IFP - July 2012

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Code of Corporate Governance 2012

Compiled by EYIFSG

The Code of Corporate Governance, 2012 (The Code) was launched at a formal ceremony organized by theSecurities and Exchange Commission of Pakistan (SECP)on 10 April 2012, in collaboration with the Center forInternational Private Enterprise (CIPE), who has beensupportive of SECP s initiative throughout the process of revising the Code.

The Code sets a minimum benchmark in terms of governance standards, brings consistency in the corporatepractices and promotes transparency through enhanceddisclosure requirements. It will result in availability of enhanced information to markets participants and hence

will provide better protection of the rights of all investors,

particularly minority shareholders.Governance standards are dynamic and changing with thedevelopment of constantly evolving corporate sector andfinancial markets. This calls for a constant review of governance framework to keep pace with globally setbenchmarks. In an endeavor to align our governanceregime with enhanced requirements of present times andglobal best practices, the SECP mandated the PakistanInstitute of Corporate Governance (PICG) to initiate work on review of the Code.

The SECP, while finalizing the Code, conducted a

thorough consultative process which included holding of three roundtables, a number of bilateral meetings withstakeholders, written and verbal comments andsuggestions received from a wide range of stakeholders.

While finalizing the Code, due consideration was given toall the suggestions received, keeping in view the globaldevelopments in corporate governance and the overallobjective of raising the standards of corporate governancein the country.

The Code has been revised taking into account the lessonslearnt from the practical issues and considerations relevant

to the listed companies and to ensure that it reflects

ISLAMIC FINANCE INDUSTRY NEWSLETTER

ISLAMIC FINANCE PAKISTAN

VOLUME 3 ISSUE 7 JULY 2012

Ayat of the month:

And when man is afflicted bypain, he calls his Lord turning to

Him passionately. Thereafter,when He blesses him with some

favor from Him, he forgets that for which he was calling Him

earlier, and sets up partners forAllah, so that he leads others

astray from His way. Say, Enjoy(the pleasure of) your disbelief for a while, (then) surely, youare from among the people of

the Fire. (Sura Al -Zumar: verse08)

Inside this issue

F e d e r a l Minister for Finance Dr. A b d u l H a f e e zS h a i k hl a u n c h e d the Code of Corpora teGovernanc e, 2012 at a f o r m a l c e r e m o n y organized b y t h e

Secur i t iesa n d E x c h a n g eCommission o f P a k i s t a n( S E C P ) .

Inside Story 1

Editors Message 2

Local andInternational NewsGet a glimpse of whatis happening in theworld of Islamicfinance

6

In the SpotlightFind our read of themonth

9

Ask USBy Mufti Ibrahim Essaand Mufti Javed

10

Pakistan IslamicBanking IndustryAnalysis

11

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Editorial

Page 2 An initiative of IFP forum

Advisory Board

Mufti Irshad Ahmed Aijaz

Mufti Najeeb Khan

Anwar Ahmed Meenai

Mohammad Aslam

Mujeeb Baig

Syed Shahjahan Salahuddin

Faizan Memon

NusratUllah Khan

Muhammad ShahzadHussain

Arshad Hussain Zubairi

Ammar KhalidRima Farooq

Takaful an alternative to conventional insurance is a concept as old as thereligion Islam itself. Its origin can be traced back to more than 1400 years.However, the prominent growth in Takaful came in 1980s when Takaful wasstarted in Malaysia. In recent years there was rapid expansion when Takaful

was introduced in Kuwait, UAE, Pakistan, Malaysia and Sri Lanka. Thelaunch of Takaful Re in Dubai was the latest development in the re-Takafulindustry. Malaysia is the hub for Islamic finance in the region and thusTakaful growth rate has also been high.

Takaful has grown with a very fast pace from 2007 to 2010 with thecumulative annual growth rate during this period of 28%. The growth was by far the largest growth as compared to 5% growth in insurance sector in

Muslims region and 8.1% growth of insurance sector in emerging markets.Contributions grew rapidly in smaller markets like that of Pakistan andBangladesh but the growth was not as strong as that of other regions likeMalaysia, UAE and Saudi Arabia. Later in 2010 the growth pace sloweddown because of Saudi Arabia s family segment, the growth recorded in 2010

was of 30%.

