| American Express Bank Limited |
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| Annual
Report 1998 |
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| AUDITORS'
REPORT TO THE DIRECTORS |
|
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| We
have audited the annexed balance sheet of AMERICAN EXPRESS BANK LIM1TED -
PAKISTAN BRANCHES as at December 31, 1998 and the related profit and loss
account and |
|
| the
cash flow statement, 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, found them satisfactory and, we report that: |
|
|
| (a)
in our opinion proper books of account have been kept by AMERICAN EXPRESS
BANK LIMITED - PAKISTAN BRANCHES 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 Banking Companies Ordinance, 1962,
and 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 |
|
| change
in accounting policy referred to in note 3 to the financial statements, with
which we concur; |
|
|
| (ii)
the expenditure incurred during the year was for the purpose of the Branches'
business; and |
|
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| (iii)
the business conducted, investments made and the expenditure incurred during
the year were in accordance with the objects of the Branches and the
transactions of the |
|
| Branches
which have come to our notice have been within the powers of the Branches; |
|
|
| c)
in our opinion and to the best of our information and according to the
explanations given to us the balance sheet and the profit and loss account
and the cash flow statement, |
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| together
with the notes forming part thereof give the information required by the
Banking Companies Ordinance, 1962, and the Companies Ordinance 1984, in the
manner so |
|
| required
and give a true and fair view of the state of the Branches' affairs as at
December 31, 1998 and its true balance of the profit and the cash flow
statement for the year the |
| ended; and |
|
|
| d)
in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance
1980, was deducted by the Branches and deposited in the Central Zakat Fund
established under |
|
| section
7 of that Ordinance. |
|
|
| Karachi |
|
Ford, Rhodes, Robson, Morrow |
|
| March
27, 1999 |
|
Chartered Accountants |
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|
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| BALANCE
SHEET AS AT DECEMBER 31, 1998 |
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|
Note |
1998 |
1997 |
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|
Rupees in
'000 |
|
|
| ASSETS |
|
|
|
|
|
| CASH |
|
|
5 |
2,286,189 |
2,542,279 |
|
|
| BALANCES
WITH OTHER BANKS |
|
6 |
16,300 |
26,871 |
|
|
| INVESTMENTS |
|
|
7 |
1,805,068 |
5,197,496 |
|
|
| ADVANCES
- NET OF PROVISIONS |
|
8 |
5,312,122 |
6,630,054 |
|
|
| OPERATING
FIXED ASSETS |
|
9 |
114,752 |
94,124 |
|
|
| OTHER
ASSETS |
|
10 |
946,607 |
1,098,961 |
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|
---------- |
---------- |
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10,481,038 |
15,589,785 |
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| LIABILITIES |
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| DEPOSITS
AND OTHER ACCOUNTS |
|
11 |
8,013,251 |
12,625,251 |
|
|
| BORROWINGS
FROM OTHER BANKS, AGENTS, ETC. |
12 |
883,305 |
959,971 |
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|
| BILLS
PAYABLE |
|
|
201,061 |
421,855 |
|
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| OTHER
LIABILITIES |
|
13 |
1,327,968 |
1,444,203 |
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|
---------- |
---------- |
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|
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|
10,425,585 |
15,451,280 |
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|
|
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|
---------- |
---------- |
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| NET ASSETS |
|
|
|
|
55,453 |
138,505 |
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|
========== |
========== |
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| REPRESENTED
BY: |
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| HEAD
OFFICE CAPITAL ACCOUNT |
|
14 |
|
| UNREMITTED
PROFIT |
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|
55,453 |
138,505 |
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---------- |
---------- |
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55,453 |
138,505 |
