| American Express Bank Limited |
|
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|
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|
| Annual
Report 1999 |
|
|
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| AUDITORS'
REPORT TO THE DIRECTORS |
|
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| We
have audited the annexed balance sheet of AMERICAN EXPRESS
BANK LIMITED - PAKISTAN |
|
| BRANCHES
as at December 31, 1999 and the related profit and loss account and the cash
flow statement, |
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| together
with the notes for 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 |
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| 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
accor- |
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| dance
with accounting policies consistently applied: |
|
|
|
|
| (ii)
the expenditure incurred during the year was for the purpose of the Branches'
business; and |
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|
|
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| (iii)
the business conducted, investments made and the expenditure incurred during
the year were |
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| in
accordance with the objects of the Branches and the transactions of the
Branches which |
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| 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 |
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| balance
sheet and the profit and loss account and the cash flow statement, together
with the notes |
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| 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 |
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| of
the Branches' affairs as at December 31, 1999 and their true balance of the
loss and the cash flow |
|
| statement
for the year then ended; and |
|
|
|
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| (d)
in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance,
1980, was deducted |
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| by
the Branches and deposited in the Central Zakat Fund established under
section 7 of that |
|
| Ordinance. |
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| Karachi |
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|
Ford, Rhodes, Robson, Morrow |
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| March 28, 2000 |
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|
Chartered Accountants |
|
|
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| BALANCE
SHEET AS AT DECEMBER 31, 1999 |
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|
Note |
1999 |
1998 |
|
|
|
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|
Rupees in
'000 |
|
|
|
|
| ASSETS |
|
|
|
|
| CASH |
|
|
|
4 |
2,931,428 |
2,286,189 |
|
| BALANCES
WITH OTHER BANKS |
|
5 |
92,148 |
16,300 |
|
| MONEY
AT CALL AND SHORT NOTICE |
|
|
200,000 |
-- |
|
| INVESTMENTS |
|
|
|
6 |
377,239 |
1,805,068 |
|
| ADVANCES
- NET OF PROVISION |
|
7 |
4,966,523 |
5,312,122 |
|
| OPERATING
FIXED ASSETS |
|
|
8 |
111,613 |
114,752 |
|
| OTHER
ASSETS |
|
|
9 |
1,719,648 |
871,470 |
|
|
|
|
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|
------------------ |
------------------ |
|
|
|
|
10,398,599 |
10,405,901 |
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|
|
|
|
|
| LIABILITIES |
|
|
|
| DEPOSITS
AND OTHER ACCOUNTS |
|
10 |
5,534,801 |
8,013,251 |
|
| BORROWINGS
FROM OTHER BANKS, |
|
|
|
| AGENTS ETC. |
|
11 |
3,325,241 |
883,305 |
|
| BILLS
PAYABLE |
|
|
294,263 |
