| Bankers Equity Limited |
|
|
|
|
|
|
|
|
|
|
| (An
LTV Group Company) |
|
| Annual
Report 1997 |
|
|
|
| Contents |
|
| Mission Statement |
|
| Introduction |
|
| Board of Directors |
|
| Senior Management |
|
| Five
Year Operational and Financial Highlight |
|
| Notice of Annual General
Meeting |
|
| Directors' Report |
|
| Auditors' Report |
|
| Balance Sheet |
|
| Profit and Loss Account |
|
| Statement of Changes in
Financial Position |
|
| Notes to the Accounts |
|
| Pattern of Shareholding |
|
| Offices and Branches |
|
|
|
|
|
|
|
| MISSION
STATEMENT |
|
|
| Our
vision for Bankers Equity is |
|
| to
develop into a professional "one |
|
| stop"
world class financial insti- |
|
| tution providing a full range
of |
|
| investment,
commercial and |
|
| development
banking services. |
|
|
|
| Introduction |
|
|
| PRIVATIZATION
OF THE BANK |
|
|
| Bankers
Equity Limited (BEL) was established in October 1979 as a Development
Financing Institution |
|
| owned
by the State Bank of Pakistan and five Government owned commercial banks. The
company |
|
| commenced
operation on January 10, 1980. In 1986 it was converted into a public limited
company |
|
| with
an authorized capital of Rs. 5,000 million. |
|
|
| On
June 17th, 1996 the government of Pakistan sold 26% of shares to the
LTV-Consortium and |
|
| simultaneously
transferred management to the consortium. Subsequently in December 1996, the
LTV |
|
| Consortium
acquired a further 25% shares from the Government, bringing its total
shareholding to |
|
| 51%. |
|
|
| The
LTV Consortium consists of three companies of the LTV Group which hold 46.88%
of BEL and |
|
| First
Leasing Corporation which holds 4.12% of BEL. |
|
|
| THE
LTV GROUP |
|
|
| In
response to the dynamic new economic environment in Pakistan a group of young
professionals |
|
| commenced
business in May, 1991 with the floatation of First Interfund Modaraba (FIM)
having an |
|
| asset
base of Rs. 35 million. |
|
|
| In
December 1992, the Managers of FIM were able to acquire controlling interest
in the Long Term |
|
| Venture
Capital Modaraba (LTVCM) which due to mismanagement, was facing severe
financial |
|
| difficulties. |
|
|
| Today
LTVCM is one of the largest Modarabas in Pakistan with an asset base of about
Rs. 900 million. |
|
|
| LTVCM
provided the Group with a strong resource base allowing it to rapidly expand
operations. In |
|
| 1993
the LTV Group made a strategic investment and floated Inter Asia Leasing
Company Limited |
|
| (ILCL)
which also has equity investment of five of Pakistan's leading financial
institutions (the five |
|
| institutions
hold 30% equity of ILCL). Subsequently, in December 1994, the Group entered
the mortgage |
|
| financing
market with the setting up of LTV Housing Finance Limited (LI-IF) together
with two other |
|
| large
financial institutions. |
|
|
| In
May 1996 the LTV Group was successful in bidding for the privatization of
Bankers Equity Limited. |
|
|
| In
6 years the LTV Group has built up considerable expertise in the areas of
leasing, including micro |
|
| enterprise
leasing, capital market operations, mortgage finance, corporate finance and
advisory, trade |
|
| financing,
venture capital, project financing and fund management. ~ |
|
|
|
| With
an asset base of over Rs. 17 billion and an equity base of over Rs. 2
billion, the LTV ~ |
|
| Group
now operates as the largest Pakistani private sector financial supermarket in
the |
|
| country. |
|
|
|
| Board
of Directors an on 30th June, 1997 |
|
|
| Mr.
Khurshid Hadi |
|
| Chairman |
|
| Mr.
Inam-ul Haq |
|
| President
& Chief Executive |
|
| Mr.
