 14,480,355 4,686,622 22,702,247 22,702,247
  279. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 2016 Total Over 1 to 3 Months Upto 1 Month Over 3 to 6 Months Over 6 Months to 1 Year Over 1 to 2 Years Over 2 to 3 Years Over 3 to 5 Years Over 5 to 10 Years Above 10 Years 63,511,215 25,498,221 988,056 89,997,492 4,551,978 34,400,971 1,588,582 40,541,531 5,182,807 18,462,299 1,966,578 25,611,684 66,392 24,717,329 2,197,950 26,981,671 Rupees in ‘000 Assets Cash and balances with treasury banks Balances with other banks Due from financial and other institutions Investments Islamic financing and related assets Operating fixed assets Deferred tax assets Other assets Liabilities Bills payable Due to financial institutions Deposits and other accounts - Current accounts - Savings deposits - Fixed deposits Sub-ordinated Sukuk Deferred tax liabilities Other liabilities Net assets Share capital Reserves Unappropriated profit Non-controlling Interest Surplus on revaluation of investments 56,037,043 12,067,855 129,115,165 134,796,574 311,530,270 9,031,686 10,689,082 663,267,675 56,037,043 3,067,855 12,674,955 12,358,043 27,031,972 1,523,815 112,693,683 9,000,000 41,977,548 411,948 93,058,189 3,202,676 147,650,361 964,595 1,094,827 41,589,182 4,804,013 48,452,617 9,130,998 32,005,501 9,130,998 15,990,356 5,230,648 10,615,991 196,584,577 224,572,971 142,842,304 563,999,852 7,000,000 1,955,203 14,403,557 628,495,111 34,772,564 196,584,577 224,572,971 33,728,127 454,885,675 1,763,996 481,771,025 (369,077,342) 24,270,606 24,270,606 2,529,732 32,030,986 115,619,375 18,389,037 18,389,037 3,794,600 32,799,628 15,652,989 73,498,067 2,388,720 11,682,754 1,302,464 1,158,578 90,030,583 28,102,014 28,102,014 488,800 701,690 29,292,504 60,738,079 45,230,644 35,089,353 988,056 81,308,053 6,843,151 6,843,151 488,801 1,403,385 8,735,337 72,572,716 7,707,497 7,707,497 488,801 1,403,385 9,599,683 80,397,809 168,506 11,385,346 11,385,346 488,801 2,806,769 14,849,422 25,692,109 - - 12,416,526 12,416,526 7,000,000 - - 19,416,526 6,195,158 26,981,671 10,027,379 9,724,001 11,340,678 1,221,989 2,458,517 34,772,564 Current and Savings deposits have been classified under maturity upto one month as these do not have any contractual maturity. Operational risk The Group uses Basic Indicator Approach (BIA) for assessing the capital charge for operational risk. Under BIA the capital charge is calculated by multiplying average positive annual gross income of the Group over past three years with 15% as per guidelines issued by SBP under Basel II. To reduce losses arising from operational risk, the Holding company has strengthened its risk management framework by developing polices, strategies, guidelines and manuals. It also includes set up of functions like operational risk management, prevention of fraud and forgery and information security function, defining responsibilities of individuals, implementing four-eyes principle, enhancing security measures, improving efficiency and effectiveness of operations, outsourcing and improving quality of human resources through trainings and development. 44 TRUST ACTIVITIES The Holding company commonly act as trustee and in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions including on behalf of certain related parties. These are not assets of the Group and, therefore, are not included in the Consolidated Statement of Financial Position. The following is the list of assets held under trust by MBL: Category Insurance Companies Asset Management Companies Employee Funds / NGOs Individuals Others Related parties Associates Other related parties Sukuk Number of IPS account Face Value Rupees in '000 2017 2016 2017 2016 Government Ijarah Government Ijarah Government Ijarah Government Ijarah Government Ijarah 5 11 13 19 4 5 11 12 19 4 1,981,000 28,000 12,700 40,000 2,063,000 28,000 7,700 40,500 Government Ijarah Government Ijarah 3 1 56 1 1 53 95,000 75,000 2,231,700 35,000 75,000 2,249,200 ANNUAL REPORT 2017 297
  280. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 45. PROFIT / (LOSS) DISTRIBUTION TO DEPOSITORS' POOLS AND SPECIFIC POOLS 45.1 The Holding company managed following general and specific pools during the year: General remunerative (Saving and Fixed) Depositors’ Pools 2017 Profit rate and Profit rate weightage return earned announcement Average period Profit sharing ratio of Mudarib Profit rate return Amount of distributed to Percentage of Mudarib Share remunerative transferred Mudarib share deposits through Hiba to transferred (Savings and remunerative through Hiba Fixed) - Average deposits Mudarib fee Rupees in '000 PKR Pool USD Pool GBP Pool EUR Pool General remunerative (Saving and Fixed) Depositors’ Pools Monthly Monthly Monthly Monthly 6.42% 3.09% 1.32% 0.66% 50% 75% 90% 90% 10,872,732 424,879 19,505 5,885 Rupees in '000 3.65% 0.77% 0.13% 0.06% 14% - 2016 Profit rate and Profit rate weightage return earned announcement Average period Profit sharing ratio of Mudarib Profit rate return Amount of distributed to Percentage of Mudarib Share remunerative transferred Mudarib share deposits through Hiba to transferred (Savings and remunerative through Hiba Fixed) - Average deposits Mudarib fee Rupees in '000 PKR Pool USD Pool GBP Pool EUR Pool 1,491,157 - Monthly Monthly Monthly Monthly 6.78% 2.19% 1.44% 0.43% 45% to 50% 60% to 75% 60% to 90% 60% to 90% 9,912,320 266,573 18,232 3,222 Rupees in '000 3.87% 0.59% 0.19% 0.05% 10% - 976,328 - Percentage of Mudarib share transferred through Hiba Amount of Mudarib Share transferred through Hiba to remunerative deposits 2017 Specific pools Profit rate and weightage announcement period Profit rate return earned Investment ratio Profit rate return distributed Islamic Export Refinance (IERS) Musharaka Pool Monthly 4.48% * * 2.06% N/A N/A Inter Bank Musharaka / Modaraba borrowing Pool As required 7.63% - 5.24% * * 6.35% - 4.50% N/A N/A Special Sharikah Certificate Musharkah / Modaraba borrowing Pool As required 7.91% - 5.24% * * 6.50% - 2.40% N/A N/A *The profit sharing ratio and the investment ratio varies on case to case basis. 298 Profit sharing ratio MEEZAN BANK LIMITED
  281. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 2016 Specific pools Profit rate and Profit rate weightage announcement return earned period Profit sharing ratio Investment ratio Amount of Mudarib Share transferred through Hiba to remunerative deposits Percentage of Mudarib share transferred through Hiba Profit rate return distributed Islamic Export Refinance (IERS) Musharaka Pool Monthly 5.31% * * 2.63% N/A N/A Inter Bank Musharaka / Modaraba borrowing Pool As required 9.01% - 5.55% * * 6.75% - 3.85% N/A N/A Special Sharikah Certificate Musharkah / Modaraba borrowing Pool As required 6.15% - 5.45% * * 6.50% - 4.00% N/A N/A *The profit sharing ratio and the investment ratio varies on case to case basis. 45.2 Following weightages have been assigned to different major products under the General pools during the year: Percentage to Total Modaraba based Deposits Minimum Weightage Maximum Weightage Minimum Weightage 2017 2016 2017 2017 2016 2016 23.37% 18.57% 10.83% 12.46% 8.71% 23.47% 18.88% 11.86% 14.74% 10.41% 0.67 0.88 1.34 1.49 1.67 0.66 0.66 0.66 1.16 1.57 0.67 0.89 1.34 1.50 1.89 0.62 0.62 0.66 1.12 1.58 USD Pool Saving Accounts Certificate of Islamic Investment 3.73% 1.71% 3.39% 1.58% 0.45 1.35 0.45 0.77 0.45 1.35 0.45 0.77 GBP Pool Saving Accounts 0.46% 0.43% 0.27 0.27 0.27 0.27 EUR Pool Saving Accounts 0.29% 0.29% 0.27 0.27 0.27 0.27 PKR Pool Saving Accounts Meezan Bachat Account Karobari Munafa Account Certificate of Islamic Investment Plus Meezan Aamdan Certificate 45.3 Maximum Weightage Allocation of Income and Expenses to Depositors' Pools Following are material items of revenues, expenses, gains and losses Profit / return earned on islamic financing and related assets, investments and placements Other Income (including other charges) Directly related costs attributable to pool 2017 Rupees in ‘000 35,375,577 2,209,095 (959,646) 2016 30,716,493 1,262,613 (650,841) ANNUAL REPORT 2017 299
  282. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 46 SUMMARY OF FINANCIAL INFORMATION OF THE SUBSIDIARY COMPANY AND FUNDS December 2017 Liabilities December 31, 2017 3,728,069 848,141 2,879,928 December 31, 2017 December 31, 2017 December 31, 2017 December 31, 2017 December 31, 2017 7,088,314 1,624,799 8,118,084 8,628,012 1,549,554 148,800 31,854 118,921 283,327 33,742 6,939,514 1,592,945 7,999,163 8,344,685 1,515,812 (1,052,198) (1,109,652) (398,489) (174,569) (725,052) (579,150) 353,106 240,216 (102,440) (76,707) December 31, 2017 December 31, 2017 December 31, 2017 December 31, 2017 December 31, 2017 December 31, 2017 December 31, 2017 5,617,099 403,341 41,491,060 11,534,132 2,491,377 7,301,627 8,449,811 77,950 21,180 1,195,075 540,312 127,582 18,656 121,509 5,539,149 382,161 40,295,985 10,993,820 2,363,795 7,282,971 8,328,302 (839,049) (932,045) 37,027 95,830 (8,052,733) (7,388,427) 655,880 274,329 317,356 (38,886) (1,274,002) (1,281,954) (970,438) (1,096,524) Accounting Date Assets December 31, 2016 4,190,855 699,458 3,491,397 2,345,576 1,201,490 December 31, 2016 December 31, 2016 December 31, 2016 December 31, 2016 December 31, 2016 8,329,898 1,124,269 7,228,121 3,721,451 678,554 153,585 27,383 135,695 114,882 45,239 8,176,313 1,096,886 7,092,426 3,606,569 633,315 2,072,977 347,827 1,433,545 212,268 42,267 2,022,014 342,223 1,346,662 109,079 47,144 December 31, 2016 December 31, 2016 December 31, 2016 December 31, 2016 December 31, 2016 December 31, 2016 December 31, 2016 13,964,561 380,669 47,766,339 9,694,212 9,734,569 3,335,202 8,390,630 90,974 2,736 842,549 257,941 565,076 30,150 136,147 13,873,587 377,933 46,923,790 9,436,271 9,169,493 3,305,052 8,254,483 Subsidiary Al Meezan Investment Management Limited Net assets Profit / (Loss) Accounting Date Assets Rupees in ‘000 Revenue 1,645,753 461,373 Associates Al Meezan Mutual Fund KSE Meezan Index Fund Meezan Balanced Fund Meezan Cash Fund Meezan Energy Fund Meezan Financial Planing Fund of Funds Meezan Gold Fund Meezan Islamic Fund Meezan Islamic Income Fund Meezan Sovereign Fund Meezan Strategic Allocation Fund Meezan Tahafuz Pension Fund Subsidiary Al Meezan Investment Management Limited Associates Al Meezan Mutual Fund KSE Meezan Index Fund Meezan Balanced Fund Meezan Cash Fund Meezan Energy Fund Meezan Financial Planning Fund of Funds Meezan Gold Fund Meezan Islamic Fund Meezan Islamic Income Fund Meezan Sovereign Fund Meezan Strategic Allocation Fund Meezan Tahafuz Pension Fund 47 December 2016 Liabilities Net assets Rupees in ‘000 Revenue Profit / (Loss) 2,782,381 2,785,842 (9,314) (9,244) 13,223,214 13,022,662 680,382 221,498 669,924 378,571 220,645 273,093 1,760,292 1,661,575 GENERAL Comparative information has been re-classified, re-arranged or additionally incorporated in these consolidated financial statements, wherever necessary to facilitate comparison and better presentation. There were no significant reclassifications during the current year except as follows: Reclassified Description 300 Rupees in '000 From To Takaful and tracker expenses on Ijarah (668,218) Administrative expenses Profit / return earned on Islamic financing and related assets, investments and placements Fees, subscription and clearing charges (124,518) Administrative expenses Fee, commission and brokerage income MEEZAN BANK LIMITED
  283. Notes to and forming part of the Consolidated Financial Statements For the year ended December 31 , 2017 48 NON-ADJUSTING EVENT 48.1 49 The Board of Directors of the Holding company in its meeting held on February 14, 2018 has announced final cash dividend of Rs 1.25 per share (12.5%). The financial statements for the year ended December 31, 2017, do not include the effect of this appropriation which will be accounted for in the financial statements for the year ending December 31, 2018. DATE OF AUTHORISATION These financial statements were authorised for issue on February 14, 2018 by the Board of Directors of the Holding company. Riyadh S. A. A. Edrees Chairman Irfan Siddiqui President & CEO Faisal A. A. A. Al-Nassar Director Mansur Khan Director Shabbir Hamza Khandwala Chief Financial Officer ANNUAL REPORT 2017 301
  284. Consolidated Statement Showing Written-Off Loans or Any Other Financial Relief of Rupees 500 ,000 or Above (Annexure 1) During the year ended December 31, 2017 Annexure 1 Consolidated Statement showing written-off loans or any other financial relief of rupees 500,000 and above during the year ended December 31, 2017. S. Name and No. address of the borrower 1 2 Name of individuals / partners / directors (with CNIC No.) 3 Father's / Husband's Name 4 Outstanding liabilities as at January 1, 2017 Principal Profit Others 5 6 7 Total (5+6+7) 8 Principal written-off Profit written-off 9 10 Other Financial Relief provided 11 Total (9+10+11) 12 Rupees in ‘000 1 Amir Majeed Kaludi Flat No. A-104, 4th Floor, West Wind Estates, Plot No. FL-11, Block-2, Clifton, Karachi. 42301-6831572-5 2 Gulzar Oil Industries House No C-15 Memon Cooperative Housing Society, Hyderabad Mrs. Razia Gulzar Muhammad 41303-1435631-6 Hussain Gulzar 3,484 - - 3,055 105 3,589 2,184 - - 2,184 - 3,055 - 3,055 - 3,055 3 Vital Chicks and Feeds 55 G- II, Johar Town, Lahore Chaudhary Nasir Ahmed 35202-4426237-1 Chaudhary Muhammad Rafiq 8,090 633 255 8,978 - 633 255 888 4 Muhammad Hashim Sher House # 21-22, Hamza Town, Moza Dhana Singh Wala, Tehsil & District, Lahore 38402-3118132-5 Muhammad Nawaz 812 708 219 1,739 - 649 219 868 5 Balqees Mustafa 35201-5955768-6 304-J, Phase I DHA, Lahore Major Waseem Mehdi 1,963 1,988 249 4,200 - 1,905 249 2,154 Hadayat Ali 13,079 4,356 290 17,725 - 4,246 290 4,536 6 302 Abdul Majeed Kaludi Hi-Tech CNG Station 248 G / 4, Johar Town, Lahore Bashir Ahmed 35202-5441458-1 Zia Ahmed Arshad 35201-1298303-7 Rais Haider 35202-3623279-3 MEEZAN BANK LIMITED Chaudhary Alaf Din Sheikh Ilyas Hussain
  285. Consolidated Statement Showing Written-Off Loans or Any Other Financial Relief of Rupees 500 ,000 or Above (Annexure 1) During the year ended December 31, 2017 Annexure 1 Consolidated Statement showing written-off loans or any other financial relief of rupees 500,000 and above during the year ended December 31, 2017. S. Name and No. address of the borrower 1 2 Name of partners / directors (with CNIC No.) 3 Father's / Husband's Name 4 Outstanding liabilities as at January 1, 2017 Principal Profit Others 5 6 7 Total (5+6+7) 8 Principal written-off Profit written-off 9 10 Other Financial Relief provided 11 Total (9+10+11) 12 Rupees in ‘000 7 Munawar Hussain 33101-4363065-9 Javed P-782, St # 9/15, 66 Foota Bazar, Mansoorabad, Faisalabad Muhammad Ishaq 656 785 83 1,524 - 429 83 512 8 Fareeha Nauman 35202-9014729-0 Plot # 323, Block-D, Phase-V, DHA, Lahore Nauman Yousuf 7,500 9,678 348 17,526 - 10,413 348 10,761 9 Merkolink Shehnaz Haider Distributors 61101-1812779-4 21/2 Altaf Town, Abdul Rasheed Multan 36302-9081117-9 Raja Gayoor Ali 37405-0560388-7 Shahid Ahmad Qureshi 36302-7710110-9 Mueen ud din Haider Saeed Ahmed Qurashi Raja Zafar Ali Khan Faqeer Ahmad Qureshi 1,495 434 70 1,999 28 434 70 532 10 Syed Wajeeh 36302-5671622-5 Haider Kazmi House No. 36-D, Tipu Sultan Road, Multan Cantt, Multan Syed Ajmal Hussain Kazmi 3,114 2,862 58 6,034 - 2,523 238 2,761 11 Rubass Rafiq 35202-7643671-9 House # 27, Block-B-III, Punjab Government Cooperative Society, Lahore Muhammad Rafique 9,533 8,141 516 18,190 - 9,146 516 9,662 49,726 32,640 2,193 84,559 2,212 33,433 2,268 37,913 ANNUAL REPORT 2017 303
  286. Additional Information Pattern of Shareholding Categories of Shareholders Standard of Ethics , Business Practices & Code of Conduct Guidelines on Whistle-blowing Summary of Information Security Policy Guidelines for Safety of Records of the Company Correspondent Banking Network Branch Network Glossary Dividend Mandate Form Proxy Form 306 307 308 310 311 311 312 317 330 339 341
  287. Pattern of Shareholding As at December 31 , 2017 No. of Shareholders 550 286 192 426 151 76 44 36 30 13 11 11 13 13 5 7 7 9 4 7 4 1 2 3 3 2 3 2 3 1 3 1 4 3 1 3 1 2 4 1 2 2 3 1 3 1 2 1 1 1 1 1 1 1 1 1 1 1 2 1 1 1 2 1 2 1 2 1 1 1 1 2 1 1 3 1 1 2 2 1 1 1 1 1 1 1 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2034 306 From 1 101 501 1001 5001 10001 15001 20001 25001 30001 35001 40001 45001 50001 55001 60001 65001 70001 75001 80001 85001 90001 95001 100001 105001 110001 115001 120001 125001 130001 135001 140001 150001 155001 160001 170001 175001 185001 190001 195001 200001 205001 210001 230001 240001 250001 260001 265001 275001 285001 290001 315001 325001 345001 365001 380001 385001 390001 420001 435001 440001 460001 465001 490001 500001 505001 530001 550001 585001 605001 710001 730001 740001 745001 750001 770001 775001 795001 805001 835001 840001 855001 910001 940001 980001 990001 995001 1055001 1085001 1170001 1225001 1240001 1300001 1320001 1355001 1515001 1555001 1585001 1610001 1745001 1900001 2000001 2220001 2305001 2335001 2405001 2840001 2910001 3095001 3180001 3410001 3470001 3845001 5005001 5815001 7045001 99100001 318870001 522030001 Company Total MEEZAN BANK LIMITED No. of Shares To 100 500 1000 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 55000 60000 65000 70000 75000 80000 85000 90000 95000 100000 105000 110000 115000 120000 125000 130000 135000 140000 145000 155000 160000 165000 175000 180000 190000 195000 200000 205000 210000 215000 235000 245000 255000 265000 270000 280000 290000 295000 320000 330000 350000 370000 385000 390000 395000 425000 440000 445000 465000 470000 495000 505000 510000 535000 555000 590000 610000 715000 735000 745000 750000 755000 775000 780000 800000 810000 840000 845000 860000 915000 945000 985000 995000 1000000 1060000 1090000 1175000 1230000 1245000 1305000 1325000 1360000 1520000 1560000 1590000 1615000 1750000 1905000 2005000 2225000 2310000 2340000 2410000 2845000 2915000 3100000 3185000 3415000 3475000 3850000 5010000 5820000 7050000 99105000 318875000 522035000 ‘Shares held’ 9,292 83,172 144,239 1,047,421 1,068,016 910,243 761,193 794,292 819,021 423,299 412,525 480,880 620,618 683,637 289,795 443,330 472,774 656,172 310,950 579,378 348,298 94,340 193,593 306,489 318,000 225,365 351,177 246,016 381,600 134,410 413,537 141,404 610,368 475,167 164,300 522,069 178,170 375,240 772,568 195,384 403,017 415,770 638,580 230,460 724,893 251,100 522,016 268,710 277,000 286,638 291,080 317,710 328,600 347,672 368,360 382,740 390,000 392,200 848,014 439,914 440,281 460,153 932,370 493,960 1,003,988 510,000 1,069,058 550,676 587,378 606,686 712,870 1,464,727 743,779 746,770 2,261,466 774,696 775,920 1,591,208 1,612,262 840,000 840,534 855,628 915,000 940,500 983,680 994,520 2,000,000 1,060,000 1,085,490 1,171,830 1,229,510 1,241,000 1,302,550 1,320,190 1,355,174 1,516,000 1,556,080 1,590,000 1,612,801 1,750,000 1,904,176 2,000,572 2,223,011 2,308,034 2,339,910 2,408,320 2,840,077 2,910,610 3,100,000 3,180,235 3,411,149 3,472,560 3,846,198 5,005,192 5,816,087 7,046,663 99,104,338 318,870,646 522,033,439 1,062,902,168 Percentage 0.0009% 0.0078% 0.0136% 0.0985% 0.1005% 0.0856% 0.0716% 0.0747% 0.0771% 0.0398% 0.0388% 0.0452% 0.0584% 0.0643% 0.0273% 0.0417% 0.0445% 0.0617% 0.0293% 0.0545% 0.0328% 0.0089% 0.0182% 0.0288% 0.0299% 0.0212% 0.0330% 0.0231% 0.0359% 0.0126% 0.0389% 0.0133% 0.0574% 0.0447% 0.0155% 0.0491% 0.0168% 0.0353% 0.0727% 0.0184% 0.0379% 0.0391% 0.0601% 0.0217% 0.0682% 0.0236% 0.0491% 0.0253% 0.0261% 0.0270% 0.0274% 0.0299% 0.0309% 0.0327% 0.0347% 0.0360% 0.0367% 0.0369% 0.0798% 0.0414% 0.0414% 0.0433% 0.0877% 0.0465% 0.0945% 0.0480% 0.1006% 0.0518% 0.0553% 0.0571% 0.0671% 0.1378% 0.0700% 0.0703% 0.2128% 0.0729% 0.0730% 0.1497% 0.1517% 0.0790% 0.0791% 0.0805% 0.0861% 0.0885% 0.0925% 0.0936% 0.1882% 0.0997% 0.1021% 0.1102% 0.1157% 0.1168% 0.1225% 0.1242% 0.1275% 0.1426% 0.1464% 0.1496% 0.1517% 0.1646% 0.1791% 0.1882% 0.2091% 0.2171% 0.2201% 0.2266% 0.2672% 0.2738% 0.2917% 0.2992% 0.3209% 0.3267% 0.3619% 0.4709% 0.5472% 0.6630% 9.3239% 30.0000% 49.1140% 100.0000%