201,061 |
|
| OTHER
LIABILITIES |
|
12 |
1,405,722 |
1,252,831 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
10,560,027 |
10,350,448 |
|
|
|
|
------------------ |
------------------ |
|
| NET ASSETS |
|
|
|
(161,428) |
55,453 |
|
|
|
|
|
========== |
========== |
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|
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| REPRESENTED
BY: |
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| HEAD
OFFICE CAPITAL ACCOUNT |
|
13 |
|
| ACCUMULATED
LOSS / UNREMITTED PROFIT |
|
|
(161,428) |
55,453 |
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|
|
|
------------------ |
------------------ |
|
|
|
|
(161,428) |
55,453 |
|
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|
========== |
========== |
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| MEMORANDUM
ITEMS: |
|
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| BILLS
FOR COLLECTION |
|
|
14 |
590,429 |
688,787 |
|
| ACCEPTANCES,
ENDORSEMENTS AND |
|
|
|
| OTHER
OBLIGATIONS |
|
|
|
556,132 |
242,623 |
|
| CONTINGENT
LIABILITIES AND COMMITMENTS |
15 |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
TAWFIQ A. HUSAIN |
|
ALTAF RAJABALLY |
|
|
SENIOR DIRECTOR AND |
|
DIRECTOR AND COUNTRY |
|
|
COUNTRY MANAGER |
|
CONTROLLER |
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|
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|
|
| PROFIT
AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 1999 |
|
|
|
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|
Note |
1999 |
1998 |
|
|
Rupee in
'000 |
|
|
|
|
| Mark-up/interest
and discount and/or return earned |
|
977,356 |
1,367,047 |
|
| Less:
Cost/Return on deposits, borrowings etc. |
|
|
876,112 |
1,210,482 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
101,244 |
156,565 |
|
|
|
|
|
|
| Fees,
commission and brokerage |
|
|
|
241,900 |
272,524 |
|
| Profit
from investment securities |
|
|
|
567 |
-- |
|
| Other
operating income |
|
16 |
37,403 |
81,592 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
279,890 |
354,116 |
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|
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|
------------------ |
------------------ |
|
|
|
|
381,134 |
510,681 |
|
| Operating
expenses: |
|
|
|
| Administrative
expenses |
|
17 |
430,056 |
440,881 |
|
| Provision
against non-performing advances |
|
7.2 |
331 |
33,569 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
(430,387) |
(474,450) |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
(49,253) |
36,231 |
|
| Other income |
|
|
18 |
2,781 |
4,103 |
|
|
|
|
------------------ |
------------------ |
|
| (Loss)
/ Profit before taxation |
|
|
(46,472) |
40,334 |
|
| Taxation |
|
|
19 |
(49,282) |
(123,386) |
|
|
|
|
------------------ |
------------------ |
|
| Loss
after taxation |
|
|
|
(95,754) |
(83,052) |
|
| Unremitted
profit brought forward |
|
|
|
55,453 |
138,505 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
(40,301) |
55,453 |
|
| Remittance
to Head Office |
|
|
|
(121,127) |
-- |
|
|
|
|
------------------ |
------------------ |
|
| Accumulated
loss / Unremitted profit carried forward |
|
(161,428) |
55,453 |
|
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts, |
|
|
|
|
TAWFIQ A. HUSAIN |
|
ALTAF RAJABALLY |
|
|
SENIOR DIRECTOR AND |
|
DIRECTOR AND COUNTRY |
|
|
COUNTRY MANAGER |
|
CONTROLLER |
|
|
|
| CASH
FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1999 |
|
|
|
|
|
|
1999 |
1998 |
|
|
|
|
Rupees in
'000 |
|
|
|
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
|
| (Loss)
/ Profit before taxation |
|
|
(46,472) |
