United Bank Limited · Chief Executive Officer Attributable to equity shareholders of the Bank Sub total Non-controlling Interest ... Blue Area, Islamabad and at UBL Head Office,

United Bank LimitedCONSOLIDATED FINANCIAL STATEMENTS

AS AT DECEMBER 31, 2017

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT DECEMBER 31, 2017

Note 2017 2016

ASSETS

Cash and balances with treasury banks 6 161,119,170 133,467,502

Balances with other banks 7 35,549,112 32,267,304

Lendings to financial institutions 8 35,893,920 35,484,586

Investments 9 1,124,921,300 838,262,274

Advances

Performing 10 629,824,756 529,818,148

Non-performing - net of provision 10 12,681,964 7,963,998

642,506,720 537,782,146

Operating fixed assets 11 50,384,077 39,298,927

Deferred tax asset - net - -

Other assets 12 54,986,201 45,179,521

2,105,360,500 1,661,742,260

LIABILITIES

Bills payable 14 13,392,978 11,759,012

Borrowings 15 517,082,159 205,865,131

Deposits and other accounts 16 1,366,157,914 1,245,791,616

Subordinated loans - -

Liabilities against assets subject to finance lease 17 4,375 3,558

Deferred tax liability - net 18 2,980,466 5,230,571

Other liabilities 19 31,248,846 29,363,148

1,930,866,738 1,498,013,036

NET ASSETS 174,493,762 163,729,224

REPRESENTED BY:

Share capital 20 12,241,798 12,241,798

Reserves 47,203,516 42,615,188

Unappropriated profit 76,651,713 68,939,008

Total equity attributable to the equity holders of the Bank 136,097,027 123,795,994

Non-controlling interest 21 4,810,519 4,227,693

140,907,546 128,023,687

Surplus on revaluation of assets - net of deferred tax 22 33,586,216 35,705,537

174,493,762 163,729,224

CONTINGENCIES AND COMMITMENTS 23

The annexed notes from 1 to 50 and annexures form an integral part of these consolidated financial statements.

Aameer Karachiwalla Sima Kamil Amar Zafar Khan Arshad Ahmad Mir Sir Mohammed Anwar Pervez, OBE, HPk

Chief Financial Officer President & Director Director Chairman

Chief Executive Officer

------------------ (Rupees in ‘000) ------------------

CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2017

Note 2017 2016

Mark-up / return / interest earned 25 110,579,895 101,755,044

Mark-up / return / interest expensed 26 52,487,753 42,933,935

Net mark-up / return / interest income 58,092,142 58,821,109

Provision against loans and advances - net 10.3 1,877,257 624,626

Reversal of provision against lendings to financial institutions - net 8.6 (8,260) (15,500)

Provision for diminution in value of investments - net 9.3 719,845 898,109

Bad debts written off directly 10.5 187,443 97,781

2,776,285 1,605,016

Net mark-up / return / interest income after provisions 55,315,857 57,216,093

Non mark-up / return / interest income

Fee, commission and brokerage income 14,831,990 14,377,568

Dividend income 1,733,757 2,276,408

Income from dealing in foreign currencies 2,150,117 1,955,790

Gain on sale of securities - net 27 4,797,686 5,609,581

Unrealized gain / (loss) on revaluation of investments classified as held for trading 9.4 2,207 (1,221)

Other income 28 780,328 916,264

Total non mark-up / return / interest income 24,296,085 25,134,390

79,611,942 82,350,483

Non mark-up / return / interest expenses

Administrative expenses 29 38,455,334 35,022,240

Other provisions / write offs - net 30 (389,069) 231,368

Workers' Welfare Fund 31 814,699 930,022

Other charges 32 59,688 69,818

Total non mark-up / return / interest expenses 38,940,652 36,253,448

Share of profit of associates 459,702 1,057,248

Profit before taxation 41,130,992 47,154,283

Taxation - Current 33 14,701,343 15,305,737

Taxation - Prior 33 (2,031,665) 2,251,412

Taxation - Deferred 33 2,264,725 1,594,832

14,934,403 19,151,981

Profit after taxation 26,196,589 28,002,302

Attributable to:

Equity shareholders of the Bank 26,190,302 27,782,758

Non-controlling interest 6,287 219,544

26,196,589 28,002,302

Earnings per share - basic and diluted 34 21.39 22.70





------------ (Rupees) ------------

------ (Rupees in ‘000) ------

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2017

2017 2016

Profit after tax for the year attributable to:

Equity shareholders of the Bank 26,190,302 27,782,758


26,196,589 28,002,302

Other comprehensive income:

Items that will not be reclassified to profit or loss in subsequent periods

Remeasurement (loss) / gain of defined benefit obligations

Equity shareholders of the Bank (105,675) (151,624)

Non-controlling interest 42,655 (36,110)

Related deferred tax reversal 47,646 37,602

(15,374) (150,132)

Items that may be reclassified to profit or loss in subsequent periods

Exchange differences on translation of net investment

in foreign branches and subsidiaries

Equity shareholders of the Bank 2,031,733 (1,830,062)

Non-controlling interest 668,725 (1,030,080)

2,700,458 (2,860,142)

Other comprehensive income transferred to equity 28,881,673 24,992,028

Items that may be reclassified to profit or loss in subsequent periods

Deficit arising on revaluation of available for sale securities (13,022,882) (1,411,776)

Related deferred tax reversal 4,479,294 799,135

(8,543,588) (612,641)

Total comprehensive income during the year - net of tax 20,338,085 24,379,387





------- (Rupees in '000) -------

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2017

Note 2017 2016

CASH FLOW FROM OPERATING ACTIVITIES

Profit before taxation 41,130,992 47,154,283

Less: Dividend income (1,733,757) (2,276,408)

Less: Share of profit of associates (459,702) (1,057,248)

38,937,533 43,820,627 Adjustments:

Depreciation on operating fixed assets 2,151,157 1,714,992

Depreciation on Islamic financing against leased assets (Ijarah) 197,824 205,186

Amortization 436,392 383,371

Workers' Welfare Fund 814,699 930,022

Provision for retirement benefits 820,115 298,805

Charge for compensated absences 24,687 315,084

Provision against loans and advances - net 1,877,257 624,626

Reversal of provision against lendings to financial institutions - net (8,260) (15,500)

Provision for diminution in value of investments - net 719,845 898,109

Reversal of provision in respect of investments disposed off during the year (55,525) (978,855)

(Reversal of provision) / charge against off balance sheet items (599,097) 27,081

Gain on sale of operating fixed assets - net (57,983) (44,329)

Gain on sale of ijarah assets - net (96) (44,685)

Bad debts written off directly 187,443 97,781

Unrealized loss / (gain) on revaluation of investments classified as held for trading (2,207) 1,221

Finance charges on leased assets 570 400

Provision against other assets - net 45,888 143,908

6,552,709 4,557,217

45,490,242 48,377,844

(Increase) / decrease in operating assets

Lendings to financial institutions (401,074) (9,555,345)

Held for trading securities (96,681,848) 3,711,930

Advances (107,059,262) (50,695,443)

Other assets (excluding advance taxation) (2,516,131) 993,408

(206,658,315) (55,545,450)

Increase / (decrease) in operating liabilities

Bills payable 1,633,966 (1,636,732)

Borrowings 311,217,028 41,633,044

Deposits and other accounts 120,366,298 125,838,552

Other liabilities (excluding current taxation) 1,451,657 1,014,068

434,668,949 166,848,932

273,500,876 159,681,326

Payments on account of staff retirement benefits (1,270,181) (736,963)

Income taxes paid (19,570,676) (23,661,738)

Net cash flow from operating activities 252,660,019 135,282,625

CASH FLOW FROM INVESTING ACTIVITIES

Net investments in available for sale securities (199,190,229) (16,328,652)

Net investments in held to maturity securities (8,969,936) (73,399,383)

Net investments in associates 4,193,675 1,881,572

Dividend income received 1,768,502 2,167,881

Investment in operating fixed assets (6,764,956) (6,358,861)

Sale proceeds from disposal of operating fixed assets 81,186 91,422

Sale proceeds from disposal of ijarah assets 72,260 191,657

Net cash outflow from investing activities (208,809,498) (91,754,364)

CASH FLOW FROM FINANCING ACTIVITIES

Payment in respect of leased obligation (2,078) (1,715)

Dividends paid to:

- Equity shareholders of the Bank (15,479,932) (16,407,693)

- Non-controlling interest (135,493) -

Net cash outflow from financing activities (15,617,503) (16,409,408)

Exchange differences on translation of net investment in

foreign branches and subsidiaries attributable to:

- Equity shareholders of the Bank 2,031,733 (1,830,062)

- Non-controlling interest 668,725 (1,030,080)

Increase in cash and cash equivalents 30,933,476 24,258,711

Cash and cash equivalents at the beginning of the year 165,734,806 141,476,095

Cash and cash equivalents at the end of the year 35 196,668,282 165,734,806





----------- (Rupees in '000) -----------

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2017

Balance as at December 31, 2015 12,241,798 3,000 24,479,375 17,141,392 1,050 59,955,027 113,821,642 5,223,744 119,045,386

Transactions with owners for the year ended

December 31, 2016

Final cash dividend - December 31, 2015 declared

subsequent to the year end at Rs.4.0 per share - - - - - (4,896,719) (4,896,719) - (4,896,719)

Interim cash dividend - March 31, 2016 declared

at Rs.3.0 per share - - - - - (3,672,539) (3,672,539) - (3,672,539)

Interim cash dividend - June 30, 2016 declared

at Rs.3.0 per share - - - - - (3,672,539) (3,672,539) - (3,672,539)

Interim cash dividend - September 30, 2016

at Rs.3.0 per share - - - - - (3,672,539) (3,672,539) - (3,672,539)