Rauf Baksh Kadri |
|
| Director |
|
| Mian
Mumtaz Abdullah |
|
| Director |
|
| Mian
Muhammad Mansha |
|
| Director |
|
| Mr.
Shahid Ghaffar |
|
| Director |
|
| Dr.
Najeeb Samie |
|
| Director |
|
|
| Senior
Management |
|
|
| Inam-ul-Haq |
|
| President |
|
| Abdul
Rashid |
|
| SEVP
- Operations and |
|
| Investment
Banking |
|
| Z.I. Saifi |
|
| SEVP
Project Division |
|
| Asif Jamil |
|
| SEVP
Central Region |
|
| M. Amjad |
|
| SEVP-Administration
and |
|
| Corporate
Communications |
|
| M.
Sadiq Khokhar |
|
| EVP
- Financial Controller |
|
| Rehamatullah
Shaikh |
|
| EVP
Funds Mohilization |
|
| Abdul
Jabbar Lodhi |
|
| VP/Company
Secretary |
|
| Muhammad
Yasin |
|
| SVP-Operations |
|
| Humayun
Saghir |
|
| SVP-Corporate
Banking |
|
| Zahid Khan Durrani |
|
| SVP-Merchant
Banking |
|
| Faiz
ur Rehman |
|
| SVP - MIS |
|
| Munawwar Suleman |
|
| SVP
Projects |
|
| Tanzim
Haqqi |
|
| SVP
- Projects |
|
| Shamsuddin
Khan |
|
| SVP-Law
Department |
|
| Shahid
Mehboob |
|
| SVP-Audit
Operations |
|
| Niaz
A. Khan |
|
| SVP-Operations
Central Region |
|
| Javaid
I. Qureshi |
|
|
|
| SVP-Administration |
|
| Azhar Raza |
|
| SVP-Public
Relation |
|
|
|
| Five
Year Operational and Financial Highlight |
|
|
|
(Rs. in Million) |
|
|
| Year
ending June 30, |
1993 |
1994 |
1995 |
1996 |
1997 |
|
| OPERATIONAL |
|
| Commitments |
|
| Local |
|
5196 |
5952 |
1284 |
1196 |
738 |
|
| Foreign |
|
312 |
370 |
756 |
40 |
191 |
|
|
---------- |
---------- |
---------- |
---------- |
---------- |
|
| Total |
|
5508 |
6322 |
2040 |
1236 |
929 |
|
|
========== |
========== |
========== |
========== |
========== |
|
| Disbursements |
|
| Local |
|
6611 |
6201 |
1920 |
499 |
871 |
|
| Foreign |
|
48 |
117 |
21 |
0 |
221 |
|
|
---------- |
---------- |
---------- |
---------- |
---------- |
|
| Total |
|
6659 |
6318 |
1941 |
499 |
1092 |
|
|
========== |
========== |
========== |
========== |
========== |
|
| FINANCIAL |
|
|
| Profit
and Loss Account |
|
|
| Income from term |
|
| financing |
|
883 |
1195 |
1279 |
1355 |
1919 |
|
| Gross
income |
1421 |
1987 |
1890 |
1836 |
2181 |
|
| Financial
cost |
992 |
1338 |
1287 |
1479 |
1329 |
|
| Operating
profit |
319 |
494 |
468 |
70 |
515 |
|
| Profit
for the year |
15 |
101 |
118 |
1 |
336 |
|
| Dividend
(%) |
12.50 |
15 |
-- |
-- |
15 |
|
|
bonus |
bonus |
|
cash |
|
|
| Earning
per share (Rs.) |
0.3 |
1.8 |
1.8 |
-- |
5.1 |
|
|
---------- |
---------- |
---------- |
---------- |
---------- |
|
| Balance
Sheet |
|
| Shareholders'
equity |
1089 |
1217 |
1335 |
1336 |
1574 |
|
| Reserves |
|
596 |
647 |
679 |
680 |
918 |
|
| Long-term
borrowings |
|
| and
deposits |
10967 |
7556 |
8958 |
7623 |
7424 |
|
| Net
term financing |
10266 |
11477 |
11556 |
11615 |
12677 |
|
| Total
assets |
14384 |
14629 |
14867 |
14777 |
16043 |
|
|
---------- |
---------- |
---------- |
---------- |
---------- |
|
| *
First year of post-privatization |
|
|
|
| Notice
of Annual General Meeting |
|
|
| Notice is hereby given that the Annual
General meeting of the Shareholders of Bankers Equity |
|
| Limited
will be held on Saturday the 18th of October, 1997 at 10.30 a.m. at Best
Western Hotel, |
|
| Islamabad
to transact the following business: |
|
|
| 1.