  288. Categories of Shareholders For the year ended December 31 , 2017 Particulars Number of Shareholders Shares held Percentage Directors, Chief Executive, their spouse and minor children 4 8,539,853 0.80% Associated Companies, undertakings and related parties 7 943,444,729 88.76% Banks, Development Financial Institutions and Non Banking Finance Companies 6 3,015,180 0.28% Insurance Companies 12 12,806,372 1.21% Modaraba and Mutual Funds 39 21,281,991 2.00% 1,775 87 34,663,749 1,477,719 3.26% 0.14% 104 37,672,575 3.55% 2,034 1,062,902,168 100.00% General Public a.Local b.Foreign Others Total Additional Information as at December 31, 2017 Particulars Number of Shareholders Shares held Percentage 1 1 1 1 1 1 1 522,033,439 318,870,646 99,104,338 2,840,077 79,819 510,000 6,410 49.11% 30.00% 9.32% 0.27% 0.01% 0.05% 0.00% 1 1 1 1 195,384 3,029,143 3,411,150 1,904,176 0.02% 0.28% 0.32% 0.18% 15 339,707 0.03% 161 74,776,118 7.04% 1,847 35,801,761 3.37% 2,034 1,062,902,168 100.00% Associated Companies & Shareholders with more than 10% shareholding Noor Financial Investment Co, Kuwait Pakistan Kuwait Investment Co. (Pvt.) Ltd. Islamic Development Bank, Jeddah CDC Trustee Meezan Islamic Fund CDC Trustee Meezan Balanced Fund CDC Trustee Meezan Dadicated Equity Fund CDC Trustee Meezan Asset Allocation Fund Directors, Chief Executive, their spouse and minor children Mr. Mohammad Abdul Aleem Mr. Noorur Rahman Abid Mr. Irfan Siddiqui Mr. Ariful Islam Executives Public Sector Companies, Corporations, Banks, DFI's, NBFC's, Insurance Companies, Modaraba, Mutual Funds and other Organizations General Public ANNUAL REPORT 2017 307
  289. Standards of Ethics , Business Practices & Code of Conduct The objective of these standards is to promote business practices within Meezan Bank, which are Shariah compliant, fair, reasonable and reflect high standards of ethical behavior. The standards of ethics and business practices, which the Bank expects from all of its employees, is a condition of employment with the Bank and may be considered at the time of performance appraisal of an employee. ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ 308 Code of Conduct, during office hours or otherwise, shall always be that of a good citizen. Act with integrity, competence, dignity, and ethically while dealing with the customers, shareholders, vendors and colleagues. Understand and comply with the legal/regulatory requirements and internal policies and procedures of the Bank that apply to the duties assigned to the employee. Never willingly enter into a business transaction, which shall violate any law or principles of Islamic finance. Never use their position to force, induce, coerce, harass and intimidate any other person, including sub-ordinate to provide any force, gift or benefit, whether financial or otherwise, to themselves or others. Avoid professional misconduct involving dishonesty, fraud, deceit or misrepresentation. Any unintentional mistake, wherever possible, shall be immediately rectified and reported to the line manager. Not make use of any information including Bank's trade secrets, proprietary, confidential information, gained in the performance of official Bank duties as a means of making any personal profit, gain or benefit for themselves or connected persons. Immediately report to the management of pre-existing personal relationship with any existing or potential customer, industry representative or government employee with whom the Bank has a business relationship. Pending clearance from the management, the employee shall take no further action associated with the business in which a personal relationship exists. Will not use the Bank's services or facilities for private purposes except with prior permission. Conduct Bank's business with honesty, integrity and in a professional manner. Avoid any action on his/her part that may be repugnant, unethical or unlawful. Avoid any action on his/her part that may be viewed as repugnant, unethical or unlawful by customers or public at large or the Bank itself. Avoid any activities that could involve or lead to involvement in any unlawful or unethical governance practice. Avoid participation in any political activities. Avoid participation in any other subversive activities. Abstain from gambling, betting and wagering contracts. Be exemplary in personal conduct towards the Bank, the other employees and customers of the Bank. MEEZAN BANK LIMITED ■ ■ ■ Safeguard the confidential information of the Bank and its customers. Avoid actual or potential conflicts of interests in transactions on behalf of the Bank. Provide accurate and reliable information in records submitted. Code of Conduct Confidential Information Employees shall maintain strict secrecy regarding the Bank's affairs and shall not (except so far as is necessary and appropriate in the normal course of their employment) disclose to any person, any information as to the practice, dealing or affairs of the Bank or any of their customers, which may come to their knowledge by reason of their employment. During the course of employment and after its termination for whatever reason, the employee must not disclose to anyone (nor use for any purpose other than the business of the Bank) any information relating to the Bank or its employees which is not already available to the public, unless authorized to do so. Such information includes customer data, product manuals, technical secrets, confidential research work, technical processes, operating manuals, marketing plans and strategies and other confidential financial or business information of the Bank. Recording of Information No unrecorded fund or assets of Bank shall be established or maintained for any reason. No false, artificial or misleading entries in the books and records of Bank shall be made for any reason. All reporting of information should be accurate, honest and timely and should be a fair representation of the facts. Conflict of Interest It is obligatory that: ■ ■ An employee may not hold a position of director, consultant, employee, representative or agent with any supplier, competitor, customer, individual or organization either doing or seeking to do business with the Bank without prior written consent of the Bank's President & CEO. If any immediate family member holds a position, with any organization doing or seeking to do business with the Bank, a written disclosure must be made promptly to line manager/HRD. An employee may not hold any interest in any organization doing business with the Bank without the written consent of Regional Manager or Department Head, unless it is a company/establishment quoted on a Stock Exchange and the interest is less than 1 percent. Mis-declaration/Concealment of Facts An employee shall not make any mis-declaration or conceal the facts in knowledge. The following are illustrative examples, but are not all-inclusive:
  290. ■ ■ ■ An employee issuing an incorrect account statement, salary certificate or any other information for any customer or staff member. An employee issuing a fake claim for reimbursem*nt of any expenses whereby either the expenses are inflated and/or the difference between expenses claimed and actually incurred are pocketed by the staff member. An employee at the time of induction in Meezan Bank (i.e. during interview and in testimonials) provided a false, forged, misleading information or concealed, hide, incompletely stated, any information regarding credentials, academic record(s), previous employment(s) and demographic details. Know Your Customer, Vendors and Counter Parties In order to safeguard the Bank's reputation and integrity, it is not only necessary for employees to discipline their own actions, it is also necessary to be aware of the character and actions of customers, vendors and counter parties. Care must be exercised in selecting those with whom we deal. Each Meezan Bank business must have processes in place for checking on the credit and character of customers, vendors and counter parties. Employees must ensure that the Bank establishes relationship with only those individuals, businesses, and entities who have a sound reputation and whose true identity has been established. Employees should conduct maximum caution in opening new accounts and before opening, ensure that due diligence steps are completed. Gifts & Entertainment At certain times of the year, some customers, suppliers, contractors and consultants to the Bank may present gifts or arrange entertainment for employees. While the sentiments behind such actions are usually genuine, there is a possibility that others may misconstrue them. In a minority of cases such actions may not be in the best interest of good working relationships. Gifts may be presented locally or internationally in the form of Cash or in kind of Services, either free or discounted. Bribery & Misconduct An employee will be guilty of an offence, who, without lawful authority or reasonable excuse: ■ ■ ■ ■ ■ ■ Solicits or accepts any advantage as an inducement or reward for doing or intending to commit any action in relation to the Bank's affairs or business. Showing or intending to show favors or disfavors to any person in relation to the Bank's affairs or business. Offers any advantage to any one as an inducement or reward for any favor/disfavor or otherwise. Intends to deceive the Bank by using any receipt, account or other document which is false or erroneous or defective in any way and which to employee's knowledge is intended to mislead the Bank. Take any cash or near-to-cash benefit from any stake holder of the bank to provide undue advantage. Pay any cash or near-to-cash benefit to any stake holder of the bank to take undue advantage. Fraud, Theft or Illegal Activities Employees shall be alert and vigilant with respect to frauds, thefts or illegal activities committed within the office. If any such activity comes to the attention of an employee, the employee must immediately report the same to the Head of Audit, Head of Operations and Head of Human Resources; who will arrange for appropriate follow-up action to be taken. Failure to report any such activity will be subject to disciplinary action. Money Laundering The Bank has set its priority not to become implicated, in any way, with individuals or firms involved in criminal activities and money laundering. The employees are expected to exercise maximum caution in this regard. The employee should know the customer, be vigilant for unusual circ*mstances and immediately report any suspected case to the Manager/Area Manager/Regional Manager/Compliance Department/Audit Department, who will arrange for appropriate follow-up action to be taken. Failure to report any such activity will be subject to disciplinary action. Courtesy & Manners Employees of Meezan Bank shall maintain utmost courtesy and exemplary manners when interacting with clients or with each other. Employees are dealing on behalf of the Bank, so they are required to keep high standards of professionalism and ethics. Any violations of this code shall be brought to the attention of supervising officials as well as the Human Resources Department for their information, record and remedial disciplinary action. Honesty & Integrity Employees shall serve the Bank, devote whole time during office hours and discharge their duties honestly, faithfully and use their utmost endeavors to promote the interest of the Bank. They shall behave with decorum, integrity, show courtesy and attention in all dealings with customers, government officials, senior officers, colleagues, subordinates and general public. Participation in Political Organizations No employee shall take part in, subscribe in aid of, or assist in anyway in any political movement in Pakistan during the office timing at the office premises. No employee shall use official influence in connection with or take part in any election to a legislative body, whether in Pakistan or elsewhere. Ideology of Pakistan No employee shall express views detrimental to the ideology or integrity of Pakistan. Direct Representations to the High Govt. & MBI Officials No employee shall make any personal representations directly to Chairman, Directors or Members of the Board, or Government functionaries. Such representations must be addressed to the President & CEO through the immediate supervisor of the employee. However this policy does not, in any way, seek to block a citizen's redress to the judiciary and other statutory redresses. ANNUAL REPORT 2017 309
  291. Core Values Shariah Compliance ■ Integrity & Innovation ■ Professionalism ■ Service Excellence ■ Social Responsibility ■ Meezan Bank's Personality The Bank expects its employees to be: ■ ■ ■ ■ ■ ■ ■ ■ ■ Sober Truthful Committed to excellence Empathetic Professional Extremely loyal Dependable friend Trustworthy business partner Committed to the cause of Islamic banking Health & Hygiene Personal Hygiene is the most important aspect of our daily life. The personality is perceived by its degree of neatness. The personal hygiene covers care of body odor, bad breath, teeth, nails, ears, nose, hair, daily shower, shave (if not keeping proper beard), daily wear washed, clean, pressed clothes etc. Computer, E-mail, Information Security Meezan Bank computer system contains an e-mail facility, access rights, information and software, which are intended to promote effective communication within and outside the Bank, on matters relating to its business and facilitate routine information flow and smooth and safe transactions. The e-mail system should therefore only be used for official/business purpose. All communication and information are the property of Meezan Bank and the Bank reserves the right to retrieve the contents of the messages for the purpose of monitoring. The employee shall be held accountable for all activities under his/her password. Dress Code & Professional Attire Attire is a reflection of professionalism as well as that of the Bank's brand and personality. A professional business appearance together with a high standard of personal hygiene is expected from all employees. The Official Dress Code of Meezan Bank is professional corporate attire inline with traditional Islamic modesty. At Meezan Bank every staff member is expected to have a professional business appearance together with a high standard of personal hygiene. Guidelines on Whistle-Blowing The purpose of these whistle blowing guidelines is to provide a mechanism to Bank’s stakeholders (employees, customers, vendors, etc.) to report any activity which in their opinion may cause financial and/or reputational loss to the Bank. The major objectives of whistle blowing policy can be classified as: • • • • To provide an environment whereby stakeholders feel confident to blow the whistle without any fear of reprisal, subsequent discrimination and of being disadvantaged in any way; To develop a culture of accountability and integrity; To create awareness amongst stakeholders regarding the whistle blowing function; and To be a source of early warning signal. Scope The scope of these guidelines includes, without limitation, disclosure of all types of unlawful acts / orders, fraud, corruption, misconduct, collusive practices or any other activity which undermines Bank’s operations, financial position, reputation and mission. 310 MEEZAN BANK LIMITED Who must blow the whistle and how? It is the responsibility of each and every stakeholder of the Bank, instead of limiting it to a particular department or senior management only, that if any stakeholder observes any suspicious, fraudulent or unethical activity, transaction or act that may cause a potential threat to the Bank or could be against the interest of the Bank, he/she must immediately report this to Whistle Blowing Unit through various modes including but not limited to Meezan Bank’s website, E-mail, fax, mobile and landline. Confidentiality & protection of whistle blowers The whistle blowing mechanism has been designed to ensure complete confidentiality of the entire process and also enables the bank to take immediate corrective measures. Identification of the whistleblower is kept completely confidential except as required by law or who have legitimate right to know. The bank stands committed to protect whistleblowers for whistle blowing and any subsequent harassment or victimization of the whistleblower is not tolerated.