Employee stock option reserve - - - - (1,050) - (1,050) - (1,050)

- - - - (1,050) (15,914,336) (15,915,386) - (15,915,386)

Total comprehensive income for the year ended

December 31, 2016

Profit after taxation for the year ended

December 31, 2016 - - - - - 27,782,758 27,782,758 219,544 28,002,302

Other comprehensive income - net of tax - - - (1,830,062) - (114,022) (1,944,084) (1,066,190) (3,010,274)

Total comprehensive income for the

year ended December 31, 2016 - - - (1,830,062) - 27,668,736 25,838,674 (846,646) 24,992,028

Ordinary dividend relating to Non-controlling shareholders - - - - - - - (149,967) (149,967)

Transfer from surplus on revaluation of fixed assets

to unappropriated profit - net of tax - - - - - 51,064 51,064 562 51,626

Transfer to statutory reserve - - 2,821,483 - - (2,821,483) - - -

Balance as at December 31, 2016 12,241,798 3,000 27,300,858 15,311,330 - 68,939,008 123,795,994 4,227,693 128,023,687

Transactions with owners for the year ended

December 31, 2017

Final cash dividend - December 31, 2016 declared

subsequent to the year end at Rs.4.0 per share - - - - - (4,896,719) (4,896,719) - (4,896,719)

Interim cash dividend - March 31, 2017 declared

at Rs.3.0 per share - - - - - (3,672,539) (3,672,539) - (3,672,539)

Interim cash dividend - June 30, 2017 declared

at Rs.3.0 per share - - - - - (3,672,539) (3,672,539) - (3,672,539)

Interim cash dividend - September 30, 2017

declared at Rs.3.0 per share - - - - - (3,672,539) (3,672,539) - (3,672,539)

Employee stock option reserve - - - - - - - - -

- - - - - (15,914,336) (15,914,336) - (15,914,336)


December 31, 2017

Profit after taxation for the year ended

December 31, 2017 - - - - - 26,190,302 26,190,302 6,287 26,196,589

Other comprehensive income - net of tax - - - 2,031,733 - (58,029) 1,973,704 711,380 2,685,084


December 31, 2017 - - - 2,031,733 - 26,132,273 28,164,006 717,667 28,881,673

Ordinary dividend relating to Non-controlling shareholders - - - - - - - (135,493) (135,493)

Transfer from surplus on revaluation of fixed assets

to unappropriated profit - net of tax - - - - - 51,363 51,363 652 52,015

Transfer to statutory reserve - - 2,556,595 - - (2,556,595) - - -

Balance as at December 31, 2017 12,241,798 3,000 29,857,453 17,343,063 - 76,651,713 136,097,027 4,810,519 140,907,546





Attributable to equity shareholders of the Bank

Sub total

Non-

controlling

Interest

Total

---------------------------------------------------------------------------------------- (Rupees in '000) --------------------------------------------------------------------------------------

Capital reserve

- Exchange

translation

Appropriations recommended by the Board of Directors subsequent to the year ended December 31, 2017 are disclosed in note 48

to these consolidated financial statements.

Share

Capital

General

reserve

Statutory

reserve

Employee

stock option

reserve

Unappropriated

profit

NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2017

1. STATUS AND NATURE OF BUSINESS

The "Group" consists of:

- Holding Company

- Subsidiary companies

- United National Bank Limited (UBL UK) - 55% holding

- UBL (Switzerland) AG -100% holding

- United Executors and Trustees Company Limited, Pakistan - 100% holding

- UBL Fund Managers Limited, Pakistan - 98.87% holding

- Al Ameen Financial Services (Pvt.) Limited - effective holding 98.87%

- UBL Bank (Tanzania) Limited - 100% holding

United Bank Limited (the Bank) is a banking company incorporated in Pakistan and is engaged in commercial banking

and related services. The Bank's registered office and principal office are situated at UBL Building, Jinnah Avenue,

Blue Area, Islamabad and at UBL Head Office, I. I. Chundrigar Road, Karachi respectively. The Bank operates 1,361

(2016: 1,341) branches inside Pakistan including 93 (2016: 47) Islamic Banking branches and 2 (2016: 2) branches in

Export Processing Zones. The Bank also operates 18 (2016: 18) branches outside Pakistan as at December 31,

2017. The Bank is a subsidiary of Bestway (Holdings) Limited which is incorporated in the United Kingdom.

The Bank's ordinary shares are listed on Pakistan Stock Exchange. Its Global Depository Receipts (GDRs) are on the

list of the UK Listing Authority and the London Stock Exchange Professional Securities Market. These GDRs are also

eligible for trading on the International Order Book System of the London Stock Exchange. Further, the GDRs

constitute an offering in the United States only to qualified institutional buyers in reliance on Rule 144A under the US

Securities Act of 1933 and an offering outside the United States in reliance on Regulation S.

UBL UK is an authorized banking institution incorporated in the United Kingdom. The Bank was formed in 2001 from

the merger of the UK branches of United Bank Limited and National Bank of Pakistan. The principal activities of UBL

UK are to provide retail banking services through its branch network in major cities of the UK, wholesale banking and

treasury services to financial institutions and trade finance facilities to businesses of all sizes. United National Bank

Limited operates under the trade name United Bank UK.

UBL (Switzerland) AG is a commercial bank owned by the Bank. Founded in 1967, its main activities are in credit

operations and trade financing. UBL (Switzerland) AG previously operated under the name, United Bank AG Zurich.

UBL Fund Managers Limited was incorporated as an unlisted public limited company in Pakistan on April 3, 2001. The

Company is licensed to carry out Asset Management and Investment Advisory Services under the Non-Banking

Finance Companies (Establishment and Regulation) Rules, 2003 and the Non-Banking Finance Companies and

Notified Entities Regulations, 2008. The principal activities of the Company are floating and managing mutual funds

and providing investment advisory services. The registered office of the Company is situated at STSM Building,

Beaumont Road, Civil Lines, Karachi.

United Executors and Trustees Company Limited ("the Company") was incorporated in Pakistan in 1965 as an

unlisted public limited company. The registered office of the Company is situated at State Life Building No. 1, I.I.

Chundrigar Road, Karachi. Currently, the Company is engaged in the business of investments.

UBL Bank (Tanzania) Limited was incorporated on March 13, 2012 and has commenced operations in May 2013. It is

engaged in providing commercial and retail banking services.

UBL Fund Managers has incorporated a wholly owned subsidiary Al Ameen Islamic Financial Services (Pvt.) Limited

on February 27, 2015. The principal activity of the subsidiary is provision of shariah compliant financial services

including distribution of shariah compliant mutual funds. The registered office of the Company is situated at STSM

Building, Beaumont Road, Civil Lines, Karachi.

6



2. BASIS OF PRESENTATION

2.1

2.2 Key financial figures of the Islamic Banking branches are disclosed in note 46 to these consolidated financial statements.

3. STATEMENT OF COMPLIANCE

3.1

-

-

- Provisions of and directives issued by the Banking Companies Ordinance, 1962;

- Provisions of and directives issued under the Companies Ordinance, 1984; and

- Directives issued by the Securities and Exchange Commission of Pakistan (SECP) and the SBP from time to time.

3.2

3.3

3.4

International Financial Reporting Standards (IFRS) and interpretations issued by the International Accounting

Standards Board (IASB) as are notified under the Companies Ordinance, 1984;

Islamic Financial Accounting Standards (IFAS) issued by the Institute of Chartered Accountants of Pakistan as are

notified under the Companies Ordinance, 1984;

Wherever the requirements of the Companies Ordinance, 1984, the Banking Companies Ordinance, 1962 or the directives

issued by the SECP and the SBP differ with the requirements of IFRS or IFAS, the requirements of the Companies

Ordinance, 1984, the Banking Companies Ordinance, 1962 or the said directives prevail.

The Companies Ordinance, 1984 has been repealed after the enactment of the Companies Act, 2017. However, as allowed

by the SECP vide its circular number 23/2017 dated October 4, 2017, these consolidated financial statements have been

prepared in accordance with the provisions of the repealed Companies Ordinance, 1984.

Standards, interpretations and amendments to approved accounting standards that are not yet effective

SECP vide its notification SRO 633 (I)/2014 dated July 10, 2014, adopted IFRS 10 effective from the periods starting from

June 30, 2014. However, vide its notification SRO 56 (I)/2016 dated January 28, 2016, it has been notified that the

requirements of IFRS 10 and section 237 of the Companies Ordinance 1984 will not be applicable with respect to the

investment in mutual funds established under trust structure.

In accordance with the directives of the Federal Government regarding the shifting of the banking system to Islamic modes,

the State Bank of Pakistan (SBP) has issued various circulars from time to time. Permissible forms of trade-related modes

of financing include purchase of goods by banks from their customers and immediate 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 consolidated financial statements as such, but are restricted to the amount of facility actually utilized and the

appropriate portion of mark-up thereon. The Islamic Banking branches of the Bank have complied with the requirements set

out under the Islamic Financial Accounting Standards issued by the Institute of Chartered Accountants of Pakistan (ICAP)

and notified under the provisions of the repealed Companies Ordinance, 1984.

The SBP, vide BSD Circular letter No. 10, dated August 26, 2002 has deferred the applicability of International Accounting

Standard 39, Financial Instruments: Recognition and Measurement and International Accounting Standard 40, Investment

Property for banking companies till further instructions. Moreover, SBP vide BPRD circular no. 4, dated February 25, 2015

has deferred the applicability of Islamic Financial Accounting Standards (IFAS) 3, Profit and Loss Sharing on Deposits.