To confirm the minutes of the last Annual General Meeting held on 4th of
February, 1997. |
|
|
| 2.
To receive and consider the Audited Accounts of the Company for the year
ended 30th June, |
|
| 1997
and the Directors' and Auditors' Reports thereon. |
|
|
| 3.
To approve, as recommended by the Board of Directors, the payment of cash
dividend to the |
|
| Shareholders
of the Company at the rate of Rs. 1.50 per share of par value Rs. 10 each
i.e. 15% |
|
| for
the year ended June 30, 1997. |
|
|
| 4.
To appoint Auditors of the Company for the next financial year and fix their
remuneration. |
|
|
| 5.
To transact any other business for the Company with the permission of the
Chair. |
|
|
|
By order of the Board |
|
|
Abdul Jabbar Lodhi |
|
| Karachi |
|
Company Secretary |
|
| Dated:
17th September, 1997 |
|
|
| NOTES: |
|
|
| I.
The share transfer books of the Company will remain closed from Saturday the
11th of October |
|
| 1997
to Friday the 17th October 1997 (both days inclusive). Transfers received in
order, at the |
|
| Company's
Registrar of Shares M/S. Universal Management Services (Pvt.) Limited at 205,
2nd |
|
| Floor,
Central Hotel Building, Civil Lines, Club Road, Karachi by the close of
business on 10th |
|
| of
October 1997 will be treated in time for the eligibility of dividend to the
transferees. |
|
|
| II.
The shareholders whose names appear in the Register of members on 10th
October 1997 shall |
|
| be
entitled to the dividend if approved by the shareholders in the Annual
General Meeting. |
|
|
| III.
A member entitled to attend and vote at the meeting may appoint a Proxy to
attend and vote |
|
| on
his/her behalf. A proxy need not be a member of the Company. |
|
|
| IV.
Proxies duly stamped with Rs. 2/- revenue stamp, signed and witnessed must be
deposited with |
|
| the Company not less than 48 hours before
the meeting. |
|
|
| V.
Shareholders are requested to notify any change in their address immediately
to the Company's |
|
| Registrar
of Shares, Universal Management Services (Pvt.) Limited. |
|
|
|
| Directors
Report for the year 1996-97 |
|
|
| The
Directors feel great pleasure in presenting the 17th Annual Report of Bankers
Equity Limited |
|
| (BEL),
together with the Balance Sheet as on 30th June 1997, Profit and Loss Account
and Cash |
|
| Flow
for the year ended 30th June, 1997. The report covers the first full year of
the management |
|
| of
the company by private sector. |
|
|
| STATE
OF THE ECONOMY |
|
|
| While
the world economy may be passing through one of its bright periods in modern
history, our |
|
| cumulative
performance as a nation over 50 years of our history can at best be called
mixed. |
|
| Considering
the odds at the time of Independence, for many of us, our existence as an
independent |
|
| nation
is an achievement in itself, but, notwithstanding the advancement in many
spheres of our |
|
| life
since then, the country still faces a daunting agenda to realize its
considerable potential. |
|
| Constraints
like lack of good governance, poor record in spreading education,
uncontrolled growth |
|
| of
population, deterioration in urban services, unchecked environmental
degradation etc. have |
|
| hindered
our progress as a part of the modern world. |
|
|
| The
state of the economy including the growth of the financial sector, is closely
linked with political |
|
| developments
and marco-economic management. A series of broad-based measures are required |
|
| to
improve the management of our economy. The year under review has been a
period of changing |
|
| political
fortunes and uncertain economic conditions The new government that came to
power in |
|
| February,
1997 faced the immediate task of reviving the economy. It has initiated
certain measures |
|
| to
control the fiscal deficit, improve the balance of payments, reform the
banking system, accelerate |
|
| privatization
and undertake "supply side" reforms to encourage investment and
promote growth. |
|
| Full
response to these measures is yet to come. Successful implementation of these
measures is |
|
| imperative
if we hope to embark on the difficult road to recovery, improve the state of
our business |
|
| and
industry and add to the viability of the financial sector. This will require
more concerted efforts |
|
| by
government, business leaders and the banking industry. The nation is capable
of doing this. |
|
|
| INVESTMENT
OPERATIONS |
|
|
| BEL
has played since its inception in 1979, a leading role in the industrial
development of country. |
|
| It
has organized total syndicate financing of Rs. 72.8 billion, including Rs.