After the introduction of Takaful Rules by the Securities and ExchangeCommission of Pakistan (SECP), in 2005 the concept of Takaful entered inthe Pakistan market, currently five dedicated Takaful companies, threecompanies providing services in General and two in Family Takaful operatesin Pakistan. Pakistan is a Muslim majority country which makes it a highly lucrative market for Takaful. Takaful has attracted many customers in a short

span and by the end 2009 Takaful market of Pakistan stood at PKR 1.16billion of contribution. At its infancy stage and with a small starting base,overall Takaful assets had increased by 47% from 2007 to 2009.

Takaful Rules 2012 were finalized on 13 July 2012 to remove the existinginconsistencies in the Takaful industry and deals with the areas which werenot covered in the previous ones. One of the most important changes in therules is that it proposed to allow conventional insurer to start up window Takaful operations. This move will result in substantial growth of Takafulindustry as established conventional insurer will look forward to enter themarket.

Happy Reading!

Let us know, if you know friends or colleagues who, in your view, may benefit from this newsletter. Send us their email

addresses at [email protected]

Editor-in-Chief

Associate Editors

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changing governance concerns,practices and economic circumstancesand international best practices. Themain areas which needed revision andto be emphasized upon aresummarized in this report.

Composition of the board

The board of directors (BOD) isencouraged to have a balance of executive and non-executive directors,including independent directors andthose representing minority interests inthe context of the company soperations. The BOD of each listed

company shall have at least one andpreferably one third of the totalmembers of the board as independentdirectors. The board shall state in theannual report the names of the non-executive, executive and independentdirector(s).

Executive directors, i.e., paid executivesof the company from among seniormanagement, shall not be more thanone third of the elected directors,including the Chief Executive.

No person shall be elected ornominated as a director of more than

seven listed companies simultaneously.There shall be a formal and transparentprocedure for fixing the remunerationpackages of individual directors. Nodirector shall be involved in decidinghis / her own remuneration.

Responsibilities, powers andfunctions of the BOD

The BOD of a listed company shallexercise its powers and carry out itsfiduciary duties with a sense of objective judgment and independencein the best interests of the company.

Page 3

Continued Code of Corporate Governance 2012

An initiative of IFP forum

S.No. Issues Code 2002 Code 20121. Independent

directorsEncouraged a minimum of oneindependent director on the board of alisted company.

One independent director is mandatory whilepreference is for 1/3rd of the total members of the board to be independent directors.

2. Criteria forassessment of independence

Insufficient criteria provided. Criteria has been substantially expanded.

3. Executive directors Number of executive directors not to bemore than 75% of elected directors

including CEO.

Maximum number of executive directorscannot be more than 1/3rd of elected

directors including CEO.4. Number of

directorships A director can be on the board of nomore than 10 listed companies at any one time.

A director can be on the board of 7 listedcompanies at any one time. However, the limitdoes not include directorship in listedsubsidiaries of a listed holding company.

5. Board evaluation No policies applicable. Within two years of the implementation of theCode 2012, the Board has to put in place amechanism for undertaking annual evaluationof the performance of the Board.

6. Office of Chairman

and CEO

The Chairman of a listed company shall

preferably be elected from among thenon-executive directors of the listedcompany.

The Chairman and CEO shall not be the

same person, unless specifically provided inany other law. The Chairman shall be electedfrom amongst the non-executive directors of the listed company.

7. Training of theBOD

It is mandatory for directors of listedcompanies to attain certification underany directors training program offeredby institutions. Initially, the PICG wasto provide the training but later it wasopened to other institutions, provided

they met the criteria specified by theSECP.

It will be mandatory for directors of listedcompanies to attain certification under any director training program (DTP) offered by any institution (local or foreign), which meetsthe criteria specified by the SECP. The criteriaare available at the websites of the stock

exchanges and the SECP.

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made with the approval of the BODand the removal of Head of IA be made

with the approval of the board only upon recommendat ion of theChairman of the Audit Committee.

No person shall be appointed as theCFO of a listed company unless theperson has at least five years of experience of handling financial orcorporate affairs of a listed company ora bank or a financial institution. Noperson shall be appointed as the Headof IA of a listed company unless theperson has 5 years of relevant auditexperience.