Further, according to the notification of the SECP issued vide SRO 411(I)/2008 dated April 28, 2008, IFRS 7, Financial

Instruments: Disclosures has not been made applicable for banks. Accordingly, the requirements of these standards have

not been considered in the preparation of these consolidated financial statements. However, investments have been

classified and valued in accordance with the requirements of various circulars issued by the SBP. Further, segment

information is being disclosed in accordance with SBP’s prescribed format as per BSD circular 4 dated February 17, 2006

which prevails over the requirements specified in IFRS 8.

These consolidated financial statements have been prepared in accordance with approved accounting standards as

applicable in Pakistan. Approved accounting standards comprise of:

The following revised standards, amendments and interpretations with respect to the approved accounting standards would

be effective from the dates mentioned below against the respective standard or interpretation:

7



Standard, Interpretation or Amendment

- IFRS 2 - Share-based Payments - (Amendments)

- IAS 28 - Investments in Associates and Joint Ventures - (Improvement)

- IFRIC 22 - Foreign Currency Transactions and Advance Consideration

- IFRIC 23 - Uncertainty over Income Tax Treatments

- IFRS 3 - Business Consideration - (Amendments)

- IFRS 11 - Joint Venture - (Amendments)

- IAS 12 - Income Taxes - (Amendments)

- IFRS 15 - Revenue from contracts with customers

- IFRS 9 - Financial Instruments: Classification and Measurement

- IFRS 9 - Financial Instruments: Classification and Measurement - (Amendments)

-

-

3.5 Standards, interpretations and amendments to approved accounting standards that are effective in the current year

4. BASIS OF MEASUREMENT

4.1 Accounting convention

4.2 Critical accounting estimates and judgments

July 01, 2018

January 01, 2019

Effective date (annual periods

beginning on or after)

July 01, 2018

January 01, 2018

January 01, 2018

January 01, 2018

January 01, 2018

January 01, 2018

January 01, 2018

The SBP vide BPRD circular no. 2 dated January 25, 2018 has specified the new reporting format for the financial

statements of banking companies. The new format has revised the disclosure requirements and will become applicable for

the financial statements of the Bank for the year ending December 31, 2018.

July 01, 2018

IFRS 15 - Revenue from contracts with customers - The Bank is currently in the process of assessing the potential

impacts of changes required in revenue recognition policies upon adoption of the standard.

The Group expects that the adoption of remaining amendments, improvements and interpretations will not affect its

financial statements in the period of initial application.

In addition to above, the Companies Act 2017 has been enacted on May 31, 2017 and according to the circular referred to

in note number 3.1 of these financial statements, the act would be applicable for periods after January 1, 2018. This would

result in additional disclosures and certain changes in financial statements presentation.

IFRS 9 - Financial Instruments - The Bank is currently awaiting instructions from SBP as applicability of IAS 39 was

deferred by SBP till further instructions.

There are certain new and amended standards, interpretations and amendments that are mandatory for the Group's

accounting periods beginning on or after January 1, 2017 but are considered not to be relevant or do not have any

significant effect on the Group's operations and therefore not detailed in these financial statements.

The preparation of these consolidated financial statements in conformity with approved accounting standards requires

management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and

income and expenses. It also requires management to exercise judgment in the application of its accounting policies. The

estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable

under the circumstances. These estimates and assumptions are reviewed on an ongoing basis. Revisions to accounting

estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the

period of revision and future periods if the revision affects both current and future periods.

These consolidated financial statements have been prepared under the historical cost convention except that certain

operating fixed assets / non-banking assets acquired in satisfaction of claims have been stated at revalued amounts,

certain investments and derivative financial instruments have been stated at fair value and net obligations in respect of

defined benefit schemes are carried at their present values.

8



i) classification of investments (notes 5.4 and 9);

ii)

iii) income taxes (notes 5.9 and 33);

iv) staff retirement benefits (notes 5.11 and 37);

v) fair value of derivatives (notes 5.16.2 and 19.3);

vi) operating fixed assets, revaluation, depreciation and amortization (notes 5.6 and 11);

vii) impairment (note 5.8); and

viii) valuation of non-banking assets acquired in satisfaction of claims (note 5.7).

5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

5.1 Basis of consolidation

The consolidated financial statements include the financial statements of the Bank and its subsidiary companies.

All material intra-group balances and transactions have been eliminated.

5.2 Cash and cash equivalents

5.3 Lendings to / borrowings from financial institutions

5.3.1 Purchase under resale agreements

Subsidiary companies are fully consolidated from the date on which more than 50% of voting rights are transferred to the

Group or the power to control the company is established and are excluded from consolidation from the date of disposal or

when the control is lost.

The financial statements of subsidiaries are prepared for the same reporting period as the Holding Company, using

accounting policies that are consistent with those of the Holding Company, except for non-banking subsidiaries in Pakistan

which follow the requirements of IAS 39 and IAS 40, and overseas subsidiaries which are required to comply with local

regulations enforced within the respective jurisdictions.

Securities held as collateral are not recognized in the consolidated financial statements, unless these are sold to third

parties, in which case the obligation to return them is recorded at fair value as a trading liability under borrowings from

financial institutions.

The accounting policies adopted in the preparation of these consolidated financial statements are consistent with those of

the previous financial year.

Cash and cash equivalents for the purpose of the cash flow statement consist of cash and balances with treasury banks

and balances with other banks.

The Group enters into transactions of reverse repos and repos at contracted rates for a specified period of time. These are

recorded as under:

The assets and liabilities of the subsidiaries have been consolidated with those of the Holding Company on a line by line

basis and the carrying value of the Bank's investment in the subsidiaries is eliminated against the subsidiaries' share

capital and pre-acquisition reserves in these consolidated financial statements.

Non-controlling interest represents that part of the net results of operations and of the net assets of the subsidiaries that is

not owned by the Group.

Securities purchased under agreement to resell (reverse repo) are included in lendings to financial institutions. The

differential between the purchase price and the resale price is amortized over the period of the agreement and recorded as

income.

Significant accounting estimates and areas where judgments were made by management in the application of accounting

policies are as follows:

provision against investments (notes 5.4 and 9.3), lendings to financial institutions (note 8.6) and advances (notes 5.5

and 10.3);

9



5.3.2 Sale under repurchase agreements

5.3.3 Bai Muajjal

5.4 Investments

Held for trading

Initial measurement

Subsequent measurement

Held for trading

Held to maturity

These are securities which are either acquired for generating a profit from short-term fluctuations in market prices, interest

rate movements and dealer's margin, or are securities included in a portfolio in which a pattern of short term profit taking

exists.

Available for sale

These are measured at subsequent reporting dates at fair value. Gains and losses on re-measurement are included in the

profit and loss account.

All “regular way” purchases and sales of investments are recognized on the trade date, i.e. the date that the Group commits

to purchase or sell the investment. Regular way purchases or sales are purchases or sales of investments that require

delivery of investments within the time frame generally established by regulation or convention in the market place.

Investments of the Group, other than investments in associates, are classified as held for trading, held to maturity and

available for sale.

Securities sold subject to a repurchase agreement (repo) are retained in the consolidated financial statements as

investments and the counterparty liability is included in borrowings from financial institutions. The differential between the

sale price and the repurchase price is amortized over the period of the agreement and recorded as an expense.

Investments are initially recognized at fair value which, in the case of investments other than held for trading, includes

transaction costs associated with the investments. Transaction costs on investments held for trading are expensed as

incurred.

The securities sold under Bai Muajjal agreement are derecognised on the date of disposal. Receivable against such sale is

recognised at the agreed sale price. The difference between the sale price and the carrying value on the date of disposal is

taken to income on straight line basis.

These are investments, other than those in subsidiaries and associates, that do not fall under the held for trading or held to

maturity categories.

These are measured at amortized cost using the effective interest rate method, less any impairment loss recognized to

reflect irrecoverable amounts.

These are securities with fixed or determinable payments and fixed maturities, in respect of which the Group has the

positive intent and ability to hold to maturity.

Held to maturity

10



Available for sale

Associates are entities over which the Group has a significant influence, but control does not exist.

5.5 Advances

5.5.1 Islamic financings and related assets

Investments in associates are accounted for using the equity method of accounting. Under the equity method, the

investment in the associate is initially recognised at cost and the carrying amount is increased or decreased to recognise

the investor's share of the profit or loss of the investee subsequent to the date of acquisition. The increase / decrease in the

share of profit or loss of associates is accounted for in the consolidated profit and loss account. The Group applies equity

accounting for UBL Insurers Limited, Oman United Exchange Company Limited, Khushhali Bank Limited, DHA Cogen

Limited and its investments in mutual funds managed by UBL Fund Managers Limited.

Provisions for diminution in the value of term finance certificates and Sukuks are made as per the ageing criteria prescribed

by the Prudential Regulations issued by the SBP. Provisions for diminution in the value of other securities are made for

impairment, if any.

Unquoted equity securities are valued at the lower of cost and break-up value. The break-up value of these securities is

calculated with reference to the net assets of the investee company as per the latest available audited financial statements.

A decline in the carrying value is charged to the profit and loss account. A subsequent increase in the carrying value, upto

the cost of the investment, is credited to the profit and loss account. Investments in other unquoted securities are valued at

cost less impairment, if any.

Advances are stated net of specific and general provisions which are charged to the profit and loss account. Specific

provisions against domestic advances and general provision against domestic consumer loans are determined on the basis

of the Prudential Regulations and other directives issued by the SBP. General and specific provisions pertaining to

overseas advances are made in accordance with the requirements of the regulatory authorities of the respective countries.

If circumstances warrant, the Group, from time to time, makes general provisions against weaknesses in its portfolio on the

basis of management's estimation.

Associates

Ijarah financing represents arrangements whereby the Bank (being the owner of assets) transfers its usufruct to its

customers for an agreed period at an agreed consideration. Assets leased out under Ijarah are stated at cost less

accumulated depreciation and accumulated impairment losses, if any. These are depreciated over the term of the lease.

