| CRESCENT INVESTMENT BANK LIMITED |
|
|
|
|
|
|
| ANNUAL
REPORT 1997 |
|
|
|
| CONTENTS |
|
| Company
Information |
|
| Board
of Directors |
|
| Directors
Report and Chief Executive's Review |
|
| Form "34" |
|
|
| Auditor's
Report to the Members |
|
| Balance Sheet |
|
|
| Profit
and Loss Account |
|
| Statement
of Sources and Application of Funds |
|
| Notes
to the Accounts |
|
| Investor
Information |
|
| Notice
of Annual General Meeting |
|
|
|
|
|
| COMPANY
INFORMATION |
|
|
| Corporate
Secretaries |
|
| Zaheer A. Shaikh |
|
| Rashid Sadiq |
|
|
| Auditors |
|
| Riaz
Ahmad & Company |
|
| Chartered
Accountants |
|
|
| Legal
Advisors |
|
| Hassan
& Hassan Advocates |
|
|
| Bankers |
|
| Bank
of America NT & SA |
|
| Deutsche
Bank A.G. |
|
| Emirates
Bank International PJSC |
|
| Faysal
Bank Limited |
|
| Habib
American Bank |
|
| Habib
Bank A.G. Zurich |
|
| Habib
Credit and Exchange Bank Limited |
|
| Industrial
Development Bank of Pakistan |
|
| Metropolitan
Bank Limited |
|
| Muslim
Commercial Bank Limited |
|
| National
Development Finance Corporation |
|
| Societe
General -- The French and International Bank |
|
| Soneri
Bank Limited |
|
| Standard
Chartered Bank PLC |
|
| The
Bank of Punjab |
|
| Bank
AI-Habib Limited |
|
|
| Registered
Office |
|
| 83-Babar
Block, New Garden Town, Lahore. |
|
|
| BOARD
OF DIRECTORS |
|
|
| Muhammad Rafi |
|
| Chairman |
|
|
| Nessar Ahmed |
|
| Chief
Executive |
|
|
| Altaf
M. Saleem |
|
| Humayun
Mazhar |
|
| M. Z. Hasan |
|
| Razi-ur-Rehman
Khan |
|
| Tadq Shafi |
|
| Zahid Bashir |
|
|
|
| DIRECTORS
REPORT AND CHIEF EXECUTIVE'S REVIEW |
|
|
| Dear
Shareholders: |
|
| We
are pleased to present the eight Annual Report of Crescent Investment Bank
Limited (CresBank). |
|
| This
report covers the twelve months period ended June 30, 1997. CresBank earned
an after tax |
|
| profit
of Rupees 66.88 million as against Rupees 18.02 million during the last year
same period. |
|
| Performance
during the period under review needs to be seen in the light of the state and |
|
| performance
of the national economy during 1996-97, a synopsis of which is submitted
below: |
|
|
| Economic
Scenario |
|
| Against
the backdrop of 3 per cent annual population growth, the country's economy
remains |
|
| relatively
underdeveloped. Agriculture remains the mainstay of the economy, providing
for 26 per |
|
| cent
of GDP and 50 per cent of employment, while semi processed agricultural goods
account for |
|
| 70
per cent of exports. In particular, the size of the annual cotton crop
remained an important |
|
| determinant
of the economic growth during the year 1996-97 given that cotton exports make
up |
|
| around
60 per cent of exports. Moreover, the economy has grown at a rate below the
expectation. Besides the poor |
|
| weather
conditions and a below expectation cotton crop, the economy has suffered from
poor economic management |
|
| and
domestic political disturbances. As a result GDP fell to the level of 3.1 per
cent during 1996-97 as against 4.6 per cent |
|
| during
1995-96. |
|
|
| The
economy's most pressing problem remained the weak fiscal position of the
public sector. On the expenditure side, |
|
| around
61 per cent of current budgetary spending was taken up by non-productive
outlays for defense and debt servicing |
|
| payments,
with the later component rising rapidly due to recurring fiscal deficits and
rising risk premia on domestic and |
|
| foreign
government debts. Although, total public sector account for only around 23
per cent of GDP, the government's |
|
| fiscal
base is weak with only around 60 per cent of expenditures being covered by
tax receipts, mainly of indirect taxes, |
|
| while
the remainder is funded by foreign aid resources, borrowing from the domestic
banking system and other domestic |
|
| sources.