40,334 |
|
|
|
|
|
|
|
|
| Adjustment
for non-cash charges: |
|
|
| Depreciation |
|
|
30,540 |
29,479 |
|
| Provision
against non-performing advances |
|
331 |
33,569 |
|
| Net
profit on sale of fixed assets |
|
(2,725) |
(4,103) |
|
|
|
------------------ |
------------------ |
|
|
|
28,146 |
58,945 |
|
|
|
------------------ |
------------------ |
|
|
|
(18,326) |
99,279 |
|
|
|
|
| (Increase)/Decrease
in operating assets: |
|
|
| Government
securities and TFCs |
|
|
|
1,427,829 |
3,392,428 |
|
| Advances |
|
|
345,268 |
1,284,363 |
|
| Other
assets (excluding advance tax) |
|
(676,383) |
409,970 |
|
|
|
------------------ |
------------------ |
|
|
|
1,096,714 |
5,086,761 |
|
| Increase/(Decrease)
in operating liabilities: |
|
|
|
|
| Deposits
and other accounts |
|
(2,478,450) |
(4,612,000) |
|
| Bills payable |
|
|
93,202 |
(220,794) |
|
| Other liabilities |
|
|
152,891 |
(116,235) |
|
|
|
------------------ |
------------------ |
|
|
|
(2,232,357) |
(4,949,029) |
|
|
|
------------------ |
------------------ |
|
| Cash
flow before tax |
|
(1,153,969) |
237,011 |
|
| Income-tax paid |
|
|
(221,077) |
(381,002) |
|
|
|
------------------ |
------------------ |
|
| Net
cash used in operating activities |
|
(1,375,046) |
(143,991) |
|
|
|
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
|
| Fixed
capital expenditure |
|
|
|
(31,915) |
(62,495) |
|
| Capital
Work in Progress |
|
|
-- |
16,491 |
|
| Sale
proceeds of fixed assets |
|
|
7,239 |
-- |
|
|
|
|
------------------ |
------------------ |
|
| Net
cash used in investing activities |
|
(24,676) |
(46,004) |
|
|
|
|
|
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
|
| Borrowings
from other banks, agents etc. |
|
2,441,936 |
(76,666) |
|
| Remittance
to Head Office |
|
(121,127) |
-- |
|
|
|
------------------ |
------------------ |
|
| Net
cash flow / used in financing activities |
|
2,320,809 |
(76,666) |
|
|
|
|
|
------------------ |
------------------ |
|
| Increase/(Decrease)
in cash and cash equivalents for the year |
|
921,087 |
(266,661) |
|
| Cash
and cash equivalents at the beginning of the year |
|
2,302,489 |
2,569,150 |
|
|
|
|
------------------ |
------------------ |
|
| Cash
and cash equivalents at the end of the year |
|
3,223,576 |
2,302,489 |
|
|
|
========== |
========== |
|
|
|
|
| Cash
and cash equivalents |
|
|
|
| Cash |
|
|
|
2,931,428 |
2,286,189 |
|
| Balances
with other banks |
|
|
92,148 |
16,300 |
|
| Money
at call and short notice |
|
|
200,000 |
-- |
|
|
|
|
|
------------------ |
------------------ |
|
|
|
3,223,576 |
2,302,489 |
|
|
|
|
========== |
========== |
|
|
|
TAWFIQ A. HUSAIN |
|
ALTAF RAJABALLY |
|
|
SENIOR DIRECTOR AND |
|
DIRECTOR AND COUNTRY |
|
|
COUNTRY MANAGER |
|
CONTROLLER |
|
|
|
| NOTES
TO THE ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 1999 |
|
|
| 1.
STATUS AND NATURE OF BUSINESS |
|
| American
Express Bank was incorporated in the U.S.A. Pakistan operations commenced 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 con- |
|
| form
with the B.P.RD. Circular No. 31 dated August 13, 1997. Expenses of the Head
Office allocable to |
|
| the
Pakistan branches are not incorporated in the books of account. |
|
|
|
| 3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|
|
|
|
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| 3.1
Accounting convention |
|
|
|
| These
financial statements are prepared under the historical cost convention. |
|
|
|
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| 3.2
Staff retirement benefits |
|
|
|
| The
bank operates a funded gratuity schemes for all its permanent employees.