52.7 billion by itself. |
|
|
| Year
Wise Distribution of Approved Investments |
|
| (Rs.
in million) |
|
|
No. of |
Total |
Bankers |
|
|
Projects |
Syndicate |
Equity |
|
|
Approvals |
Portion |
|
| 1980--81 |
|
8 |
715.374 |
553.88 |
|
| 1981--82 |
|
16 |
567.535 |
405.21 |
|
| 1982--83 |
|
14 |
733.262 |
369.75 |
|
| 1983--84 |
|
30 |
1,088.978 |
615.48 |
|
| 1984--85 |
|
44 |
1,025.398 |
712.16 |
|
| 1985--86 |
|
45 |
1,118.463 |
742.45 |
|
| 1986--87 |
|
68 |
3,216.264 |
2,161.224 |
|
| 1987--88 |
|
79 |
2,957.514 |
2,457.828 |
|
| 1988--89 |
|
123 |
4,691.974 |
3,508.600 |
|
| 1989--90 |
|
228 |
13,729.695 |
6,346.058 |
|
| 1990--91 |
|
246 |
10,283.269 |
8,997.358 |
|
| 1991--92 |
|
321 |
11,594.75 |
9,757.188 |
|
| 1992--93 |
|
174 |
5,583.836 |
5,507.780 |
|
| 1993--94 |
|
140 |
7,074.483 |
6,321.715 |
|
| 1994--95 |
|
35 |
4,510,000 |
2,040.000 |
|
| ! 995--96 |
|
38 |
2,974.381 |
1,235.716 |
|
| 1996--97 |
|
11 |
928.713 |
928.713 |
|
| ---------- |
---------- |
---------- |
---------- |
---------- |
|
| Total |
|
1,620 |
72,793.889 |
52,661.111 |
|
| ========== |
========== |
========== |
========== |
========== |
|
|
|
| Notes: |
|
| 1.
Total syndicate includes Bankers Equity. |
|
| 2.
Projects means no. of proposals as distinct from no. of companies financed.
Also includes proposals for working capital financing. |
|
| 3.
Figures relating to previous years have been revised to account of revisions
and reallocations in financing. |
|
|
| However,
imbalance in sectoral financing with preference for larger projects coupled
with emphasis |
|
| on
promoting new entrepreneurs in the pre-privatization era, had largely been
responsible for |
|
| accumulation
of a significant non-performing portfolio. The new management has, therefore,
chalked |
|
| out
a policy which aims at introducing greater prudence in lending activities and
building a more |
|
| balanced
portfolio over the years. With this objective, starting from 1997-98 BEL will
give preference |
|
| to
small and medium size projects. Larger projects will be handled in
syndication with other |
|
| institutions.
