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Allied Bank of Pakistan Limited
Annual Report 1999
Performance Highlights 1999
Rupees in million
Authorised Capital Rs. 5,000
Capital & Reserves Rs. 3,012
Deposits Rs. 93,107
Advances Rs. 55,264
Investments Rs. 26,775
Total Assets (Less contra) Rs. 106,926
International Business (Import/Export) Rs. 52,832
Home Remittances Rs. 5,206
Clientele (Nos). Rs. 3,830,562
Branch Network (Nos.) 929
Board of Directors
Rashid M. Chaudhry
Chairman & Chief Executive
M. Salim Shaikh
Director
S. Jauhar Husain
Director
I.A. Usmani
Director
Tanwir Ali Agha
Director
Shaukat Hayat Durrani
Director
Mukhtar Ali Malik
Director
Mohammadi Yaqoob
Company Secretary
Tahir Saeed Effendi
Executive Vice President
&
Chief Finance Division
Share Registrars
Share Division
Allied Bank
of Pakistan Ltd.
17th Floor, NIC Building,
Abbasi Shaheed Road,
Karachi.
Head Office
8-Kashmir/Egerton Road,
Lahore
Central Office
NIC Building, (12-17)
Abbasi Shaheed Road,
Off Sharae Faisal,
Karachi.
AUDITORS REPORT TO THE MEMBERS
We have audited, in accordance with the International Standards on Auditing, the annexed Balance
sheet of Allied Bank of Pakistan Limited as at December 31, 1999 and the related profit and loss
account and the cash flow statement, expressed in Pak Rupees, together with the notes forming part
thereof for the year then ended, in which are incorporated the unaudited certified returns from the
branches except for twenty branches which have been audited by us, and four branches audited by
auditors abroad, 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 verifica-
tion thereof, found them satisfactory and, we report that:
(a) in our opinion, proper books of account have been kept by the Bank as required by the
Companies Ordinance, 1984, and the returns referred to above received from the branches, as
subsequently reviewed and amended at the head office, have been found adequate for the pur-
poses of our audit;
(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;
(ii) the expenditure incurred during the year was for the purpose of the Bank's business; and
(iii) the business conducted, investments made and the expenditure incurred during the
year were in accordance with the objects of the Bank and the transactions of the Bank
which have come to our notice have been within the powers of the Bank;
(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 cash flow statement, 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 respectively give a true
and fair view of the state of the Bank's affairs as at December 31, 1999 and its true balance of
the profit, and cash flows for the year then ended;
(d) in our opinion, Zakat deductible at source under the Zakat and Ushr Ordinance, 1980, was
deducted by the Bank and deposited in the Central Zakat Fund established under Section 7 of
that Ordinance; and
Without qualifying our opinion, we draw attention to note 10.1 of the financial statements. Amounts paid
to the employees under the optional retirement scheme have been deferred due to reasons stated in
that note.
KHALID MAJID HUSAIN RAHMAN RAHIM IQBAL RAFIQ & CO.
Chartered Accountants Chartered Accountants
Karachi Karachi
BALANCE SHEET AS AT DECEMBER 31, 1999
(Rs. In '000)
Note 1999 1998
ASSETS
Cash 4 8,601,193 7,646,937
Balance with other banks 5 1,757,510 1,878,798
Money at call and short notice 300,000 100,000
Investments 6 26,774,766 25,605,470
Advances - Net of provision 7 55,263,762 42,719,179
Operating fixed assets 8 3,062,045 2,488,619
Capital work-in-progress 8.3 44,246 37,472
Net Investment in finance lease 9 34,415 53,707
Other assets 10 11,088,394 8,827,987
------------------ ------------------
106,926,331 89,358,167
LIABILITIES
Deposits and other accounts 11 93,107,291 76,541,153
Borrowings from other banks, agents, etc. 12 7,144,163 6,243,517
Bills payable 1,073,491 1,084,151
Other liabilities 13 2,588,936 2,487,440
------------------ ------------------
103,913,881 86,356,261
------------------ ------------------
Net Assets 3,012,450 3,001,906
========== ==========
REPRESENTED BY
Share capital 14 1,063,156 1,063,156
Reserve fund and other reserves 15 480,760 455,760
Unappropriated profit 1,638 16,094
Shareholders' equity 15 1,545,554 1,535,010
Surplus on revaluation of fixed assets 8.1 1,466,896 1,466,896
------------------ ------------------
3,012,450 3,001,906
========== ==========
MEMORANDUM ITEMS
Bills for collection 16 8,142,388 10,910,897
Acceptances, endorsements and other obligations 18,360,244 13,354,826
Contingent liabilities and commitments 17
The annexed notes form an integral part of these financial statements.