Ijarah income is recognized on an accrual basis.

Diminishing Musharaka is partnership agreement between the Bank and its customer for financing vehicle or plant and

machinery. The receivable is recorded to the extent of Bank's share in the purchase of asset. Income is recognised on

accrual basis.

Advances are written off when there is no realistic prospect of recovery. The amount so written off is a book entry and does

not necessarily prejudice to the Group's right of recovery against the customer.

Receivables under Murabaha financing represent cost price plus an agreed mark-up on deferred sale arrangement. Mark-

up income is recognised on a straight line basis over the period of the instalments.

The Bank determines write-offs in accordance with the criteria prescribed by the SBP vide BPRD Circular No. 06 dated

June 05, 2007.

Quoted securities classified as available for sale investments are measured at subsequent reporting dates at fair value.

Any surplus / deficit arising thereon is kept in a separate account shown in the statement of financial position below equity

and is taken to the profit and loss account when realized upon disposal or when the investment is considered to be

impaired.

11



5.6 Operating fixed assets and depreciation

5.6.1 Tangible

5.6.2 Intangible assets

5.7 Non banking assets acquired in satisfaction of claims

5.8 Impairment

Impairment of available for sale equity investments

Intangible assets are stated at cost less accumulated amortization and accumulated impairment losses, if any. The cost

and the accumulated amortization of intangible assets of foreign branches include exchange differences arising on

currency translation at the year-end rates of exchange. Amortization is calculated so as to write-off the amortizable amount

of the assets over their expected useful lives at the rates specified in note 11.3 to these consolidated financial statements.

The amortization charge for the year is calculated on a straight line basis after taking into account the residual value, if any.

The residual values and useful lives are reviewed and adjusted, if appropriate, at each statement of financial position date.

Amortization on additions is charged from the month the asset is available for use. No amortization is charged in the month

of disposal.

Gains and losses on sale of intangible assets are included in the profit and loss account.

Available for sale equity investments are impaired when there has been a significant or prolonged decline in their fair value

below their cost. The determination of what is significant or prolonged requires judgment. In making this judgment, the

Group evaluates, among other factors, the normal volatility in share price.

Depreciation on additions is charged from the month the asset is available for use. No depreciation is charged in the month

of disposal.

Major renewals and improvements are capitalized and the assets so replaced, if any, are retired. Normal repairs and

maintenance are charged to the profit and loss account as and when incurred.

Property and equipment, other than land (which is not depreciated) and capital work-in-progress, are stated at cost or

revalued amount less accumulated depreciation and accumulated impairment losses, if any. Land is carried at revalued

amount less impairment losses while capital work-in-progress is stated at cost less impairment losses. The cost and the

accumulated depreciation of property and equipment of foreign branches include exchange differences arising on currency

translation at the year-end rates of exchange.

Non banking assets acquired in satisfaction of claims are carried at revalued amounts less accumulated depreciation.

These assets are revalued by professionally qualified valuers with sufficient regularity to ensure that their net carrying value

does not differ materially from their fair value. A surplus arising on revaluation of property is credited to the 'surplus on

revaluation of non-banking assets' account and any deficit arising on revaluation is taken to profit and loss account directly.

Legal fees, transfer costs and direct costs of acquiring title to property are charged to the profit and loss account and not

capitalised.

Depreciation is calculated so as to write-off the depreciable amount of the assets over their expected useful lives at the

rates specified in note 11.2 to these consolidated financial statements. The depreciation charge for the year is calculated

on a straight line basis after taking into account the residual value, if any. The residual values and useful lives are reviewed

and adjusted, if appropriate, at each statement of financial position date.

Gains and losses on sale of fixed assets are included in the profit and loss account, except that the related surplus on

revaluation of fixed assets (net of deferred tax) is transferred directly to unappropriated profit.

Land and buildings are revalued by professionally qualified valuers with sufficient regularity to ensure that their net carrying

value does not differ materially from their fair value. A surplus arising on revaluation is credited to the surplus on

revaluation of fixed assets account. Any deficit arising on subsequent revaluation of fixed assets is adjusted against the

balance in the above mentioned surplus account as allowed under the provisions of the repealed Companies Ordinance,

1984. The surplus on revaluation of fixed assets, to the extent of incremental depreciation, is transferred to unappropriated

profit.

12



Impairment in investments in associates

Impairment in non-financial assets (excluding deferred tax)

5.9 Taxation

5.9.1 Current

5.9.2 Prior years

5.9.3 Deferred

5.10 Provisions

Provisions are reviewed at each statement of financial position date and are adjusted to reflect the current best estimate.

Deferred tax is recognized using the balance sheet method on all major temporary differences between the amounts

attributed to assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax

is calculated at the rates that are expected to apply to the period when the differences are expected to reverse, based on

tax rates that have been enacted or substantively enacted at the statement of financial position date.

The Group also recognizes deferred tax asset / liability on the deficit / surplus on revaluation of fixed assets / non-banking

assets acquired in satisfaction of claims and securities which is adjusted against the related deficit / surplus in accordance

with the requirements of IAS 12, Income Taxes.

Provision against identified non-funded losses is recognized when intimated and reasonable certainty exists that the Group

will be required to settle the obligation. The provision is charged to the profit and loss account net of expected recovery and

the obligation is classified under other liabilities.

The Group considers that a decline in the recoverable value of the investment in an associate below its cost may be

evidence of impairment. Recoverable value is calculated as the higher of fair value less costs to sell and value in use. An

impairment loss is recognized when the recoverable value falls below the carrying value and is charged to the profit and

loss account. A subsequent reversal of an impairment loss, upto the cost of the investment in the associate, is credited to

the profit and loss account.

Provisions are recognized when the Group has a legal or constructive obligation as a result of past events which makes it

probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be

made.

The taxation charge for prior years represents adjustments to the tax charge relating to prior years, arising from

assessments and changes in estimates made during the current year.

The carrying amounts of non-financial assets are reviewed at each reporting date for impairment whenever events or

changes in circumstances indicate that the carrying amounts of these assets may not be recoverable. If such indication

exists, and where the carrying value exceeds the estimated recoverable amount, assets are written down to their

recoverable amount. The resulting impairment loss is charged to the profit and loss account except for an impairment loss

on revalued assets, which is adjusted against the related revaluation surplus to the extent that the impairment loss does not

exceed the revaluation surplus.

Provision for current taxation is based on taxable income for the year determined in accordance with the prevailing laws

and at the prevailing rates for taxation on income earned by the Group in the respective regions / territories.

Deferred tax assets are recognized only to the extent that it is probable that future taxable profits will be available against

which the assets can be utilized.

The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to the

extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset

to be utilized.

13



5.11 Staff retirement and other benefits

5.11.1 The Bank

The Bank operates the following staff retirement schemes for its employees:

a)

- an approved contributory provident fund (defined contribution scheme); and

- an approved gratuity scheme (defined benefit scheme).

b) For employees who have not opted for the conversion option introduced in 2001, the Bank operates:

- an approved non-contributory provident fund in lieu of the contributory provident fund; and

- an approved funded pension scheme, introduced in 1986 (defined benefit scheme).

The Bank also operates benevolent fund for all its eligible employees (defined benefit scheme).

Other benefits

a) Employees' compensated absences

b) Post retirement medical benefits (defined benefit scheme)

c) Employee motivation and retention scheme

Remeasurement of defined benefit obligations

In 2001, the Bank modified the pension scheme and introduced a conversion option for employees covered under option

(b) above to move to option (a). This conversion option ceased on December 31, 2003.

The Bank provides post retirement medical benefits to eligible retired employees. Provision is made on the basis of

actuarial advice under the Projected Unit Credit Method.

The Bank has a long term motivation and retention scheme for its employees. The liability of the Bank in respect of

the scheme for each year, if any, is fixed, and is accounted for in the year to which the scheme relates.

Remeasurement gains and losses pertaining to long term compensated absences are recognized in the profit and loss

account immediately.

For new employees and for those who opted for the below mentioned conversion option introduced in 2001, the Bank

operates:

The Bank makes provisions for compensated vested and non-vested absences accumulated by its eligible employees

on the basis of actuarial advice under the Projected Unit Credit Method.

Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are

recognized in other comprehensive income when they occur with no subsequent recycling through the profit and loss

account.

Annual contributions towards defined benefit schemes are made on the basis of actuarial advice using the Projected Unit

Credit Method.

For the defined contribution scheme, the Bank pays contributions to the fund on a periodic basis. The Bank has no further

payment obligation once the contributions have been paid. The contributions are recognized as an expense when the

obligation to make payments to the fund has been established. Prepaid contributions are recognized as an asset to the

extent that a cash refund or a reduction in future payments is available.

14



5.11.2 United National Bank Limited (UBL UK)

Defined benefit scheme

Defined contribution scheme

5.11.3 UBL Fund Managers Limited (UFML)

Defined benefit plan

Defined contribution plan

Employee Stock Option Scheme

5.11.4 UBL (Switzerland) AG

5.11.5 UBL Bank (Tanzania) Limited

5.12 Subordinated loans

UBL UK operates a defined contributory pension scheme. The contribution payable in the year in respect of pension costs

and other post retirement benefits is charged to the profit and loss account. Differences between the contribution payable in

the year and contribution actually paid are shown as either accruals or prepayments in the statement of financial position.

UBL UK operates a pension scheme (defined benefit scheme) for certain staff. This scheme is closed for new members

and the accrual of benefits has ceased from January 1, 2010. Gains and losses on settlements and curtailments are

charged to the profit and loss account. The interest cost and the expected return on assets are included in other liabilities

and other assets respectively. Remeasurement gains and losses are recognised immediately in other comprehensive

income.