It will also place emphasis on portfolio diversification, joint ventures,
up-gradation |
|
| of
technology and value addition. Appropriate organizational changes have also
been made to ensure |
|
| that
projects are selected on the basis of merit, their inherent commercial
strength and the reputation |
|
| and
experience of the sponsors. |
|
|
| COMMITMENTS
AND DISBURSEMENTS |
|
|
| The
aggregate investment approved by BEL during 1996-97, inclusive of working
capital against |
|
| bank
guarantee, amounted to Rs.928.713 million. This was about 25% lower than the
previous year, |
|
| essentially
due to a deliberate policy to avoid further exposure, besides sluggish
business conditions |
|
| and
slow economic activity in the country. Also, with the privatization of BEL
and changes in the |
|
| constitution
of the Board, the previous syndicated financing arrangement with the five
banks |
|
| (ex-NCBs)
is no longer available. Hence the entire commitments were taken up by BEL.
During |
|
| 1996-97,
BEL disbursed an amount of Rs. 1,092.158 million which was more than double
the |
|
| disbursement
of Rs. 499.544 million in the previous year. |
|
|
| Disbursements
- Sector Wise |
|
| (Rs.
in million) |
|
|
|
1994-95 |
|
1995-96 |
|
1996-97 |
|
|
| INDUSTRIAL
SECTOR |
|
Bankers |
Total |
Bankers |
Total |
Bankers |
Total |
|
|
Equity |
Syndicate |
Equity |
Syndicate |
Equity |
Syndicate |
|
|
| Food,
Tobacco |
|
| & Beverages |
|
323.955 |
434.180 |
216.093 |
297.806 |
382.335 |
382.335 |
|
|
| Textiles |
|
629.012 |
660.369 |
94.501 |
112.044 |
275.803 |
275.803 |
|
|
| Leather
& Leather Prod. |
|
32.922 |
32.922 |
28.288 |
28.288 |
42.795 |
42.795 |
|
|
| Paper
& Pulp |
|
71.041 |
71.041 |
72.496 |
89.733 |
13.543 |
13.543 |
|
|
| Chemicals,
Pharmaceuticals |
|
| and
Fertilizers |
|
47.525 |
47.525 |
6.610 |
6.610 |
0.025 |
0.025 |
|
|
| Petroleum,
Refining |
|
| and
Petrochemicals |
|
166.000 |
166.000 |
20.000 |
20.000 |
125.000 |
125.000 |
|
|
| Cement
& Other |
|
| Non-Metalic
Minerals & |
|
| their Products |
|
150.291 |
161.343 |
0.527 |
0.527 |
200.026 |
200.026 |
|
|
| Basic
Metals |
|
290.179 |
290.179 |
0.000 |
0.000 |
0.000 |
0.000 |
|
|
| Metal
Products |
|
| Other
than Machinery & |
|
| Transport
Equipment |
|
151.075 |
152.164 |
10.044 |
10.044 |
0.000 |
0.000 |
|
|
| Appliances
& Fittings |
|
| (Electric
Machinery) |
|
0.019 |
0.019 |
0.014 |
0.014 |
18.167 |
18.167 |
|
|
| Electronic |
|
11.570 |
11.570 |
0.550 |
0.550 |
0.056 |
0.056 |
|
|
|
|
| Service
& Miscellaneous |
|
67.885 |
67.885 |
50.421 |
50.421 |
34.408 |
34.408 |
|
|
---------- |
---------- |
---------- |
---------- |
---------- |
---------- |
|
| Total |
|
1,941.474 |
2,095.197 |
499.544 |
616.037 |
1,092.158 |
1,092.158 |
|
|
========== |
========== |
========== |
========== |
========== |
========== |
|
|
|
|
| The
disbursement made during 1996-97 comprised of 79.8% local currency component
and 20.2% |
|
| foreign
currency component. During the two years prior to privatization, the
disbursement made |
|
| by
BEL was almost entirely in local currency. Thus the new management of BEL has
successfully |
|
| tapped
foreign currency lines of credit. |
|
|
| Most
of the financing during 1996-97 was by way of LT-TFCs (38.5%) as compared to
LMM financing |
|
| (40.6%)
during 1995-96. The management plans to utilize LMM facility as well as other
lines of |
|