Contributions are made |
|
| in
accordance with the funds' rules. Presently there is a short fail in the
gratuity fund due to greater than |
|
| anticipated
payments to separating employees. An Actuarial valuation is under progress
and contribu- |
|
| tions
recommended by the actuaries would be made to the fund after finalisation of
the report. |
|
|
|
|
| The
bank also operates an approved provident fund for all its permanent
employees. Equal monthly |
|
| contribution
are made both by the bank and its employees in accordance with the funds'
rule. |
|
|
|
|
| 3.3 Taxation |
|
|
|
| Taxation
charged in the accounts is based on the taxable income after taking into
account tax credits |
|
| available,
if any. The bank accounts for the deferred taxation on material temporary
differences using |
|
| the
liability method. Deferred tax debits are recognized only if there is a
reasonable expectation of reali- |
|
| sation
in the foreseeable future. There was no deferred tax liability at the year
end as the deferred tax |
|
| computation
showed a debit balance which has not been accounted for. |
|
|
| 3.4 Advances |
|
|
|
| Provision
for advances (and relevant mark-up) are made against specific non-performing
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 provision for possible losses and
reserved mark-up, |
|
| respectively. |
|
|
|
|
| 3.5 Investments |
|
|
|
| Investments
are carried 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 pur- |
|
| chase
price and the differential of the contracted purchase and resale price is
amortised over the |
|
| period
of their contract and recorded as income. |
|
|
|
| 3.6
Operating fixed assets and depreciation |
|
|
|
| Fixed
assets are stated at cost less accumulated depreciation. Cost represents
their purchase cost, |
|
| together
with any incidental costs of acquisition. Depreciation is calculated so as to
write off the assets |
|
| over
their estimated useful lives using the straight line method. |
|
|
|
|
| 3.7
Revenue recognition |
|
|
|
| interest/mark-up
income is recognisecl on an accrual basis except if the recovery is
considered 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, except on guarantees
on which the commis- |
|
| sion
is recorded as income over the period of the guarantee. |
|
|
|
| 3.8
Foreign currencies |
|
|
| Assets
and liabilities in foreign currencies have been translated into rupees at the
rates of exchange |
|
| approximating
those ruling at the balance sheet date except those in respect of which
forward |
|
| exchange
cover is taken from the State Bank of Pakistan. Foreign Exchange contracts
are revalued |
|
| using
the forward rates applicable to their respective remaining maturities except
for forward contracts |
|
| on
deposits surrendered to State Bank of Pakistan, which are not revalued.
Exchange gains and losses |
|
| are
included in income currently. |
|
|
|
|
|
|
1999 |
1998 |
|
|
|
|
|
Rupees in
'000 |
|
|
|
|
| 4. CASH |
|
|
|
|
| In hand: |
|
|
|
|
| - Local currency |
|
|
|
1,132,931 |
452,631 |
|
| -
Foreign currencies |
|
|
45,814 |
85,923 |
|
|
|
|
|
------------------ |
------------------ |
|
|
|
159,107 |
131,186 |
|
|
|
|
|
| With
State Bank of Pakistan: |
|
|
| Capital
deposited in foreign currency |
|
1,136,470 |
1,007,299 |
|
| Placement
of new foreign currency deposits |
|
669,448 |
-- |
|
| Special
deposit account |
|
622,763 |
690,000 |
|
| Current account |
|
343,640 |
457,704 |
|
|
|
------------------ |
------------------ |
|
|
|
2,772,321 |
2,155,003 |
|
|
|
------------------ |
------------------ |
|
|
|
2,931,428 |
2,286,189 |
|
|
|
|
========== |
========== |
|
|
|
|
| 5.
BALANCES WITH OTHER BANKS |
|
|
| In Pakistan: |
|
|
|
| - current accounts |
|
89,695 |
15,894 |
|
| Outside
Pakistan: |
|
|
| - current accounts |
|
2,453 |
406 |
|
|
|
------------------ |
------------------ |
|
|
|
92,148 |
16,300 |
|
|
|
|
========== |
========== |
|
|
|
|
| 6.