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========== |
========== |
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| MEMORANDUM
ITEMS: |
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| BILLS
FOR COLLECTION |
|
15 |
688,787 |
742,788 |
|
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| ACCEPTANCES,
ENDORSEMENTS AND OTHER |
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| OBLIGATIONS |
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|
242,623 |
2,185,573 |
|
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| CONTINGENT
LIABILITIES AND COMMITMENTS |
16 |
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| The
annexed notes form an integral part of these accounts. |
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|
Sd/- |
|
Sd/- |
|
|
TAWFIQ A. HUSAIN |
|
ALTAF RAJABALLY |
|
|
SENIOR DIRECTOR AND |
|
DIRECTOR AND COUNTRY |
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|
COUNTRY MANAGER |
|
CONTROLLER |
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| PROFIT
AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31 |
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|
Note |
1998 |
1997 |
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|
Rupees in '000 |
|
|
|
|
|
|
|
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| Mark-up/interest
and discount and/or return earned |
1,367,047 |
1,846,009 |
|
| Less:
Cost/Return on deposits, borrowings etc. |
|
1,210,482 |
1,356,904 |
|
|
|
---------- |
---------- |
|
|
|
|
|
156,565 |
489,105 |
|
|
|
|
|
---------- |
---------- |
|
| Fees,
commission and brokerage |
|
|
272,524 |
281,298 |
|
| Other
operating income |
|
17 |
81,592 |
94,628 |
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|
---------- |
---------- |
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|
354,116 |
375,926 |
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|
---------- |
---------- |
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510,681 |
865,031 |
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| Operating
expenses: |
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|
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| Administrative
expenses |
|
18 |
440,881 |
529,370 |
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| Provisions
against non-performing advances |
8.2 |
33,569 |
18,789 |
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|
|
---------- |
---------- |
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|
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|
(474,450) |
(548,159) |
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|
---------- |
---------- |
|
|
|
36,231 |
316,872 |
|
| Other
income |
|
19 |
4,103 |
8,172 |
|
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|
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|
---------- |
---------- |
|
| Profit
before taxation |
|
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|
40,334 |
325,044 |
|
| Taxation
- current |
|
20 |
(123,386) |
(212,848) |
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|
---------- |
---------- |
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| (Loss)/Profit
after taxation |
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|
(83,052) |
112,196 |
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| Unremitted
profit brought forward |
|
|
138,505 |
177,767 |
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|
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|
---------- |
---------- |
|
|
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|
55,453 |
289,963 |
|
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| Remittance
to Head Office |
|
|
- |
(151,458) |
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|
---------- |
---------- |
|
| Unremitted
profit carried forward |
|
|
55,453 |
138,505 |
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
Sd/- |
|
Sd/- |
|
|
TAWFIQ A. HUSAIN |
|
ALTAF RAJABALLY |
|
|
SENIOR DIRECTOR AND |
|
DIRECTOR AND COUNTRY |
|
|
COUNTRY MANAGER |
|
CONTROLLER |
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|
|
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|
|
| CASH
FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1998 |
|
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|
1998 |
1997 |
|
|
|
|
Rupees in
'000 |
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
|
|
| Profit
before taxation |
|
40,334 |
325,044 |
|
| Adjustment
for non-cash charges: |
|
|
|