Rashid M. Chaudhry
Chairman
M. Salim Shaikh S. Jauhar Husain I.A. Usmani
Director Director Director
Tanwir Ali Agha Shaukat Hayat Durrani Mukhtar Ali Malik
Director Director Director
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 1999
(Rs. In '000)
Note 1999 1998
Mark-up/interest and discount and/or return earned 7,287,432 6,059,060
Less: Cost/return on deposits, borrowings, etc. 6,953,006 5,289,971
334,426 769,089
Fees, commissions and brokerage 358,997 426,229
Profit from dealing securities 1,172,024 1,033,310
Profit from investment securities 971,956 755,170
Dividend income 21,791 14,401
Other operating income 18 995,310 607,820
------------------ ------------------
3,520,078 2,836,930
------------------ ------------------
3,854,504 3,606,019
Operating expenses
Administrative expenses 19 3,772,889 3,396,440
Provision (written back)/made against
Non-performing advances 7.2 (53,131) (254,985)
Loss for diminution in the value of investments -- 218,398
Other provisions -- 36,587
------------------ ------------------
3,719,758 3,396,440
------------------ ------------------
134,746 209,579
Other income 20 64,356 88,017
------------------ ------------------
199,102 297,596
Other charges 21 128,004 128,004
------------------ ------------------
Profit before taxation 71,098 169,592
Taxation 22 60,544 150,000
------------------ ------------------
Profit after taxation 10,544 19,592
Unappropriated profit brought forward 16,094 502
------------------ ------------------
Profit available for appropriation 26,638 20,094
Appropriations:
Transfer to statutory reserve 25,000 4,000
------------------ ------------------
Unappropriated profit forward 1,638 16,094
========== ==========
The annexed notes form an integral part of these financial statements.
Rashid M. Chaudhry
Chairman
M. Salim Shaikh S. Jauhar Husain I.A. Usmani
Director Director Director
Tanwir Ali Agha Shaukat Hayat Durrani Mukhtar Ali Malik
Director Director Director
CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1999
(Rs. In '000)
Note 1999 1998
Cash Flow From Opening Activities
Profit before taxation 71,098 169,592
Less: Profit from investments 971,956 755,170
Dividend income 21,791 14,401
------------------ ------------------
(922,649) (599,979)
Adjustment for non-cash charges
Depreciation 238,473 125,381
Provision against non-performing advances (53,131) (254,985)
(Reversal)/provision on other assets -- 218,398
Amortization of deferred cost -- 36,587
Profit on disposal of fixed assets 128,004 128,004
Profit on disposal of investment (27,215) (21,340)
(16,489) (64)
------------------ ------------------
269,642 231,981
------------------ ------------------
(653,007) (367,998)
(Increase) in operating assets
Advances (12,574,491) (6,232,837)
Other assets (excluding advance tax) (1,314,557) (1,238,302)
------------------ ------------------
(13,889,048) (7,471,139)
Increase (decrease) in operating liabilities
Deposits and other accounts 16,566,138 13,111,444
Bills payable (10,660) 281,784
Other liabilities 101,496 746,095
------------------ ------------------
16,656,974 14,139,323
------------------ ------------------
Cash flow before tax 2,114,919 6,300,186
Income tax paid (1,118,310) (1,072,808)
------------------ ------------------
Net cash flow from operating activities 996,609 5,227,378
Cash Flow From Investing Activities
Net (purchase)/sale of investments (1,077,741) (5,631,105)
Profit from investments 971,956 755,170
Dividend received 21,791 14,401
Net proceeds of finance lease 11,167 41,115
Fixed capital expenditure (828,653) (342,227)
Sale proceeds of fixed assets 37,195 84,865
------------------ ------------------
Net cash used in investing activities (864,285) (5,077,781)
Cash Flow From Financing Activities
Borrowings from other banks, agents etc. 900,646 1,328,959
------------------ ------------------
Net cash flow from financing activities 900,646 1,328,959
------------------ ------------------
Increase/(Decrease) in Cash and Cash Equivalents during the year 1,032,970 1,478,556
Cash and Cash Equivalents at the beginning of period 9,625,733 8,147,177
------------------ ------------------
Cash and Cash Equivalents at end of the period 10,658,703 9,625,733
========== ==========
Rashid M. Chaudhry
Chairman
M. Salim Shaikh S. Jauhar Husain I.A. Usmani
Director Director Director
Tanwir Ali Agha Shaukat Hayat Durrani Mukhtar Ali Malik
Director Director Director
NOTES TO THE FINANCING STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999
1. Status and Nature of Business
Allied Bank of Pakistan Limited (the Bank) was incorporated in Pakistan and is a scheduled bank
engaged in commercial banking and related services. The Bank was operating as a nationalized
bank fully controlled by the Government of Pakistan (GOP) until September 11, 1991 when the,,
GOP handed over the management of the Bank to the Bank's employees. The GOP has since dis-
invested 51% of its shareholding to the employees. The bank has 925 (1998: 925) branches in
Pakistan and 4 (1998: 4) overseas branches.