Committees of the Board

Audit Committee

The BOD of every listed company shallestablish an Audit Committee, at leastof which three members comprise of non-executive directors. The chairmanof the committee shall be anindependent director, who shall not bethe chairman of the board. The boardshall satisfy itself such that at least one

member of the audit committee hasrelevant financial skills / expertise andexperience.

H u m a n r e s o u r c e a n dremuneration committee (HR&R)

There shall also be a (HR&R)committee of at least three memberscomprising a majority of non-executivedirectors, including preferably anindependent director. The CEO may be included as a member of the

committee but not as the chairman of committee. The CEO if member of (HR&R) shall not participate in theproceedings of the committee onmatters that directly relate to hisperformance and compensation.

Internal audit

There shall be an IA function in every listed company. The Head of IA shallfunctionally report to the AuditCommittee and administratively to the

CEO. A director cannot be appointed, in any

capacity, in the IA function, to ensureindependence of the IA function.

The IA function may be outsourced by

a listed company to a professionalservices firm or be performed by the IA staff of holding company. In the eventof outsourcing the IA function,company shall appoint or designate afulltime employee other than CFO, ashead of IA, to act as coordinatorbetween the firm providing internalaudit services and the board.

All listed companies shall ensure thatinternal audit reports are provided forthe review of external auditors. Theauditors shall discuss any major

findings in relation to the reports withthe Audit Committee, which shallreport matters of significance to theBOD.

External auditors

No listed company shall appoint asexternal auditors a firm of auditors

which has not been given a satisfactory rating under the quality control review program of the Institute of Chartered

Accountants of Pakistan.

No listed company shall appoint asexternal auditors a firm of auditors

which or a partner of which is non-compliant with the InternationalFederation of Accountants' (IFAC)guidelines on code of ethics, as adoptedby the Institute of Chartered

Accountants of Pakistan.

Every listed company shall requireexternal auditors to furnish a

management letter to its BOD within45 days of the date of audit report.

Compliance with the code of corporate governance

All listed companies shall publish andcirculate a statement along with theirannual reports to set out the status of their compliance with the requirementsset out above.

All listed companies shall ensure thatthe statement of compliance with thebest practices of corporate governanceis reviewed and certified by statutory auditors, where such compliance can beobjectively verified, before i tspublication. Statutory auditors of listedcompany shall ensure that any non-compliance with the code requirementsis highlighted in their review report.

Where the SECP is satisfied that it isnot practicable to comply with any of

the best practices of the code in aparticular case, it may, for reasons to berecorded, relax the same subject to suchconditions as it may deem fit.

Page 5

Continued Code of Corporate Governance 2012


All listed companies shall publish and circulate astatement along withtheir annual reports to set out the status of their compliance with therequirements set out incode of corporate governance.

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Disclaimer:The news included here is on the basis of information obtained from local and international print and electronic mediasources. IFP team does not accept any responsibility about their bona-fide.

Gulf Finance House is eyeing acquisitions and restarting stalled projects inBahrain in an effort to turn around its fortunes.It reached an agreement with sukuk holders in the beginning of July topush back repayment on US$110 million (Dh404m) of Islamic bonds forsix years. The bank is in the midst of overhauling its business model togenerate steady sources of cash and ensure that its profits are lessdependent on fee income from deals.

50,000 Islamic financialprofessional neededglobally

Clifford Chance advisesDIFC investments insecuring a USD 1.035b i l l i o n I s l a m i csyndicated facility

Islamic bank Gulf Finance House seeks better times

Dubais Noor IslamicBank seeks business inSingapore, Malaysia

In accordance with the growingindustry of Islamic Banking andFinance, globally there is a need of 50,000 Islamic Finance Expertsright away so that the emergingmarket of Islamic Banking andFinance may be easily promoted

said by Mr. Muhammad ZubairMughal, Chief Executive Officer

AlHuda Centre of Islamic Bankingand Finance, during his speech onthe topic of "Importance of IslamicFinance Education" during Moscow Halal Expo.