| Depreciation |
|
|
|
29,479 |
28,034 |
|
| Provision
against non-performing advances |
|
33,569 |
18,789 |
|
| Net
profit on sale of fixed assets |
|
(4,103) |
(8,172) |
|
|
|
---------- |
---------- |
|
|
|
58,945 |
38,651 |
|
|
|
---------- |
---------- |
|
|
|
99,279 |
363,695 |
|
| Decrease/(Increase)
in operating assets: |
|
|
| Government
securities |
|
|
3,392,428 |
(1,626,461) |
|
| Advances |
|
|
|
1,284,363 |
536,522 |
|
| Other
assets (excluding advance tax) |
|
409,970 |
(102,455) |
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
5,086,761 |
(1,192,394) |
|
| Increase/(decrease)
in operating liabilities: |
|
|
|
| Deposits
and other accounts |
|
(4,612,000) |
788,410 |
|
| Bills
payable |
|
(220,794) |
184,056 |
|
| Other
liabilities |
|
|
116,235 |
232,089 |
|
|
|
---------- |
---------- |
|
|
|
(4,949,029) |
1,204,555 |
|
|
|
---------- |
---------- |
|
| Cash
flow before tax |
|
|
237,011 |
375,856 |
|
| Income-tax
paid |
|
|
(381,002) |
(387,378) |
|
|
|
---------- |
---------- |
|
| Net
cash (outflow) from operating activities |
|
(143,991) |
(11,522) |
|
|
|
|
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
|
|
| Fixed
capital expenditure |
|
|
(62,495) |
(28,321) |
|
| Sale
proceeds of fixed assets |
|
16,491 |
13,909 |
|
|
|
---------- |
---------- |
|
| Net
cash used in investing activities |
|
(46,004) |
(14,412) |
|
|
|
|
|
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
|
|
| Borrowings
from other banks, agents etc. |
|
(76,666) |
(45,680) |
|
| Remittance
to Head Office |
|
- |
(151,458) |
|
|
|
|
|
---------- |
---------- |
|
| Net
cash (outflow) from financing activities |
|
(76,666) |
(197,138) |
|
|
|
---------- |
---------- |
|
| (Decrease)
in cash and cash equivalents for the year |
(266,661) |
(223,072) |
|
| Cash
and cash equivalents at the beginning of the year |
2,569,150 |
2,792,222 |
|
|
|
|
---------- |
---------- |
|
| Cash
and cash equivalents at the end of the year |
2,302,489 |
2,569,150 |
|
|
|
|
========== |
========== |
|
|
|
|
|
|
| Cash
and cash equivalents |
|
|
|
| Cash |
|
|
2,286,189 |
2,542,279 |
|
| Balances
with other banks |
|
16,300 |
26,871 |
|
|
|
---------- |
---------- |
|
|
|
2,302,489 |
2,569,150 |
|
|
|
========== |
========== |
|
|
|
Sd/- |
|
|
Sd/- |
|
|
TAWFIQ A. HUSAIN |
|
|
ALTAF RAJABALLY |
|
|
SENIOR DIRECTOR AND |
|
|
DIRECTOR AND COUNTRY |
|
|
COUNTRY MANAGER |
|
|
CONTROLLER |
|
|
|
|
|
|
|
|
|
|
|
| NOTES
TO THE ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 1998 |
|
|
|
|
|
|
| 1.
STATUS AND NATURE OF BUSINESS |
|
| American
Express Bank was incorporated in the U.S.A. Pakistan operations com- |
|
| menced
in 1948 and is currently being conducted in Pakistan through branches in |
|
| Karachi,
Lahore and Islamabad. It is engaged in banking business permitted under the |
|
| Banking
Companies Ordinance, 1962. |
|
|
|
|
| 2.
BASIS OF PRESENTATION |
|
|
| These
financial statements have been prepared in accordance with the requirements
of |
|
| the
State Bank of Pakistan (under the powers conferred upon it under the Banking |
|
| Companies
Ordinance, 1962) to conform with BPRD Circular No. 31 dated August 13, |
|
| 1997. |
|
|
|
|
|
|
| 3.
CHANGE IN ACCOUNTING POLICY |
|
|
| From
the current year, in these financial statements, Head Office expenses have
not |
|
| been
accounted for. This change has been made to reflect a more realistic position
in |
|
| the
financial statements. Had this change not been made, there would have been a |
|
| decrease
in profit before tax of Rs 153 million. |
|
|
| 4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|
|
| 4.1
Accounting convention |
|
|
| These
financial statements are prepared under the historical cost convention. |
|
|
| 4.2
Staff retirement benefits |
|
|
| The
bank operates funded gratuity and provident and schemes for all its permanent |
|
| employees.
Contributions are made in accordance with the respective funds' rules. The |
|
| gratuity
fund balance is considered adequate to meet the current liability in respect
of |
|
| this
obligation. |
|
|
|
|
| 4.3
Taxation |
|
|
|
| Current |
|
|
|
|
|
|
|
| Provision
for current taxation is based on taxable income at the current rates of
taxation |
|
| after
taking into account tax credits available, if any. |
|
|
|
|
| Deferred |
|
|
|
| Deferred
taxation is computed and recorded, on all material timing differences except |
|
| those
which are considered not likely to reverse in the foreseeable future.