  292. Summary of Information Security Policy Information Security relates to protection of valuable assets against loss , misuse, disclosure or damage. Each asset has to be reviewed from the perspective of its Confidentiality, Integrity and its Availability to the authorized personnel. A number of factors play a critical role in the successful implementation of information security. Information Security Policy The Information Security Policy defines the policies and supporting standards that guides the consistent application of information security and ensures that the interests/information are adequately protected against loss, improper disclosure and unauthorized modification. Meezan Bank's Information Security Policy is based on ISO 27001. The policy comprises of the following domains: Organization of Information Security In order to manage information security within the Bank, a framework has been established by the Bank's management to initiate and control the implementation of information security within the organization. Risk Assessment & Treatment To review of IT System and Operation for identifying and mitigating the risk that could affect the Meezan Bank’s infrastructure through internal and external attacks. The basis of these assessments is the Confidentiality, Integrity and Availability (CIA) of the information assets and services. Human Resources Security This segment of the policy ensures that the Bank's employees, contractors and third party users understand their responsibilities and are suitable for the roles they are considered for, thereby reducing the risk of theft, fraud or misuse of facilities. Asset Management To achieve and maintain appropriate protection of the Bank's Information Assets. Access Control To control the access to information, information processing facilities and business processes based on business and security requirements. Cryptography To protect the confidentiality, authenticity and integrity of information by Cryptography (The conversion of data into a secret code for transmission over a public network.) Physical and Environmental Security To prevent unauthorized physical access, damage to, and interference with the Bank's premises (head office and branches) and information. Operations Security To ensure correct and secure operation of information processing facilities. Communications Security To maintain the integrity and availability of information and information processing facilities. Information Systems Acquisition, Development and Maintenance To ensure that security measures are always built into and are an integral part of all information systems. Supplier Management To ensure the protection of the organization’s Information assets that is accessible by IT suppliers for providing IT service delivery. Information Security Incident Management To ensure that information security events and weaknesses associated with the Bank's information systems are communicated in a manner that allows timely corrective action to be taken. Information Security Aspects of Business Continuity Management To counteract interruptions to business activities and to protect critical business processes from the effects of major failures of information systems or disasters and to ensure their timely resumption. Compliance To ensure that any law, statutory, regulatory or contractual obligations and security requirements are not breached. Information Security Trainings and Awareness Appropriate awareness programs and regular updates in organizational IT security policy and procedures, as relevant for their job function are conducted. Each of the above domains comprise of multiple processes and controls to ensure promotion of an information security. Guidelines for Safety of Records of the Company Comprehensive guidelines are in place at Meezan Bank for ensuring that physical documents are being archived in an organized, efficient and reliable manner. These guidelines encompass detailed processes for preservation, organization, transfer, retrieval and destruction of physical records. The guidelines comprise of the following elements: General Guidelines This section deals with the role of the Administration Department in providing an Archive facility outside the branch and provides guidelines on when old records will be transferred to the archive, signatories that may authorize retrieval of records, treatment of records under litigation/dispute, type of records that may be kept under fire-proof cabinet, and the convention to be followed for allocating serial numbers to archived records. Preservation of Old Records This section deals with maintenance of old records in a secured environment and the procedure for documenting their complete details to facilitate retrieval and destruction after expiry of retention timelines. This section also defines the responsibilities of the Archiving Officer. Procedures to Handle Records at Archives These are detailed procedures with clearly allocated responsibilities of Branch/Head Office departments and archiving officers for transferring/retrieval of records to and from Archives. Destruction of Records This section provides guidelines about the type of records that need to be retained permanently or till the time approval from Regulators is obtained for their destruction. e.g. cases in litigation, records relating to suspicious transactions, etc. Relevant Branch Manager/Area Manager/Departmental Head is responsible for checking and verifying the list of records that need to be destroyed. For branch records, Head Office operations will finally approve branch's request for destruction of record, which will be carried out in the presence of Branch Manager & Operations Manager. Retention of Old Records These guidelines outline the various types of records and the recommended period for their retention and subsequent destruction in view of the Banking Companies Ordinance, SBP Prudential Regulations and other regulatory requirements. Standardized Formats Formats for forms and registers have been provided to facilitate standardization and controls across Meezan Bank's network. ANNUAL REPORT 2017 311
  293. Correspondent Banking Network Country Bank AFGHANISTAN Afghan United Bank Bank Alfalah Limited (Afghanistan - Kabul Branch) Bank Of America, N.A. Sydney Bank Of Sydney Ltd Bankwest A Division Of Commonwealth Bank Of Australia Commonwealth Bank Of Australia Sydney HSBC Bank Australia Limited Industrial And Commercial Bank Of China Sydney Branch JP Morgan Chase Bank, N.A., Sydney Branch National Australia Bank Limited Allgemeine sparkasse oberoesterreich bankaktiengesellschaft Commerzbank Ag, Niederlassung Wien Wien Deutsche Bank Aktiengesellschaft Filiale Wien (Vienna Branch) Erste Group Bank Ag Hypo Vorarlberg Bank Ag Oberbank Ag Raiffeisen Bank International Ag Raiffeisenlandesbank Oberoesterreich Aktiengesellschaft Al Baraka Islamic Bank Bank Al Habib Limited BMI Bank Bsc (C) Gulf International Bank, B.S.C. Ithmaar Bank B.S.C. (C) JS Bank Limited Khaleeji Commercial Bank B.S.C. (C) Standard Chartered Bank Turkiye Is Bankasi A.S. Bahrain Branch United Bank Limited Woori Bank, Manama Bank Alfalah Limited (Bangladesh - Dhaka Branch) Eastern Bank Ltd. Export Import Bank Of Bangladesh Ltd International Finance Investment And Commerce Bank Ltd. Mercantile Bank Limited Shahjalal Islami Bank Limited Social Islami Bank Limited Standard Chartered Bank The Hongkong And Shanghai Banking Corporation Limited Woori Bank, Dhaka Belarusbank Minsk Transit Bank Bank Of America Merrill Lynch International Limited, Brussels Branch Belfius Bank Sa/Nv Byblos Bank Europe S.A. Commerzbank Ag,The,Brussels Branch Credit Europe Bank N.V. Antwerp Branch Deutsche Bank A.G. Habib Bank Ltd. KBC Bank Nv First National Bank Of Botswana Limited Banco Bradesco S.A. Banco Bradesco Sa (Formerly Kirton Bank S.A. - Banco Multiplo) Deutsche Bank S.A. - Banco Alemao Itau Unibanco S/A (Successor Of Banco Itau Bba S.A.) Eurobank Bulgaria Ad United Bulgarian Bank Unicredit Bulbank Ad Bank Of America, National Association, Canada Branch Canadian Imperial Bank Of Commerce AUSTRALIA AUSTRIA BAHRAIN BANGLADESH BELARUS BELGIUM BOTSWANA BRAZIL BULGARIA CANADA 312 MEEZAN BANK LIMITED Country CHILE CHINA CYPRUS CZECH REPUBLIC DENMARK EGYPT ESTONIA ETHIOPIA FINLAND FRANCE Bank Habib Canadian Bank Royal Bank Of Canada Toronto-Dominion Bank, The Itau Corpbanca (Formerly Banco Itau Chile) Agricultural Bank Of China, The Bank Of China Bank Of Communications Bank Of Jiangsu Co Ltd Bank Of Wenzhou (Formerly Wenzhou City Commercial Bank) China Citic Bank China Everbright Bank Citibank (China) Co., Ltd. Commerzbank Ag Deutsche Bank (China) Co. Ltd. Hua Xia Bank Industrial And Commercial Bank Of China Industrial Bank Co.,Ltd. Industrial Bank Of Korea (China) Limited Jinan Rural Commercial Bank Co.,Ltd(Formerly Shandong Jinan Runfeng Rural Cooperative Bank) Korea Development Bank, The Laishang Bank Co., Ltd (Formerly Laiwu City Commercial Bank Co., Ltd) Mega International Commercial Bank Mizuho Bank (China),Ltd. Shengjing Bank Co.,Ltd Skandinaviska Enskilda Banken Ab (Publ), Shanghai Branch Standard Chartered Bank (China) Limited The Bank Of New York Mellon, Shanghai Branch Weifang Rural Commercial Bank Co., Ltd Yantai Bank Co., Ltd. Zhejiang Chouzhou Commercial Bank Co.,Ltd Zhejiang Mintai Commercial Bank Bank Of Cyprus Public Company Limited Hellenic Bank Public Company Ltd. Ceskoslovenska Obchodni Banka, A.S. Commerzbank Ag HSBC Bank Plc Komercni Banka A.S. Unicredit Bank Czech Republic And Slovakia, A.S. Danske Bank A/S Nordea Danmark, Filial Af Nordea Bank Ab (Publ), Sverige Nordjyske Bank A/S Skjern Bank Sydbank A/S Bank Of Alexandria S A E Emirates National Bank Of Dubai Sae (Formerly BNP Paribas Sae,Egypt) HSBC Bank Egypt S.A.E Mashreq Bank Luminor Bank As, Estonia (Former Nordea Bank Ab Estonia Branch) Versobank As Commercial Bank Of Ethiopia Dashen Bank S.C. Danske Bank Danske Bank Plc Nordea Bank Ab (Publ), Finnish Branch Op Corporate Bank Plc Skandinaviska Enskilda Banken Bmce Bank International Plc Succursale En France BNP-Paribas Sa (Formerly Banque Nationale De Paris S.A.) Byblos Bank Europe S.A. (Paris Branch) CM - CIC Banques
  294. Country GEORGIA GERMANY GREECE HONG KONG HUNGARY INDIA Bank Commerzbank Ag Credit Du Nord Credit Mutuel - Cic Banques Deutsche Bank Ag Habibsons Bank Limited HSBC France (Formerly HSBC Ccf) National Bank Of Pakistan Societe Generale Sumitomo Mitsui Banking Corporation Europe Limited Union De Banques Arabes Et Francaises Jsc Bank Of Georgia Bankhaus Lampe Kg Commerzbank Ag Commerzbank Ag (Formerly Dresdner Bank Ag) Deutsche Bank Ag Deutsche Bank Privat-Und Geschaeftskunden Ag DZ Bank Ag (Formerly WGZ Bank Ag) DZ Bank Ag Deutsche Zentral-Genossenschaftsbank HSBC Trinkaus Und Burkhardt Ag HSH Nordbank Ag Landesbank Baden-Wuerttemberg Landesbank Hessen-Thueringen Girozentrale Mainzer Volksbank E.G. National Bank Of Pakistan, Frankfurt Nordea Bank Ab Frankfurt Branch Raiffeisenlandesbank Oberoesterreich Aktiengesellschaft Zweigniederlassung Sueddeutschland SEB Ag Sparkasse Bremen Ag, Die Sparkasse Dortmund Sparkasse Koelnbonn (Former Stadtsparkasse Koeln) Sparkasse Westmuensterland Standard Chartered Bank Germany Branch Unicredit Bank Ag (Hypovereinsbank) Volksbank Bielefeld-Guetersloh Eg Volksbank Bocholt Eg VTB Bank (Deutschland) Ag Piraeus Bank Sa Abn Amro Bank N.V. Hong Kong Branch Axis Bank Limited Bank Of America, N.A. Hong Kong BNP Paribas Citibank N.A. Commerzbank Ag DBS Bank (Hong Kong) Limited Deutsche Bank Ag Habib Bank Zurich (Hong Kong) Limited Habib Finance International Limited Hongkong And Shanghai Banking Corporation Limited, The Industrial And Commercial Bank Of China (Asia) Limited Intesa Sanpaolo Spa Hong Kong KBC Bank Nv, Hong Kong Kookmin Bank, Hong Kong Branch Mashreqbank Psc., Hong Kong Branch National Bank Of Pakistan Hong Kong Skandinaviska Enskilda Banken Ab Standard Chartered Bank (Hong Kong) Limited Sumitomo Mitsui Banking Corporation The Bank Of New York Mellon, Hong Kong Branch Wells Fargo Bank, N.A., Hong Kong Branch Woori Bank, Hong Kong CIB Bank Ltd. (Formerly Central-European Int.Bank Ltd.) Commerzbank (Budapest) Rt. K And H Bank Zrt.(Formerly Kereskedelmi Es Hitelbank Rt) Raiffeisen Bank Zrt. Unicredit Bank Hungary Zrt. Axis Bank Limited Country INDONESIA IRAQ IRELAND ITALY JAPAN JORDAN Bank Bank Of Baroda Bank Of Ceylon Bank Of America, N.A. Mumbai Citibank N.A. Deutsche Bank Ag HDFC Bank Limited Jammu And Kashmir Bank Ltd Mashreq Bank Punjab National Bank State Bank Of India Standard Chartered Bank Bank Mandiri (Persero), Pt Pt. Bank CIMB Niaga, Tbk. Bank Of America, N.A. Jakarta Branch Bank Of Tokyo-Mitsubishi Ufj, Ltd., The Pt Bank Syariah Mandiri Bank Central Asia Deutsche Bank Ag Woori Bank, Indonesia P.T. Jakarta Pt. Bank Sbi Indonesia Standard Chartered Bank Rasheed Bank AIB Bank Bank Of America Merrill Lynch International Limited Bank Of Ireland Citibank Europe Plc Danske Bank A/S Intesa Sanpaolo Bank Ireland Plc Banca Adriatica S.P.A. Banca Di Credito Cooperativo Di Carate Brianza S.C.A.R.L. Banca Di Pisa E Fornacette Credito Cooperativo Soc.Coop.P.A. Banca Monte Dei Paschi Di Siena S.P.A. Banca Nazionale Del Lavoro S.P.A. Banca Nuova Spa (Intesa Sanpaolo Group) Banca Popolare Di Milano S.P.A. Banca Popolare Di Sondrio Banca UBAE Spa Banco Bpm Spa Banco BPM Spa (Formerly Credito Bergamasco) Banco Di Napoli Spa Bank Of America Merrill Lynch International Limited, Milan Branch Bper Banca S.P.A. Cassa Di Risparmio Del Veneto S.P.A. Cassa Di Risparmio Di Pistoia E Della Lucchesia Spa Cassa Di Risparmio In Bologna Spa - Carisbo Spa Commerzbank Ag Credit Agricole Cariparma Spa Credito Emiliano S.P.A. Credito Valtellinese Deutsche Bank S.P.A. HSBC Bank Plc Iccrea Banca - Istituto Centrale Del Credito Cooperativo Intesa Sanpaolo Spa UBI Banca S.P.A. Unicredit S.P.A. Bank Of Tokyo-Mitsubishi Ufj, Ltd., The Citibank N.A., Tokyo Branch Commerzbank Ag Tokyo Deutsche Bank Ag Mizuho Bank, Ltd. National Bank Of Pakistan Standard Chartered Bank State Bank Of India Sumitomo Mitsui Banking Corporation The Bank Of New York Mellon, Tokyo Branch U.B.A.F. - Union De Banques Arabes Et Francaises Tokyo Branch Wells Fargo Bank, N.A., Tokyo Branch Woori Bank, Tokyo Housing Bank For Trade And Finance, The Jordan Islamic Bank ANNUAL REPORT 2017 313
  295. Correspondent Banking Network Country Bank Country KAZAKHSTAN KENYA Sb Sberbank Jsc Gulf African Bank Ltd Habib Bank Ag Zurich KCB Bank Kenya Limited Busan Bank Daegu Bank , Ltd.,The Deutsche Bank Ag, Seoul Branch Industrial Bank Of Korea KEB Hana Bank KEB Hana Bank(Formerly Hana Bank) Kookmin Bank Kyongnam Bank National Bank Of Pakistan, Seoul Branch Korea Nonghyup Bank (Formerly Known As National Agricultural Cooperative Federation) Shinhan Bank Standard Chartered Bank Korea Limited Sumitomo Mitsui Banking Corporation The Bank Of New York Mellon, Seoul Branch The Hongkong And Shanghai Banking Corporation Limited, Seoul Branch U.B.A.F.-Union De Banques Arabes Et Francaises Wells Fargo Bank, N.A., Seoul Branch Woori Bank, Seoul Boubyan Bank (K.S.C) Burgan Bank K.P.S.C Citibank N.A. Commercial Bank Of Kuwait Kpsc,The Kuwait Finance House (K.S.C.) National Bank Of Kuwait S.A.K.P. Noor Financial Investment Company ABLV Bank, As Luminor Bank As Latvia (Former Nordea Bank Ab Latvia) Bank Of Beirut S.A.L. Byblos Bank S.A.L. Lebanon And Gulf Bank Sal Luminor Bank Ab (Former Nordea Bank Ab Lithuania) Societe Generale Bank And Trust S.A. MOROCCO KOREA, REPUBLIC OF KUWAIT LATVIA LEBANON LITHUANIA LUXEMBOURG MACEDONIA,THE FORMER YUGOSLAV REPUBL. OF MALAYSIA MALTA MAURITIUS MEXICO MONGOLIA 314 NLB Banka Ad Skopje Al Rajhi Banking And Investment Corporation (Malaysia) Bhd Ambank (M) Berhad Bank Muamalat Malaysia Berhad (6175-W) Bank Of America, Malaysia Berhad Bank Of Tokyo-Mitsubishi Ufj (Malaysia) Berhad CIMB Bank Berhad CIMB Islamic Bank Berhad Citibank Berhad Deutsche Bank (Malaysia) Berhad Hong Leong Bank Berhad Industrial And Commercial Bank Of China (Malaysia) Berhad. Malayan Banking Berhad (Maybank) RHB Bank Berhad Standard Chartered Bank Malaysia Berhad Credit Europe Bank N.V. Malta Branch HSBC Bank Malta P.L.C. Afrasia Bank Limited Hongkong And Shanghai Banking Corporation Ltd., The Maubank Ltd Banco Del Bajio, S.A. Banco Nacional De Mexico S.A. Bank Of America, Mexico S.A. Trade And Development Bank Of Mongolia MEEZAN BANK LIMITED Bank Attijariwafa Bank (Formerly Banque Commerciale Du Maroc) Banque Marocaine Du Commerce Exterieur Societe Generale Marocaine De Banques MYANMAR Kanbawza Bank Ltd NEPAL Bank Of Kathmandu Limited Himalayan Bank Ltd. Nabil Bank Limited NIC Asia Bank Limited NETHERLANDS ABN Amro Bank N.V. Bank Of America Merrill Lynch International Limited, Netherlands Branch Commerzbank Ag Kantoor Amsterdam Credit Europe Bank N.V. Deutsche Bank Ag Deutsche Bank Ag (Formerly Deutsche Bank Nederland N.V.) Habib Bank Ltd. HSBC Bank Plc. Rabobank NEW ZEALAND Bank Of New Zealand Hongkong And Shanghai Banking Corporation Limited, The NORWAY Danske Bank A/S DNB Bank Asa DNB Markets, A Business Unit Of Dnb Bank Asa, Oslo Nordea Bank Ab (Publ), Filial I Norge Skandinaviska Enskilda Banken OMAN Bank Dhofar (S.A.O.G.) BankMuscat Saog Bank Nizwa Bank Sohar S.A.O.G Habib Bank Oman PAKISTAN Albaraka Bank (Pakistan)Limited Allied Bank Limited Askari Bank Limited Bank Al Habib Limited Bank Alfalah Limited Bank Of Khyber, The Bank Of Punjab, The Bank Islami Pakistan Limited Citibank N.A. Deutsche Bank Ag, Karachi Branch Dubai Islamic Bank Pakistan Limited Faysal Bank Limited Habib Bank Limited Habib Metropolitan Bank Limited Industrial And Commercial Bank Of China, Karachi Branch JS Bank Limited MCB Bank Limited MCB Islamic Bank Limited National Bank Of Pakistan Samba Bank Limited Silkbank Limited Sindh Bank Limited Soneri Bank Limited Standard Chartered Bank (Pakistan) Limited Summit Bank Ltd United Bank Limited PALESTINE, STATE OF Bank Of Palestine Plc PAPUA NEW GUINEA Bank Of South Pacific Limited PHILIPPINES Asian Development Bank BDO Unibank, Inc. The Hongkong And Shanghai Banking Corporation Ltd - Philippine Branch POLAND Alior Bank Spolka Akcyjna Bank BPH Sa Bank Polska Kasa Opieki Sa - Bank Pekao Sa Deutsche Bank Polska S.A. HSBC Bank Polska S.A.
  296. Country Bank Mbank S .A. (Formerly Bre Bank S.A.) Societe Generale Spolka Akcyjna Oddzial W Polsce PORTUGAL Montepio Geral - Caixa Economica Novo Banco, Sa QATAR Barwa Bank Doha Bank Mashreq Bank Qatar International Islamic Bank United Bank Limited, Doha ROMANIA Citibank Europe Plc, Dublin-Sucursala Romania Unicredit Bank Sa RUSSIAN FEDERATION Alef-Bank Asian-Pacific Bank Bank Otkritie Financial Corporation (Public Joint-Stock Company) Commerzbank (Eurasija) Ao Credit Bank Of Moscow (Public Joint Stock Company) HSBC Bank (Rr) Ooo Unicredit Bank Ao Vnesheconombank VTB Bank (Pjsc) SAUDI ARABIA Al Inma Bank Al Rajhi Bank Alawwal Bank Bank Al Bilad Bank Al-Jazira Banque Saudi Fransi Emirates NBD Pjsc Gulf International Bank B.S.C., Riyadh Islamic Development Bank National Bank Of Pakistan National Commercial Bank, The Riyad Bank Saudi British Bank, The State Bank Of India SINGAPORE ABN Amro Bank N.V. Singapore Branch Axis Bank Limited Bank Mandiri (Persero)Tbk. Pt Bank Of America, N.A. Singapore Bank Of Tokyo-Mitsubishi Ufj, Ltd., The Citibank,N.A. Commerzbank Ag, Singapore Branch DBS Bank Ltd. Deutsche Bank Ag Emirates NBD Bank Pjsc (ENBD) First Abu Dhabi Bank Pjsc (Formerly National Bank Of Abu Dhabi) Habib Bank Limited KBC Bank Singapore Branch KEB Hana Bank Singapore Branch (Formerly Hana Bank) Mizuho Bank, Ltd. Singapore Branch Nordea Bank Ab Singapore Branch Oversea-Chinese Banking Corporation Limited Rabobank Singapore Shinhan Bank, Singapore Branch Skandinaviska Enskilda Banken Ab (Publ) Societe Generale Standard Chartered Bank Standard Chartered Bank (Singapore) Limited Sumitomo Mitsui Banking Corporation The Bank Of New York Mellon, Singapore Branch The Hongkong And Shanghai Banking Corporation Limited U.B.A.F. - Union De Banques Arabes Et Francaises Unicredit Bank Ag Singapore Branch (Hypovereinsbank Ag Singapore Branch) Wells Fargo Bank, Na Woori Bank, Singapore SLOVAKIA Ceskoslovenska Obchodna Banka, A.S. Commerzbank Ag SLOVENIA Unicredit Banka Slovenija D.D. SOUTH AFRICA Citibank South Africa Firstrand Bank Limited Country Bank HBZ Bank Limited Habib Overseas Bank Limited Standard Chartered Bank SPAIN Abanca Corporacion Bancaria, S.A. Aresbank, S.A. Banco Bilbao Vizcaya Argentaria S.A. Banco De Sabadell, S.A. Bank Of America Merrill Lynch International Limited Bankia S.A. Caixabank, S.A. Commerzbank Ag HSBC Bank Plc Kutxabank, S.A. SRI LANKA Amana Bank Plc Axis Bank Ltd. Bank Of Ceylon Habib Bank Ltd. Hatton National Bank Plc Hongkong And Shanghai Banking Corporation Limited, The MCB Bank Ltd. Nations Trust Bank Plc People's Bank,Head Office Public Bank Berhad Sampath Bank Plc Standard Chartered Bank SWEDEN Danske Bank Nordea Bank Ab (Publ) Skandinaviska Enskilda Banken Skandinaviska Enskilda Banken Ab SWITZERLAND Arab Bank (Switzerland) Ltd Banca Popolare Di Sondrio (Suisse) Banque Cantonale Vaudoise Banque De Commerce Et De Placements S.A. Barclays Bank (Suisse) S.A. Commerzbank Ag Credit Europe Bank (Suisse) S.A. Deutsche Bank Ag Zurich Branch Habib Bank Ag Zurich HSBC Bank Plc Nordea Bank S.A., Luxemburg, Zweigniederlassung, Zuerich. UBL (Switzerland) Ag Zuercher Kantonalbank TAIWAN Bank Of America, N.A. Taipei Citibank Taiwan Limited Deutsche Bank Ag, Taipei Branch King's Town Bank Mega International Commercial Bank Co., Ltd. Standard Chartered Bank (Taiwan) Limited Sumitomo Mitsui Banking Corporation Taipei Branch Taiwan Cooperative Bank Ltd The Bank Of New York Mellon, Taipei Branch Union Bank Of Taiwan TANZANIA, UNITED REPUBLIC OF Amana Bank Limited Habib African Bank THAILAND Bangkok Bank Public Company Limited Bank Of America, N.A. Bangkok Citibank N.A. Deutsche Bank Ag, Bangkok Branch Krung Thai Bank Public Company Limited Mizuho Bank, Ltd., Bangkok Branch Standard Chartered Bank (Thai) Pcl Sumitomo Mitsui Banking Corporation TUNISIA Arab Tunisian Bank Citibank N.A. Societe Tunisienne De Banque TURKEY Aktif Yatirim Bankasi A.S. Albaraka Turk Participation Bank Citibank A.S. Denizbank A.S. Habib Bank Ltd. HSBC Bank A.S. ICBC Turkey Bank A.S. (Formerly Tekstil Bankasi A.S.) Kuveyt Turk Katilim Bankasi A.S. Odeabank A.S. Sekerbank T.A.S. ANNUAL REPORT 2017 315