The Banker Middle East Industry Awards recognize the bestperforming institutions across theMiddle East and North Africa andare widely considered as abenchmark of excellence in theindustry. The award was based onthe quantitative analysis of 14 key measures such as assets, liabilities,total income, net attributable profitand return on assets, to identify theregion's leading financialinstitutions.

Clifford Chance advised DIFCInvestments LLC (DIFCI) in se-curing a USD 1.035 billion Is-lamic syndicated facility to con-

tribute towards financing in fullthe repayment of its USD 1.25billion Sukuk maturing 13th June2012. This is a landmark transac-tion in the history of the DIFC

which further evidences the com-mitment of Dubai to meet itsobligations in a timely manner.

will be held in mid-2013 in KualaLumpur, Malaysia. Bank NegaraMalaysia will host the IFSB's majorannual event.The IFSB started operations inMarch 2003. This was five monthsafter the IFSB Articles of

Ag ree me nt was si gn ed, inNovember 2002, by nine foundingmembers including the IslamicDevelopment Bank, Bank Negara

Malaysia along with seven other

Noor Islamic Bank, a lender con-trolled by Dubai s government, isseeking business in Singapore andMalaysia as it aims to benefit fromgrowth in Southeast Asia. Malaysiais the world s biggest sukuk market.

I understand companies arelooking to finance infrastructureprojects. Hussain Al Qemzi, chief executive officer of the United

Arab Emirates based lender, said inan interview in Singapore. Hefurther said that, the Europeandebt crisis offered Islamic lenders agolden opportunity to capture abigger share of the world bankingmarket.

Ajman bank awarded'fastest growing bank' inthe UAE by the bankerMiddle East

Bank Negara Malaysia tohost the 10th IslamicFinancial Services Boardsummit in 2013

The 10th Summit of the IslamicFinancial Services Board (IFSB)

D u b a i d u t y f r e ec o m p l e t e s I s l a m i cfinance facility

Dubai Duty Free (DDF) has com-pleted a $1.75bn, six-year seniorunsecured syndicated credit facil-ity. The retailer s debut interna-tional financing comprised a con-

ventional term loan facility andIslamic facilities. The purpose of the financing is to fund the ongo-ing expansion of Dubai interna-tional Airport.

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Saudi Arabia is one of the world's fastest growing banking markets. Accordingto RNCOS new research report "Saudi Arabia Banking Sector Outlook 2015",commercial banks operating in the Kingdom are likely to be more efficient innear future on back of technological developments and favorable governmentpolicies. Despite the eurozone crisis, the Saudi Arabian banking industry registered an impressive growth, and it is estimated that the lending will grow at a compound annual rate of around 10 percent during 2012-2015 in theKingdom due to liquidity and capitalization.The report found that despite adverse economic conditions, the Saudi bankscontinued to expand their lending activities. Forecasts for key bankingsegments, like loans, and deposits, have also been presented to help clientsknow the direction in which the Saudi banking sector is likely to proceed inthe coming years.

Islamic banks 'can fillfunding gap': SporeMonetary Authority

KFH takes part in worldI s l a m i c b a n k i n gconference

Crescent Wealth tolaunch Australia's 1stIslamic pension fund

MoU signed for Islamicbanking training course

Saudi banks shun eurozone crisis

Bahrain Islamic banks to vote on key merger

Islamic banks are themselves tocapture a larger share of the globaltrade and project financing market,as European banks pull back fundsto mend balance sheets back home.The Monetary Authority of Singapore's (MAS) managing

director Ravi Menon noted thatt r a d e a n d i n f r a s t r u c t u r ed e v e l o p m e n t i s n a t u r a l l y compatible with Islamic finance,

which has a focus on supportingreal productive activities.

Kuwait Finance House Group

(KFH -Group) took part insponsoring and attending the Third World Islamic Banking Conference Asia Summit that was hosted inSingapore. The two day eventd i s c u s s e d t h e a v a i l a b l eopportunities in global marketsconcerning Islamic investments,and the potential of developmentand growth of Islamic banking.

million and assets in excess of $400million, which would givethem a scale that would make themmore competitive in the market.The transaction is the first three-

way merger to take place inBahrain. The banks are being ad-

vised on the merger by KuwaitFinance House-Bahrain (KFH-Bahrain).