UBL (Switzerland) AG maintains a contribution-oriented pension scheme for employees who have reached the age of 25. It

bears a large share of the costs of the occupational pension plan for all employees as well as their surviving dependents

pursuant to legal requirements. The employee benefit obligations and the assets serving as coverage are outsourced to a

collective insurance firm. The organization, management and financing of the pension plan comply with legal regulations,

the deed of foundation and the applicable regulations of the benefit plan.

All eligible employees are members of the Public Pension Fund (PPF) or National Social Security Fund (NSSF). The fund is

a defined contribution scheme with the Bank having no legal or constructive obligation to pay further top-up contributions.

Subordinated loans are initially recorded at the amount of proceeds received. Mark-up accrued on subordinated loans is

recognised separately as part of other liabilities and is charged to the profit and loss account over the period on an accrual

basis.

UFML operates an approved contributory provident fund (defined contribution scheme) for all eligible employees.

UBL Fund Managers provides an incentive scheme for its top performing employees in the form of share options under the

Employee Stock Option Scheme (ESOS). The scheme has been approved by the SECP.

The defined benefit scheme is funded, with the assets of the scheme held separately from those of UBL UK, in separate

trustee administered funds. Pension scheme assets are measured at fair value and liabilities are measured based on

actuarial valuations using the Projected Unit Credit Method. The actuarial valuations are obtained at least triennially and

are updated at each statement of financial position date.

UFML operates an approved funded gratuity scheme for all employees. Annual contributions to the fund are made on the

basis of actuarial advice using the Projected Unit Credit Method. Remeasurement gains and losses arising from experience

adjustments and changes in actuarial assumptions are recognized in other comprehensive income when they occur with no

subsequent recycling through the profit and loss account.

15



5.13 Borrowings / deposits

a) Borrowings / deposits are recorded at the amount of proceeds received.

b) The cost of borrowings / deposits is recognized on an accrual basis as an expense in the period in which it is incurred.

5.14 Revenue recognition

5.14.1 Advances and investments

5.14.2 Dividend income

Dividend income is recognised when the right to receive the dividend is established.

5.14.3 Fee, brokerage and commission

5.14.4 Grants

5.15 Foreign currencies

5.15.1 Functional and presentation currency

5.15.2 Foreign currency transactions

5.15.3 Foreign operations and subsidiaries

Grants received are recorded as income when the right to receive the grant, based on the related expenditure having been

incurred, has been established.

Non-monetary assets and liabilities in foreign currencies are expressed in rupee terms at the rates of exchange prevailing

at the date of initial recognition of the non-monetary assets / liabilities.

The assets and liabilities of foreign operations and subsidiaries are translated to rupees at exchange rates prevailing at the

statement of financial position date. The results of foreign operations and subsidiaries are translated at the average rate of

exchange for the year.

Revenue is recognized to the extent that the economic benefits associated with a transaction will flow to the Group and the

revenue can be reliably measured. The following recognition criteria must be met before revenue is recognized.

Mark-up / return / interest on performing advances and investments is recognized on a time proportionate basis over the

term of the advances and investments that takes into account the effective yield of the asset. Where debt securities are

purchased at a premium or discount, such premium / discount is amortized through the profit and loss account over the

remaining period of maturity of the debt securities.

Interest or mark-up recoverable on non-performing or classified advances and investments is recognized on a receipt

basis.

Fee, brokerage and commission income is recognized on an accrual basis.

Items included in these consolidated financial statements are measured using the currency of the primary economic

environment in which the Holding Company operates. These consolidated financial statements are presented in Pakistani

Rupees, which is the Group's functional and presentation currency.

Transactions in foreign currencies are translated to rupees at the foreign exchange rates prevailing on the transaction date.

Monetary assets and liabilities in foreign currencies are expressed in rupee terms at the rates of exchange prevailing at the

statement of financial position date. Forward foreign exchange contracts and foreign bills purchased are valued in rupees

at the forward foreign exchange rates applicable to their respective maturities.

16



5.15.4 Translation gains and losses

5.15.5 Contingencies and commitments

5.16 Financial instruments

5.16.1 Financial assets and liabilities

5.16.2 Derivative financial instruments

5.16.3 Hedge accounting

Cash flow hedges

5.16.4 Off setting

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any

cumulative gain or loss existing in equity at that time remains in equity and is recognised when the hedged item is

ultimately recognised in the profit and loss account.

Translation gains and losses are taken to the profit and loss account, except those arising on translation of the net

investment in foreign branches and subsidiaries which are taken to capital reserves (Exchange Translation Reserve) until

the disposal of the net investment, at which time these are recognised in the profit and loss account.

Commitments for outstanding forward foreign exchange contracts are disclosed in these consolidated financial statements

at contracted rates. Contingent liabilities / commitments denominated in foreign currencies are expressed in rupee terms at

the rates of exchange prevailing at the statement of financial position date.

For qualifying cash flow hedges, the fair value gain or loss associated with the effective portion of the cash flow hedge is

recognised initially in the statement of changes in equity, and recycled through the profit and loss account in the periods

when the hedged item will affect profit or loss. Any gain or loss on the ineffective portion of the hedging instrument is

recognised in the profit and loss account immediately.

Financial assets and liabilities carried on the statement of financial position include cash and bank balances, lendings to

financial institutions, investments, advances, certain receivables, bills payable, borrowings from financial institutions,

deposits, subordinated loans and certain payables. The particular recognition methods adopted for significant financial

assets and financial liabilities are disclosed in the individual policy notes associated with them.

The Group makes use of derivative instruments to manage exposures to interest rate, foreign currency and credit risks. In

order to manage particular risks, the Group may undertake a hedge. The Group applies hedge accounting for transactions

which meet the specified criteria.

Financial assets and financial liabilities are set off and the net amount is reported in the consolidated financial statements

when there is a legally enforceable right to set off and the Group intends to either settle on a net basis, or to realize the

assets and to settle the liabilities simultaneously.

At the inception of the hedging relationship, the Group formally documents the relationship between the hedged item and

the hedging instrument, including the nature of the risk, the objective and strategy for undertaking the hedge and the

method that will be used to assess the effectiveness of the hedging relationship. A formal assessment is also undertaken to

ascertain whether the hedging instrument is expected to be highly effective in offsetting the designated risk in the hedged

item. A hedge is regarded as highly effective if, during the period for which the hedge is designated, changes in the fair

value or cash flows attributable to the hedged item are expected to be offset by between 80% to 125% by corresponding

changes in the fair value or cash flows attributable to the hedging instrument.

Derivative financial instruments are initially recognized at fair value on the date on which the derivative contract is entered

into and are subsequently re-measured at fair value using appropriate valuation techniques. All derivative financial

instruments are carried as assets when their fair value is positive and liabilities when their fair value is negative. Any

change in the fair value of derivative financial instruments during the period is taken to the profit and loss account.

17



5.17 Segment reporting

5.17.1 Business segments

(a) Corporate finance

(b) Trading and sales

(c) Retail banking

(d) Commercial banking

(e) Asset management

(f) Others

Others includes functions of the Group and subsidiaries which cannot be classified in any of the above segments.

5.17.2 Geographical segments

The Group operates in following geographical regions:

- Pakistan

- Middle East

- United States of America

- Export Processing Zones in Karachi and Sialkot

- Europe

- Africa

5.18 Dividends and appropriations to reserves

5.19 Earnings per share

The Group presents basic and diluted earnings per share (EPS). Basic EPS is calculated by dividing the profit or loss

attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during

the year.

Dividends and appropriations to reserves are recorded in the year in which these are approved, except appropriations

required by law which are recorded in the period to which they pertain.

Corporate finance includes services provided in connection with mergers and acquisitions, project finance and the

underwriting / arrangement of debt and equity instruments through syndications, Initial Public Offerings and private

placements.

Commercial banking includes project finance, working capital finance, trade finance, import and export, factoring,

leasing, lending, deposits and guarantees.

A segment is a distinguishable component of the Group that is engaged either in providing particular products or services

(business segment), or in providing products or services within a particular economic environment (geographical segment),

and is subject to risks and rewards that are different from those of other segments.

Trading and sales includes fixed income, equity, foreign exchange, credit, funding, own position securities, lendings

and borrowings and derivatives for hedging and market making.

Asset management includes discretionary and non-discretionary fund management activities in the form of pooled,

segregated, retail, institutional, private equity, open, close ended funds etc.

Retail banking includes retail and consumer lending and deposits, banking services, cards and branchless banking.

18



Note 2017 2016

6. CASH AND BALANCES WITH TREASURY BANKS

In hand

Local currency 9,133,749 13,072,595

Foreign currency 4,757,384 5,013,886

13,891,133 18,086,481

With State Bank of Pakistan in

Local currency current accounts 6.1 47,566,242 33,315,897

Foreign currency current accounts 6.2 2,603,208 2,307,913

Foreign currency deposit account 6.3 7,374,423 6,841,899

57,543,873 42,465,709

With other central banks in

Foreign currency current accounts 6.4 34,049,196 33,616,331

Foreign currency deposit accounts 6.5 7,272,440 1,775,653

41,321,636 35,391,984

With National Bank of Pakistan in local currency current accounts 48,257,470 37,422,940

National Prize Bonds 105,058 100,388

161,119,170 133,467,502

6.1

6.2

6.3

6.4

6.5

Note 2017 2016

7. BALANCES WITH OTHER BANKS

Inside Pakistan

In current accounts 3,674 493

In deposit accounts 7.1 5,879,308 2,842,953

5,882,982 2,843,446

Outside Pakistan

In current accounts 15,014,403 14,148,042

In deposit accounts 7.2 14,651,727 15,275,816

29,666,130 29,423,858

35,549,112 32,267,304

7.1

7.2

------- (Rupees in '000) -------

These carry mark-up at rates ranging from 0.13% to 5.25% (2016: 0.10% to 1.84%) per annum and include balances

amounting to Rs. 220.834 million (2016: Rs. 1,004.146 million), maintained with an overseas bank against the statutory

reserves requirement of a foreign branch.