  297. Correspondent Banking Network Country Bank Turkiye Cumhuriyeti Ziraat Bankasi A .S. Turkiye Finans Katilim Bankasi A.S. Turkiye Garanti Bankasi A.S. Turkiye Halk Bankasi A.S. (Head Office) Turkiye Is Bankasi A.S. Turkiye Vakiflar Bankasi T.A.O. Turkland Bank A.S. (T-Bank) Yapi Ve Kredi Bankasi A.S. Ziraat Katilim Bankasi A.S. UKRAINE Jsc The State Export-Import Bank Of Ukraine Prominvestbank UNITED ARAB EMIRATES Abu Dhabi Commercial Bank Abu Dhabi Islamic Bank Ajman Bank Pjsc Axis Bank Limited, Difc Branch (Regulated By Dfsa) Banque De Commerce Et De Placements Sa-Difc Branch Citibank N.A. Credit Europe Bank (Dubai) Ltd Deutsche Bank Ag Dubai Islamic Bank Emirates Islamic Bank Emirates NBD Bank Pjsc First Abu Dhabi Bank Pjsc (Formerly First Gulf Bank) First Abu Dhabi Bank Pjsc (Formerly National Bank Of Abu Dhabi) Habib Bank Ag Zurich Habib Bank Limited HSBC Bank Middle East Limited KEB Hana Bank Abudhabi Branch Mashreqbank Psc. MCB Bank Limited National Bank Of Fujairah National Bank Of Ras Al-Khaimah, The Noor Bank P.J.S.C. Standard Chartered Bank State Bank Of India Unicredit S.P.A. Union National Bank United Arab Bank United Bank Ltd. UNITED KINGDOM Allied Irish Bank (Gb) (Aib Group (Uk) Plc T/A) Bank Mandiri (Europe) Limited Bank Of America, N.A. London Bank Of China Byblos Bank Europe S.A. (London Branch) Citibank N.A. Commerzbank Ag Commonwealth Bank Of Australia Deutsche Bank Ag Emirates Nbd Pjsc Gulf International Bank B.S.C. Habib Bank Uk Habib Bank Zurich Plc HSBC Bank Plc HSBC Bank Plc (Rfb) Keb Hana Bank Mashreq Bank Psc Mizuho Bank, Ltd. London Branch National Westminster Bank Plc Nordea Bank Ab (Publ) London Branch Northern Bank Limited (Trading As Danske Bank) Skandinaviska Enskilda Banken London Standard Chartered Bank United National Bank Woori Bank, London UNITED STATES OF AMERICA Abacus Federal Savings Bank ABN Amro Capital USA Llc American First National Bank 316 MEEZAN BANK LIMITED Country URUGUAY VIETNAM YEMEN Bank Banco Do Brasil S.A Bangkok Bank Public Company Limited, New York Bank Of America, N.A. Bank Of New York Mellon, The Bank Of Tokyo-Mitsubishi Ufj, Ltd., The BNP Paribas U.S.A - New York Branch Branch Banking And Trust Company Capital One, N.A. Cathay Bank Citibank N.A. Commerzbank Ag Commonwealth Bank Of Australia Continental Exchange Solutions, Inc. Deutsche Bank Ag Deutsche Bank Trust Company Americas First Tennessee Bank N.A. Gulf International Bank Habib American Bank Hanmi Bank HSBC Bank Usa, N.A. International Finance Corporation Intesa Sanpaolo Spa (Formerly Banca Intesa Spa New York) Israel Discount Bank Of New York JP Morgan Chase Bank, N.A. KEB Hana Bank. New York Agency (Formerly Hana Bank New York Agency) Keybank National Association Malayan Banking Berhad Mashreqbank Psc., New York Branch Mizuho Bank, Ltd. New York Branch National Bank Of Pakistan New York Commercial Bank Nonghyup Bank, New York Branch Nordea Bank Ab (Publ), New York Branch PNC Bank, N.A. Regions Bank Societe Generale Standard Chartered Bank State Bank Of India (California) Sumitomo Mitsui Banking Corporation Suntrust Bank U.S. Bank Unicredit Bank Ag (Hypovereinsbank) United Bank Ltd. Unitibank Wells Fargo Bank, N.A. Woori Bank, Los Angeles Woori Bank, New York Banco Itau Citibank N.A. Deutsche Bank, Ho Chi Minh City Branch Southeast Asia Commercial Joint Stock Bank Vietnam Bank For Agriculture And Rural Development Vietnam Public Joint Stock Commercial Bank (Pvcombank) Woori Bank Vietnam Limited Wooribank Hochiminh Saba Islamic Bank Shamil Bank Of Yemen And Bahrain United Bank Limited
  298. Branch Network Alhamdulillah , Meezan Bank has established 601 branches in 159 cities across Pakistan. This is a milestone that is not only the success story of Meezan Bank but also the continuing success story of Islamic banking in Pakistan. With this extensive network, our existing and potential customers are now closer than ever in attaining Islamic banking at their doorstep. All branches provide real time online banking facilities to customers. As the first and largest dedicated Islamic bank in Pakistan, Meezan Bank's team continues to build on its Vision of establishing ‘Islamic banking as banking of first choice’. One of the key objectives of the Bank is to have its footprint strategically placed throughout the country enabling public to avail the benefits of Shariah-compliant banking in their neighbourhood. The Bank presently operates in the following cities of Pakistan: Abbottabad Ahmedpur East Alipur Arifwala Attock Bahawalnagar Bahawalpur Bannu Batagram Bhalwal Burewala Chakwal Chamman Charsadda Chichawatni Chiniot Chishtian Choa Saidan Shah Chung Dadu Dadyal Daharki Daska Depalpur Dera Ghazi Khan Dera Ismail Khan Digri Dina Dinga Dukki Dunyapur Ellahabad Faisalabad Fatehpur Fort Abbas Gaggo Mandi Gawadar Ghotki Gilgit Gojra Gujar Khan Gujranwala Gujrat Hafizabad Haripur Haroonabad Hasilpur Hassanabdal Havelian Hub (Lasbela) Hyderabad Islamabad Jacobabad Jalalpur Jattan Jampur Jaranwala Jauharabad Jhang Jhelum Kabirwala Kahror Pakka Kahuta Kamalia Kamoki Karachi Karak Kasur Khairpur Khanbela Khanewal Khanpur Kharian Khushab Khuzdar Kohat Kot Addu Kot Radha Kishan Kotli Kunri Lahore Lalamusa Larkana Layyah Liaquatpur Lodhran Loralai Mailsi Mandi Bahauddin Malakwal Mansehra Mardan Mehar Mian Channu Mianwali Mirpur Azad Kashmir Mirpurkhas Moro Multan Muridkay Muslim Bagh Muzaffarabad Muzaffargarh Nankana Sahib Narowal Nawabshah Nowshera Okara Pabbi Pakpattan Panjgoor Pattoki Peshawar Phalia Pirmahal Pishin Qalanderabad Qila Saifullah Quetta Rahim Yar Khan Raiwind Rajanpur Rashidabad Rawalakot Rawalpindi Rawat Renala Khurd Sadiqabad Sahiwal Sakrand Samundri Sanghar Sara-e-Alamgir Sargodha Shahdadpur Shakargarh Sheikhupura Shikarpur Sialkot Shahkot Shujabad Sukkur Swabi Swari Swat Talagang Tando Adam Tando Allahyar Tando Mohammad Khan Tarlai Taunsa Taxila Timergara Toba Tek Singh Turbat Umerkot Vehari Wah Cantt Wazirabad Zhob For 2018, Meezan Bank has planned to expand its Branch Network by 50 branches countrywide. Meezan Bank's mission is to provide its customers dedicated and pure Islamic banking facilities with the greatest of convenience and personalized services. It remains the Bank's endeavour to establish solid foundations of Islamic banking in Pakistan. ANNUAL REPORT 2017 317
  299. Abbottabad Chakwal Chakwal Branch B-VI /4-A, Bab-e-Chakwal, Talagang Road, Chakwal Tel: (92-543) 543381-4 Sangham Chowk D.G Khan Branch Khata No 711, Khasra No 91/12/3, Mauza Gadai Shumali, Sangham Chowk, Dera Ghazi Khan Tel: (92-64) 2460613-15 City Abbottabad Branch Jamal Building , Eidgah Road, Abbottabad Tel: (92-992) 341990-03 Chamman Dera Ismail Khan Charsadda Digri Shabqadar Branch Khasra No.3976/339-340-401, Khata No.656/1780, 663/1789, Shabqadar Dina Abbottabad Branch Plot No. 843-846, Mansehra Road, Abbottabad Tel: (92-992) 344701-3 Ahmedpur East Ahmedpur East Branch Property No. 338, Block-IV, Kutchery Road, Ahmedpur East Tel: (92-62) 2273261-2 Alipur Alipur Branch Khata No.230, Khasra No.13714, Ward No.18, Near College Chowk, Multan Road, Alipur Tel: (92-066) 2700731-34 Arifwala Arifwala Branch Shop # 68-69-A, Main City road, Timber Market, Arifwala Tel: (0457)-834502-3 Attock Attock Branch G-4, Block G, Siddiqui Road, Attock City. Tel: (92-57) 2700811-12 Bahawalnagar Bahawalnagar Branch Shop No. 12, Grain Market, Minchanabad Road, Bahawalnagar Tel: (92-63) 2271611-2 Bahawalpur Circular Road Branch, Circular Road, Near Milad chowk, Bahawalpur Tel: (92-62) 2732145-47 Dubai Chowk Branch Property No. 209-CB, Ahmedpur East Road, Near Dubai Chowk, Bahawalpur Tel: (92-62) 2889417-18 Satellite Town Branch Plot No. 20/D, Street No.30, One Unit Chowk, Satellite Town, Bahawalpur Tel: (92-62) 2285303-04, 2285306-07 Shahi Bazar Branch Property No. 3 BIV-400 Zanana Hospital Chowk Shahi Bazar, Bahawalpur. Tel: (92-62) 2730042-43 Bannu Bannu Branch Property No. 322-D, 322-D/A, Outside Qasayban Gate Hospital Road, Bannu Tel: (92-928) 620841-3 Batagram Batagram Branch Khasra No. 3359/971 & 3360/971, Kahata No. 880/1351 & 881/1351, Sultan Market, Ajmeera, Batagram Tel: (92-997) 310850-51 Burewala Burewala Branch Multan Road, Opp. College Road, Burewala Tel: (92-67) 3773751-4 Vehari Bazar Branch Property 44 Block-F, Vehari Bazar, Burewala. Tel: (92-67) 3351112-13 Bhalwal Bhalwal Branch Property No. 941/935/20, Khewat No.770, Khatooni No.791, Block-04, Main Liaqat Shaheed Road, Bhalwal Tel: (92-48) 6642383-4 318 MEEZAN BANK LIMITED Chamman Branch Khasra # 579-580 Jogi Ram Road, Trunch Bazar, Chamman Tel: (92 826) 618355 Mardan Road Charsadda Branch Shop No. 286-287, Khata No.486, Sultan Building, Main Mardan Road Charsadda Tel: (92-91) 9220171-73 Chichawatni Chichawatni Branch Property No. 278-279, Adjacent National Saving Centre, G.T. Road, Chichawatni Tel: (92-405) 487601-03 Chiniot Sharah-e-Quaid-e-Azam Chiniot Branch P-468, AI-469 II, Shahrah-e-Quaid-e-Azam, Chiniot Tel: (92-47) 6331103-4 Chishtian Chishtian Branch Plot No. 109, B- Block, Opposite Ghalla Mandi Gate, Chishtian Tel: (92-63) 2509301-2 Chilas Chilas Branch Abu Bakar Siddique Chowk, Main Bazar Chilas Tel: (92-05812) 450673-74 Choa Saidan Shah Choa Saidan Shah Branch Khasra No.3125,5440/3124, Khewat No.438/1295, 189/363, Chakwal Road, Choa Saidan Shah Tel: (92-543) 579108-9 Chung Chung Multan Road Branch Main Stop Chung, Main Multan Road, Chung, Lahore Tel: (92-42) 35404761- 63 Dadu Dadu Branch Ground Floor, Nareja Shopping Centre, Kutchery Chowk, Near College Road, Dadu Tel: (92-245) 710816-8 Dadyal Dadyal Branch Plot No. 313, Hussain Shopping Centre, Main Bazar Dadyal, Mirpur Azad Kashmir Tel: (92-5827) 465881-3 Daharki Daharki Branch Survey No.446, Deh Daharki, Tappo Daharki, Taluka Daharki Tel: (92-723) 641385-7 Daska Daska Branch Rest House Chowk, Gujranwala Road, Daska Tel: (92-52) 6612837-41 Depalpur Dera Ismail Khan Branch Plot No.04. Shops No. 168-170. Circular Road Bazar Area cantt Dera Ismail Khan. Tel: (92-966) 717257-8 Digri Branch Survey No. 413, Ward No.B, Tando Ghulam Ali Road, Digri Tel: (92-233) 870213-16 Dina Branch Al-Bilal Shopping Centre, Main Chowk, G.T. Road, Dina, Distt. Jhelum Tel: (92-544) 636119-21 Dinga Dinga Branch Khewat No.1246, Khatooni No.2599, Khasara # 4165 Fowara Chowk Kharian Road Dinga Tel: (053) 7401692-94 Dukki Dukki Branch Plot No.329, Nana Sahab, Ziarat Road, Dukki Tel: (92-824) 666013 Dunyapur Dunyapur Branch Khewat No. 189, 225 Khatooni No. 516, 517 Dokota Road Dunyapur Tel: (92-60) 8304118-19 Ellahabad Ellahabad Branch Khewat No.443, Khatooni No.707-740, Main Depalpur Road, Ellahabad, Tehsil Chunian, District Kasur Tel: (92-49) 4751371-73 Faisalabad Bilal Gunj Market Branch P-1154, Islam Nagar, Bilal Gunj Market, Sargodha Road, Faisalabad Tel: (92-41) 8784051-53 Bhowana Bazar Branch 150-D. Main Bhowana Bazar, Faisalabad Tel: (92-41) 2633042-4 Canal Road Branch P-404, 405, Amin Town, Near Kashmir Bridge, West Canal Road, Faisalabad Tel: (92-41) 8505438-40 Circular Road Branch Shop # 6,7,8, Jinnah Market, Circular Road, Faisalabad. Tel: (92-41) 2628261-63 Civil Lines Branch Plot No. 17/K, Civil Lines, Bilal Road, Faisalabad Tel: (92-41) 2603471-473 Clock Tower Branch P-175, Clock Tower, Karkhana Bazar, Faisalabad Tel: (92-41) 2606085-7 Dijkot Road Branch Shop # 85, Dijkot Road, Adjacent to Grain Market, Faisalabad Tel: (92-41) 2416141-3 Depalpur Branch Khewat No. 2100/2053, Khatooni No. 3159, Kutchery Road Depalpur Tel: (92 44) 4544550-51 Fawara Chowk Faisalabad Branch 301-A, Nalka Stop, Main Road, Peoples Colony No. 2, Fawara Chowk Faisalabad Tel: (92-41) 8710523-24 Dera Ghazi Khan Ghulam Muhammad Abad Branch P-317, Alaf Sani Chowk, Main Saddar Bazar, Ghulam Muhammad Abad, Faisalabad Tel: (92-41) 2694381- 83 Dera Ghazi Khan Branch Jampur Road, Dera Ghazi Khan Tel: (92-64) 2474255-7
  300. Gole Cloth Katchery Bazar Branch P-54 Gole Cloth , Katchery Bazar, Faisalabad Tel: (92-41) 2610373-4 Gulberg Branch P-307-A, Gulberg Colony, Main Bazar, Faisalabad Tel: (92-41) 2541611-13 Hajiabad Branch Plot No. P-409, Main Sheikhupura Road Hajiabad Faisalabad Tel: (92-41) 8846181-83 Jail Road Branch Plot No.17-B, Jail Road, Faisalabad Tel: (92-41) 111 852 852 Jaranwala Road Branch Property No.P-1, Near Hassan Park, Corner Farid Road, Main Jaranwala Road, Faisalabad Tel: (92-41) 2428241-43 Jhang Road Branch Plot No. S-29-30, Near Ayub Colony, Opposite Motor Market, Jhang Road, Faisalabad Tel: (92-41) 2650854-6 Kotwali Road Branch P-66, Kotwali Road Faisalabad Tel: (92-41) 2602586-8 Madina Town Susan Road Branch Plot No. 98/23, Madina Town, Susan Road, Faisalabad Tel: (92-41) 8557141-3 Fort Abbas Fort Abbas Branch Khewat No.347/348, Khatooni No.347, Qasba Mandi, Zia-ul-Haq Shaheed Road Fort Abbas Tel: (92-063) 2510584-85 Gaggo Mandi Gaggo Mandi Branch Khasra No.59/3, Khewat No. 56/52, Khatooni No. 218, Opposite Grain Market, Sheikh Fazal Road, Gaggo Mandi Tel: (92-067) 3500574-75 Gawadar Airport Road Gawadar Branch Khasra No.575,593-596, Khewat No.202, Airport Road Gawadar. Tel: (92-86) 4210124-25 Gujrat Branch Amin Fan Building, G.T Road, Gujrat Tel: (92-53) 3538104-7 Gilgit Branch Shop No. 433/102, Northern Light Infantry, Welfare Complex Gilgit Baltistan Tel: (92-0581) 458039-41 Gojra Gojra Branch Al Khalid Shopping Centre, Opposite Surayya Hospital, Tehsil Office Road, Gojra Tel: (92-46) 3516272-3 Gujranwala Sargodha Road Branch Plot No. 654-656, Near Hafeez Plaza, Ali Town Sargodha Road, Faisalabad Tel: (92-41) 8785151-3 Satyana Road Branch 718-I, Batala Colony Main Satyana Road Faisalabad Tel: (92-41) 8500719-20 Gujar Khan Branch B-III, 215-E, G.T. Road, Gujar Khan Tel: (92-51) 3515679-83 Hafizabad Hafizabad Branch Sagar Road Branch, Hafizabad Tel: (92-54) 7540811-2 Haripur Haripur Branch Rehana Plaza, G.T. Road, Haripur Tel: (92-995) 627250-3 Dal Bazar Branch Property No. BII-19S-31, Near Chowk Chashma, Dal Bazar, Gujranwala Tel: (92-55) 4227592-6 Haroonabad D.C Colony Branch Shops No.UG-08 - UG-11, Commercial Centre, Ravi Block, PGECHS, D.C Colony, Gujranwala Tel: (92-55) 3782805-07 Hassanabdal Gondlanwala Road Gujranwala Branch Khewat No.76, Khatooni No.79, Khasra No.7818, Gondlanwala Road Gujranwala Tel: (92-55) 3842303-05 Hafizabad Road Branch Khewat # 2116, Khatooni # 2352, Khasra # 20, Mohallah Baghbanpura, Hafizabad Road Gujranwala Tel: (92-55) 4442104-06 Tata Market Branch Chak No. 212-RB Main Road, Factory Area, Opposite Madina Centre, Tata Market, Faisalabad Tel: (92-41) 2417555-7 Model Town Gujranwala Branch Property No.BXIV-18AS-18/A, Waqia Plot No.1-L/B, Model Town Gujranwala Tel: (92-55) 3857314-16 Fatehpur Branch Khewat No.14, Karor Lal Eisan Road, Fatehpur Tel: (92-0606) 841135-37 Kutchery Chowk Branch B-1/92, Opposite Bar Room, Kutchery Chowk, Gujrat Tel: (92-53) 3600751-753 Main Bazar Branch Main Bazar, Near Sheranwala Gate, Haripur Tel: (92-995) 615103, 615322 Kashmir Plaza Branch Kashmir Plaza, Near Ghalla Mandi G.T Road, Gujranwala Tel: (92-55) 3847205-8 Fatehpur Chowk Pakistan Branch Property No. B-II 849-850, Chowk Pakistan, Circular Road, Gujrat Tel: (92-53) 3522352-4 Citi Housing Society Gujranwala Branch Plot No.31, Block PH-1-C, Phase-1, Citi Housing Society, Gujranwala Tel: (92-55) 4287480-1 Serena Hotel Branch Serena Hotel, Club Road, Faisalabad Tel: (92-41) 2602595-7 Yarn Market Branch P-180, Yarn Market, Montgomery Bazar, Faisalabad Tel: (92-41) 2541501-03 Wapda Town Gujranwala Branch Block No.13, Wapda Town, Gujranwala Tel: (92-55) 4283902-5 Gilgit Millat Chowk Branch 158-B-1, Gulistan Colony No. 2, Millat Chowk, Faisalabad Tel: (92-41) 8784346-7 Samanabad Branch Plot No. P-178/1 A, Main Road, Samanabad, Faisalabad Tel: (92-41) 2663840-2 Sialkot Road Branch Khewat No. 517, Khatooni No. 632, Khasra No. 227, Wania More, Sialkot Road Gujranwala Tel: (92-55) 3200102-04 Gujrat Ghotki Branch Survey No.10, Deh Odharwali Tappo Ghotki Tel: (92-0723) 600134-36 Gujar Khan PMC Branch Branch P-1, Allied Moor, Opposite Punjab Medical College, Jail Road, Faisalabad. Tel: (92-41) 8781381-83 Satellite Town Gujranwala Branch Plot No.40-A, Nursery Chowk, Satellite Town, Gujranwala Tel: (92-55) 3847191-3 Ghotki Mansoorabad Branch Plot No. P-1224 Corner Dipu Bazar, Main Jhumra Road, Mansoorabad, Faisalabad Tel: (92-41) 8734400-02 Peoples Colony Branch 1/A-II, Peoples Colony-1, Faisalabad Tel: (92-41) 8555002-4 Sheikhupura Road Branch Khewat No. 42, Khatoni No. 43, Khasra No. 182, Mian Sansi, Sheikhupura Road Gujranwala Tel: (92-55) 4233981-83 Peoples Colony Branch 13-Y/ 7-SITE-1, Peoples Colony Gujranwala Tel: (92-55) 4240571-3 Qila Didar Singh, Gujranwala Khasra No.4215 / 184 , Khatooni No.1736, Khewat No.1394, Mohallah Qasurian, Moza Qila Didar Singh, Tehsil & District Gujranwala Tel: (92-55) 4711103-5 Haroonabad Branch 14-C, Grain Market, Haroonabad Tel: (92-63) 2251751-2 Hassanabdal Branch Khewat No.1756, Khatooni No.2201, Khasra No.1956 Near Bus Stand Main G.T Road Hassanabdal Tel: (92-057) 2520708-711 Hasilpur Hasilpur Branch 68/B, Baldia Road, Hasilpur Tel: (92-62) 2443300-1 Havelian Havelian Branch Near Old TMA Office, Main Bazar Havelian, Distt. Abbottabad Tel: (92-992) 811501-3 Hub (Lasbela) Hub Chowki Branch Hub City, District Lasbela, Balochistan Tel: (92-853) 310252-3 Hyderabad Auto Bhan Branch Shop No 6 & 7, Boulevard Enclave Auto Bhan Road Latifabad No. 3, Hyderabad Tel: (92-22) 3821291-8 Citizen Colony Branch Shop No.1-4, Citizen Plaza, Citizen Colony, Jamshoro Road, Hyderabad Tel: (92-22)2100904-8 Cloth Market Branch C/916/918, Guru Nagar, Hyderabad Tel: (92-22) 2621341-2 ANNUAL REPORT 2017 319