Moreover, the imposition of high tax rate on a narrow base lead to enhanced
tax evasion, increased corruption |
|
| and
a large black economy. |
|
|
| Government
borrowing from the banking system has also severely impaired the conduct of
monetary policy by the State |
|
| Bank
of Pakistan (SBP). Excessive government borrowing from the banking system in
the year 1996-97 frequently forced |
|
| SBP
to cap M2 growth by either restricting credit growth to the private sector or
drawing down on net foreign assets. This |
|
| has
subjected the banking system, private sector and the economy at large to
periodic liquidity crunches during most of |
|
| the
year 1996-97. |
|
|
| The
severe liquidity crunch pockets throughout the year had an unfavorable effect
on capital market which witnessed |
|
| further
bearish sentiments during the year, although subsequently there has been a
significant improvement. The KSE |
|
| 100
index declined from 1703 points as on June 30, 1996 to 1566 points as at end
of June 1997, a decrease of 8 per cent. |
|
| Market
capitalization as on June 30, 1997 was Rs. 492.88 billion as compared to
371.32 billion (increase 33 per cent) |
|
| mainly
due to listing of new companies. The tone of the market remained highly
speculative and the activity was confined |
|
| to
a few shares. |
|
|
| The
commitment of new government towards implementing structural reforms is
translating into visible improvements in |
|
| economic
and financial discipline. The outcome of this is leading towards renewed
confidence in the country by the |
|
| foreign
investors. Incremental foreign investment flow is finding its way into equity
and project financing. |
|
|
| The
State Bank of Pakistan relaxed the statutory liquidity requirement by 5 per
cent and decreased the discount window |
|
| rate
by 1 per cent which will result in freeing up liquidity for private sector
allocation and reduce borrowing costs. On the |
|
| investment
bank's scenario, restrictions on government securities repo transactions with
commercial banks and raising of |
|
| foreign
currency deposits place these institutions at a distinct disadvantage. The
former restriction, in fact, prevents |
|
| investment
banks from carrying out one of their stated objectives of assisting and
developing money markets. |
|
|
| Financing
Activities |
|
| Our
efforts during the year were again directed towards maintaining a "high
quality low risk" portfolio. Outstanding position |
|
| of
financial assistance as on June 30, 1997 is given below: |
|
|
|
June 30, 1997 |
June 30, 1996 |
Growth over |
|
|
Rupees in |
Rupees in |
1996 |
|
|
million |
million |
(Percentage) |
|
|
|
|
| Fund Based: |
|
7,033.45 |
6,292.93 |
11.77 |
|
| Commercial
Papers |
|
6,625.11 |
6,042.17 |
9.65 |
|
| Project
& Margin Finance/Others |
408.34 |
250.76 |
62.84 |
|
|
| Non-Fund
Based: |
|
1,631.01 |
1,491.74 |
9.34 |
|
| Guarantees/Acceptances |
|
1,611.01 |
1,296.74 |
24.24 |
|
| Underwriting
Commitments |
|
20.00 |
195.00 |
(89.74) |
|
|
| Stock
Market Operations/Investments |
|
| The
return on Bank's investment portfolio was fairly good keeping in view the
poor performance of capital market. During |
|
| the
year 1996-97 the bank earned dividends/capital gains of Rupees 136 million as
against Rupees 143 million during the |
|
| corresponding
period last year. As on June 30, 1997 the Bank's investment in quoted shares
was 1,571 million as against |
|
| Rs.
840 million as on June 30, 1996 showing a net increase of Rs. 731 million
during the period. Your company management |
|
| is
of the opinion that equity investments in the medium to long terms yield
higher returns than any other investing avenues |
|
| though
in the short term returns can be volatile resulting in oscillation of
profits. It is expected that a successful reform |
|
| program
of the new government will considerably ease the external and internal
financing constraints facing the country's |
|
| economy
and significantly enhance the expectation of a potentially bullish medium
term equity market. |
|
|
| During
the year management of your company decided to bifurcate the equity
investment portfolio into short term and |
|
| long
term as it felt that in the case of various investments the prices at which
these shares are quoted are understated |
|
| when
compared to their inherent strength based on the financial position and
operating performance of respective investee |
|
| companies.