Deferred tax |
|
| assets
are not accounted for. |
|
|
|
|
|
| 4.4
Advances |
|
|
|
| Provisions
for advances (and relevant mark-up) are made against specific non-perform- |
|
| ing
advances, essentially in compliance with the requirements of the Prudential |
|
| Regulations
of the State Bank of Pakistan. Advances and mark-up are stated net of pro- |
|
| visions
for possible losses and reserved mark-up, respectively. |
|
|
| 4.5
Investments |
|
|
|
| Investments
are carded at cost adjusted for amortisation of premium or discount (where' |
|
| applicable). |
|
|
|
|
|
|
| The
bank also enters into transactions of repo/reverse repo of securities at
contracted |
|
| rates
for specific periods of time. These are recorded as follows: |
|
|
|
| (a)
In the case of sale under repurchase obligations the securities are deleted
from the |
|
| books
and the charges arising from the differential in sale and repurchase values
are |
|
| accrued
on a pro-rata basis and recorded as expense. Upon repurchase the securities |
|
| are
reinstated. |
|
|
|
|
|
| (b)
In the case of purchase under resale obligations the securities are booked at
the contracted |
|
| purchase
price and the differential of the contracted purchase and resale price is
amortised |
|
| over
the period of their contract and recorded as income. |
|
|
|
| 4.6
Operating fixed assets and depreciation |
|
|
| Fixed
assets are stated at cost less accumulated depredation. Cost represents their
purchase |
|
| cost,
together with any incidental costs of acquisition. Depredation is calculated
so as to write |
|
| off
the assets over their estimated useful lives. |
|
|
|
| 4.7
Revenue recognition |
|
|
|
| Interest/mark-up
income is recognised on an accrual basis except if the recovery is con- |
|
| sidered
doubtful, recognition is deferred until it is received. Commission and fees
are |
|
| generally
recognised as income at the time of affecting the transaction to which they |
|
| relate. |
|
|
|
|
| 4.8
Foreign currencies |
|
|
|
| Assets
and liabilities in foreign currencies have been translated into rupees at the
rates |
|
| of
exchange approximating to those ruling at the balance sheet date except those
in |
|
| respect
of which forward exchange cover is available. Exchange gains and losses are |
|
| included
in income currently. |
|
|
|
|
|
|
|
|
|
1998 |
1997 |
|
|
|
Rupees in
'000 |
|
| 5. CASH |
|
|
|
|
|
| In hand: |
|
|
|
| - Local currency |
|
45,263 |
38,963 |
|
| - Foreign currencies |
|
85,923 |
119,666 |
|
|
|
---------- |
---------- |
|
|
|
131,186 |
158,629 |
|
| With
State Bank of Pakistan: |
|
|
|
| Special
deposit account |
|
690,000 |
881,000 |
|
| Capital
deposited in foreign currency |
|
1,007,299 |
964,599 |
|
| Current
accounts |
|
|
457,704 |
538,051 |
|
|
|
|
|
---------- |
---------- |
|
|
|
2,155,003 |
2,383,650 |
|
|
|
---------- |
---------- |
|
|
|
2,286,189 |
2,542,279 |
|
|
|
========== |
========== |
|
|
|
|
|
| 6.
BALANCES WITH OTHER BANKS |
|
|
|
| In
Pakistan: |
|
|
|
|
| -
Current account |
|
|
|
15,894 |
24,133 |
|
| Outside
Pakistan: |
|
|
|
|
| Current
account |
|
|
|
406 |
2,738 |
|
|
|
|
|
---------- |
---------- |
|
|
|
16,300 |
26,871 |
|
|
|
========== |
========== |
|
|
|
|
|
| 7.