The Malaysia-based InternationalCentre of Education in IslamicFinance (INCEIF) and AmjaadDevelopment, the corporatedivision of Amjaad Group, signed amemorandum of understanding(MoU) to impart training andeducation in the field of Islamicbanking and finance throughspecialized professional courses

tailored specifically to meet theneeds of professionals involved inIslamic banking and finance andalso for potential candidatesseeking employment in this vibrants e c t o r .

Australian fund manager Crescent Wealth plans to launch thecountry's first Islamic pension fundby December and allocate between15 to 30 percent of it in property.

Talal Yassine, the Founder andManaging Director of Crescent

Wealth said Crescent Wealth hopesto build the fund to between A$4billion ($4.03 billion) and A$6billion in five years.

Bahrain-based Islamic banksCapivest, Elaf Bank and CapitalManagement House will be votingon a proposed merger of the threebanks by the end of July.If the deal goes ahead, it will createa Sharia-compliant institution withshareholders' equity of almost $350

Kuala Lumpur to beIslamic finance hub forStandard Chartered

Malaysia's efforts to become aninternational Islamic finance centrehave received a boost as thecountry's oldest bank, StandardChartered Bank, (StanChart) ismaking Kuala Lumpur its globalhub for Islamic consumer banking.

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Meezan Bank completes10 years of Islamicbanking in Pakistan

Islamic finance, fundsi n d u s t r y g a i n i n gpopularity

SECP okays Letter of agreement to Ijarah

Meezan Bank has recently achievedthe milestone of completing 10yearsof Islamic Banking in Pakistan.Meezan Bank is Pakistan s 9th largestCommercial Bank in terms of branchnetwork with a very comprehensiveportfolio of Islamic financial

products and services for Consumer,Corporate and Investment Banking,thus catering to all categories of customers.

An International Conference onIslamic Funds and Investment in

which large number of investors fromUAE, USA, UK, Canada, Malaysiaand Qatar participated.

The topics covered on first day of theconference were, investmentopportunities for Islamic Funds,Shariah status and Mechanism of Islamic Investments and Funds withglobal trends, Standardization andBrokerage and exchange rules andthe Islamic Exchange Indices.

The next two days have beenallocated for training workshops onthe allied topics on IslamicInvestments, Marketing and Shariahguidelines.

Securities and Exchange Commissionof Pakistan (SECP) has got the Letterof Agreement to Ijarah approvedfrom the religious board forModarabas.

The SECP circular stipulates that theModarabas extend Ijarah financingfacility to their clients on the basis of Ijarah agreement duly approved by the religious board.

Burj Bank participates insyndicated Islamic financefacility for DawoodH ercu le s F e r t i l i z e r slimited

Dawood Hercules Fertilizers isamongst Pakistan s leading fertilizer

manufacturers and a wholly ownedsubsidiary of the Dawood HerculesCorporation (formerly DawoodHercules Chemicals Limited) one of the largest groups and trustedbusiness names in Pakistan. ThePKR 4.8 Billion Syndicated IslamicFinance Facility was mandatedto Meezan Bank as a Financial

Advisor & Lead Arranger.United Bank and Allied Bank jointly led the consortium while AlBaraka

Bank, BankIslami & Burj Bank wereCo-Lead Arrangers of the Facility.

Demand to make Islamicbanking mandatory inPakistan

In Pakistan Islamic banking is beingpracticed on the basis of supply anddemand, and is not mandatory, saidDirector Education JamiaturRasheed Abdul Aziz Raja.

Addressing a seminar on A blend of contemporary and religiouseducation, held at the Korangi

Association of Trade and Industry (KATI), Raja said that a bankingordinance was introduced in 1974but tabled in-house in 1984, under

which Islamic banking in Pakistanshould be mandatory and notoptional. He said that Islamicbanking should be enforced with theSupreme Courts orders.

Islamic banks need tointroduce transparency

Senator Professor Khurshid Ahmedhas said that despite best efforts

riba-free banking is yet to makeany substantial contribution to theeconomy and to the evolution of anew Islamic financial system inPakistan. Renowned researchscholar, educationist andeconomist Prof. Khurshid Ahmedsaid that Islamic banks (IBs) needto introduce more transparency and stop misusing Kibor.