This represents an account maintained with the SBP to comply with the Special Cash Reserve requirement. The return on

this account is declared by the SBP on a monthly basis and as at December 31, 2017, it carries mark-up at the rate of

0.37% (2016: 0.00%) per annum.

This represents a US Dollar settlement account maintained with the SBP and current accounts maintained with the SBP to

comply with statutory requirements.

These represent placement with overseas central banks and carry mark-up at the rate ranging from 1.22% to 1.50%

(2016: 0.75%) per annum.

These carry mark-up at rates ranging from 5.60% to 5.70% (2016: 5.80% to 5.95%) per annum.

This represents current accounts maintained with the SBP under the Cash Reserve Requirement of section 22 of the

Banking Companies Ordinance, 1962.

Deposits with other central banks are maintained to meet the minimum cash reserves and capital requirements pertaining

to the foreign branches and subsidiaries of the Group.

------- (Rupees in '000) -------

19



Note 2017 2016

8. LENDINGS TO FINANCIAL INSTITUTIONS

Call money lending 8.2 585,000 1,500,000

Repurchase agreement lendings 8.3 6,931,953 -

Bai Muajjal receivable from State Bank of Pakistan 8.4 3,109,215 -

Bai Muajjal receivable from other financial institutions - 11,226,452

Other lendings to financial institutions 8.5 26,100,227 23,564,197

36,726,395 36,290,649

Provision against lendings to financial institutions 8.6 (832,475) (806,063)

35,893,920 35,484,586

8.1 Particulars of lendings to financial institutions - gross

In local currency 19,991,458 19,335,529

In foreign currencies 16,734,937 16,955,120

36,726,395 36,290,649

8.2

8.3 Securities held as collateral against repurchase agreement lendings

2016

Held by

Group

Further given

as collateral /

sold

TotalHeld by

Group

Further given

as collateral /

sold

Total

Market Treasury Bills 6,931,953 - 6,931,953 - - -

8.4

8.5

8.6

2017 2016

Opening balance 806,063 822,485

Exchange adjustments 37,210 (922)

Reversal during the year (8,260) (15,500)

Amounts written off (2,538) -

Closing balance 832,475 806,063

2017

------- (Rupees in '000) -------

------- (Rupees in '000) -------

----------------------------------------------- (Rupees in '000) -----------------------------------------------

This represents unsecured lending carrying mark-up at a rate 5.75% per annum (2016: 5.25% per annum) and is due to

mature by January 2018.

This represents provision made against lendings to financial institutions with movement as follows:

Lendings pertaining to domestic operations carry mark-up at rates ranging from 0.00% to 8.19% per annum (2016: 0.00%

to 8.14% per annum) and are due to mature latest by November 2022. Lendings pertaining to overseas operations carry

mark-up at rates ranging from 2.61% to 6.02% per annum (2016: 1.20% to 4.13% per annum) and are due to mature latest

by February 2022.

This represents Bai Muajjal agreements entered into with State Bank of Pakistan (SBP) whereby the Bank has sold sukuks

having carrying value of Rs. 2,948.799 million (2016: Rs. nil) on deferred payment basis. The average return on these

transactions is 5.44% per annum (2016: 0.00%). The balances are due to mature latest by June 2018.

20



9. INVESTMENTS

9.1 Investments by type Note

Held by GroupGiven as

collateralTotal Held by Group

Given as

collateralTotal

Held for trading securities

Market Treasury Bills 59,117,369 45,383,907 104,501,276 8,120,078 - 8,120,078

Pakistan Investment Bonds 582,376 - 582,376 263,156 - 263,156

Term Finance Certificates 10,245 - 10,245 26,608 - 26,608

59,709,990 45,383,907 105,093,897 8,409,842 - 8,409,842

Available for sale securities

Market Treasury Bills 108,314,347 194,204,632 302,518,979 25,117,903 47,933,801 73,051,704

Pakistan Investment Bonds 23,830,510 205,729,962 229,560,472 184,088,469 96,854,633 280,943,102

Government of Pakistan Sukuk 19,102,273 - 19,102,273 7,233,271 - 7,233,271

Government of Pakistan Eurobonds 16,768,510 - 16,768,510 15,378,790 - 15,378,790

Ordinary shares of listed companies 18,362,340 - 18,362,340 16,007,143 - 16,007,143

Preference shares 391,315 - 391,315 372,636 - 372,636

Ordinary shares of unlisted companies 258,757 - 258,757 243,334 - 243,334

Term Finance Certificates 441,406 - 441,406 556,284 - 556,284

Investment in REIT 458,590 - 458,590 458,590 - 458,590

Foreign bonds - sovereign 38,492,705 - 38,492,705 33,743,383 - 33,743,383

Foreign bonds - others 18,150,879 - 18,150,879 18,150,994 - 18,150,994

244,571,632 399,934,594 644,506,226 301,350,797 144,788,434 446,139,231

Held to maturity securities

Market Treasury Bills 7,363,088 - 7,363,088 27,735,599 - 27,735,599

Pakistan Investment Bonds 311,766,517 - 311,766,517 289,522,875 - 289,522,875

Government of Pakistan Eurobonds 6,564,140 - 6,564,140 8,366,542 - 8,366,542

Government of Pakistan Sukuk 221,823 - 221,823 894,199 - 894,199

Term Finance Certificates 6,626,766 - 6,626,766 4,715,333 - 4,715,333

Sukuks 10,512,247 - 10,512,247 9,024,950 - 9,024,950

Participation Term Certificates 437 - 437 2,795 - 2,795

Debentures 2,266 - 2,266 2,266 - 2,266

Foreign bonds - sovereign 15,208,115 - 15,208,115 11,877,893 - 11,877,893

Foreign bonds - others 6,098,955 - 6,098,955 3,393,747 - 3,393,747

Recovery note 340,333 - 340,333 322,399 - 322,399

CDC SAARC Fund 240 - 240 228 - 228

Commercial Paper 227,224 - 227,224 - - -

364,932,151 - 364,932,151 355,858,826 - 355,858,826

Associates

United Growth and Income Fund 9.9 264,763 - 264,763 615,046 - 615,046

UBL Liquidity Plus Fund 9.9 93,371 - 93,371 11,738 - 11,738

UBL Money Market Fund 9.9 11,455 - 11,455 11,445 - 11,445

UBL Retirement Savings Fund 9.9 - - - 30,654 - 30,654

UBL Government Securities Fund 9.9 265,325 - 265,325 3,092,749 - 3,092,749

UBL Gold Fund 9.9 - - - 86,734 - 86,734

UBL Asset Allocation Fund 9.9 - - - 765,932 - 765,932

UBL Stock Advantage Fund 9.9 210,149 - 210,149 186,565 - 186,565

UBL Financial Planning Fund 9.9 37,036 - 37,036 - - -

Al Ameen Islamic Cash Fund 9.9 367 - 367 12,862 - 12,862

Al Ameen Islamic Aggressive Income Fund 9.9 - - - 31,923 - 31,923

Al Ameen Islamic Sovereign Fund 9.9 382 - 382 59,360 - 59,360

Al Ameen Shariah Stock Fund 9.9 320,894 - 320,894 363,868 - 363,868

Al Ameen Islamic Asset Allocation Fund 9.9 216,916 - 216,916 128,665 - 128,665

Al Ameen Islamic Financial Planning Fund 9.9 316,142 - 316,142 611,598 - 611,598

Al Ameen Islamic Financial Planning Fund II 9.9 45,123 - 45,123 - - -

UBL Insurers Limited 9.9 345,097 - 345,097 295,604 - 295,604

Khushhali Bank Limited 9.9 2,046,922 - 2,046,922 1,606,377 - 1,606,377

Oman United Exchange Company, Muscat 9.9 69,702 - 69,702 66,497 - 66,497

DHA Cogen Limited 9.9.1.6 - - - - - -

4,243,644 - 4,243,644 7,977,617 - 7,977,617

673,457,417 445,318,501 1,118,775,918 673,597,082 144,788,434 818,385,516

Provision for diminution in value of investments 9.3 (3,149,523) - (3,149,523) (2,434,908) - (2,434,908)

Investments - net of provision 670,307,894 445,318,501 1,115,626,395 671,162,174 144,788,434 815,950,608

Surplus on revaluation of available

for sale securities 22.2 3,311,811 5,980,887 9,292,698 12,665,549 9,647,338 22,312,887

Surplus / (deficit) on revaluation of held for trading

securities 9.4 34 2,173 2,207 (1,221) - (1,221)

Total investments 673,619,739 451,301,561 1,124,921,300 683,826,502 154,435,772 838,262,274

---------------------------------------------------------- (Rupees in '000) ----------------------------------------------------------

2017 2016

21



Note 2017 2016

9.2 Investments by segment

Federal Government Securities

Market Treasury Bills 407,020,255 96,090,512

Pakistan Investment Bonds 541,909,365 570,729,133

Government of Pakistan Sukuk 19,324,096 8,127,470

Government of Pakistan Eurobonds 23,332,650 23,745,332

991,586,366 698,692,447

Foreign securities

Market Treasury Bills 7,363,088 12,816,869

Sovereign bonds 53,700,820 45,621,276

CDC SAARC Fund 240 228

Recovery note 340,333 322,399

Other bonds 24,249,834 21,544,741

85,654,315 80,305,513

Ordinary shares

Listed companies 18,362,340 16,007,143

Unlisted companies 258,757 243,334

18,621,097 16,250,477

Preference shares 391,315 372,636

Term Finance Certificates

Listed 1,189,615 1,190,052

Unlisted 5,888,802 4,108,173

7,078,417 5,298,225

Sukuks 10,512,247 9,024,950

Debentures 2,266 2,266

Participation Term Certificates 437 2,795

Investment in REIT 458,590 458,590

Commercial Paper 227,224 -

Investment in associates 4,243,644 7,977,617

Total investments - Gross 1,118,775,918 818,385,516

Provision for diminution in value of investments 9.3 (3,149,523) (2,434,908)