INVESTMENTS |
|
|
|
| Investment
securities - unquoted: |
|
|
|
| Federal
and Provincial Government securities: |
|
|
| Federal
Investment Bonds |
|
|
- |
650,000 |
|
| Government
loan |
|
|
379,796 |
387,496 |
|
| Treasury
bills |
|
|
1,417,146 |
- |
|
| Short-Term
Federal Bonds |
|
- |
4,160,000 |
|
|
|
---------- |
---------- |
|
|
|
1,796,942 |
5,197,496 |
|
| Investment
securities - quoted: |
|
|
|
| Term
Finance Certificate |
|
8,126 |
- |
|
|
|
---------- |
---------- |
|
|
|
1,805,068 |
5,197,496 |
|
|
|
========== |
========== |
|
|
|
|
| Book
value of unquoted investments Rs. 1,796.942 million. |
|
|
| Market
value of quoted investments Rs. 8,176 million. |
|
|
|
|
|
| 8. ADVANCES |
|
|
|
| Loans,
cash credits, overdrafts etc. |
|
|
| In Pakistan |
|
5,205,342 |
6,095,701 |
|
| Bills
discounted and purchased: |
|
|
|
| Payable
in Pakistan |
|
180,505 |
315,234 |
|
| Payable
outside Pakistan |
|
48,562 |
307,837 |
|
|
|
---------- |
---------- |
|
|
|
229,067 |
623,071 |
|
|
|
---------- |
---------- |
|
|
|
5,434,409 |
6,718,772 |
|
| Provisions
for non-performing advances - note 8.2 |
(122,287) |
(88,718) |
|
|
|
---------- |
---------- |
|
|
|
5,312,122 |
6,630,054 |
|
|
|
========== |
========== |
|
| Gross
advances include Rs 122.618 million which have been placed on non-performing |
|
| status,
according to the prudential regulations of the State Bank of Pakistan. |
|
|
|
|
|
| 8.1
Particulars of advances |
|
|
|
|
| In
local currency |
|
|
5,263,560 |
6,322,217 |
|
| in
foreign currencies |
|
|
48,562 |
307,837 |
|
|
|
|
---------- |
---------- |
|
|
|
|
5,312,122 |
6,630,054 |
|
|
|
|
========== |
========== |
|
| Debts
considered good in respect of |
|
|
|
| which
the bank is fully secured |
|
|
5,189,507 |
6,424,793 |
|
|
|
|
|
|
| Debts
considered good for which the |
|
|
|
|
|
| bank
holds no other security than the |
|
|
|
|
| debtors'
personal security |
|
|
13,777 |
9,268 |
|
|
|
|
|
|
| Debts
considered good secured by the |
|
|
|
|
| personal
liabilities of one or more parties |
|
|
|
|
| in
addition to the personal security of |
|
|
|
|
| the debtors |
|
|
108,838 |
195,993 |
|
|
|
---------- |
---------- |
|
|
|
5,312,122 |
6,630,054 |
|
|
|
|
|
|
========== |
========== |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance |
Maximum total amount of |
|
|
|
|
Outstanding |
advances including
temporary |
|
|
|
|
December |
advances granted during |
|
|
|
|
31, 1998 |
the year |
|
|
|
|
Rupees in
'000 |
|
| Debts
due by directors or executives |
|
| of
the bank or any of them either |
|
| severally
or jointly with any other |
|
| persons |
|
|
68,760 |
68,760 |
|
|
|
|
| 8.2
Particulars of provisions against non-performing advances |
|
|
|
|
|
|
|
Total |
|
| Specific |
|
1998 |
1997 |
|
|
|
|
|
Rupees in
'000 |
|
|
|
|
|
| Opening
balance |
|
|
88,718 |
69,929 |
|
|
|
| Charge
for the year |
|
|
33,569 |
18,789 |
|
|
|
|
|
|
|
---------- |
---------- |
|
|
|
| Closing
balance |
|
|
122,287 |
88,718 |
|
|
|
|
|
|
|
========== |
========== |
|
|
|
|
|
|
|
|
|
|
|
|
| Provisions
against: |
|
|
|
| Advances
to banks |
|
- |
- |
|
|
|
| Advances
to others |
|
|
122,287 |
88,718 |
|
|
|
|
---------- |
---------- |
|
|
|
122,287 |
88,718 |
|
|
|
========== |
========== |
|
|
|
|
| 9.
OPERATING FIXED ASSETS |
|
|
|
|
|
|
|
|
COST |
|
DEPRECIATION |
|
Book |
Rate of |
|
|
At |
Additions/ |
At |
At |
Charge for |
At |
value at |
depreciation |
|
|
January 1, |
(deletions) |
December |
January 1, |
the year |
December |
December |
% |
|
|
1998 |
|
31, 1998 |
1998 |
|
31, 1998 |
31, 1998 |
|
|
|