If situation was not improved, IBs will it difficult to attract customersas it is it is getting difficult toprove what IBs claim and whatthey actually practice are aboveboard. The regulator has aresponsibility to make Islamicfinance a success by taking somecorrective measures amid growingair of uncertainty.

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take over different forms of buyingand selling, even though third

volume par ti cu la r ly d i scuss

contemporary forms of buying andselling and the fourth volume coversspecific tradable items. Whereas thelast four volumes focus on Shariahconcerns on macro level notably Islamic Banking, interest basedsystem and its alternate and idealIslamic economic system.

The compiler translated the articlesthat were originally published inEnglish or Arabic to Urdu. All thesearticles are supported withreferences from Quran and Sunnahthat constitutes an eminent part of adiscussion on an Islamic topic,therefore the compiler also addedproper citation for these references.

This review is a compilation of allsix volume. In the later issues detailreview of each volume will beincluded.

The book under review is acompilation of different articles

written by a renowned religious

scholar Mufti Muhammad TaqiUsmani, who is also recognized allover the Muslim, as well as, western

world for his efforts for Islamiceconomic system. These articles wereeither published separately or werescattered in his tremendouspublications on various topics indifferent languages. On the otherhand this compilation emphasizeson Fiqh-ul-Mua amlat (a branch of Islamic jurisprudence specifically relating to economic activities) as itis evident from the title.

First volume of this compilationconsists more of a general andethical responsibilities for tradersand other people involved ineconomic activities like prohibitionof short weighing, hoarding andmisrepresentation of goods. Thesecond, third and fourth volumes


Book in the Spotlight

Islam aur Jadeed Maashi Masail

By : Mufti Muhammad Taqi Usmani

Reviewed by Mufti Haseeb Ahmed

Published by: Idara-e-Islamiat,Lahore

Available at: Kutub KhanaMazhari, Karachi

Price: Rs. 2,200 /-

About the AuthorMufti Muhammad Taqi Usmani is one of the leading Islamic scholars living today. He is an expert in the fieldsof Islamic Jurisprudence, Economics, Hadith and Tasawwuf. Born in Deoband in 1362H(1943 CE), hegraduated par excellence form Dars e Nizami at Darul Uloom, Karachi, Pakistan. Then he specialized in Islamic

Jurisprudence under the guidance of his eminent father, Mufti Muhammad Shafi, the late Grand Mufti of Pakistan. Since then, he has been teaching hadith and Fiqh at the Darul-Uloom, Karachi. He also holds adegree in law and was a Judge at the Sharia Appellate Bench of the Supreme Court of Pakistan. He has been

writing on various Islamic topics and is author of more than 60 books and numerous articles. Presently he is the Vice-president of Darul-Uloom, Karachi, Pakistan, where he teaches Sahih Bukhari, Fiqh and Islamic

economics.

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Ask UsBy Mufti Ibrahim Essa and Mufti Javed Ahmed

Question

When an agent under paid agency agreement refrains to carry on the

work or forced to discontinue the work, will he be entitled for theagreed remuneration?

Answer

When the agent, for no reasonableexcuse, refrains from carrying onagency that he has been paid for, andthe work he has done was beneficial,he becomes entitled to theremuneration commensurate withpart of work done, and within thelimits of the contract value for thatpart of work. The agent in this case isbound to indemnify the principal forany loss resulting from his refusal tocontinue the work.

However, when the principal, for nogood reason, forces the agent todiscontinue the work before the end

of the agency period, the agent

becomes entitled to the fullremuneration agreed upon. But if the principal, for a valid reason,forces the agent to discontinue the

work before the end of the contract,the agent becomes entitled toremuneration for that part of work he has already performed.

Question

Is it permissible for the buyer inSalam contract to exchange the

subject matter of Salam with any other commodity with the consent of the seller? What are thecommandments of Shariah in thisregard?

Answer

It is permissible for the buyer toexchange the subject matter in Salamfor other goods, except currency,after the delivery date falls due, as

long as such substitution was not

stipulated in the contract. This ruleapplies whether or not the substituteis similar in kind to the subject matterof Salam. This is provided that thesubstitute is suitable for beingexchanged as the subject matter of Salam for the capital of the Salamcontract. Furthermore, the market

value of the substitute should not begreater than the market value of thesubject matter of Salam at the time of delivery.