2. Basis of Presentation
2.1 These financial statements have been prepared in accordance with the requirements of BPRD
Circular No. 31 dated August 13, 1997 issued by the State Bank of Pakistan (SBP). This circular
has amended the Second Schedule to the Banking Companies Ordinance, 1962.
2.2 In accordance with the directives of the GOP regarding the shifting of the banking system to Islamic
modes, the SBP has issued various circulars from time to time. Permissible form of trade-related
mode of financing include purchase of goods by the Bank from its customers and immediately resale
to them at appropriate mark-up in price on deferred payment basis. 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 utilized and the appropriate portion of mark-up thereon.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3.1 Historical Cost Convention
These financial statements have been prepared under the historical cost convention as modified by
revaluation of certain fixed assets as indicated in note 8.1.
3.2 Staff Retirement Benefits
The Bank operates an approved funded pension scheme for eligible employees. Contributions to
the fund are made to discharge the liability on the basis of actuarial valuation. The principal
assumptions used for actuarial valuation are as follows:
Salary escalation 6% per annum
Pension escalation 0% per annum
Discount rate 8% per annum
Withdrawal 2% per annum upto age 40
Further, the Bank also operates an unfunded gratuity scheme for those employees who have not
opted for the pension scheme.
3.3 Taxation
Current
Provision for current taxation is based on taxable income at current rate of taxation after taking into
account tax rebates, if any.
Deferred
The Bank accounts for deferred taxation on major timing differences using the liability method
Deferred tax debits are recognized when there is a reasonable expectation of realization.
3.4 Advances
Advances are stated at their principal amount less provision for balances considered doubtful.
Specific provisions are made against advances if their recovery is in doubt and additional provisions
are made in accordance with the requirements specified in the Prudential Regulations issued by the
SBP.
Uncollectible advances are recognized as expense where full and final settlements are made,
and/or there are no chances of recoveries.
3.5 Investments
Long term investments in listed securities are carried at cost. Provisions are made for other than
temporary diminution in the value of investments. Short term investments in listed securities are valued
at the lower of cost and market value determined on an aggregate portfolio basis.
Investments in unlisted securities are stated at cost less provision for diminution, other than temporary
in value thereof, determined by using their breakup values.
Securities issued by the Federal and Provincial Governments are shown at amortized values and
accordingly difference between face value and purchase cost is amortized on a straight line basis
over the term of the respective securities.
Profit and loss on sale of investment are dealt through the profit and loss account in the year in
which they arise.
3.6 Operating Fixed Assets and Depreciation
Fixed assets are stated at cost or revalued amount less accumulated depreciation. Depreciation is
charged to income over the estimated useful lives of the respective assets using the diminishing
balance method except motor vehicles which are depreciated on straight line method. Full year's
depreciation is provided on fixed assets acquired during the year while no depreciation is charged
on the assets disposed off during the year.
Gains and losses on disposal of fixed assets are taken to income currently.
3.7 Revenue Recognition
Revenue from advances is generally recognized on accrual basis except in case of loans classified
under the Prudential Regulations on which return is taken to suspense account until realized.
Fees, commission and brokerage income is recognized when earned.
Dividend income is recognized when the right to receive the dividend is established
3.8 Foreign Currencies
The financial statements of foreign branches and other foreign balances are translated into Rupees
at the rates of exchange prevailing at the balance sheet date except those covered by forward
exchange contracts which are translated at contracted rates. Foreign currency transactions are
converted into Rupees by applying the exchange rate at the date of the respective transactions.
Gains and losses on translations are included in net income for the year.
3.9 Deferred Costs
The deferred costs incurred are amortized over a period not exceeding five years from the date of
incurrence.
(Rs. In '000)
1999 1998
4. CASH
In hand:
- local currency 24,874,051 2,471,831
- foreign currencies 312,543 227,294
------------------ ------------------
2,799,948 2,699,125
With State Bank of Pakistan
Special deposit account:
- export refinance -- 6,850
- credit target account 11 --