| credit
much more effectively in the future. The details of the disbursements is
given below: |
|
|
| Disbursement
by Type of Investment |
|
|
(Rs. in million) |
|
|
|
1994-95 |
|
1995-96 |
|
1996-97 |
|
|
|
|
|
| INDUSTRIAL
SECTOR |
Bankers |
Total |
Bankers |
Total |
Bankers |
Total |
|
|
Equity |
Syndicate |
Equity |
Syndicate |
Equity |
Syndicate |
|
|
|
|
| Local
Currency: |
|
|
| Direct
Equity Investment |
12.790 |
12.790 |
15.199 |
15.199 |
24.855 |
24.855 |
|
| Purchase
of ST-TFCs/ |
|
|
| ST-PTCs/Underwriting |
84.337 |
169.101 |
88.024 |
121.922 |
3.429 |
3.429 |
|
|
|
|
| Purchase of |
|
|
|
| L-TFCs/LT-PTCs |
726.020 |
794.979 |
135.953 |
166.763 |
416.141 |
416.141 |
|
|
|
|
|
|
|
| PLS
funds for |
|
|
| purchase of |
|
|
|
| local
machinery |
155.012 |
155.012 |
202.646 |
254.431 |
26.522 |
26.522 |
|
|
|
|
| Working
Capital |
0.000 |
0.000 |
27.722 |
27.722 |
211.565 |
211.565 |
|
|
|
|
| Working
Capital |
|
|
| against
Bank |
|
|
| Guarantee |
|
917.000 |
917.000 |
0.000 |
0.000 |
155.000 |
155.000 |
|
|
|
|
| Others |
|
25.196 |
25.196 |
30.000 |
30.000 |
33.613 |
33.613 |
|
|
---------- |
---------- |
---------- |
---------- |
---------- |
---------- |
|
| Total
Local Currency |
1920.355 |
2074.078 |
499.544 |
616.037 |
871.125 |
871.125 |
|
|
---------- |
---------- |
---------- |
---------- |
---------- |
---------- |
|
| Foreign
Currency: |
|
|
|
|
|
| FCY
Loan |
|
21.119 |
21.119 |
0.000 |
0.000 |
221.033 |
221.033 |
|
|
---------- |
---------- |
---------- |
---------- |
---------- |
---------- |
|
| Total |
|
1941.474 |
2095.197 |
499.544 |
616.037 |
1092.158 |
1092.158 |
|
|
========= |
========= |
========= |
========= |
========= |
========= |
|
| RUPEE
RESOURCES |
|
| The
rupee resources of BEL consist of shareholder's equity of Rs.1574 million,
redeemable capital |
|
| of
Rs.700 million, short term borrowings from banks and financial institutions,
a COI deposit base |
|
| and
LMM credit lines from the State Bank of Pakistan. Both the availability and
utilization of |
|
| LMM
credit has been slow both because of policy changes and the industrial
climate in the country. |
|
| The
deposits had started eroding much before privatization. In the beginning of
the year, BEL had |
|
| to
face very heavy withdrawal notices. The main reason of withdrawal of COIs was
post privatization |
|
| instructions
of government to public corporations and local bodies to keep their deposits
only in |
|
| specified
government owned institutions. This was contrary to the understanding given
by gov- |
|
| ernment
to the BEL. Such an action seriously affects the institution building after
privatization |
|
| of
public sector banks and has implications for future programme of the sale of
major government |
|
| owned banks. |
|
|
| In
spite of these adverse developments BEL managed with considerable effort, to
maintain the deposit |
|
| base
by the end of the year |
|
|
| FOREIGN
CURRENCY RESOURCES |
|
| During
the second half of the year BEL launched a foreign currency deposit-scheme.
The response |
|
| to
the scheme is encouraging though it is still at its initial stage. In
addition to this, BEL has |
|
| access
to the following foreign credit lines. |
|
|
| Kreditanstalt
fur Wiederaufbau |
(KFW) |
DM |
100,000,000/= |
|
| Berliner
Handles-und Frankfurter Bank |
(BHF) |
DM |
30,000,000/= |
|
| Bayerische
Vereins Bank |