INVESTMENTS |
|
|
|
| Investment
securities - unquoted: |
|
|
|
| Federal
and Provincial Government securities: |
|
|
| Treasury Bills |
|
|
|
1,542 |
1,417,146 |
|
| Government
loans |
|
370,363 |
379,796 |
|
| Investment
securities - quoted: |
|
|
| Term
Finance Certificates |
|
5,334 |
8,126 |
|
|
|
------------------ |
------------------ |
|
|
|
377,239 |
1,805,068 |
|
|
|
|
|
========== |
========== |
|
|
|
|
|
| Book
value of unquoted investments Rs 371.905 million (1998: Rs. 1,796.942
million) |
|
|
| Market
value of quoted investment Rs 5.451 million (1998: 8.176 million). |
|
|
|
|
|
| 7. ADVANCES |
|
|
|
| Loans,
cash credits, overdrafts etc. |
|
|
| In Pakistan |
|
4,766,607 |
5,205,342 |
|
| Bills
discounted and purchased: |
|
|
| Payable
in Pakistan |
|
284,859 |
180,505 |
|
| Payable
outside Pakistan |
|
31,759 |
48,562 |
|
|
|
------------------ |
------------------ |
|
|
|
316,618 |
229,067 |
|
|
|
------------------ |
------------------ |
|
|
|
*5,083,225 |
5,434,409 |
|
| Provisions
for non-performing advances - note 7.2 |
|
(116,702) |
(122,287) |
|
|
|
------------------ |
------------------ |
|
|
|
4,966,523 |
5,312,122 |
|
|
|
========== |
========== |
|
|
|
|
| *Advances
include Rs. 116.702 million (1998: Rs. 122.287 million) which have been
placed on non- |
|
| performing
status, according to the Prudential Regulations of the State Bank of
Pakistan. |
|
|
|
|
| 7.1
Particulars of advances |
|
|
| In
local currency |
|
4,934,764 |
5,263,560 |
|
| In
foreign currencies |
|
31,759 |
48,562 |
|
|
|
------------------ |
------------------ |
|
|
|
4,966,523 |
5,312,122 |
|
|
|
========== |
========== |
|
|
|
|
| Debts
considered good in respect of which the bank is fully |
|
4,916,523 |
5,189,507 |
|
| secured |
|
|
|
| Debts
considered good for which the bank holds no other |
|
9,662 |
13,777 |
|
| security
than the debtors' personal security |
|
|
| Debts
considered good secured by the personal liabilities |
|
40,338 |
108,838 |
|
| of
one or more parties in addition to the personal |
|
|
| security
of the debtors |
|
|
------------------ |
------------------ |
|
|
|
|
4,966,523 |
5,312,122 |
|
|
|
|
========== |
========== |
|
|
|
|
|
|
|
|
|
Maximum total amount of |
|
|
Balance Out, standing |
|
advances including temporary |
|
|
at December 31,1999 |
|
advances granted during the |
|
|
|
|
year |
|
|
|
|
Rupees in
'000 |
|
|
|
|
| Debts
due by the executives of the |
|
99,828 |
|
100,100 |
|
| bank
or any of them either severally or |
|
|
| jointly
with any other persons |
|
|
|
|
|
|
| 7.2
Particulars of provision against non-performing advances |
|
|
|
|
Total |
|
| Specific: |
|
|
|
| Opening
balance |
|
|
122,287 |
88,718 |
|
| Charge
for the year |
|
|
331 |
33,569 |
|
| Amounts
written off - note 7.3 |
|
|
(5,916) |
-- |
|
|
|
|
------------------ |
------------------ |
|
| Closing balance |
|
|
|
116,702 |
122,287 |
|
|
|
|
========== |
========== |
|
| Provision
against: |
|
|
| Advances
to banks |
|
|
-- |
-- |
|
| Advances
to banks |
|
|
116,702 |
122,287 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
|
|
116,702 |
122,287 |
|
|
|
|
========== |
========== |
|
|
|
|
| 7.3
Amounts written-off during the year |
|
| In
terms of sub-section (3) of Section 33A of the Banking Companies Ordinance,
1962 the |
|
| Statement
in respect of written-off loans or any other financial relief of five hundred
thousand |
|
| rupees
or above allowed to a person(s) during the year ended December 31, 1999 is
given at |
|
| Annexure-I. |
|
|
|
|
| 8.
OPERATING FIXED ASSETS |
|
|
|
|
|
COST |
|
DEPRECIATION |
|
BOOK VALUE |
|
|
|
|
|
|
|
|
At |
Additions/ |
At |
At |
Charge for |
At |
|
|
|
January 1 |
Rate of |
December |
January 1, |
the year/ |
December |
December |
Depreciation |
|
|
1999 |
(deletions) |
31, 199 |
1999 |
(Reversal due |
31, 1999 |
31, 1999 |
% |
|
|
|
to deletions) |
|
| Building on |
|