Investments - net of provision 1,115,626,395 815,950,608

Surplus on revaluation of available for sale securities 22.2 9,292,698 22,312,887

Surplus / (deficit) on revaluation of held for trading securities 9.4 2,207 (1,221)

Total investments 1,124,921,300 838,262,274

9.3 Provision for diminution in value of investments

9.3.1 Opening balance 2,434,908 2,550,531

Exchange adjustments 51,363 (9,329)

Charge / (reversals)

Charge for the year 750,715 969,980

Reversals (30,870) (71,871)

719,845 898,109

Reversed on disposal (55,525) (978,855)

Amounts written off (1,068) (25,548)

Closing balance 3,149,523 2,434,908

-------- (Rupees in '000) -------

22



2017 2016

9.3.2 Provision for diminution in value of investments by type


Ordinary shares of listed companies 1,824,103 1,218,693

Ordinary shares of unlisted companies 128,758 137,379

Term Finance Certificates 97,616 104,040

Foreign bonds 2,107 -


2,407,272 1,796,046



Sukuks 117,841 42,650

Foreign bonds 239,487 226,867




742,251 638,862

3,149,523 2,434,908

9.3.3 Provision for diminution in value of investments by segment

Equity securities

Listed companies 1,824,103 1,218,693

Unlisted companies 128,758 137,379


2,307,549 1,692,006

Debt securities


Sukuks 117,841 42,650


Foreign bonds 241,594 226,867



841,974 742,902

3,149,523 2,434,908

9.4 Unrealized gain / (loss) on revaluation of held for trading securities

Market Treasury Bills 1,563 (1,962)

Pakistan Investment Bonds 729 636

Term Finance Certificates (85) 105

2,207 (1,221)

9.5

9.6

9.7

9.8

Information relating to investments required to be disclosed as part of the consolidated financial statements under the

SBP's BSD Circular No. 4 dated February 17, 2006, and details in respect of the quality of available for sale securities are

disclosed in Annexure 'A' which form an integral part of these consolidated financial statements.

------- (Rupees in '000) -------

Investments include Rs. 282.000 million (2016: Rs. 282.000 million) held by the SBP and National Bank of Pakistan as

pledge against demand loan, TT / DD discounting facilities and foreign exchange exposure limit sanctioned to the Bank and

Rs. 5.000 million (2016: Rs. 5.000 million) held by the Controller of Military Accounts (CMA) under Regimental Fund

Arrangements.

Investments include securities which are held by the Holding Company to comply with the statutory liquidity requirements

as set out under Section 29 of the Banking Companies Ordinance, 1962.

Investments include amounts aggregating to Rs. 2,175.182 million which have been classified as loss in accordance with

the requirements of Prudential Regulations prescribed by SBP. Provision has however, not been made against them as

these investments are secured by way of guarantee from the Government of Pakistan.

23



9.9 Investment in associates

9.9.1 Movement of Investment in associates2017

Note

Percentage

Holding

Investment

at the

beginning

of the year

Investment /

(Redemption)

during the

year

Share of

profit /

(loss)

Dividend

received

Share of

unrealized

(loss) /

surplus on

assets

Investment

at the end

of the year

United Growth and Income Fund 9.9.1.1 8.14% 615,046 (347,046) 33,235 (31,887) (4,585) 264,763

UBL Liquidity Plus Fund 9.9.1.1 1.41% 11,738 78,160 4,165 (692) - 93,371

UBL Money Market Fund 9.9.1.1 1.62% 11,445 - 611 (601) - 11,455

UBL Retirement Savings Fund 9.9.1.1 - 30,654 (32,355) 1,701 - - -

UBL Government Securities Fund 9.9.1.1 9.36% 3,092,749 (2,852,278) 36,611 (11,757) - 265,325

UBL Gold Fund 9.9.1.1 - 86,734 (89,577) 2,843 - - -

UBL Asset Allocation Fund 9.9.1.1 - 765,932 (716,196) (4,339) (45,397) - -

UBL Stock Advantage Fund 9.9.1.1 3.19% 186,565 64,317 (24,370) (16,363) - 210,149

UBL Financial Planning Fund 9.9.1.1 7.18% - 32,668 4,368 - - 37,036

UBL Principal Protected Fund - III 9.9.1.1 - - - - - - -

Al Ameen Islamic Cash Fund 9.9.1.2 0.01% 12,862 (12,674) 195 (16) - 367

Al Ameen Islamic Aggressive Income Fund 9.9.1.2 - 31,923 (32,415) 492 - - -

Al Ameen Islamic Sovereign Fund 9.9.1.2 0.01% 59,360 (59,376) 419 (21) - 382

Al Ameen Shariah Stock Fund 9.9.1.2 4.33% 363,868 25,655 (40,158) (29,320) 849 320,894

Al Ameen Islamic Asset Allocation Fund 9.9.1.2 2.79% 128,665 115,159 (6,422) (20,819) 333 216,916

Al Ameen Islamic Financial Planning Fund 9.9.1.2 4.54% 611,598 (259,627) (35,829) - - 316,142

Al Ameen Islamic Financial Planning Fund II 9.9.1.2 0.36% - 44,994 129 - - 45,123

Al Ameen Islamic Retirement Savings Fund 9.9.1.2 - - - - - - -

Al Ameen Islamic Principal Preservation Fund – III 9.9.1.2 - - - - - - -

Al Ameen Islamic Principal Preservation Fund – IV 9.9.1.2 - - - - - - -

Al Ameen Islamic Principal Preservation Fund – V 9.9.1.2 - - - - - - -

UBL Insurers Limited 9.9.1.3 30.00% 295,604 - 49,493 - - 345,097

Khushhali Bank Limited 9.9.1.4 29.69% 1,606,377 - 440,524 - 21 2,046,922

Oman United Exchange Company, Muscat 9.9.1.5 25.00% 66,497 7,171 (3,966) - - 69,702

7,977,617 (4,033,420) 459,702 (156,873) (3,382) 4,243,644

2016

Note

Percentage

Holding

Investment

at the

beginning

of the year

Investment /

(Redemption)

during the

year

Share of

profit /

(loss)

Dividend

received

Share of

unrealized

(loss) /

surplus on

assets

Investment

at the end

of the year

---------------------- (Rupees in '000) --------------------------------------

United Growth and Income Fund 9.9.1.1 13.48% 479,035 118,000 64,164 (33,862) (12,291) 615,046

UBL Liquidity Plus Fund 9.9.1.1 0.47% 11,755 - 610 (627) - 11,738

UBL Money Market Fund 9.9.1.1 2.13% 11,474 - 539 (568) - 11,445

UBL Retirement Savings Fund 9.9.1.1 3.23% 290,427 (292,644) 32,962 - (91) 30,654

UBL Principal Protected Fund - III 9.9.1.1 0.00% 245,308 (238,146) (7,162) - - -

UBL Government Securities Fund 9.9.1.1 28.95% 3,033,104 78,445 194,508 (213,308) - 3,092,749

UBL Gold Fund 9.9.1.1 69.63% 83,247 - 6,218 (2,731) - 86,734

UBL Asset Allocation Fund 9.9.1.1 35.56% 557,764 125,904 113,382 (31,118) - 765,932

UBL Stock Advantage Fund 9.9.1.1 2.56% 220,801 (73,670) 44,064 (4,630) - 186,565

Al Ameen Islamic Cash Fund 9.9.1.2 0.56% 1,012,287 (1,003,500) 4,642 (567) - 12,862

Al Ameen Islamic Aggressive Income Fund 9.9.1.2 2.46% 31,569 (70) 2,097 (1,641) (32) 31,923

Al Ameen Islamic Sovereign Fund 9.9.1.2 1.84% 57,515 800 3,283 (2,238) - 59,360

Al Ameen Islamic Retirement Savings Fund 9.9.1.2 0.00% 241,725 (271,938) 30,218 - (5) -

Al Ameen Shariah Stock Fund 9.9.1.2 5.00% 242,645 36,703 90,051 (5,531) - 363,868

Al Ameen Islamic Principal Preservation Fund – III 9.9.1.2 0.00% 117,560 (119,948) 2,388 - - -

Al Ameen Islamic Principal Preservation Fund – IV 9.9.1.2 0.00% 112,882 (119,486) 9,631 (3,027) - -

Al Ameen Islamic Principal Preservation Fund – V 9.9.1.2 0.00% 100,454 (103,927) 3,692 (219) - -

Al Ameen Islamic Asset Allocation Fund 9.9.1.2 3.42% 115,004 (454) 19,118 (5,003) - 128,665

Al Ameen Islamic Financial Planning Fund 9.9.1.2 4.34% 201,376 304,690 110,222 (4,690) - 611,598

UBL Insurers Limited 9.9.1.3 30.00% 253,662 - 41,942 - - 295,604

Khushhali Bank Limited 9.9.1.4 29.69% 1,305,528 - 301,001 - (152) 1,606,377

Oman United Exchange Company, Muscat 9.9.1.5 25.00% 76,819 - (10,322) - - 66,497

8,801,941 (1,559,241) 1,057,248 (309,760) (12,571) 7,977,617

9.9.1.1

9.9.1.2

9.9.1.3

These represent open ended mutual funds managed by UBL Fund Managers Limited. These funds are listed on the

Pakistan Stock Exchange and offer units for public subscription on a continuous basis.