  301. Gari Khata Branch City Survey No . F/1054, Ward - F, Gari Khata, Hyderabad Tel: (92-22) 2725671-2 Hyderabad Branch Saddar Bazar Cantonment, Hyderabad Tel: (92-22) 2782772 Latifabad Branch 3/D Commercial Area, Latifabad No. 7, Hyderabad Tel: (92-22) 3866964-5 Latifabad-II Branch Plot No. A/53 Block-B, Unit No. 05, Shah Latifabad, Hyderabad Tel: (92-22) 3864281-84 Market Road Branch Market Road Hyderabad, Survey No. 2669, 2669/1, Ward-A, Market Road, Hyderabad Tel: (92-22) 2638362-6 Qasimabad Branch Plot No. QEA/R-6/03-4,11-12, Housing Scheme No. 1, Main Road Qasimabad, Hyderabad Tel: (92-22) 2670511-5 SITE Hyderabad Branch Plot No. A/3, Fateh Chowk, SITE Area, Hyderabad Tel: (92-22) 3880202-03 Station Road Branch Shop No.F-438/2, F-438/3, Ward “F”, Station Road, Hyderabad Tel: (92-22) 2729791-94 Islamabad Aabpara Branch Plot No. Ramna 6/1-4, Aabpara Market, Sector G-6, Islamabad Tel: (92-51) 2603061-4 Bani Gala Branch Khasra No. 631-632, Khewat No. 504, Sadaat Market, Main Bazar Bani Gala Islamabad Tel: (92-51) 2612790-92 Barakahu Branch Fazal ul Haq Plaza, Main Murree Road, Baharakahu, Islamabad Tel: (92-51) 2232881-2 B-17 Islambad Branch Mumtaz Plaza Plot No. 43 Commercial Area Sector B-17 Block B, Multi Gardens, Main G.T Road Islamabad Tel: (92-51) 5203240-3 F-11 Branch Shops No. 2, 3, 9, 10,11 & 12, Ground Floor, Sardar Arcade, F-11 Markaz, Islamabad Tel: (92-51) 2228384-5, 2228388-9 G-8 Branch Plot No. 40-A , I & T Centre, Jhelum Road , G – 8/1 , Islamabad. Tel:(92-51) 2261040 - 41 G-9 Markaz Branch 21-B, G-9 Markaz, Islamabad Tel: (92-51) 2285849-51 G-10 Markaz Islamabad Branch Plot No.20-E, G-10 Markaz, Islamabad Tel: (92-51) 2351953-4 G-11 Branch Plot No.15, Penorama Arcade, G-11 Markaz, Islamabad Tel: (92-51) 2830513-6 G-13 Branch Plot No 2-A , Qaiser Wasim Plaza, G-13 Markaz, Islamabad Tel:(92-51)2285849 – 50 G-15 Markaz Branch Plot No. 18 , Family Plaza, Jammu & Kashmir Housing Society, G-15 Markaz Islamabad Tel: (92-51)2328317-8 Ghouri Town Branch Plot No. 11-12 Sadiq Center Phase V-A Ghouri Town Islamabad Tel: (92-51) 2157680-83 Jinnah Super Branch Plot # Q-13, College Road F-7 Jinnah Super Market Islamabad Tel: (92-51) 2656501-5 I-8 Branch Plot No. 25, VIP Square, I-8 Markaz, Islamabad Tel: (92-51) 4861389-92 I-9 Branch Plot No. 2/A, Industrial Area, I-9, Islamabad Tel: (92-51) 4859644-7 I-10 Branch Shop No. 7-10, Ahmadal Plaza, Plot No. 3-I, Sector I-10 Markaz, Islamabad Tel: (92-51) 4432711-3 DHA Phase II Branch Plot No. 7, Sector A, Near Gate No-3, Kalsum Plaza, DHA Phase-II, Islamabad Tel: (92-51) 5161562-4 I-11 Sabzi Mandi Branch Plot No.189/A, Sabzi Mandi, I-11, Islamabad Tel: (92-51) 4100637-40 D-17 Islamabad Branch Plot No.A-1, Shop Nos.G 01-04, 06, 24, Prime Arcade Main Markaz Margalla View Housing Society, D-17/2 Islamabad Tel: (92-51) 2229996-98 Jinnah Avenue Branch Plot No. 37-B, Tahir Plaza, Jinnah Avenue, Blue Area, Islamabad Tel: (92-51) 2276712-5, 2801112-5 E-11 Markaz Branch Plot No. 02, 03, 04, Square Eleven Plaza, Islamabad Garden Phase II, Sector E-11/1 Islamabad. Tel: (92-51) 2305691-92 F-6 Markaz Branch Ground & First Floor, Sethi Plaza, Super Market, F-6 Markaz, Islamabad Tel: (92-51) 2601791-5 F-7 Jinnah Super Market Branch Unit No. 14, Plot No. 12-B, F-7 Markaz, Jinnah Super Market, Islamabad Tel: (92-51) 2655001-4 F-8 Branch Panther Plaza, F-8 Markaz, Islamabad Tel: (92-51) 2817403-5 320 F-10 Markaz Branch Plot No. 2-F, F-10 Markaz, Islamabad Tel: (92-51) 2112762-3 MEEZAN BANK LIMITED Naval Complex E-8 Branch Naval Shopping Centre, Naval Complex, E-8, Islamabad Tel: (92-51) 2261192-93 PWD Branch Plot No. 786-G, Block-C, Pakistan PWD Employees Co-operative Housing Society, Lohi Bher, Islamabad Tel: (92-51) 5170756-8 Soan Garden Branch Plot No. SC-17, Iftikhar Shopping Mall, Main Double Road, Soan Garden Islamabad Tel: (92-51) 5739501 - 2 74-E Blue Area Branch Unit No. 03-04 , Plot No.74-East Ajaib Plaza, Blue Area Islamabad Tel: (92-51) 2605693-97 Jacobabad Jacobabad Branch Survey No.764/1, Old College Road Ward No.02, Jacobabad Tel: (92-0722) 650276-78 Jalalpur Jattan Circular Road Branch Khewat No.1729/1730 Khatooni No. 2355-2358 2359-2362, Circular Road, Jalalpur Jattan Tel: (92 53) 3430313-5 Jampur Jampur Branch Indus Highway, Dera Road, Opposite Nadra Office, Jampur Tel: (92-604) 569446-8 Jaranwala Jaranwala Branch P-92, Main Hassan Road, Jaranwala City Tel: (92-041) 4312084-85-86 Jauharabad Jauharabad Branch Plot No.191, Khewat No.681, Khatooni No.1101, Block No.14, Main Bazar Jauharabad Tel: (0454) 720683-84 Jhang Rail Bazar Chowk Branch P-864, Block-9, Circular Road, Rail Bazar Chowk, Jhang Tel: (92-47) 7652203-4 Yousaf Shah Road Branch P- 5, Yousaf Shah Road, Near Church Chowk, Jhang Tel: (92-47) 7652101-3 Jhelum Jhelum Branch B-VI-24-S-II, Mehar Plaza, Civil Lines, Jhelum Tel: (92-544) 611751-5 Kabirwala Kabirwala Branch Property No. 162, Khanewal Road, Opposite PSO Petrol Pump, Kabirwala Tel: (92-65) 2400721-3 Kahror Pakka Kahror Pakka Branch Plot No.107/C/4, Khewat No.27, Dunya Pur Road, Kahror Pakka, District Lodhran Tel: (92-608) 341016-17 Kamoki G.T Road Kamoki Branch Main G.T Road, Kamoki Tel: (92-55) 6810351-3 Karachi 26 Street DHA Karachi Branch Plot # 15-C, Badar Commercial Street No. 1, D.H.A Phase V, Karachi, Tel: (92-21) 35161361-65 Abdullah Haroon Road Branch S/1, Plot No. P.R 2/31/5, Preedy Quarters, Abdullah Haroon Road, Karachi Tel: (92-21) 32700143-5 Abul Hasan Isphani Road Branch Plot No. 25-A, Main Abul Hasan Isphani Road, Azeem Khan Goth, Gulshan-e-Iqbal, Block 4-A, Karachi Tel: (92-21) 34810729-32 Al-Hilal Society Branch Nafees Arcade, Plot No. SC-14, Chandni Chowk, KDA Scheme No.7, Main University Road, Karachi Tel: (92-21) 34124111-5
  302. Al-Tijarah Centre Branch S-8 , Ground Floor, Al-Tijarah Centre, Block-6, PECHS, Shahrah-e-Faisal, Karachi Tel: (92-21) 34169030-4 Alamgir Road Branch Plot No. Z-484, Block No-3, Bhadur Yar Jang Co-operative Housing Society, Alamgir Road, Karachi Tel: (92-21) 34140968 Allama Iqbal Road Branch Plot No. 830-C, Central Commercial Area, Block 2, PECHS, Allama Iqbal Road, Karachi Tel: (92-21) 34373263 Azizabad Branch Shop Nos. S-3, S-4, S-5, S-6, Plot No.CS-54, Azizabad, Block 7, Federal B Area, KDA Scheme No.16, Karachi Tel: (92-21) 36376211-15 Block-A North Nazimabad Branch Plot No. SD-1, Block A, KDA Scheme No. 2, North Nazimabad, Karachi Tel: (92-21) 36722430-4 DHA Phase II Extension Branch C-69 & C-71, 12th Commercial Street, Phase-II (Extension), DHA, Karachi Tel: (92-21) 35311953-8 Block-E North Nazimabad Branch Plot No.ST-4, Shop # A/D-66 & 67, Block "E" Hyderi, North Nazimabad, Karachi Tel: (92-21) 36724294-96 DHA Phase I Branch Ground Floor, Plot No. 119, DHA Phase I, Korangi Road, Karachi Tel: (92-21) 35396854-8 Block-F North Nazimabad Branch Shop # 9,10,11 & 12 Sub-Plot # SC14-3 Plot No SC-14,Block -F, KDA Scheme No. 2 ,Samar Residency North Nazimabad Karachi Tel: (92-21) 36723549-554 DHA IV Branch Plot No 78, 10th, Commercial Street, Phase IV, DHA, Karachi Tel: (92-21) 35314861-4 Block-18, Gulistan-e-Jauhar Branch Rufi Lacks Drive, Unit No. 34 & 35, Perfume Chowk, Block-18, Gulistan-e-Jauhar, Karachi Tel: (92-21) 34198130-134 Babar Market Landhi Branch 2-A/167,168 & 169, Babar Market, Landhi Township, Karachi Tel: (92-21) 35011071-5 Block-3 A Gulistan-e-Jauhar Branch Palm Residency, Unit # 01, Block- 3A, Kamran Chowrangi, KDA Scheme-36, Gulistan-e-Jauhar Tel: (92-21) 34161921-25 Bahria Town Branch Shop No. 07, Plot Old Customer support centre, Bahria Town Karachi, Main super highway Karachi, Pakistan. Cell: 0304 1927363 - 64 0304-0920612 Boat Basin Branch Shop No. 40-43, Commercial Sub Plot No. FL-7/C/4 of Plot No. 7, Block No. 5, Clifton, Karachi Tel: (92-21) 35870697-8 Bahadurabad Branch Plot No.28, Adam Arcade, Bihar Muslim co-operative Housing Society, Bahadurabad Karachi Tel: (92-21) 34145018-21 Bohrapir Branch Ranchore Quarter, Prince Street, Bohrapir, Karachi Tel: (92-21) 32712915-8, 32712909 Baitul Mukkaram Masjid Branch Shop No. S-3, S-4,Yasir Apartments,FL-6,Block No. 16, Gulshan-e-Iqbal, Karachi Tel: (92-21) 34839021-3 Baitus Salam Branch Plot # 22-C, Commercial Street No.03, Baitus Salam DHA Phase-IV, Karachi Tel: (92-21) 35805181-85 Baldia Town No.9 Branch Plot No.ST-21, Saeedabad, Baldia Town No.9, Karachi Tel: (92-21) 32819106-10 Baradari North Karachi Branch Plot No A-45,Sector 11-B, North Karachi Township, Karachi Tel: (92-21) 36900930-34 Boulton Market Branch Plot No. 8-9/D-I, Serai Quarters, Boulton Market, M.A. Jinnah Road, Karachi Tel: (92-21) 32467811-5 Bombay Bazar Branch Plot No. 105, Shop No. 1 & 2, Mashallah Terrace, Old Town Quarters, Bombay Bazar, Karachi Tel: (92-21) 3246-8701 -05 Buffer Zone Branch R-914, Sector-15-A/1, Buffer Zone, North Karachi, Karachi Tel: (92-21) 36965851-5 Cattle Colony Landhi Branch Plot No. 45/B, Cattle Colony Landhi, Karachi Tel: (92-21) 35135-181- 85 Barkat-e-Hyderi Branch D-10, Block-H, Scheme No 2, North Nazimabad, Karachi Tel: (92-21) 36705073-159 162-146-194-215 Commercial Avenue Phase VII DHA Branch Plot No.33-D, Khy-e-Sehar Lane 4, Commercial Avenue, Phase VII, D.H.A, Karachi Tel: (92-21) 35171201-05 Beaumont Plaza Branch Plot No.4, Shop No.7 & 8, Beaumont Road, Civil Lines Quarters, Karachi Tel: (92-21) 35642370-74 Chawla Market Nazimabad No.1 Branch Shop No.1-4, Bukshi Residency, Plot No.3, Sub-Block-K, Chawla Market Nazimabad No.1, Karachi Bhittai Colony Korangi Branch Plot No.395, Block “A”, Bhittai Colony, Korangi, Karachi Tel: (92-21) 3515-1741-45 Clifton Branch Shop # 5, 6, Ground Floor, Al-Karam Centre, BC1, Block-7, Main Clifton Road,Clifton, Karachi, Add Space Shop # 4, Plot # BC 2, Block 7 Clifton, Kararachi Tel: (92-21) 35372060-64 Bilawal Chowk Branch Plot No. Commercial 7/1, Green Belt Residency, Shop No 4 & 5, Block 2 , Scheme 5, Clifton Karachi Tel: (92-21) 35830628,729,1448, 2083 Bin Qasim National Highway Branch Survey # 435, Deh Landhi,Taluka Bin Qasim town,Karachi Tel: (92-21) 35012365, 35012376 Block-4 Clifton Branch Plot No. COM-2/A, Block 4, Scheme No. 5, Kehkashan, Clifton, Karachi Tel: (92-21) 35879531-35 Cloth Market Branch Shop # 14, Ground Floor, Atique Market, Survey No.1-2, Survey Sheet B.R.2, Bunder Quarters, Karachi Tel: (92-21) 32418137-39 Darakhshan Society Malir Branch Plot No. A-16/1, Darakhshan Society, Malir Township, Karachi Tel: (92-21) 34492788, 34493005 Dhorajee Branch Plot # 35/182 C.P & Berar Cooperative Housing Society, Karachi Tel: (92-21) 34860861-4 Drigh Road Branch Plot No.26/183 Drigh Road Cantt Bazar Faisal Base, Karachi Tel: (92-21) 34687172-76 F.B Area Branch C-12, Block-10, F.B. Area, Karachi Tel: (92-21) 36805370 Federal B Industrial Area Branch Plot No. ST-7, Block – 22, Federal B Industrial Area, Karachi Tel: (92-21) 36834625-29 Fish Harbor Branch Fish Auction Hall, Fish Harbor Karachi FTC Branch Ground Floor, Block-B, Finance & Trade Centre, Shahrah-e-Faisal, Karachi Tel: (92-21) 35650771-5 Garden West Branch Shop No. 9,10,11 & 12 , Plot Survey no.130/1 Sheet No. G-R.2, Garden West, Karachi Tel: (92-21) 32241383-87 Gizri Branch Plot No. K-7/9 Gizri, Chaudhry Khalique-uz-Zaman Colony, Bakhshan Village, Bazar Area, Clifton, Karachi Tel: (92-21) 35865670-4 Gole Market Nazimabad Branch Plot No. 2-E/3, Gole Market Nazimabad, Karachi Tel: (92-21) 3641 8011-15 Gulbahar Branch Shop No. G-8, G-9, G-10 and G-11, Sub Plot No.20/3, Sana Towers, Firdous Co-operative Housing Society, Golimar Chowrangi, Nazimabad, Karachi Tel: (92-21) 36701155-9 Gulbai SITE Area Branch Plot No. C-25, Gulbai, SITE Area, Karachi Tel: (92-21) 32594711-5 Gulberg Branch Plot No. B-1, Block 18, Gulberg, F.B. Area, Karachi Tel: (92-21) 36829112-5 Gulshan-e-Iqbal Branch Shop No. 1, 2, 3 & 4, Plot No.B-41, Block 13-A, Gulshan-e-Iqbal, Karachi Tel: (021) 4811901-905 Gulshan-e-Iqbal Block-5 Branch Plot No. 9/ FL-3 KDA Scheme No. 24, Gulshan-e-Iqbal Block-5, Main Rashid Minhas Road, Karachi. Gulshan-e-Hadeed Branch Plot No.C-27, Sub Sector 8-C/I, Phase I, Gulshan-e-Hadeed, Steel Town, Karachi Tel: (92-21) 34712151-155 ANNUAL REPORT 2017 321
  303. Katchi Gali No .2 Branch No. G-1, situated at Katchi Gali No. 2, Marriot Road, Karachi Tel: (92-21) 32443526-7 Korangi II Branch Q 37, Sector 33-A, Main Road Korangi, Karachi Tel: (92-21) 35059215-16 Gulshan Block 2 Branch Plot No. SB 08, Gulshan-e-Iqbal Block 2, Near Rab Medical Centre, Karachi Tel: (92-21) 34971232 K.A.E.C.H.S Branch Plot No. SA / 49 (Commercial) Block No. 4, Karachi Administrative Employees Co-operative Housing Society LTD. Karachi Tel: (92-21) 34302920 Korangi Industrial Area II Branch Plot No.27 & 28, Sector - 16, Korangi Industrial Area, Karachi Tel: (92-21) 3514-4341-45 Gulshan Chowrangi Branch Gulistan-e-Erum, Sub-Plot # 5-A/1-10, Plot No.FL-5, Block-3, Scheme 24 Gulshan-e-Iqbal, Karachi Tel: (92-21) 34811849-56, 34810762 Karachi Cantt Branch Shop No.1, Salalah Apartment, Civil Lines Quarters, Dr. Dawood Pota Road, Near Cantt. Station, Karachi Tel: (92-21) 3562-0180-84 Gulshan-e-Iqbal Block 6 Branch Plot No. FL-6 /1/A-4, Al-Shams Plaza, Block-6, KDA Scheme No. 24, Rashid Minhas Road, Gulshan-e-Iqbal, Karachi Tel: (92-21) 3481-3521-25 KDLB Branch 2nd Floor, KDLB Building, West Wharf Road, Karachi Tel: (92-21) -32314103-07 Gulistan-e-Jauhar Block-1 Branch Shops No. 1, 2, 3, 7, Ground Floor, Samrah Arcade, Plot No. SB-04, Block 1, KDA Scheme No. 36, Gulistan-e-Jauhar, Karachi Tel: (92-21) 34013922-6 Gulistan-e-Jauhar Branch Plot No ST-19,Block 15, Scheme 36,Gulistan-e-Jauhar, Karachi Tel: (92-21) 34030251-55 Lasbella Branch Plot No.460, G-2, Garden East Lasbella, Karachi Tel: (92-21) 32244290-294 Lea Market Branch Plot No. 3/20, Khajoor Bazar, Lea Market, Karachi Tel: (92-21) 32521650-4 Liaquatabad Branch No.18, Plot No. 1/19, S.M.Taufiq Road, Liaquatabad, Karachi Tel: (92-21) 34125673 Gulshan-e-Maymar Branch Flat No. A-102 & shop no. 1 & 2, Sub Plot no. SB-1 / X / IV,Gulshan-e-Maymar Karachi Tel: (92-21) 36350513-4-5 Khadda Market Branch (Khayaban-e-Shamsheer) Branch Plot No.4-C, Khadda Market, Khayaban-e-Shamsheer, DHA Phase V, Karachi Tel: (92-21) 35240811-5 Gulzar-e-Hijri Branch Plot No.B-14, Al-Memon Welfare Cooperative Housing Society, Unit No.1-3, Sector 13-A, Scheme-33 Gulzar-e-Hijri, Karachi Tel: (92-21) 3465-5860-64 Khadija Market, Block I North Nazimabad Branch Plot No. SC-4, Shop Nos. 2, 2-A, 3, 4,5 Khadija Market, Block I North Nazimabad Karachi Tel: (92-21) 3672-2790 - 94 Light House Branch Plot No. 57, Jahangir Mansion, Shop No.14, Thatia Compound Street, Wadhumal Odharam Quarters, Light House, M.A Jinnah Road, Karachi Tel: (92-21) 32742775-6 Hub River Road Branch Building No. 06 Commercial Sector No. 04, Haroon Bahria Coperative Housing Society, Hub River Road, Karachi Tel: (92-21) 32364236-9 Khalid Bin Waleed Branch Plot No. 89/N, Muhammadi Terrace, Block-2, Khalid Bin Waleed Road, P.E.C.H.S, Karachi Tel: (92-21) 34383914-16 M.A. Jinnah Road Branch M.R2/52, Sheba Centre, M.A Jinnah Road Karachi Tel: (92-21) 32467032-7036 Hussainabad Branch Plot # 1109 & 1110,Block # 3, Ground Floor,Pakistan Memon Education & Welfare Society Hussainabad Karachi Tel: (92-21) 36320461 Kharadar Branch Shop No.1, Ground Floor, Al-Fatima Plaza, Paria Street, Ghulam Hussain Kassam Quarters, Kharadar, Karachi Tel: (92-21) 32316510-4 I.I.Chundrigar Branch Shop No. 9 & 10,Gul Tower, I.I.Chundigar Road Karachi Tel: (92-21) 32423676 Indus Mehran Cooperative Housing Society Branch Plot No.14-A , Naclass No.55, Indus Mehran Co-operative Housing Society Malir, Karachi Tel: (92-21) 3449640-44 Khayaban-e-Bokhari Branch Plot No 22-C, Khayaban-e-Bokhari, Ph-VI, DHA Karachi Tel: (92-21) 35243561-5 Khayaban-e-Rahat Branch Plot No. 32 /C, Shop No.1-5, Khayaban-e-Rahat Phase VI, DHA Karachi Tel: (92-21) 3585-7531-35 Jama-e-Millia Malir Branch Plot No.S-25, Survey No.282, Gulzar-e-Ibrahim, Jama-e-Millia Malir, Karachi Tel: (92-21) 3416-2270-74 Khayaban-e-Sehar Branch 9-C, Shahbaz Commercial. Lane 1, Khayaban-e-Sehar, Phase VI, DHA, Karachi Tel: (92-21) 35349307-13 Jamshed Road Branch Plot No. 713/6, Shaheen Tower, Jamshed Quarters, M.A Jinnah Road, Karachi Tel: (92-21) 34923281-5 Khayaban-e-Shamsheer Branch 23-C, Main Khayaban-e-Shamsheer, Phase V (Ext) DHA, Karachi Tel: (92-21) 35247600-04 Jodia Bazar Branch MR5/115-114 Darya Lal Street, Jodia Bazar, Karachi Tel: (92-21) 32473326-28 Joffa Towers Branch SB-23 & 24,Office No. G2, 102-104, Joffa Towers, Main University Road, Block-13-C, Gulshan-e-Iqbal, Karachi Tel: (92-21) 34830141-5 Jubilee Market Branch Plot No.64, Ghulam Hussain Hidayatullah Colony, Jubilee Market Karachi Tel: (92-21) 32720454-58 322 Keamari Branch Plot No. 29/1, Opposite Jungle Shah College, Keamari Town, Karachi Tel: (92-21) 32863170-4 Korangi Darul Uloom Branch Sector 28, Darul Uloom, Main Korangi Industrial Road, Karachi Tel: (92-21) 35123134-35, 35123138-40 MEEZAN BANK LIMITED Khayaban-e-Ittehad Branch Plot No.124-N, Khayaban-e-Ittehad DHA Phase VI Karachi Tel: (92-21) 3515-5911-15 Korangi Branch Plot No. LS-3, ST-3/1, Sector No.15,Korangi Industrial Area, Karachi Tel: (92-21) 35114324-5 Kokan Colony Baldia Town Branch Plot No. 328 Deh Moach Kokan Colony Baldia Town Karachi. Tel: (92-21) 32591300-04 Liaquat Market Malir Branch Plot No. LS-38, ST-32 Block-04, Malir Township Liaquat Market Malir, Karachi Tel: (92-21) 34502880-84 Marriott Hotel Branch Marriott Hotel, Abdullah Haroon Road, Karachi Tel: (92-21) 35683491 Malir Cantt Branch Army Shopping Complex, Malir Cantt, Karachi Tel: (92-21) 34196121-25 Maskan Chowrangi Branch Plot No. FL-12/B-41, Allah Noor Apartment, Block 7, KDA Scheme No. 24, Maskan Chowrangi, Gulshan-e-Iqbal Karachi Tel: (92-21) 34835100-04 Mehmoodabad Branch Plot No. 178 -179, Survey No. 250- 251 Sheet No. MAC-II Mehmoodabad Tel: (92-21) 35319051 - 055 Metroville SITE Branch Plot No.E-11, E-12 Block-1 Metroville, SITE Karachi Tel: (92-21) 36752601-5 Model Colony Branch Plot No.6, Survey No.N-55, Tina Square Housing Project,Deh Mehran,Tappo, Malir Karachi Tel: (92-21) 34492445-7 Muhammad Ali Society Branch Plot No 5/F, Muhammad Ali Memorial Co-Operative Housing Society, Karachi Tel: (92-21) 34301864-67 Nanakwara Branch Plot No. WO-1/13, Muhammadi Manzil, Syedna Tahir Saifuddin Road, Paan Mandi, Nanakwara, Karachi Tel: (92-21) 327141014-105
  304. Nadir House Branch Nadir House Branch , I.I. Chundrigarh Road Karachi Tel: (92-21) 32410085-88 PIB Colony Branch Plot No 390-391, PIB Colony Main Road, Karachi Tel: (92-21) 34191201-205 Nayabad Branch Plot No. No. 113/A, Shop No.1-6, 18-29, Shah Waliullah Road Nayabad Lyari, Karachi Tel: (92-21) 32385631-5 Plaza Quarters Branch Plaza Square Karachi, Bombay Building, City Survey No. 37/22, Off M.A. Jinnah Road, Karachi Tel: (92-21) 32751560, 32751124 Nazimabad No. 3 Branch 3-A-1/13 Nazimabad No. 3, Karachi Tel: (92-21) 36707431-4 PNSC (Lalazar) Branch 37-A, Lalazar Area, Off Moulvi Tamizuddin Khan Road, Karachi Tel: (92-21) 35636240 New Challi Branch Fakhri Trade Centre, Plot No. SR – 6/10, Shahra-e-Liaquat, New Challi, Karachi. Tel: (92-21) 32602121-126 New Town Branch Plot No.371 Kutiana Centre, Shop No.10-13, Jamshed Quarters, Karachi Tel: (92-21) 34943581-5 New Truck Stand Hawksbay Branch Plot No.F-1/4 to F-1/9, K-28 Phase-I Trans Lyari, Hakwsbay Road, Karachi Tel: (92-21) 32373204-13 New Fruit & Vegetable Market Super Highway Branch Block No. C-X, New Fruit & Vegetable Market, Super Highway, Karachi Tel: (92-21) 3687-0190-94 North Karachi Branch Plot # SA-6 (ST-8),11-C-1 North Karachi Tel: (92-21) 36965051-55 North Karachi Industrial Area Branch Plot # 1-A, Sector # 12-C,North Karachi Town ship Karachi Tel: (92-21) 36963117-121 North Napier Branch Shop No. 12,Poona wala, Trade Tower,W.O 1/55, Opposite City Court Chabba Gali,Main North Napier Road Karachi Tel: (92-21) 32713530-34 North Nazimabad Block-M Branch Plot No. SB-2, Block-M, North Nazimabad, Karachi Tel: (92-21) 36627054-5 Nursery Branch Plot No.13-A, Survey Sheet No. 35-P/1, Amber Pride show room No.1, Ground Floor, Block-06 P.E.C.H.S, Nursery, Karachi Tel: (92-21) 34396510-14 Orangi Town Branch Plot No. LS-15, Sector 6-E, Orangi Town, Karachi Tel: (92-21) 36694370-4 Panorama Center Branch Survey # 248 , Shop # 6 & 6-A Panorama Centre, Staff Line, Fatima Jinnah Road, Saddar, Karachi Tel: (92-21) 335642587-91 P & O Plaza Branch Ground Floor, P & O Plaza, Opposite Muhammadi House, I.I Chundrigar Road, Karachi Tel: (92-21) 32467901-5 Pakistan Chowk Branch Ground Floor, Plot No. 08, Survey Sheet No. RB-5, Pakistan Chowk Arambagh, Road, Karachi Tel: (92-21) 32219651-6 Paposh Nagar Branch Plot No.18, Row No.1, Block-E, Block No-V, Paposh Nagar Nazimabad, Karachi Tel: (92-21) 36700640-44 Power House Branch Plot No. R-17, Sector 5-C/4, North Karachi Tel: (92-21) 36902608-12 Rashid Minhas Road Branch Ground Floor, Aqsa Tower, Block-C, Rashid Minhas Road, KDA Scheme No.33, Karachi Tel: (92-21) 34978062, 34978064 Razi Road Branch Plot No 44-A, Nice Trade Orbit, Block 6, Razi Road, PECHS, Karachi Tel: (92-21) 34370151-155 Regal Chowk Branch Shop No. 1-B, Survey No. 273/2, Sheet A.M (Part -2), Rahman Mansion, Artillery Maidan Quarter, Frere Road, Saddar, Karachi Tel: (92-21) 32701151-5 Saddar Branch Survey No.70/2, Survey Sheet No.SB-6, Javeria Gems & Jewels centre, Raja Ghazanfar Ali Khan Road, Saddar Bazar Quarters Karachi Tel: (92-21) 35224601-05 Saeedabad Baldia Town Branch Plot No.604 & 609/1-A, Sector 5-J, Saeedabad Baldia Town, Karachi Tel: (92-21) 32817511-5 Safora Chowk Branch Shop No. 3, 4, 5 & 6, Ground Floor, Prime Tower, Plot No. SB-20, Block 7, KDA Scheme No. 36, Safora Chowk, Gulistan-e-Jauhar, Karachi Tel: (92-21) 34660661-5 Sharafabad Branch Plot No.525, Block-3, Shop No. 1-3, Ground Floor, Karachi Memon Cooperative Housing Society, Sharafabad, Karachi Tel: (92-21) 3494-2941-45 Shaheen Complex Branch Shaheen Commercial Complex, M.R. Kayani Road, GPO Box 121, Karachi Tel: (92-21) 111 852 852 Shahrah-e-Faisal Branch Shops No. 9,10,11,12 Ground Floor and Mezzanien Plot No.6/29-A, Sabah Palace, PECHS, Karachi Tel: (92-21) 34322184-90 Shahrah-e-Quaideen Branch Plot # 19/A, Block 2, PECHS, Main Shahrah-e-Quaideen Road, Karachi Tel: (92-21) 3418 8601-05 Shahrah-e-Orangi Branch Plot No. CI-59, Sector 11, Orangi Township, Orangi, Karachi Tel: (92-21) 36699621-25 Shadman Karachi Branch Plot No. ST 21/2A Sec.No 14-B, Shadman, North Karachi Tel: (92-21) 36940650-54 Shaheed-e-Millat Road Branch Plot No. 7-A/228, Block-3, Dehli Mercentile Muslim Cooperative Housing Society Ltd, Shaheed-e-Millat Road, Karachi Tel: (92-21) 34140151-155 Saba Avenue Branch Plot # 22-C-C, Saba Avenue, DHA Phase VI, Karachi Tel: (92-21) 35155901-905 South Asia Pakistan Terminal Branch Plot No.1, South Asia Pakistan Terminal Building, Container Port Road Keamari, Karachi Shah Faisal Colony Branch CB-33, Al Falah Society, Shah Faisal Colony, Karachi Tel: (92-21) 34686271-3 Shamsi Society Malir Halt Branch Plot No. CM 44 & 45, Ground Floor Shamsi cooperative Housing Society Ltd., Malir Halt, Karachi Tel: (92-21) 34682405-07 Shershah Branch Plot No. D.283/15 & 16, Quality Godown Shershah Road, SITE Karachi Tel: (92-21) 32562411-15 Sidco Centre Branch Shop No.13, Sidco Centre Din Muhammad Wafai Road Karachi Tel: (92-21) 35224850-54 Shireen Jinnah Colony Branch Plot No. 4-B,Block No. 1, Clifton Karachi Tel: (92-21) 35833025, 35836758, 35836780 Sir Syed Road Branch Plot No. 152-S, Ground Floor, Sir Syed Road, Block 2, PECHS, Karachi Tel: (92-21) 35143500-4 SITE Branch Plot No. B/9-C, Site Area, Karachi Tel: (92-21) 32550328-31 SITE-II, Super Highway Branch Showroom # 1 & 2, Plot # D/41-A, SITESuper Highway Phase-II, Karachi Tel: (92-21) 36880342-349 Soldier Bazar Branch G-2, Ground Floor, Plot No. SOL.B-2/16, VII-E/100/1, Soldier Bazar Quarters, Karachi Tel: (92-21) 32290320-24 Steel Market Branch Plot No.5, Shop No12, Al-Hamd Centre, Ranchore Quarter Steel Market, Baba-e-Urdu Road Karachi Stock Exchange Branch Office # 41, 42 & 43 Ist Floor Stock Exchange Building, I.I Chundrigar Road Karachi Tel: (92-21) 32470920-8 Super Highway Branch Highway Trade Centre, Shop # 11-12-13 &14 Block-2, Sector1-A, Super Highway, Karachi Tel: (92-21) 36830076-78, 36830045 & 36830107 Tahir Villa Chowrangi Branch Plot No. 74/1, Block 5, Tahir Villa Chowrangi, F.B.Area, Karachi Tel: (92-21) 36364452-54 Tariq Road Branch Plot No. 138-A, Block No. 02, PECHS, Tariq Road, Karachi Tel: (92-21) 34300180-84 ANNUAL REPORT 2017 323