Accordingly where the breakup value of a share is higher than the respective
acquisition cost of these shares, |
|
| the
same has been classified as "long term". Your company management
feels that holding these investments will fetch |
|
| realistic
prices in the medium to long term. Against our total long term investments
cost of Rupees 819 million, the |
|
| breakup
value of these investments was Rupees 1,176 million whereas the market value
was Rupees 622 million. However, |
|
| in
the case of short term investments, an amount of Rupees 41 million has been
provided this year to cover the diminution |
|
| in
the value of short term investments. |
|
|
| Resources
Mobilization |
|
| Deposits:
Under the foreign currency deposits scheme, Cresbank has outstanding deposits
of around US Dollars 204.30 |
|
| million
as at June 30, 1997 (1996: US Dollars 203.77 million). Total deposits as at
June 30, 1997 were Rupees 8,155 |
|
| million
as against Rupees 7,488 million as at June 30, 1996. Composition of the
deposits portfolio as at June 30, 1997 is |
|
| shown below: |
|
|
| Legal
and policy constraints continues to hamper the flow of long term funds
particularly from pension and provident fund |
|
| into
Investment Banks. An amendment in the Trust Act 1882 is required to enable us
to mobilize deposit from these |
|
| sources. |
|
|
| Borrowings:
Besides utilization of existing ADD Line, US Dollars 12 million were also
utilized during the year out of US |
|
| Dollars
15 million line of credit provided by International Finance Corporation
(IFC). CresBank is also an eligible PFI |
|
| (Participating
Financial Institution)in the Asian Development Bank (US Dollars 100 million)
and World Bank (US Dollars |
|
| 200
million) lines. In addition, CresBank has at its disposal a standby local
currency credit line of Rupees 115 million. |
|
|
| Balance
Sheet & Operating Results |
|
| Total
assets of the CresBank increased by Rupees 1,383 million (an increase of
15.62 percent) during 1996-97 to |
|
| Rupees
10,235 million. |
|
|
| CresBank
earned an after tax profit to Rupees 66.88 million during the year as against
Rupees 18.02 million last year. The |
|
| composition
of Profit (After Tax) and appropriation thereof is as follows: |
|
|
|
(Rupees in million) |
|
|
1996-97 |
|
(adjusted for 12 months) |
|
| Profit
After Taxation |
|
18.02 |
|
66.88 |
|
| Unappropriated
profit brought forward |
81.50 |
|
77.62 |
|
| Profit
Available for Appropriation |
99.52 |
|
144.50 |
|
|
| Appropriations |
|
| Special
reserve |
|
4.47 |
|
6.20 |
|
| General
reserve |
|
50.20 |
|
- |
|
| Reserve
for contingencies |
|
22.20 |
|
15.70 |
|
| Unappropriated
Profit Carried Forward |
67.63 |
|
77.62 |
|
|
========== |
|
========== |
|
|
| Objectives |
|
| The
Bank's set objectives for 1996-97 included start of a brokerage operation and
floatation of Mutual Funds. Keeping in |
|
| view
the performance of the capital market and of the private sector Mutual Funds
which remained quoted at massive |
|
| discounts
to their offered price, the management had deferred the implementation of the
objectives till conducive environment |
|
| is
created in the country for such activities. |
|
|
| The
matters of financing Locally Manufactured Machinery (LMM) and allowing
Provision for bad debts as a tax deductible |
|
| expenses
are being pursued with SBP and Central Board of Revenue respectively through