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Page 11

The Progress of Islamic Banking IndustryPart 2 - Islamic Banking Divisions{ {

Compiled by EY IFSG


Overview of Islamic Banking division

Pakistan s Islamic Banking division (IBDs) demonstrates anincredible overall growth which in FY 2011 increased to 36%. As amatter of fact, it is one of the fastest growing industries of Pakistanand expectations are that it will grow at a similar higher pace in thefuture years to come. Conventional banks are moving more andmore towards Islamic banking windows due to the growth.

Overall profitability of the IBDs crossed 8 billion mark in the FY 2011, whereas total assets and deposits for this segment was morethat Rs. 266 billion and Rs.189 billion respectively.

Overall profitability growth

Considering the performance of IBDs, Standard Chartered Bank (Pakistan) Limited (SCB) evidently leads and exceeds by registeringa profit before taxation (PBT) of Rs. 1.2 billion as compared to last

year s PBT of Rs 0.71 billion, representing a 69% growth. Theanalysis gives a sight that it is due to large increase in their depositincome and other income. Following after SCB was HabibMetropolitan Bank (HMB), with a PBT of Rs. 0.53 billion. HMBshowed an extraordinary rise in its profit by 72% from Rs. 0.31billion in FY 2010 to Rs. 0.53 billion in FY 2011. This was due to

major increase in their return on financing and other income. Onthe other hand Bank of Khyber (BOK) marked PBT of Rs. 0.49billion showing an increase of 20% from 2010.

Pakistans Islamic Bankingd i v i s i o n ( I B D s )demonstrates an incredibleoverall growth which, in FY 2011 increased to 36%. As amatter of fact, it is one of t h e f a s t e s t g r o w i n gindustries of Pakistan and expectations are that it will grow at a similar higher pace in the future years tocome. Conventional banksare moving more and moretowards Islamic bankingw i n d o w s d u e t o t h e

g r o w t h .

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Bank Al-Habib showed a growth of 138% from Rs. 0.15 billion to Rs. 0.37billion in PBT, Habib Bank Limitedshowing 123% growth i.e. from Rs.0.13 billion to Rs. 0.3 billion. MuslimCommercial Bank (MCB) showing agrowth of 44% from Rs. 0.12 billion toRs. 0.17 billion, Faysal Bank Limitedrecovered from a loss of Rs. 0.2 billionin 2010 to a PBT of Rs. 0.13 billion,

Askari Bank Limited showed a growthof 126% from loss of Rs. 0.37 billion toRs. 0.098 billion, UBL showing agrowth of 139% by recovering from aprevious year loss to a PBT of Rs. 0.011

million. Analysis of total assets anddeposits of IBDs

Total assets and deposits of the Islamicbanking industry achieved a growth of 40% in FY 2011,while the assets of IBDs achieved a growth around 62%.Standard Chartered bank s total assetcrossed Rs. 28 billion in FY 2011increasing by 99% for last year. Totalassets of Standard Chartered bank

showed a boost due to increase ininvestment of Standard Chartered.

Habib Metropolitan bank increased itsdeposits by 11% from Rs. 13.2 billionto Rs. 14.7 billion, after that HBL andFaysal bank made a huge expansion intheir deposits by 109% each and totalassets increased by 104% and 80%

respectively. Habib metropolitandeclares their total assets and depositsas Rs. 18 billion while on the other

hand Faysal bank showing total assetsfrom Rs. 7.3 billion to Rs.12.6 billion.

Faysal bank as a whole managedto increase its total assetssubstantially to 80% growth.Faysal bank has the deposit basein FY 2011 of Rs. 10 billionrepresenting a growth of 109%

when compared with FY 2010.Standard Chartered deposit forthe FY 2011 was of nearly Rs.16.5 billion increasing by 44%.Bank of Khyber depositincreased by 31% and totalassets by 34% in FY 2011 and

Askari bank increased itsdeposits by 28% and profit by

39%. UBL achieved a growth of 83% in their deposits and 74%in assets whereas Bank Al Habibhad 25% growth in deposits and32% in total assets in FY 2011.