  305. Textile Avenue Branch Plot No . H-6, SITE Survey Sheet No. 21, Near Site Police Station SITE, Karachi Tel: (92-21) 32584850-59 Timber Market Branch Plot No. 03, Main Timber Market, Siddique Wahab Road, Karachi Tel: (92-21) 32740060 - 64 Urdu Bazar Branch Shops No. 11 & 12, Anfal Centre, Plot No. RB-9/1, Rambagh Quarters, Urdu Bazar, Karachi Tel: (92-21) 32603031-5 University Road Plot No. SB-25, S-1, S-2 & S-3, Block-1 Gulistan-e-Jauhar, Main University Road, Karachi. Tel: (92-21) 34170471-5 Water Pump Branch Plot No. BS-13,Block No.14, Federal B.Area Karachi. Tel: (92-21) 36332443, 36332523 West Wharf Road Branch Plot No.14, A & K Chambers West Wharf Road, Karachi Tel: (92-21) 32203445-9 Karak Karak Branch Khasra Nos.615-616-243-236-233-235, Tehsil Road, Karak Tel: (092) 7211032-34 Kahuta Kahuta Branch Khewat # 15-16 Khatooni # 17-20, Gul Siraj Plaza Rawalpindi Road Kahuta Tel: (92-051) 3313015-16 Kamalia Kamalia Branch Khasra No. 4169-4191, Muhallah Mitianwala, Railwary Road, Kamalia Tel: (92-046) 3413590-94 Kasur Kasur Branch 216-9, R-IV, Railway Road, Kasur Tel: (92-492) 2764999 Khairpur Khairpur Branch Shop No.1,2,3 Ground Floor Civic Centre, Mall Road, Khairpur Tel: (92-243) 715772-73 Khanewal Khanewal Branch Plot No. 624-625, Block No. 8, Sir Syed Road, Khanewal Tel: (92-65) 2556625-7 Kohat Branch 1st Floor, Jinnah Municipal Plaza, TMA, Near King Gate, Bannu Road, Kohat Tel: (92-922) 523037-40 Kot Addu Kot Addu Branch Khewat No. 264/241,Ward No. 2, Mauza Pirhar Sharqi, G.T.Road, Kot Addu. Tel: (92-66) 2240333-37 Kot Radha Kishan Kot Radha Kishan Branch Shop No. 9, Grand City Center, Main Raiwind Pattoki Road, Kot Radha Kishan Tel: (92-049) 2382011 Kotli AJ&K Kotli AJ&K Branch Mouza Pang Piran, Pindi Road, Kotli AJK Tel: (92-05826) 444673-4-5 Kunri Kunri Branch Plot No. 12, Survey No. 263, Station Road, Deh Gorraho, Kunri, District Umerkot Tel: (92-238) 558412-15 Lahore Akbar Chowk Branch Plot No.46, Block-10 Sector B-1 Township Lahore Pabx: (92-042) 35201425-26 Akbari Mandi Branch Outside Akbari Mandi, Circular Road, Lahore Tel: (92-42) 37660969-70 Al-Saeed Chowk Branch Al-Saeed Chowk, near Phool Mandi, Saggian By pass, Jaranwala Road, Tehsil Ferozwala, District Sheikhupura, Lahore Tel: (92-42) 37163873-5 Allama Iqbal Town Branch 06 Asif Block Main Boulevard Allama Iqbal Town Lahore Tel: (92-42) 37806882 - 37806887 Avian Chowk Branch H # 44, Nadeem Shaheed Road, Avian Chowk, Near Pakki Thatti, Samanabad, Lahore Tel: (92-42) 37563352-54 Azam Cloth Market Branch 19-Bismillah Block, Azam Cloth Market, Lahore Tel: (92-42) 37642011-3 Khanpur Badami Bagh Branch 35-Peco Road, Badami Bagh, Lahore Tel: (92-42) 37369610-3 Khan Bela Bahria Town Branch Plot No.68/69-B, Sector-C, Bahria Town Lahore Tel: (92-42) 35976270-72 Kharian Bank Square, Model Town Branch Ground Floor, Central Commercial Market Area, Model Town, Lahore Tel: (92-42) 35915601 Khushab Badami Bagh Auto Market Branch Property No. 355,357 Circular Road, Outside Kashmiri Gate, Badami Bagh Auto Market, Lahore Tel: (92-42) 37104010-13 Khanpur Branch Kutchery Road, Khanpur Tel: (92-68) 5577127-8 Khan Bela Branch Main K.L.P Road, Khan Bela Tel: (92-068) 5580100-101 G.T Road Kharian Branch Ground Floor, Barakat Plaza, Main G.T Road, Kharian Tel: (92-537) 533497-8 Katha Chowk Khushab Branch P-4106-27-1, Sargodha Road, Katha Chowk, Khushab Tel: (92-454) 711683-4 Khuzdar Khuzdar Branch Khasra No. 3042/1569, Sultan Ibrahim Road, Khuzdar 324 Kohat MEEZAN BANK LIMITED Bedian Road Branch Khasra No. 3799, Mauza Lidhar, Main Bedian Road, Lahore Tel: (92-42) 35749607-10 Bedon Road Branch Plot No.15 Bedon Road, Lahore Tel: (92-42) 36290273-76 Begum Kot Branch Plot # 4/A Geya Musa, Begum Kot Shahdrah, Lahore Tel: (92-42) 37929103-05 Bilal Gunj Lahore Branch Khewat No.1611 Khatooni No.2842 Khasra No.3807, Bilal Gunj Sheesh Mahal Road, Lahore Tel: (92-42) 3716657- 58 Bhubtian Branch Khasra No.4202/711, Bhubtian Chowk, Raiwind Road Lahore Tel: (92-42) 35320413-15 Brandrath Road Branch 46 Brandrath Road, Lahore Tel: (92-42) 37676388-92 Burki Road Branch Khasra No.159, Khatooni No.30, Khewat No.20, Main Burki Road, Adjacent Paragon City, Lahore Tel: (92-42) 37167203-4 Bund Road Branch Property No. SW XI 1-S-1/B/6, Main Bund, Road, Lahore Tel: (92-42) 37482671-3 Canal Bank Road Branch Mughalpura Lahore Branch PlotNo. 125, StNo. 33, Naya Pul, Punj Pir Road, Canal Bank Road, Mughalpura, Lahore Tel: (92-42) 365543-44 Cavalry Ground Branch 72-Commercial Area, Cavalry Ground, Lahore Cantt Tel: (92-42) 36619780-3 Chowk Yateem Khana Branch Bund Road Chowk Yateem Khana Lahore Tel: (92-42)37467113-16 Chowk Baba Attar Ichra Branch Plot # SXVIII-44-S-110/A, Ichra II, Chowk Baba Attar, Lahore Tel: (92-42) 37534152-54 Chungi Amar Sadhu, Branch Khasra # 1050, DAR Plaza, Chungi Amar Sadhu , Main Ferozpur Road, Lahore Tel: (92-42) 35922114-17 Circular Road Branch 141- Circular Road, Outside ShahAlam Gate, Lahore Tel: (92-42) 37642001-4 Civic Centre Johar Town Branch Property No. 20, Civic Centre, Johar Town, Lahore Tel: (92-42) 35189531-3 Cloth Market Branch F-2332, Rrara Tailian, Near Kashmir Block, Azam Cloth Market, Lahore (92-42) 7380461-65 College Road Branch House # 15, Block 2, Sector C-1, Township College Road Lahore Tel: (92-42) 35157181-85 DHA Phase I Branch 167- G, DHA Phase I, Lahore Tel: (92-42) 35742891-2 DHA Phase III Branch Plot No. 97-Y, DHA Phase III Commercial, Opposite Sheba Park, Lahore Tel: (92-42) 35742582-3 DHA Phase IV Branch 210-CCA, Phase-IV DHA, Lahore Tel: (92-42) 35747761-2 DHA Phase V Branch Plot No.6 - CCA Phase V, DHA Lahore Tel: (92-42) 37182334-5
  306. DHA Phase VI Branch Plot No . 101, Main Boulevard Phase VI (Commercial), DHA Lahore Tel: (92-42) 35006026, 042-35006028-9 Kot Abdul Malik Branch Mouza Sharqpur Khurd, Kot Abdul Malik Main Sheikhpura Road, Lahore Tel: (92-42) 37340743-5 New Fruit Market Branch Property No.116-117 New Fruit Market Ravi Road Lahore Tel: (92-42) 37729213-17 DHA Phase VIII Branch Plot No.C-3, Commercial Broadway, Phase VIII, DHA Lahore Tel: (92-42) 38107774-75 Khayaban-e-Jinnah Road Branch Plot No. 630/325 Air line Housing Society, Block B, Phase I, Iqbal Avenue Cooperative Housing Society, Khayaban-e-Jinnah Road, Lahore Tel: (92-42) 35955461-63 New Garden Town Branch Ground Floor, Ibrahim Centre, 1-Aibak Block, New Garden Town, Lahore Tel: (92-42) 35941474-7 Doctors Hospital - Johar Town Branch Plot No.3-A, G-Block, Doctors Hospital, Johar Town, Lahore Tel: (92-42) 35453153-55 EME Housing Society Branch Plot No. 1 & 37, Block-D Commercial, EME Sector, DHA, Lahore Tel: (92-42) 37498956-8 Faisal Town Branch Plot # 16, Block B, Faisal Town, Lahore Tel: (92-42) 35202116 - 8 Ferozpur Road Branch Opposite DESCON Head Quarters, 18-KM Main Ferozpur Road, Lahore Tel: (92-42) 35401873-6 Garhi Shahu Branch Property No.84, Allama Iqbal Road, Garhi Shahu, Lahore Tel: (92-42) 36294191-92 Ghalib Market Branch 64 A-II, Gulberg III, Ghalib Market, Lahore Tel: (92-42) 35772147-9 G.T Road Daroghawala Branch Plot No. 329-F, Main G.T Road, Daroghawala, Lahore Tel: (92-42) 36550501-3 Gulberg Branch 60-Main Boulevard Gulberg, Lahore Tel: (92-42) 35879870-2 Gulshan-e-Ravi Branch Plot No. 9, Block F, Gulshan-e-Ravi, Lahore Tel: (92-42) 37404822-5 Haider Road Township Branch 434, A-1, Haider Road Township, Lahore Tel: (92-42) 35157101-3 Hall Road Branch S-50-R-19, Hall Road, Lahore Tel: (92-42) 37211806-8 Khayaban-e-Iqbal Branch Plot No.34-A, Khayaban-e-Iqbal, Sector-XX, Phase III-C,DHA, Lahore Tel: (92-42) 356948833-34-35-38 New Muslim Town Branch Plot # 15-B New Muslim Town, Ayubia Market, Lahore Tel: (92-42) 35926800-02 Liberty Market Branch Shop # 14-17, Liberty Shopping Centre, Gulberg III, Lahore Tel: (92-42) 35760813, 35760814 Punjab Cooperative Housing Society Branch 66-F, Phase I, Punjab Co-operative Housing Society, Ghazi Road, Lahore Cantt Tel: (92-42) 35924683-4 L.D.A Scheme Tajpura Branch Plot No.425 A, L.D.A Scheme Tajpura Lahore Tel: (92-42) 36631463-5 Q-Block DHA Phase II Branch 295-Q Commercial Area, Phase II DHA, Lahore Tel: (92-42) 35708324-7 Main Boulevard Branch E-44-1-4-COM, Iqbal Park Commercial, Main Boulevard DHA, Lahore Tel: (92-42) 36621482-4 Qartaba Chowk Branch Qartaba Chowk, Temple Road, Rehman Chamber, Lahore Tel: (92-42) 37112406-10 Maulana Shaukat Ali Road Branch Plot No. 4-E Jauhar Town, Adjacent BOR, Main Maulana Shaukat Ali Road Lahore Tel: (92-42) 35202067-69 Quaid-e-Azam Industrial Estate Branch 169 - S, Quaid-e-Azam Industrial Estate, Kot Lakhpat, Lahore Tel: (92-42) 35215765 McLeod Road Branch SE-10-R-2/12, Nihal Chand Building, Mc'leod Road, Lahore Tel: (92-42) 36284501-4 Mini Market College Road Gulberg II Branch Plot No.25-L, College Road, Gulberg II Lahore Tel:(92-42)35246614-16 Model Town C-Block Lahore Branch Shop No. 24 & 25, Central Commercial Market, Model Town, Lahore Tel: (92-42) 35844202-4 Model Town Link Road Branch Plot No. 13, Model Town Link Road, Lahore Tel: (92-42) 35942355-8 Ichra Branch 156-Main Ferozepur Road, Ichra, Lahore Tel: (92-42) 37522989-1 Moon Market Allama Iqbal Town Lahore Branch Plot No. 10, Kashmir Block, Main Boulevard, Allama Iqbal Town Lahore Tel: (92-42) 35427936-40 Islampura Branch Property No. 61, Main Bazar, Islampura, Lahore Tel: (92-42) 37117463-4 Moti Bazar Branch Property No. F-2627, Ali Arcade Chowk Choona Mandi, Moti Bazar Lahore Tel: (92-42) 37338870-75 J-III Johar Town Branch Plot No. 12, Block- J-III, Opposite Expo Centre Johar Town, Lahore Tel: (92-42) 35311862 - 864 Mustafa Abad Branch Property No. SE-6-R-148, Allama Iqbal Road, Mustafa Abad, Lahore Tel: (92-42) 36886051-3 Johar Town Branch 63/R-1, M.A Johar Town Branch, Lahore Tel: (92-42) 35314631-4 Mustafa Town Branch Property # 15, Mamdot Block, Mustafa Town Scheme, Lahore Tel: (92-42) 35418031-33 Karim Block Branch Baig Plaza, 21 Commercial Zone, Karim Block, Allama Iqbal Town, Lahore Tel: (92-42) 35296701-5 Multan Road Branch S-94, R-334, Multan Road, Near Social Security Hospital, Multan Chungi, Lahore Tel: (92-42) 37492383-85 Kahna Nau Ferozpur Road Branch Khasra # 1508, Hakeem Colony, Mouza Gujjumatta Tehsil Cantt, Kahna Nau, Ferozpur Road, Lahore Tel: (92-42) 35270205-7 Naseerabad Ferozpur Road Branch Plot No.405 Naseerabad Gulberg III, Main Ferozpur Road, Lahore Tel: (92-42) 35441601-3 New Anarkali Bazar Branch Property No.S-64-R-132-134/2 New Anarkali Bazar Lahore Tel: (92-42) 37360590-91, 37311977-83 Raja Market, New Garden Town, Branch 81-Ahmad Block, Raja Market, New Garden Town, Lahore Tel: (92-42) 35913345-7 Ravi Road Branch 33, Main Ravi Road, Opposite Bilal Masjid, Lahore Tel: (92-42) 37706835-7 Riwaz Garden Branch Plot No.317, Riwaz Garden, Near Chuhburji Lahore Tel: (92-42) 37242381-84 Sabzazar Branch Plot No.325, Block – B, Main Boulevard, Sabzazar, Lahore Tel: (92-42) 35962280-82 Saddar Bazar Branch Property No. 1184, Dubai Chowk, Main Tufail Road, Saddar Bazar, Lahore Tel: (92-42)-36622824-6 Samanabad Branch Plot No. 210, Main Poonch Road, Samanabad, Lahore Tel: (92-42) 37587213-5 Shad Bagh Branch 13-A, Tajpura Chowk, Near PTCL exchange, Shad Bagh, Lahore Tel: (92-42) 37600667-9 Shadman Colony Branch 91 Shadman Colony - 1, Shadman, Lahore Tel: (92-42) 37522976-9 Shahdra Branch 113 G.T. Road, Lahore Tel: (92-42) 37921266-7 Shahalam Market Branch D-2050, Fawara Chowk, Inside Shahalam Market, Lahore Tel: (92-42) 37377340-3 Shahkam Chowk, Canal Road Branch Plot 47-48, Block B, Mohlanwal Scheme, Shahkam Chowk Canal Road, Lahore Tel: (92-42) 35966778 ANNUAL REPORT 2017 325
  307. Shah Jamal Branch Property No .158, Shah Jamal Road, Lahore Tel: (92-42) 35912954-56 Main Bazar Lalamusa Branch Property No.B-9/18/R.H & B-9/26/Shop & B-9/27/Shop,Main Bazar Lalamusa Tel: (92-53) 7511803-04 Shalimar Garden Branch Chowk Shalimar Bagh, G.T Road, Baghban Pura, Lahore Tel: (92-42) 36846584-8 Larkana Shalimar Link Road Branch Khata No. 222, Khatooni No.397, Khasra No.2240, Near Shalimar Hospital Shalimar Link Road Lahore Tel: (92-42) 36810102-06 State Life Society Branch Plot No.1011, Sector F, State Life Society, Lahore Tel: (92-42) 35474180-81-82 Sultan Pura Branch Property No. 16, Hide Market Sultan Pura Lahore Tel: (92-42) 36862452-58 T Block Phase II Branch Plot No. 07, 2-C, CCA-T Block Phase –II Lalik Jan Chowk DHA Lahore Tel: (92-42) 5707383-86 Thokar Niaz Baig Branch 171-A, Ali Town Raiwind Road, Lahore Tel: (92-42) 7516128-30 Tufail Road Branch Shop No.06, 10-11, 33-34 Cantt Shopping Plaza, Tufail Road Lahore Cantt Tel: (92-42) 36602701-703 Urdu Bazar Branch 4-Kabeer Street, Urdu Bazar, Lahore Tel: (92-42) 37116684-7 Valancia Town Branch Plot No.1-D, Valencia Society Lahore Tel: (92-42) 35225894-98 Walton Road Branch E-29/21-A, Bank Stop, Walton Road, Lahore Tel: (92-42) 36626602-5 WAPDA Town Chowk Branch Plot No. 429, Block-E, Main Boulevard, P.I.A Employees Co-operative Housing Society, Wapda Town Chowk, Lahore Tel: (92-42) 35211591-4 Wahdat Road Branch Plot No.16-A, Wahdat Road Branch, Lahore. Tel: (92-42) 35912954-56 West Wood Colony Branch Plot No 24, West Wood Colony, Canal Road, Lahore Tel: (92-42) 37498592-93 Zafar Ali Road Branch Plot No.03, Zafar Ali Road, Gulberg V, Lahore Tel: (92-42) 35775758-59 Layyah Layyah Branch Property No. B-II-174, 175, 176, Chobara Road, Layyah Tel: (92-606) 412975-7 Liaquatpur Liaquatpur Branch Plot No.150, Rest House Road, Liaquatpur Tel: (92-068) 5693263-264 Lodhran Mianwali Mianwali Branch Property No. D-3-4/A, Ballo Khel Road, Mianwali Tel: (92-459) 233305-9 Mirpur Azad Kashmir Mirpur Branch Plot No. 123, Sector F/1, Sultan Plaza, Kotli Road, Mirpur Azad Kashmir Tel: (92-5827) 438891-3 Mirpurkhas Mirpurkhas Branch Plot No. 15, Ward No. A, Adam Mohallah Town, Umerkot Road, Mirpurkhas Tel: (92-233) 876103-8 Satellite Town Branch Survey No.14/4 - 15/12, Satellite Town, Near Chandni Chowk Mirpurkhas Tel: (92-233) 861764-5 Loralai Moro Branch Property No. 60, Ward 13, Main Road National Highway, Moro Tel: (92-242) 411008-14 Loralai Branch Plot No. 1060, Zhob Road, Loralai, Balochistan Tel: (92-824) 4660103 Mailsi Mailsi Branch Khewat No.75/73, Khatooni No.99, Colony Road, Mailsi Tel: (92-67) 3750704- 05 Mandi Bahauddin Mandi Bahauddin Branch Plot No. 5/181 Ward No. 5, Outside Ghallah Mandi, Near Tawakli Masjid, Mandi Bahauddin Tel: (92-546) 520931-3 Malakwal Malakwal Branch Khewat No.448, Khatooni No.779-789, Badshah Pur Road, Malakwal Tel: (92-546) 581591-2 Katchery Road Branch Khewat No. 1047-1048, Khatooni No.1055-1056 Katchery Road, Mandi Bahauddin Tel: (92-546) 500693-4 Moro Multan Bahawalpur Bypass Chowk Branch Khewat No. 537/530, Khatooni No.796. Shaukat Commercial Center Bahawalpur Road Near Bahawalpur Bypass Chowk, Multan Tel: (92-61) 4482702-706 Bosan Road Branch Chungi No. 9, Lawyers Colony, Bosan Road, Multan Tel: (92-61) 6210090-2 Chowk Shaheedan Branch Property No. 3493, Chowk Shaheedan, Multan Tel: (92-61) 4502906-9 Chungi No.14 Branch Ground Floor, Al Makkah Centre Chungi No.14, Multan Tel: (92-61) 4577572-4 Gulgasht Branch 437/C Gulgashat Colony, Multan Tel: (92-61) 6511931-2 Mansehra Lari Adda Branch Near Madni Masjid, Lari Adda, Karakuram Highway, Mansehra Tel: (92-997) 307640-2 Hussain Agahi Branch Property No. 2560, Ward No. 10, Hussain Agahi Road, Multan Tel: (92-61) 4512206-7 Mansehra Branch Meezan Plaza, Near Markazi Jamia Masjid, Abbottabad Road, Mansehra Tel: (92-997) 308315-8 Nawan Shaher Branch Plot No.92,93,94, LMQ Road, Chowk Nawan Shaher, Multan Tel: (92-61) 4785604-07 Mardan Old Shujabad Road Multan Branch Khewat No.332, Mouza Qutabpur , Old Shujabad Road, Multan Tel: (92-61) 6303731-34 Bank Road Mardan Branch Khewat No.1643, Khatooni No.2393, Khasra No. 2126-2128, Bicket Gunj, Bank Road Mardan. Tel: (92-937) 9230561-62 Zarrar Shaheed Road Branch Khasra No. 3939/3296, Block-B, Al-Faisal Town, Zarrar Shaheed Road, Lahore Cantt Tel: (92-42) 36674862 Par Hoti Branch Khata No 367 neher chowk Main Bazar Par Hoti Mardan Tel: (92-937) 560013-14 Lalamusa Mehar Branch Plot No. 151, Khairpur Nathan Shah Road, Mehar Tel: (92-25)4730913-4 MEEZAN BANK LIMITED Mian Channu Branch 17-B, Ghazi More, G.T. Road, Mian Channu Tel: (92-65) 2662001-3 Lodhran Branch Plot No. 493-A, A-1, A-2/5H, Ghosia Chowk, Multan Bahawalpur Road, Lodhran Tel: (92-608) 364797-8 Zahoor Elahi Road Branch Building No.3-A, Block A, Gulberg II, Zahoor Elahi Road, Lahore Tel: (92-42) 111 852 852 Lalamusa Branch Col. Plaza, Plot No. 9, Camping Ground, G.T. Road, Lalamusa Tel: (92-53) 513022, 7513032 326 Larkana Branch Property No.1796, Ward No. A, Bank Square, Bunder Road, Larkana Tel: (92-74) 4055923-5 Mian Channu Mehar Qadafi Chowk Branch Khatooni No. 1261 , Qadafi Chowk Masoom Shah Road, Multan Tel: (92-61) 6780853-54 Rasheed Abad Branch Khatooni No.1101, Shop No.1, 2, 3 Anees Plaza, Chowk Rasheedabad, Khanewal Road, Multan Tel: (92-61) 6305714-6 Sameejabad Multan Branch Khasra No.10/7/1, Khewat No.04, Peeran Ghaib Road, Sameejabad Multan.