the platform of the Investment |
|
| Banks
Association. |
|
|
| Objectives
for the year 1997-98 |
|
| Brokerage
Division & Floatation of Mutual Funds: It may take sometime but the
policies being pursued by the government |
|
| are
expected to put the economy back on the track. As and when the environment is
conducive your company management |
|
| will
start the Brokerage house and launch the mutual fund. |
|
|
| Foreign
Currency Lines of Credit: Efforts are under way for utilization of the
foreign currency lines of credit provided by |
|
| the
various international lending agencies. The high cost of exchange risk cover
is posing a major constraint in early |
|
| utilization
of the lines. |
|
|
| Investment
Banking Advisory Services (IBAS): CresBank intends to play its due role as
investment bank and also |
|
| provide
advisory services in the matters of financial engineering. For this purpose
the Bank has further strengthened the |
|
| division. |
|
|
| Auditors |
|
| The
Auditors Messrs. Riaz Ahmad & Company, Chartered Accountants, retire and
offer themselves for re-election. |
|
|
| We
would also like to thank the State Bank of Pakistan for the continued
guidance and support for the growth of the |
|
| financial
sector. |
|
|
| In
the end, the Directors appreciate the dedication and hardwork put in by the
officers and staff of the Bank. |
|
|
|
| FORM '34' |
|
| Pattern
of Holding of Shares as at 30th June 1997 |
|
|
|
|
Shareholding |
|
Total shares |
|
| No. Of |
|
Held |
|
| Shareholders |
From |
|
To |
|
|
| 327 |
1 |
|
100 |
17276 |
|
| 464 |
101 |
|
500 |
121934 |
|
| 334 |
501 |
|
1000 |
238498 |
|
| 706 |
1001 |
|
5000 |
1498514 |
|
| 114 |
5001 |
|
10000 |
780144 |
|
| 43 |
10001 |
|
15000 |
524119 |
|
| 25 |
15001 |
|
20000 |
413258 |
|
| 26 |
20001 |
|
25000 |
572153 |
|
| 8 |
25001 |
|
30000 |
216216 |
|
| 14 |
30001 |
|
35000 |
444591 |
|
| 8 |
35001 |
|
40000 |
297145 |
|
| 4 |
40001 |
|
45000 |
167590 |
|
| 5 |
45001 |
|
50000 |
241555 |
|
| 1 |
50001 |
|
55000 |
53445 |
|
| 1 |
55001 |
|
60000 |
59000 |
|
| 4 |
60001 |
|
65000 |
253341 |
|
| 1 |
65001 |
|
70000 |
67914 |
|
| 3 |
70001 |
|
75000 |
215901 |
|
| 2 |
75001 |
|
80000 |
153370 |
|
| 2 |
80001 |
|
85000 |
166334 |
|
| 2 |
85001 |
|
90000 |
172028 |
|
| 1 |
95001 |
|
100000 |
97707 |
|
| 1 |
100001 |
|
105000 |
104703 |
|
| 3 |
105001 |
|
110000 |
320676 |
|
| 4 |
115001 |
|
120000 |
469943 |
|
| 3 |
125001 |
|
130000 |
386522 |
|
| 1 |
135001 |
|
140000 |
138173 |
|
| 3 |
145001 |
|
150000 |
444499 |
|
| 1 |
150001 |
|
155000 |
154500 |
|
| 1 |
155001 |
|
160000 |
158180 |
|
| 1 |
175001 |
|
180000 |
177908 |
|
| 1 |
180001 |
|
185000 |
182677 |
|
| 1 |
190001 |
|
195000 |
193327 |
|
| 1 |
200001 |
|
205000 |
202502 |
|
| 1 |
210001 |
|
215000 |
215000 |
|
| 3 |
230001 |
|
235000 |
702335 |
|
| 1 |
265001 |
|
270000 |
267850 |
|
| 1 |
275001 |
|
280000 |
275111 |
|
| 1 |
295001 |
|
300000 |
300000 |
|
| 1 |
320001 |
|
325000 |
323168 |
|
| 1 |
430001 |
|
435000 |
430600 |
|
| 1 |
525001 |
|
530000 |
525855 |
|
| 1 |
550001 |
|
555000 |
550238 |
|
| 1 |
665001 |
|
670000 |
666500 |
|
| 3 |
820001 |
|
825000 |
2466750 |
|
| 1 |
955001 |
|
960000 |
956864 |
|
| 1 |
1055001 |
|
1060000 |
1058645 |
|
| 1 |
1245001 |
|
1250000 |
1249500 |
|
| 1 |
1535001 |
|
1540000 |
1539400 |
|
| 1 |
1890001 |
|
1895000 |
1890350 |
|
| 1 |
2390001 |
|
2395000 |