Total assets and deposits of the Islamic banking industry achieved a growth of 40 %in FY 2011,while the assetsof IBDs achieved a growth

around 62%.Standard Chartered bankstotal asset crossed Rs. 28billion in FY 2011 increasingby 99% for last year.

Continued The Progress of Islamic Banking Industry

The data for Islamic operations of National Bank of Pakistan is not separately available in its financialstatements.

The data for 2011 of Alfalah Bank wasalso not available.

Results of Habib Bank Limited - Islamic

banking branch is not separatelyavailable in the financial statements.

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Financial summary of the Islamic bank divisions for the year 2011


Statement of Financial Position Figure in Rs.000

Sr.No Description HBL MCB Soneri Bank

StandardChartered HMB

1. Balances with other banks 16,606 - 26 1,744,661 -

2. Investments 12,648,185 2,938,706 606,897 5,923,668 10,050,774

3. Financings 933,881 5,611,142 1,764,097 14,335,084 6,446,125

4. Total assets 15,738,926 13,223,995 2,998,169 28,705,376 18,610,310

5. Due to financial institutions - - 123,975 1,922,500 -

6. Deposits and other accounts 11,944,594 7,305,780 2,171,638 16,533,520 14,747,474

7. Total liabilities 14,570,074 12,032,397 2,745,811 25,783,554 17,041,077

8. Net assets 1,168,852 1,191,598 252,358 2,921,822 1,569,233

Statement of Comprehensive Income

9. Profit on financings 2,086,280 1,422,236 398,079 2,355,604 2,094,756

10. Return on deposits 1,214,450 979,325 353,530 627,700 1,452,193

11. Provisions 365,363 36,743 157,332 185,514 73,602

12. Net spread after provisions 506,467 406,168 (112,783) 1,542,390 568,961

13. Total other income 42,599 114,519 145,012 461,967 69,407

14.Administrative and otherexpenses 240,084 344,353 165,991 797,869 99,435

15.Profit / (Loss) beforetaxation 308,982 176,334 (147,219) 1,206,488 538,933

Disclaimer:The data presented in this summary is extracted from the published audited financial statements of the respective banks forthe year ended 31 December 2011. The newsletters management does not take any responsibility of authencity of any data

presented here and will not assume any liability due to any loss or damage caused by the usage of the informationpresented here. User discretion advised.


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Financial summary of the Islamic bank divisions for the year 2011


Statement of Financial Position Figure in Rs.000

Sr.No Description Askari Bank Bank Al-Habib

Bank ofKhyber Faysal Bank UBL

1. Balances with other banks 528,613 494,968 530,736 173,799 1,714,138

2. Investments 9,818,059 1,362,945 7,722,833 5,586,837 4,490,991

3. Financings 3,036,063 5,359,450 3,071,604 4,974,329 521,109

4. Total assets 14,956,845 8,319,891 12,612,588 12,651,579 8,791,159

5. Due to financial institutions - 1,192,491 - - -

6. Deposits and other accounts 11,842,633 5,447,863 10,058,574 10,977,485 8,155,280

7. Total liabilities 14,037,447 7,045,815 10,734,306 11,846,582 8,303,333

8. Net assets 919,398 1,274,076 1,878,282 804,997 487,826

Statement of Comprehensive Income

9. Profit on financings 1,312,988 1,029,044 1,249,127 1,117,006 595,492

10. Return on deposits 831,691 569,686 393,780 597,956 437,892

11. Provisions 78,301 - 28,887 16,463 29,874

12. Net spread after provisions 559,598 459,358 826,460 502,587 187,474

13. Total other income 59,006 41,383 89,533 23,275 40,946

14.Administrative and otherexpenses 520,055 128,635 424,188 395,586 216,494

15. Profit / (Loss) before taxation 98,549 372,106 491,805 130,276 11,926

Disclaimer:The data presented in this summary is extracted from the published audited financial statements of the respective banks forthe year ended 31 December 2011. The newsletters management does not take any responsibility of authencity of any data

presented here and will not assume any liability due to any loss or damage caused by the usage of the information presented here. User discretion advised.


Documents

IFP - July 2012