  308. Shah Rukn-e-Alam Branch Shop No . 26-27, Block F, Main Market, T-Chowk, Shah Rukn-e-Alam Colony, Multan Tel: (92-61) 6784324-5 Sher Shah Road Branch Property No. 50/A, Opposite Garden Town, Sher Shah Road, Multan Tel: (92-61) 6536752-5 University Road Branch Khewat No.856/833, Khatooni No.1309, Shalimar Colony Chowk, University Road, Multan Tel :(92-61) 6224974-5 Vehari Chowk Branch Shop Nos. 82,83,84,112, Madni Commercial Center, Near Vehari Chowk, Multan Tel: (92-61) 6241201-3 Vehari Road Branch Al Hamd Centre Plot No. 2228/10 Vehari Road Grain Market Multan Tel: (92-61) 6244153-5 Okara Branch MA Jinnah Road, Okara Tel: (92-44) 2521935-7 Pabbi Pabbi Branch Khasra No.2080, Main G.T Road, Pabbi Tel: (92-923) 528401-403 Pakpattan Pakpattan Branch College Road, Pakpattan Tel: (92-457) 352711-13 Pishin Pattoki Branch Shop No. 09-11, Abdullah Centre, Opposite Ghalla Mandi, Shahrah-e-Quaid-e-Azam, Pattoki Tel: (92-49) 4421025-8 Peshawar Muslim Bagh Muzaffarabad Dalazak Road Branch Khata No 46/57, Khasra No 424/398/191, Malik Plaza, Opposite Muslim College of Commerce, Iqbal Colony, Main Dalazak Road, Peshawar Tel: (92-91) 2245901-3 Muzaffarabad Branch Secretariat Road, Sathra Muzaffarabad, Azad Jammu & Kashmir Tel: (92-5822) 920458-60 Muzaffargarh Muzaffargarh Branch Property No. 470, Block No. IV, Hakeem Plaza, Multan Road, Muzaffargarh Tel: (92-662) 428708-10 Nankana Sahib Nankana Sahib Branch P-66, Guru Bazar Ghalla mandi Nankana Sahib Tel: (92-56) 2877023-24 Narowal Kutchary Road Narowal Branch Building No.B-IV/ 4B/ 7, Kutchary Road Narowal Tel: (92-054) 2411703-6 Nawabshah Nawabshah Branch Plot No. 573, Ground Floor, Ward-B, Katcheri Road, Nawabshah Tel: (92-244) 330902-6 Sanghar Road Branch Plot No A-17 Survey No. 166/1,166/2, 166/3, Ali Raza Shah Colony, Deh 86, Nasrat, Sanghar Road Nawabshah Tel: (92-244) 4361924-25 Nowshera Nowshera Branch Ground Floor, Taj Building Main G.T Road Nowshera Cantt-Pakistan Tel: (92-923) 613174-5 Okara Okara II Branch Khatooni No. 448, Depalpur Chowk, G.T Road, Okara Tel: (92-44) 2701106-07 Pir Mahal Pattoki Chowk Yadgar Branch Mohmand Plaza, Naz Cinema Road, Peshawar City, Peshawar Tel: (92-91) 9213950-2 Madina Market Muzaffarabad Branch Mohallah Madina Market, Muzaffarabad, AJ&K Tel: (92-5822) 920457-9, 920458-60 Phalia Branch Khewat # 174, Khatooni # 436, Khasra # 106 Helan Road, Phalia Tel: (92-0546) 586273-5 Panjgoor Branch Chitkan Bazar, Panjgoor Muridkay Muslim Bagh Branch Shop No 40 - 41, School Road, Muslim Bagh Tel: (92-823) 669592-3 Phalia Pir Mahal Branch Plot No. P-10-11, Kousar Abad, Chak Abadi 779-GB, Qasba Pir Mahal Tel: (92-46) 3367601-7 Panjgoor Charsadda Road Branch Property No. 190, Opposite Al Hajj Market, Mirch Mandi, Charsadda Road, Peshawar Tel: (92-91) 5270543-5 Muridkay Branch Khewat No. 1061, Khatooni No. 2615, G.T Road Muridkay District Sheikhupura Tel: (92-42) 37980131-133 Warsak Road Branch Azam Market. Opp. Peshawar Public School & College, Warsak Road, Peshawar. Tel: (92-91) 5201307- 9 G.T. Road Branch Taxation # 3845,3846, Main G.T Road Kirashan Pura, Mouza, Tukrah # 1, Peshawar Tel: (92-91) 2612020-3 Gulbahar Branch Plot No. 45, New Nanak Pura Gulbahar, Peshawar Tel: (92-91) 2603091-3 Hayatabad Township Branch Plot No. 08, Bilal Market, Sector D-1, Phase 1, Hayatabad, Peshawar Tel: (92-91) 5816163-5 Karkhano Market Branch Royal Shopping Plaza, Hayatabad, Peshawar Tel: (92-91) 5893471-4 Khyber Bazar Branch Property No.417/D, Rehman Baba Colony, Mohallah Akara Mufti Abdul Latif Khan, Outside Bajori Gate, Khyber Bazar Peshawar Tel: (92-91) 2564019-20 Kohat Road Branch Khasra No.1493 & 1953, Mauza Achar Hadbast No.254, Opposite Small Industrial Estate, Kohat Road Peshawar Tel: (92-91) 2320676-576 Saddar Road Branch 6 Saddar Road, Peshawar Cantt. Peshawar Tel: (92-91) 9213471-5 University Road Branch Khattak Plaza, University Road, Peshawar Tel: (92-91) 5703400-2 Pishin Branch Khasra No.649-653, Block-1, Bund Road Pishin Tel: (92-826) 421015-17 Qalanderabad Qalanderabad Branch Khata No.206, Khatoni No.290, Khasra No.329/2, Shahrah-e-Resham Road, Qalanderabad Tel: (0992) 370600-02 Qilla Saifullah Qilla Saifullah Branch Khasra No.27, Intiqal No.59, Jahangir Market Quetta Road, Qilla Saifullah Tel: (92-0823) 610206-207, 0823-610234-235 Quetta Alamdar Road Branch Khasra # 11690/5518, Alamdar Road, Quetta Tel: (92-81) 2662502-503 Alamo Chowk Branch Shop No.17-19, Al-Emirate City Plaza, Alamo Chowk, Air Port Road, Quetta Tel: (92-81) 2820158-9 Choharmal Road Branch Shop No: 1-5, Agha Super Complex Choharmal Road Quetta Pabx: (92-81) 2845593-94 Double Road Branch Khasra No.2, Qithas, Zarghoon Road Quetta Tel: (92-81) 2440885-86 Hazar Ganji Branch Plot No. 715-716 A, Truck Stand, Hazar Ganji, Quetta Tel: (92-81) 2472143, 081-2472167 Liaquat Bazar Branch Shop No. 1,2 Alazmat Plaza, Masjid Rd. London Street, Quetta Tel: (92-81) 2840195-6 Mannan Chowk Branch Mannan Chowk, Jinnah Road, Quetta Tel: (92-81) 2829470-2 Mission Road Branch Shop No 1-30/51 & 1-30/52, Mission Road, Opposite Palace Bakery, Quetta Tel: (92-81) 2832851-5 Sirki Road Branch Shop No. 1 & 2, Kasi Complex, Sirki Road, Quetta Tel: (92-81) 2454222-3 Quetta Cantt Branch Jinnah Welfare Shopping Complex, Jinnah Road Quetta Cantt Tel: (92-81) 2820889 ANNUAL REPORT 2017 327
  309. Suraj Ganj Bazar Branch Khasra No .292, NRB Plaza, Thana Road, Suraj Ganj Bazar, Quetta Tel: (92-81) 2831021, 0812-2831022 Bohar Bazar Branch D-327, Hakim Muhammad Amjal Khan Road, Bohar Bazar, Rawalpindi Tel: (92-51) 5778875, 5778834 Muslim Town Branch B-IV, 628-629, Chirah Road, Muslim Town, Rawalpindi Tel: (92-51) 4476013 Rahim Yar Khan Chah Sultan Chowk Branch Plot No. NE-4286 - NE-4287 Chah Sultan Chowk, Rawalpindi Tel: (92-51) 5702491-2 Peshawar Road Branch Khasra No. 2573 Peshawar Road Rawalpindi. Tel: (92-51) 5167368-70 Chaklala Scheme III Branch Plot No. 38, Bazar Area, Chaklala Housing Scheme No. III, Rawalpindi Cantt Tel: (92-51) 5766435-8 Saidpur Road Branch Plot No. CA-294/A, Chistiabad, Shabbir Plaza, Near Siddiqui Chowk, Saidpur Road Rawalpindi Tel: (92-51) 4416215-17 Chandni Chowk Branch Umer Farooq Plaza, Block C, Satellite Town, Chandni Chowk, Murree Road, Rawalpindi Tel: (92-51) 4851046-9 Shamsabad Branch Khewat # 79,80,89,107/1, Khatooni # 97,100,124,132/1, Khasra # 101,102,103,107,106,104,110 Shamsabad Murree Road Rawalpindi Tel: (92-51) 4854471-4 Raiwind Branch Khasra No. 5024 & 5031, Main Bazar, Opposite Railway Phattak, Raiwind Tel: (92-42) 35394620-2 Commercial Market Branch Plot No. 847-B, Commercial Market, Satellite Town Rawalpindi Tel: (92-51) 4944203-04 Tench Bhatta Branch Property No. CB-185/185-1-11 Tench Bhatta Rawalpindi Cantt Tel: (92-51) 5562716-18 Rajanpur Fateh Jhang Road Branch Faisal Town Fateh Jhang Road Rawalpindi Tel: (92-51) 4342707-8 Tulsa Road Lalazar Branch Property No.9-A Main Tulsa Road Lalazar Rawalpindi Cantt Tel: (92-51) 5178189-191 G.T Road Morgah Branch Khasra No. 1663, Riaz Plaza, G.T Road Morgah More, Rawalpindi. Tel: (92-51) 5450010-11 Westridge Branch Al Farooq Plaza Khasra No.1704-1705, Khewat No.601,606, Khatooni No. 863-868, Moza Chur Harpal Allabad Westridge-III Rawalpindi Tel: (92-51) 5490250-252 Factory Area Branch Plot No.21, 22, Shahbaz Pur Road, Factory Area Rahim Yar khan Tel: (92-68) 5888603-04 New Grain Market, Rahim Yar Khan Branch Khata No.16/16, Khatooni No.135/137 New Grain Market, By Pass Road, Rahim Yar Khan Tel: (92-68) 5708103-04 Rahim Yar Khan Branch 23 - Model Town, Rahim Yar Khan Tel: (92-68) 5887603-4 Raiwind Rajanpur Branch Khata No.1270, Khasra No.617/1, Jinnah Road, Rajanpur Tel: (92-604) 688071-72 Rashidabad Rashidabad Branch Survey No. 510-511, Deh Daro, Main Hyderabad Mirpurkhas Road, Rashidabad Tel: (92-22) 2732153-55 Rawat Rawat Branch Khokhar Mall Plaza, Main G.T Road, Rawat, Islamabad Tel: (92-51) 4612346-47 Renala Khurd Gulrez Rawalpindi Branch Plot No. 471 Asghar Mall Plaza Gulrez Housing Scheme Phase II, Rawalpindi. Tel: (92-51) 5595895 - 897 Renala Khurd Branch Plot No. 26-27, 58-60 Khewat No.3, Khatooni No.4, Khasra No.34/26/2/26, Welcome Road, Renala Khurd Tel: (92-044) 2622336-37 Gulzar-e-Quaid Branch Mangral Plaza, Mauza Gangal, Main Airport Road, Gulzar-e-Quaid, Rawalpindi Tel: (92-51) 5191802-3 Rawalakot Hamilton Road Branch Shop No. AA-710 - 713, Hamilton Road, Raja Bazar, Rawalpindi Tel: (92-51) 5777192 - 194 Rawalakot Branch Plot No. D-269, D-113, Housing Scheme, Rawalpindi Road, Rawalakot Azad Jammu Kashmir Tel: (92-5824) 442240-41 Rawalpindi Adyala Road Branch Ground Floor, Daulat Plaza, Near Dhaman Morh, Main Adyala Road, Rawalpindi Tel: (92-51) 5574880-2 Afshan Colony Branch Khasra No.294, Afshan Colony, Range Road Rawalpindi Cantt Tel: (92-51) 5142109-11 Bahria Town Branch Shop No 10, 11 & 12, Bahria Heights - I, Phase - I, Bahria Town, Rawalpindi Tel: (92-51) 5730171-3 Bahria Town Phase-7 Branch Plot No.36, Sikandar Arcade, Service Road Spring North, Bahria Town Phase-7 Rawalpindi Tel: (92-51) 5400373 -75 328 G.T Road Tarnol Branch Khan Malook, Wazir Plaza, G.T. Road, Turnol, Rawalpindi Tel: (92-51) 2226406 Jinnah Road Branch Property No. 167, Commercial Area, Mohan Pura, Jinnah Road - City Saddar Road, Rawalpindi City Tel: (92-51) 5778511-2 FFC Chowk Branch Rehmat Center, FFC Chowk, K.L.P Road, Sadiqabad Tel: (92-68) 5786209-10 Sadiqabad Branch 31-D, Main Bazar, Sadiqabad Tel: (92-68) 5701207-8 Sahiwal G.T. Road Sahiwal Branch Property No. IV-343/334, 343/335, Ghalla Mandi G.T Road, Sahiwal Tel: (92-40) 4224911-2 High Street Branch Khewat # 146, Khatooni # 146, Mission Chowk, High Street Sahiwal Tel: (92-40) 4222661-62 Sahiwal Branch 276-B-I, Alpha Tower, High Street, Sahiwal Tel: (92-40) 4465009, 4466592 Kallar Syedan Branch Khewat No.105, Khatooni No.211, Choa Road, Mouza & Tehsil Kallar Syedan, District Rawalpindi Tel: (92-51) 3572261-263 Sakrand Kalma Chowk Branch Ground Floor, Rajco Plaza, Kalma Chowk, Kamal Abad, Rawalpindi Tel: (92-51) 5684491-2 Samundri Khana Pul Branch Khewat No.1674, Khatooni No.2185, Khasra No.833, Mouza Khana Dak, Tehsil & District Rawalpindi Tel: (92-51) 4473781-84 Bank Road Branch No. 47/62, Bank Road Saddar, Rawalpindi Tel: (92-51) 9273404-6 Khayaban-e-Sir Syed Branch Plot # 164-A/1, Sector-I, Area Development Scheme Khayaban-e-Sir Syed Rawalpindi Tel: (92-51) 4832926-27 Banni Chowk Branch Shop Nos. O-383/A, O-383/A-2, O-383/A-3, Kohati Bazar Banni Chowk Rawalpindi Tel: (92-51) 5556301-2 Liaquat Road Rawalpindi Branch Plot No.B-541-542, Liaquat Road Rawalpindi Tel: (92-51) 5559121-23 MEEZAN BANK LIMITED Sadiqabad Sakrand Branch Deh.18, Taluka City Sakrand, District, Nawabshah Tel: (92-244) 322054-57 Samundri Branch Plot No 1, Commercial Area Development Scheme, Gojra Road, Samundri Tel: (92-041) 3420181-85 Sanghar Sanghar Branch Property No.124 / A-1, Housing Society Town, Sanghar Tel: (92-235) 543662-3 Sara-e-Alamgir Sara-e-Alamgir Branch Khewat No.92-93, Khatooni No.106-107 , Near Mirpur Bus Stand G.T Road, Sara-e-Alamgir Tel: (92-544) 286103-5
  310. Sargodha Shahkot Taxila Gole Chowk Branch Plot No .123-25, Block No. 10, Gole Chowk, Sargodha Tel: (92-48) 3700943-45 Shujabad Timergara Shikarpur Toba Tek Singh 47 Adda Branch Khewat No.167, Khatooni No.195, Main Canal View Chowk 47 Adda Sargodha Tel: (92-48) 3212648-9 Muslim Bazar Branch 12-Block Chowk, Muslim Bazar, Sargodha Tel: (92 48) 3741609-13 Queens Chowk, Sargodha Cantt Branch Property No 193/1, 194/2, Mansoorabad, Queens Chowk Cantonment Area Sargodha Tel: (92-48) 3722904-6 Sargodha Branch 91 Civil Lines, University Road, Sargodha Tel: (92-48) 3741608-10 Satellite Town Branch Plot No. 34 Block-C, Main Chowk, Satellite Town, Sargodha Tel: (92-48) 3223731-5 Shahdadpur Shahdadpur Branch Property No. 293/1, Ward-C, Station Road, Shahdadpur Tel: (92-235) 842952-3 Shakargarh Shakargarh Branch B-IV-942/RH-SH, Railway Road Shakargarh Tel: (92-54) 2452180-2 Sheikhupura Sheikhupura Branch Civic Center, Sargodha Road, Sheikhupura Tel: (92-56) 3813360-2 Sialkot Shahkot Branch Property No. 518, Jaranwala Bazar, Corner Circular Road, Sultan Baho Chowk, Shahkot Shujabad Branch Property No.323-A, Ward No.06, Jalalpur Road, Shujabad Tel: (92-61) 4425574-76 Shikarpur Branch Plot Survey No.5/142, 5/143, 5/144 & 5/158 Circular Road Staurt Gunj, Shikarpur Tel: (0726) 540341-43 Sukkur Military Road Branch Plot No.E-717, Military Road Sukkur. Tel: (92-71) 5630631- 33 March Bazar Branch C-45, Station Road, Sukkur Tel: (92-71) 5620771-3 Sukkur Branch 3-45, Ward-C, Station Road, Sukkur Tel: (92-71) 5617192-4 Swabi Swabi Branch Amjad Mughalbaz Khan Plaza, Near TMA Office Mardan Road, Swabi Tel: (92-938) 222704-6 Swari Swari Branch Khata No.579, Khatoni No.715, Khasra No.2964, Moza Swari, Tehsil Gagra, District Buner Tel: (92-93) 9555204-5 Swat Green Chowk Branch Abasin Tower, Green Chowk, Madyan Road, Mingora Swat Tel: (92-946) 711581-83 Aziz Shaheed Road Branch Qayyum Trade Center, Aziz Shaheed Road, Sialkot Cantt Tel: (92-52) 111 852 852 Mingora Branch Makanbagh Chowk, Mingora Swat Tel: (92-946) 714316-8 Circular Road Sialkot Property No. XXlll - 4S- 17 / RH Circular Road Sialkot Tel: (92-52) 4586601-03 Talagang Branch Khasra No.529, Khewat No.909 Traffic Chowk, Old Rawalpindi Road Talagang Tel: (0543) 410460-61 Gohad Pur Branch Building No. BI - 25 S-304, Airport Road Gohad Pur Sialkot Tel: (92-52) 4296054-6 Haji Pura Road Sialkot Branch Khatooni No.322-324, Khewat No.106, Haji Pura Road Sialkot Tel: (92-52) 3574763-65 Kashmir Road Branch Address: Pakka Garha, Kashmir Road Sialkot Tel: (92-52)-4295301-02 Kutchery Road Branch Kutchery Road, Sialkot Tel: (92-52) 4263461 Pasrur Road Branch Plot No.BXIV-II-S-I/B/RH, Pul Aik, Pasrur Road Sialkot Tel: (92-52) 3521701-04 Shahabpura Road Branch Plot No 31-A, Shahabpura Road, Adjacent to Grays of Cambridge Ltd. Sialkot Tel: (92-52) 3242941-43 Taxila Branch Khewat 17, Khatooni 29, Khasra 403, Nabi Plaza, Chowk Sara-e-Kala, Taxila Tel: (92-51) 4544119, 4547116 Timergara Branch Al-Imran Hotel G.T Road, Timergara Bazar, Timergara Tel: (92-945) 825271-3 Toba Tek Singh Branch P-103, Farooq Road, Toba Tek Singh Tel: (92-46) 2513765-6 Turbat Main Road Turbat Branch Khasra No. 32, Khewat No. 32, Main Road Branch Turbat UmerKot Umerkot Branch Survey No.699,115, Shops No.15-17, Gulshan-e-Akber Housing Project Phase II, Mirpurkhas Road, Umerkot Tel: (92-238) 570409-411 Vehari Karkhana Bazar Vehari Road Branch Plot No. 23, Block-A, Karkhana Bazar, Vehari Tel: (92-67) 3366031-3 Wah Cantt Wah Cantt Branch Ground Floor, Mall View Plaza, Mall Road, Wah Cantt Tel: (92-51) 4530584-6 Wazirabad Wazirabad Branch Plot No. I-14S-37, Sialkot Road, Wazirabad Tel: (92-55) 6600313-4 Zhob Zhob Branch Patta No. I-46, Market Road, Zhob Tel: (92-822) 413803 Talagang Tando Adam Tando Adam Branch Muhammad Chowk, Tando Adam, District Sanghar Tel: (92-235) 576565-66 Tando Allahyar Tando Allahyar Branch Survey No. 1610/07, Opposite General Bus Stand, Tando Allahyar Tel: (92-22) 3892021, 3891242 Tando Mohammad Khan Tando Mohammad Khan Branch Shop # 25,26 & 27, Deh Pataar main Hyderabad-Badin Road Tando Mohammad Khan Tel: (92-22) 3341584-5 Tarlai Tarlai Branch Khewat No.88, Khatooni No.168, Khasra No.411/2, Near Tramdi Chowk, Lehtrar Road Tarlai Kalan, Tehsil & District Islamabad. Tel: (92-51) 2243700 - 701 Taunsa Taunsa Branch Property ETO No.347, 348, 349, 350-III, Wahuwa Road, Taunsa Tel: (92-64) 2601301-03, 2601201-02 ANNUAL REPORT 2017 329
  311. Glossary AAOIFI Accounting and Auditing Organization for Islamic Financial Institutions . The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) is an Islamic international autonomous non-for-profit corporate body that prepares accounting, auditing, governance, ethics and Shariah standards for Islamic financial institutions and the industry. Acceptances Promise to pay created when the drawee of a time draft stamps or writes the words “accepted” above his signature and a designated payment date. Accrued Profit Profit earned but not received from the customer. Acquirer Acquirers are banks and financial institutions that collaborate with businesses to accept credit/debit card payments. Additional Unit Purchase Purchase of units in excess of initially agreed schedule in Diminishing Musharakah to reduce bank's share in the asset. Advance Booking Booking of vehicle with the manufacturer through advance payment. Advance Rental Payment of rent after lease agreement before utilization of usufruct. Agreement Stamping Charges Charges paid by the customer for stamping of financing agreement. Al-‘Aqd Legal contract implying an enforceable act involving a bilateral declaration, namely, the offer (’Ejab) and the acceptance (qabul). Al-Bai A contract of sale. Tech: Sale of definite goods or property with the free consent of parties for a definite price. It involves offer (Ejab) and acceptance (qabul). It has many types. Al-Bai‘ Al-Batil An agreement of sale which is unlawful in respect of its substance and description. Al-Bai‘ Al-Mu’ajjal A financing technique adopted by Islamic banks. It is a contract in which the seller allows the buyer to pay the price of a commodity at a future date in lump sum or in instalments. Al-Gharar Gharar is a state of uncertainty that exists when the process of concluding a transaction involves an unknown aspect. Al-’Ijma‘ Consensus of the Islamic jurists (mujtahidwn) on a certain Shariah issue after the demise of the Holy Prophet (P.B.U.H.) Al-’Ijtihad Endeavour of an Islamic jurist to derive or formulate a rule of law pertaining due to a matter not explicitly mentioned in the Shariah sources on the basis of evidence found in the Shariah sources. Al-Kafalah A contract of surety in which a person adds to his responsibility or liability on behalf of another person in respect of a demand for a loan or debt. Al-Mudarabah Al-Muqayyadah A contract of Mudarabah in which certain conditions like place, season, commodities, credit and techniques of trade are stipulated by the provider of the capital (rabb al-mal). Al-Mudarabah Al-Mutlaqah A contact of Mudarabah that does not bind the entrepreneur about the place, time, season, commodities, credit or techniques of trade. These matters are left to the option of the entrepreneur. The Mudarabah contract defines merely the profit-sharing ratio. 330 MEEZAN BANK LIMITED Al-Musha‘ Mixing up of the proprietary rights of more than one person in a thing, such as in joint ownership where each co-owner has a right until the entire property is distributed. Al-Qard Al-Hasan A loan with the stipulation to return the principal sum in the future without any increase. Al-Qimar An agreement in which ownership of a property is contingent upon the happening of an uncertain event. By implication it applies to those commutative agreements in which gain of one party is linked with the loss of other party. Al-Qiyas Derivation of the law on the analogy of another law if the basis (‘illah) of the two is the same. It is one of the primary sources of Islamic law including Islamic economics. Al-Rahn To pledge or lodge a real or corporeal property of material value, in accordance with the law, as security for a debt or financial obligation, so as to make it possible for the creditor to regain the debt or some portion of the goods or property. Al-Tabarru‘ It means the right of complete and unfettered disposition over joint property. This right has not been conceded by the jurists to any partner. However, one has the right of tabarru‘ with personal property. Amortization Schedule Information of Equal Monthly Installments (EMI) with breakup of unit price & rental along with balance outstanding. Annual Fee / Renewal Fee An annual fee typically charged to customers with debt cards. Applicable rate Profit rate applied on the facility. Application form A form to be filled in and signed as per the Bank’s requirements to avail Banking facilities. Requirement of details to be filled in will vary for each facility. Applications may also require certain specified documents also to be attached. Appraisal Agency Agency used for assessing market value of an Asset. ATM An automated teller machine or any card-operated machine or device whether belonging to the Bank or other participating banks or financial institutions or concerns or to the Visa Card or MasterCard global ATM Network, or the affiliated networks thereof, as the case may be, which accepts the Card. Bai‘ Al-’Amanah A sale whereby both parties express trust in each other. Examples: bai‘ al-wafa, bai‘ al-talji’ah, bai‘ al-wadWyah, Murabaha, etc. Bai‘ Al-Dain Sale of debt. Bai‘ Al-‘Inah It refers to the process of purchasing the commodity to a deferred price, and selling it for a lower spot price to the same party from whom the commodity was purchased. Bai‘ Al-’Istijrar A form of sale whereby the buyer keeps on taking the goods from the seller as and when needed with or without settling the price and then settles the account later on. Bai‘ Al-Kali Bil Kali A sale in which both the delivery of the object of the sale and the payment of its price are delayed.