2393906 |
|
| 1 |
2740001 |
|
2745000 |
2740915 |
|
| 1 |
3455001 |
|
3460000 |
3457158 |
|
| 1 |
4570001 |
|
4575000 |
4574999 |
|
| 1 |
6465001 |
|
6470000 |
6466213 |
|
| ---------- |
---------- |
---------- |
---------- |
---------- |
|
| 2141 |
|
42757000 |
|
| ========== |
========== |
========== |
========== |
========== |
|
|
|
| Categories
of shareholders |
|
|
|
| Type
of Shareholders |
Number |
Shares Held |
Percentage |
|
| Individuals |
|
2021 |
7523062 |
17.59 |
|
| Investment
Companies |
10 |
1139622 |
2.67 |
|
| Insurance
Companies |
8 |
1160646 |
2.71 |
|
| Joint
Stock Companies |
39 |
18433149 |
43.11 |
|
| Financial
Institutions |
23 |
10962810 |
25.64 |
|
| Others
(Breakup given below) |
40 |
3537711 |
8.28 |
|
| ---------- |
---------- |
---------- |
---------- |
---------- |
|
| Total |
|
2141 |
42757000 |
100.00 |
|
| ========== |
========== |
========== |
========== |
========== |
|
|
|
| Others |
|
| Modarabas |
|
22 |
732108 |
1.71 |
|
| Non-Residents |
|
17 |
2794870 |
6.54 |
|
| Trust |
|
1 |
10733 |
0.03 |
|
| ---------- |
---------- |
---------- |
---------- |
---------- |
|
| Total |
|
40 |
3537711 |
8.28 |
|
| ========== |
========== |
========== |
========== |
========== |
|
|
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of Crescent Investment Bank Limited as
at 30 June 1997 and the related |
|
| profit
and loss account and statement of sources and application of funds, together
with the notes forming part thereof, for |
|
| the
year then ended and we state that we have obtained all the information and
explanations which to the best of our |
|
| knowledge
and belief were necessary for the purposes of our audit and, after due
verification thereof, we report that: |
|
|
| (a)
in our opinion, proper books of account have been kept by the company as
required by the Companies Ordinance, |
|
| 1984; |
|
|
| (b)
in our opinion: |
|
|
| i)
the balance sheet and profit and loss account together with the notes thereon
have been drawn up in conformity |
|
| with
the Companies Ordinance, 1984, and are in agreement with the books of account
and are further in |
|
| accordance
with accounting policies consistently applied except for the changes as
stated in note 2.6 with |
|
| which
we concur; |
|
|
| ii)
the expenditure incurred during the year was for the purpose of the company's
business; and |
|
| iii)
the business conducted, investments made and the expenditure incurred during
the year were in accordance |
|
| with
objects of the company; |
|
|
| (c)
in our opinion and to the best of our information and according to the
explanations given to us, the balance |
|
| sheet,
profit and loss account and the statement of sources and application of
funds, together with the notes |
|
| forming
part thereof, give the information required by the companies Ordinance, 1984,
in the manner so required |
|
| and
respectively give a true and fair view of the state of the company's affairs
as at 30 June 1997 and of the |
|
| profit
and the changes in sources and application of funds for the year then ended;
and |
|
|
| (d)
in our opinion, Zakat deductible at source under the Zakat and Ushr
Ordinance, 1980 was deducted by the |
|
| company
and deposited in the Central Zakat Fund established under section 7 of the
Ordinance. |
|
|
|
| BALANCE
SHEET AS AT 30 JUNE 1997 |
|
|
|
Note |
Rupees in Thousand |
|
|
1997 |
1996 |
|
| SHARE
CAPITAL AND RESERVES |
|
|
| Authorized
capital |
|
| 100
000 000 (1996:50 000 000) Ordinary shares |
|
| of
Rupees 10 each |
|
1,000,000 |
500,000 |
|
|
========== |
========== |
|
| issued,
subscribed and paid up capital |
|
| 42
757 000 ordinary shares of Rupees 10 each |
3 |
427,570 |
427,570 |
|
|
| Reserves
and surplus |
|
|
| Capital
reserves |
|
4 |
353,900 |
331,700 |
|
| Revenue
reserves |
|
5 |
239,470 |
184,800 |
|
| Unappropriated
profit |
|
|
67,627 |
77,622 |
|
|
|
---------- |
---------- |
|
|
|
660,997 |
594,122 |
|
|
|
---------- |
---------- |
|
|
|
1,088,567 |
1,021,692 |
|
|
|
|
| DEPOSITS
OF FIXED MATURITIES |
|
6 |
8,155,341 |
7,488,319 |
|
| BORROWINGS |
|
7 |
518,163 |
35,298 |
|
|
|
|
| OTHER
LIABILITIES AND PROVISIONS |
|
|
|
|
|
|
| Liabilities
against assets subject to finance lease |
8 |
6,984 |
5,711 |
|
| Profit
accrued on deposits/borrowin9s |
|
|
312,370 |
196,628 |
|
| Accrued
and other liabilities |
|
9 |
153,186 |
104,303 |
|
|
|
472,540 |
306,642 |
|
|
|
|
| COMMITMENTS
AND CONTINGENTS |
|
|
|
| LIABILITIES |
|
10 |
|
|
---------- |
---------- |
|
|
10,234,611 |
8,851,951 |
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
| BALANCES
WITH BANKS AND |
|
| IN HAND |
|
11 |
130,045 |
343,328 |
|
|
|
|
|
| INVESTMENTS |
|
|
|
|
|
|
| Shares/certificates |
|
|
|
|
|
|
| Quoted |
|
12 |
1,570,629 |
840,107 |
|
| Unquoted |
|
13 |
107,966 |
108,512 |
|
|
|
|
| Other
investments |
|
|
|
|
|
|
| Quoted |
|
14 |
118,325 |
99,180 |
|
| Unquoted |
|
15 |
425,995 |
622,366 |
|
|
|
---------- |
---------- |
|
|
|
2,222,915 |
1,670,165 |
|
|
|
|
| COMMERCIAL
PAPERS |
|
16 |
6,625,108 |
6,042,172 |
|
| LOANS
AND ADVANCES |
|
17 |
408,337 |
250,760 |
|
| DEFERRED
COSTS |
|
18 |
129 |
419 |
|
|
|
|
|
| OTHER ASSETS |
|
|
|
| Tangible
fixed assets |
|
|
|
| Operating
fixed assets |
|
19 |
116,447 |
39,462 |
|
| Assets
subject to finance lease |
|
20 |
6,973 |
5,498 |
|
|
|
---------- |
---------- |
|
|
123,420 |
44,960 |
|
| Advances,
deposits, prepayments and |
|
|
|
| sundry
receivables |
|
21 |
724,657 |
500,147 |
|
|
---------- |
---------- |
|
|
848,077 |
545,107 |
|
|
---------- |
---------- |
|
|
10,234,611 |
8,851,951 |
|
|
========== |
========== |
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| for
the year ended 30 June 1997 |
|
|
|
Note |
Rupees in Thousand |
|
|
1997 |
1996 |
|
| INCOME |
|
|
| Discount/return/profit
on commercial papers, |
|
| Loans
and advances |
|
832,664 |
697,488 |
|
| Income
from investments |
|
| Dividend |
|
49,171 |
17,459 |
|
| Profit/return
on other investments and bank deposits |
|
274,692 |
348,556 |
|
| Gain
on sale of investments |
|
86,599 |
125,512 |
|
|
---------- |
---------- |
|
|
410,462 |
491,527 |
|
| Fee,
commission and other income |
|
22 |
29 106 |
24,665 |
|
|
|
---------- |
---------- |
|
|
1,272,232 |
1,213,680 |
|
| EXPENDITURE |
|
| Profit/return
on deposits/borrowings and other charges |
|
1,08,062 |
950,990 |
|
| Administrative
and operating expenses |
|
23 |
72,634 |
64,416 |
|
|
|
---------- |
---------- |
|
|
|
1 157 696 |
1 015,406 |
|
|
|
---------- |
---------- |
|
| Operating
Income Before Provisions |
|
|
114 536 |
198,274 |
|
| Provision
for diminution in Value of investments |
|
40 661 |
165,250 |
|
|
|
---------- |
---------- |
|
| Profit
before taxation |
|
|
73 875 |
33,024 |
|
| Provision
for taxation |
|
24 |
7 000 |
15,005 |
|