  312. Bai ‘ Al-Khiyar A sale contract that provides an option to conclude or rescind the deal. Bai‘ Al-Muqayadah Selling a commodity for another commodity/Barter sale. Bai‘ Al-Murabahah Sale of goods with an agreed price with profit on the cost. Bai‘ Al-Musawamah Sale of goods at a price on which the buyer and seller agree after haggling without mentioning the cost to the seller. Bai Al-Salam This term refers to advance payment for specifically defined goods which are to be delivered later. Bai‘ Al-Tawliyah A contract of sale in which the seller agrees to sell a product at his cost. Bai‘ Al-Wad‘Iyah A sales contract in which a seller informs the buyer his actual cost and then gives a further discount on it. Balloon Payment Payment by customer in addition/additional/excess to the installment amount to reduce the number of outstanding units. Bank Investment Ratio (BIR) Ratio of bank's investment in an asset against the value of that asset. Banker's lien Bank's charge on the asset. Basel II Basel II is the second of the Basel Committee on Bank Supervision's recommendations, and unlike the first accord, Basel I, where focus was mainly on credit risk, the purpose of Basel II was to create standards and regulations on how much capital financial institutions must put aside. Banks need to put aside capital to reduce the risks associated with their investing and lending practices. Base rate Benchmark rate for driving the pricing of product/service. Billing cycle Date of a month when bill/statement is generated. Bills for Collection A bill of exchange drawn by the exporter usually at a term, on an importer overseas and brought by the exporter to this bank with a request to collect the proceeds. BOQ Bill of quantity - Break up of amount in construction cases. Breakup Value per share The total worth (equity) of the business per share, calculated as shareholders’ equity or Net Assets excluding the impact of revaluation on fixed assets, divided by the total number of share outstanding at year end. BRP (Bankers Ratio of Profit-Sharing) Percentage share of profit due to financier in the profit of an enterprise financed on the basis of Mudarabah or Musharakah. Capital Contributions Relating to an Islamic Fund, they are additional funds collected from investors in the fund to finance needs that may arise in the future as the fund manager considers appropriate. New shares/units are not issued in exchange of these capital contributions. Capital Transactions With reference to an Islamic Fund, they include the sale of units/shares, and the number of units/shares issued on reinvestment of distributions/dividends less the value of units/shares returned. Card The applicable Visa Card, MasterCard and / or any other card including but not limited to co-branded cards, e-card, debit card the second card as issued by the Bank, from time to time, to the Card member and shall include Supplementary and subsequently issued, renewal or replacement Cards. Card Account Visa/Master Card account or any account pertaining to the Card(s) issued by the Bank from time to time, as the case may be, opened by the Bank for the purpose of entering debits / charges incurred by or for the account of, and credits received by or for the Card member and Supplementary Card member. Card Issuer A bank, financial institution, credit union, or agency that issues a card to public or its members is called a card issuer. Card member A person to whom the Card is issued by the Bank and shall also include every Supplementary Card member. Card Replacement Fee Fees to be charged by the bank for replacement of lost/stolen or damage card. Card Transaction Any payment made or any amount to be debited from the Card Account or any amount charged by the Bank or any Merchant for any goods, services and other benefits by or through the use of the Card. Cash Equivalents Short–term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Cash Reserve Ratio (CRR) Cash Reserve Ratio is the amount of funds that the banks have to keep with the State Bank of Pakistan. CAGR An abbreviation for Compound Annual Growth Rate. CDs (Central Deposits) One of the proposed monetary policy tools for the Islamic economy. The central bank may open investment accounts in member banks in which it deposits whatever money it creates and from which it withdraws whatever money it retires. Member banks may invest these deposits in the real sector in accordance with the investment policy of each bank. Profits earned on such deposits may be used to cover the cost of central bank operations. Business Person Individual having his own business. Certificate of Musharakah An Islamic financial instrument approved by the Corporate Law Authority of Pakistan in April 1995. Buy-Back A non-permissible transaction where Bank purchases goods, equipment or property form the client with the agreement that the client would buy it back from the bank at a higher price, to be paid later by the client. Charges The amount payable by the customer to the Bank under the Terms and Conditions, including but not limited to any transactions, Annual Membership , Services Fee, Charity and other fees / charges. Capital Adequacy Ratio (CAR) The relationship between capital and risk weighted assets as defined in the framework developed by the State Bank of Pakistan. Charity Means monetarily helping those in need. In IBIs in order to mitigate the risk of delayed payment customer is asked to undertake, that if he/she fails to pay dues on due date, he/she will pay certain amount to a charity, which will be administered through the Islamic Bank. Such amount is not the income of IB. ANNUAL REPORT 2017 331
  313. Clean Limit Financing Limit which has been granted by the bank without any collateral /liquid/non-liquid securities. Clear Title When the property in question is free from any doubt is not disputed and is not having any encumbrances and it is said to have a clear title. Closed-End Funds Mutual funds with a fixed number of shares (or units). Unlike open-end funds, new shares/units in a closed-end fund are not created by managers to meet demand from investors. Instead, the shares can only be purchased (and sold) in the secondary market. Closing Balance The amount payable (or available) as of last working day of the certain period/month. Co-Applicant A co-applicant is a person who signs a finance contract with the primary applicant, pledging to be responsible for paying off financed amount in the event the applicant is unable to pay. Collateral An asset pledged to a financer/creditor to guarantee payment/repayment. Collateral could include savings, Sukuks, takaful policies, jewelry, property or other items that are pledged to pay off financing/rentals/balance outstanding if payments are not made according to the contract. Collector Bank employee responsible for collection/recovery. Commingled Mudarabah Relating to Islamic banks, a form of Mudarabah in which a bank accepts funds for investment and contributes its own funds as well. The profit and loss are shared in agreed proportions and the bank also receives a share of the profit from out of the share of investors for its role as mudarib. Commitment to Extend Credit Credit facilities approved but not yet utilized by the client as at the Balance Sheet date. Commodity Mudarabah A contract of Mudarabah wherein the owner of capital provides capital in the form of stock-in-trade (‘urwd) and not cash. Constant Musharakah It is a Musharakah in which the proportionate shares of partners in the equity remain unchanged within the currency of the agreement. Contingencies A condition or situation existing at Balance Sheet date where the outcome will be confirmed only by occurrence of one or more future events. Contract Price Total amount payable by the Customer to the Bank for the Asset pursuant to the Musawamah / Mudarabah Transaction. Corporate Governance The process by which corporate entities are governed. It is concerned with the way in which power is exercised over the management and direction of an entity, the supervision of executive actions and accountability to owners and others. Cost/Income Ratio Operating expenses as a percentage of total income. Credit History A financial profile of any person based on how he pays his bills, clears his debt and the amount a person owes to various banks and other financial intuitions. Credit Limit It is the maximum amount of money one can draw on his account based on prior sanction or approval from the bank. In other words, drawing limit fixed by a bank for a customer depending on his credit history, paying capacity and relationship with bank. 332 MEEZAN BANK LIMITED Credit Murabahah A sale agreement on the basis of determined profit over the purchase price of the seller with the condition that the buyer will pay the sale price in future. Credit Rating / Score A credit rating is an evaluation of the credit risk of a prospective customer, predicting his ability to pay the financed amount, and an implicit forecast of the likelihood of the customer defaulting. Credit Risk Credit risk involves the risk that a counter-party to a contractual obligation, be it Murabahah, Mudarabah, ’Ijarah, qard hasan, ’Ijarah wa ’iqtina’ or shirkah, would default on the promised date of payment. Cross sell Selling of product to already existing customer. Current Customer making all the payments on time. Customer A person who is availing any facility or products of a bank. Dealership Vehicle is provided through dealership. Debt Ratio/Debt Burden A ratio of amount of money customer owe to banks or credit issuers against total monthly income of a customer. It reflects the percentage of income that goes to paying customer debts every month. Islamic banks calculate Debt Ratio to assess the amount of financing that can be provided. Default/ Delinquency When a customer fails to make any payment(s) due towards the bank as per the terms and conditions agreed or otherwise is termed as default. Furthermore, a breach of contract/terms and conditions may also be categorized as an event of default. Account is classified as delinquent when rentals are not paid according to the contractually agreed upon terms or when due. Deferred Taxation Sum set aside for tax in the Financial Statements that will become payable in a financial year other than the current financial year. Delivery Acceptance Form In the context of auto finance, this is a mandatory document which the customer signs acknowledging acceptance and possession of vehicle from the dealer. Desired Financing Amount Amount required by the customer. Desired Financing Tenure Tenure required by the customer. Diminishing Musharakah Bank and customer participate in joint ownership of a property. The share of the bank is divided into number of units and the units owned by the Bank are rented to the customer. Customer purchases these units from bank at periodic intervals, thereby increasing his/her share in the undivided property until all the units are purchased by the customer. Direct Debit / Auto Debit Facility A facility offered by the bank to customer against which monthly full payment or minimum payment will be debited from his/her account on the due date. Disbursem*nt Payment made in the name of the customer. Discrepancy Incomplete or missing documents, or alternatively incomplete, illegible or contradictory information in the customer's financing application or documentation provided by customer. Dishonored/Returned Cheque A Cheque which is returned by the payer's Bank due any number of possible reasons including but not limited "insufficient funds, amounts' mismatch, illegible signature, overwriting, date-barring etc."
  314. Disputed transaction A cardholder posted transaction which is not accepted by him /her and requires clarification. Dividend A sum of money paid by a company to its shareholders out of it profits (or reserves). FED Federal Excise Duty. Financing Agreement Document used for agreement between the customer and the bank. Dividend Payout Ratio Dividends (cash dividend plus bonus shares) paid per share as a fraction of earnings per share (EPS). Financial Losses and Provisions Amount set aside against identified and possible losses on loans, advances and other credit facilities as a result of their becoming partly or wholly un-collectible. Dividend Yield Ratio Dividend per share divided by the market value of share. Fiscal Year A year as reckoned for taxing or accounting purposes. DPD Number of days past the due date after the customer's payment became due as per the contractually agreed upon terms and conditions. Fixed Rate Facilities where the profit rate defined at the time of financing is fixed for the tenure of the facility or until facility is closed. Due Date /Payment Due Date /Installment due date Date specified in the statement of account for monthly payments/ schedule for the payment of the Current Balance or Installment to be made to the Bank for the facility availed by the customer. E-Alerts Electronic Alerts to be sent to customer via email / SMS. E-Banking / Internet Banking Banking transactions which can be conducted on internet after accessing Bank's application with unique password. E-CIB /Credit Bureau Electronic Credit Information Bureau-eCIB has been established by the State Bank of Pakistan which requires all banks and financial institutions to report all financings and advances, to the State Bank. Early Settlement Payment of entire financed amount before the agreed upon maturity of financing as per payment schedule. Early Termination Price If the customer wishes to terminate the Ijarah/Diminishing Musharakah Agreement before the agreed period, the customer has an option to buy the asset on the pre-agreed purchase price. Earnings per Share Profit after taxation divided by the weighted average number of ordinary shares in issue. Effective Tax Rate Provision for taxation excluding deferred tax divided by the profit before taxation. EMI Equal Monthly Installments. Equity The amount of the funds on a company's Balance Sheet contributed by the owners (the stockholders) plus the retained earnings (or minus the losses). Equity/down payment Customer's stake in the vehicle, customer pays a vehicle value's part before financing. Fixed Term This applies to products and services, which have a set lifetime. Floating Rate Profit rate renewable after certain defined period of time. The profit rate is linked with KIBOR plus a fixed percentage of profit margins. Forced Sale Value (FSV) Forced Sale Value means the value which fully reflects the possibility of price fluctuations and can currently be obtained by selling the mortgaged/pledged assets in a forced/distressed sale conditions. FX Conversion Charges Foreign Currency Transactions charges to be borne by customer to convert into Pakistani Rupees. GCAS Global Customer Assistance Service. General Takaful A form of Islamic insurance to cover losses of fire, theft or natural calamities. The scheme or concept follows the principles of mutual insurance. Government Securities Government Securities shall include such types of Pak. Rupee obligations of the Federal Government or a Provincial Government or of a Corporation wholly owned or controlled, directly or indirectly, by the Federal Government or a Provincial Government and guaranteed by the Federal Government as the Federal Government may, by notification in the Official Gazette, declare, to the extent determined from time to time, to be Government Securities. Gross Dividends The portion of profits distributed to the shareholders including the tax withheld. Guarantee A promise given by a person called 'the guarantor' to pay another person's installment/outstanding balance if that person does not pay them. Hiba Gift/Transfer of ownership of an asset without any consideration. Expiry Date The date of expiry specified by the Bank on the Card. Historical Cost Convention Recording transactions at the actual value received or paid. External agencies Agencies providing services to customers which are on Bank's panel. Hypothecation Process of placing a charge / lien on vehicle financed by the Bank. Facility Rate / Pricing Profit rate charged on the product/service. IAS International Accounting Standards. Fatwa A decree by a competent Shariah scholar qualified to issue decrees (mufti) on a matter giving an opinion about the position of a matter in the light of the Shariah rules and principles. IFRIC International Financial Reporting Interpretation Committee. FCY Foreign Currency. IFRS International Financial Reporting Standards. ANNUAL REPORT 2017 333
  315. Ijara /Ijarah Letting on lease; technically, sale of a definite usufruct in exchange for a definite reward; commonly used for wages. It also refers to a mode of financing adopted by Islamic banks. It is an arrangement under which an Islamic bank leases equipment, a building or other facility to a client against an agreed rental. Liabilities Any or all amounts payable whatsoever by the customer to the Bank. Ijarah Expense Installment of rent paid for leasing an asset are shown as ’Ijarah expense in the books of the lessee. Litigation charges Charges which will be incurred at the time of filling a suit by the bank against a defaulted customer. Ijarah Revenue Installments of rent received on leased assets by the financial institutions. Liquid Assets The assets which are readily convertible into cash without recourse to a court of law. Impairment allowances A provision held on the balance sheet as a result of the raising of a charge against profit for the incurred loss inherent in the lending book. An impairment allowance may either be identified or unidentified and individual or collective. LOU Letter of understanding between the bank and the customer mentioning some of the important terms & conditions related to the financed product usage. Income Estimation Agency Agency used for assessing customer's income. Income Spread Represents the difference between the average rate of income earned and the average rate of cost paid on funds. Investment Assets With reference to Islamic banks, they are investments in financial instruments using any of the suitable Islamic financial instruments. Investment Risk Reserve With reference to Islamic banks, it is the amount appropriated out of the income of investment account holders, after allocating the mudarib’s share, in order to provide a cushion against future losses for investment account holders. Islamic Banking Banking in consonance with the ethics and value system of Islam as compared to conventional banking that conducts its business of borrowing and lending on the basis of interest. Islamic Credit Card It is an Islamic alternative to the conventional credit card. ISO 27001 ISO/IEC 27001 formally specifies a management system that is intended to bring information security under explicit management control. Being a formal specification means that it mandates specific requirements. Organizations that claim to have adopted ISO/IEC 27001 can therefore be formally audited and certified compliant with the standard. Istisna’a/Istisna This is a kind of sale where a commodity is transacted before it comes into existence. It means: To order a manufacturer to manufacture a specific commodity for the purchaser. If the manufacturer under takes to manufacture the goods for him with material from the manufacturer, the transaction of Istisna comes into existence. But it is necessary for the validity of istisna that the price is fixed with the consent of the parties and that necessary specification of the commodity (intended to be manufactured) is fully settled between them. IVR Interactive voice response (IVR) is a technology that allows a computer to interact with humans through the use of voice and DTMF (Dual Tone Multi Frequency) tones input via keypad. KIBOR Karachi Interbank Offer Rate as directed by SBP on daily basis. Lawyer appraisal agency Agency used to verify and appraise the property document. Leasing Certificate Leasing certificate is an Islamic financial instrument. The certificate is offered by Islamic banks to savers when the latter want to invest their funds in lease operations. Lease Facility A lease is a contractual arrangement calling for the lessee (user) to pay the lessor (owner) for use of an asset. 334 MEEZAN BANK LIMITED Linked Account Account opened for making monthly payments/installments. Market Capitalization Number of ordinary shares in issue multiplied by the market value of shares as at the year end. Materiality The relative significance of a transaction or an event the omission or misstatement of which could influence the economic decisions of users of financial statements. Maturity Financing payment completion. Merchant Any person / entity supplying goods and / or services and / or other benefits who accepts the Card as a means of payment. Microfinance The provision of financial services to micro-entrepreneurs and small businesses, which lack access to banking and related services due to the high transaction costs associated with serving these client categories. Month Calendar month. Mortgages Mortgage is the transfer of an interest in specific immovable property for the purpose of securing the payments by the customer. Mudarabah An agreement between two or more persons whereby one or more of them provide finance, while the other provides entrepreneur ship and management to carry on any business venture whether trade, industry or service, with the objective of earning profits. They share the profit in an agreed proportion. The loss is borne only by the financier(s) in proportion to their share in total capital. Mudarabah Certificate A financial instrument devised by Islamic investment companies to mobilize funds for investment. A Mudarabah certificate can be for a specific purpose or for a general purpose. The former is related to financing of specific projects and matures only on the completion of the project. The latter can have a specific or indefinite duration but proceeds can be invested in any halal business. Both the types can be issued in negotiable form and can be either registered or bearer. Mudarabah Shares Normally issued by the state, they are instruments for obtaining funds from the private sector on the basis of Mudarabah. The state issues a share certificate, indicating the price, the period and the terms of the contract. The funds thus collected are invested in some profit-yielding project so that the state can share profit or loss with the public. Mudarib A working partner; the partner who provides entrepreneurship and management in a Mudarabah agreement. Musharakah A partnership contract where all the partners invest funds and are not restricted from working for the partnership.
  316. NCCA / Non Checking Account A type of account where a customer can only make deposits but cannot withdraw funds from the account. As such, no instruments (debit card, Cheque book, internet banking etc.) ar