These represent open ended shariah compliant mutual funds managed by UBL Fund Managers Limited. These funds are

listed on the Pakistan Stock Exchange and offer units for public subscription on a continuous basis.

UBL Insurers Limited is an unquoted public company, whose principal objective is to conduct general insurance business.

-------------------------------- (Rupees in '000) ----------------------------------------------------------

-------------------------------- (Rupees in '000) ----------------------------------------------------------

24



9.9.1.4

2017 2016

Group share of Net Assets 1,912,278 1,471,254

Government Grant (479) -

Goodwill 135,123 135,123

Carrying amount of interest in associates 2,046,922 1,606,377

9.9.1.5

9.9.1.6

9.9.2 Summary of financial position and performance2017 2016

Assets Liabilities Revenue Profit /

(loss) Assets Liabilities Revenue Profit / (loss)

United Growth and Income Fund 3,299,033 45,050 374,614 99,761 4,699,614 138,406 285,572 230,833

UBL Liquidity Plus Fund 6,683,601 75,089 279,725 173,339 2,596,259 96,132 258,831 259,761

UBL Money Market Fund 724,871 17,787 46,997 38,542 552,999 16,484 45,976 33,589

UBL Retirement Savings Fund 2,718,168 63,596 (62,624) 14,955 2,710,586 79,423 515,627 449,137

UBL Government Securities Fund 5,385,942 2,551,190 309,628 (10,097) 10,801,539 116,657 1,111,171 881,667

UBL Gold Fund - - - - 126,675 2,109 11,579 7,691

UBL Asset Allocation Fund 1,758,704 29,331 28,110 24,724 2,176,010 22,058 404,246 340,412

UBL Stock Advantage Fund 6,728,463 147,481 (528,583) (683,292) 7,418,566 129,616 1,579,209 1,407,589

UBL Financial Planning Fund 518,173 2,068 10,572 9,798 - - - -

Al Ameen Islamic Cash Fund 4,167,060 21,509 243,331 82,107 2,322,129 18,254 202,067 165,412

Al Ameen Islamic Aggressive Income Fund 971,430 15,373 64,904 15,756 1,318,142 18,047 92,909 67,925

Al Ameen Islamic Sovereign Fund 6,389,388 331,327 161,947 (2,611) 3,259,568 33,231 226,456 179,164

Al Ameen Shariah Stock Fund 7,570,462 163,601 257,086 208,666 7,599,244 327,929 1,940,494 1,759,903

Al Ameen Islamic Asset Allocation Fund 7,859,580 85,572 (67,124) 263,886 3,840,684 81,558 502,945 454,245

Al Ameen Islamic Financial Planning Fund 9,514,590 100,333 (561,808) (825,416) 14,303,216 101,535 2,682,088 2,654,547

Al Ameen Islamic Financial Planning Fund II 11,674,838 52,017 (651,228) (666,092) - - - -

UBL Insurers Limited 4,180,839 3,026,792 1,062,464 169,206 3,545,452 2,532,690 866,749 134,733

Khushhali Bank Limited 58,978,610 52,538,695 6,971,272 1,876,462 33,667,570 28,712,879 6,862,796 1,275,802

Oman United Exchange Company, Muscat 371,264 92,455 166,714 (26,307) 336,369 70,382 158,699 (40,791)

DHA Cogen Limited 4,603,235 18,110,429 - (822,551) 4,660,062 18,170,794 - (957,462)

10. ADVANCES Note

2017 2016 2017 2016 2017 2016

Loans, cash credits, running finances, etc.

In Pakistan 388,577,958 317,697,928 25,313,698 29,717,889 413,891,656 347,415,817

Outside Pakistan 153,189,777 150,678,664 24,715,132 13,531,495 177,904,909 164,210,159

541,767,735 468,376,592 50,028,830 43,249,384 591,796,565 511,625,976

Islamic financing and related assets 46.3 22,106,385 7,277,360 94,421 94,614 22,200,806 7,371,974

Bills discounted and purchased

Payable in Pakistan 18,330,853 13,976,584 2,784,397 2,700,944 21,115,250 16,677,528

Payable outside Pakistan 51,126,252 43,483,888 - - 51,126,252 43,483,888

69,457,105 57,460,472 2,784,397 2,700,944 72,241,502 60,161,416

Advances - gross 633,331,225 533,114,424 52,907,648 46,044,942 686,238,873 579,159,366

Provision against advances 10.3

- Specific - - (40,225,684) (38,080,944) (40,225,684) (38,080,944)

- General (3,506,469) (3,296,276) - - (3,506,469) (3,296,276)

(3,506,469) (3,296,276) (40,225,684) (38,080,944) (43,732,153) (41,377,220)

Advances - net of provision 629,824,756 529,818,148 12,681,964 7,963,998 642,506,720 537,782,146

10.1 Particulars of advances - gross

10.1.1 In local currency 415,892,300 329,236,693 27,820,386 32,166,038 443,712,686 361,402,731

In foreign currencies 217,438,925 203,877,731 25,087,262 13,878,904 242,526,187 217,756,635

633,331,225 533,114,424 52,907,648 46,044,942 686,238,873 579,159,366

10.1.2 Short term 379,929,030 311,500,514 - - 379,929,030 311,500,514

Long term 253,402,195 221,613,910 52,907,648 46,044,942 306,309,843 267,658,852

633,331,225 533,114,424 52,907,648 46,044,942 686,238,873 579,159,366

Khushhali Bank Limited is a microfinance bank. The principal objective of the bank is to provide microfinance services and

promote social welfare through community building and social mobilization.

Oman United Exchange Company LLC (the Company) is incorporated in the Sultanate of Oman as a limited liability

company and is primarily engaged in money changing, issuing of drafts and the purchase and sale of travellers cheques.

------- (Rupees in '000) -------

---------------------------------------------------------- (Rupees in '000) ----------------------------------------------------------

TotalNon-performingPerforming

As a result of exercise of a pledge in 2013, the Bank holds 20.99% of the issued and paid up capital of DHA Cogen Limited

without any consideration having been paid. Consequently, DHA Cogen Limited is classified as an associated company.

---------------------------------------------------------- (Rupees in '000) ----------------------------------------------------------

25



10.2

Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total

Other assets especially

mentioned * 81,653 - 81,653 2,012 - 2,012 2,012 - 2,012

Substandard 1,062,286 4,417,061 5,479,347 258,707 942,062 1,200,769 258,707 942,062 1,200,769

Doubtful 1,452,224 6,910,333 8,362,557 783,804 2,475,262 3,259,066 783,804 2,475,262 3,259,066

Loss 25,596,353 13,387,738 38,984,091 24,512,775 11,251,062 35,763,837 24,512,775 11,251,062 35,763,837

28,192,516 24,715,132 52,907,648 25,557,298 14,668,386 40,225,684 25,557,298 14,668,386 40,225,684

Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total

Other assets especially

mentioned * 126,711 - 126,711 3,576 - 3,576 3,576 - 3,576

Substandard 908,055 1,916,117 2,824,172 222,697 337,466 560,163 222,697 337,466 560,163

Doubtful 2,471,496 2,670,087 5,141,583 1,203,332 1,042,384 2,245,716 1,203,332 1,042,384 2,245,716

Loss 29,007,185 8,945,291 37,952,476 27,881,140 7,390,349 35,271,489 27,881,140 7,390,349 35,271,489

32,513,447 13,531,495 46,044,942 29,310,745 8,770,199 38,080,944 29,310,745 8,770,199 38,080,944

* The Other Assets Especially Mentioned category pertains to agricultural finance and advances to small enterprises.

10.3 Particulars of provision against advances

Note Specific General Total Specific General Total

Opening balance 38,080,944 3,296,276 41,377,220 38,477,438 4,195,716 42,673,154

Exchange adjustments 663,238 (25,487) 637,751 (132,226) (133,765) (265,991)


Charge for the year 6,240,241 235,680 6,475,921 5,757,387 80,549 5,837,936

Reversals 10.3.3 (4,598,664) - (4,598,664) (4,367,086) (846,224) (5,213,310)

1,641,577 235,680 1,877,257 1,390,301 (765,675) 624,626

Transfers in - net 653,818 - 653,818 524,620 - 524,620

Amounts written off 10.5 (813,893) - (813,893) (2,179,189) - (2,179,189)

Closing balance 40,225,684 3,506,469 43,732,153 38,080,944 3,296,276 41,377,220

10.3.1

10.3.2

10.3.3 This includes provision reversals amounting to Rs. nil (2016: Rs. 444.034 million) as a result of settlement through debt

asset swap arrangements with various customers.

Provision required

Provision requiredClassified advances

Provision heldClassified advancesCategory of Classification

Provision held

----------------------------------------------------------------------- (Rupees in '000) --------------------------------------------------------------------

General provision represents provision amounting to Rs. 247.323 million (2016: Rs. 218.074 million) against consumer

finance portfolio, Rs. 49.088 million (2016: Rs. 39.088 million) against advances to small enterprises as required by the

Prudential Regulations issued by the SBP and Rs. 2,881.358 million (2016: Rs. 2,550.117 million) pertaining to overseas

advances to meet the requirements of the regulatory authorities of the respective countries in which the overseas branches

and subsidiaries operate. General provision also includes Rs. 328.700 million (2016: Rs. 488.997 million) which is based

on regulatory instructions.

The Bank has availed the benefit of Forced Sale Value (FSV) of certain mortgaged properties held as collateral against non-

performing advances as allowed under BSD Circular 1 of 2011. Had the benefit under the said circular not been taken by

the Bank, the specific provision against non-performing advances would have been higher by Rs. 24.540 million (2016: Rs.

56.375 million). The FSV benefit availed is not available for the distribution of cash or stock dividend to shareholders.

2016

2017

Advances include Rs. 52,907.648 million (2016: Rs. 46,044.942 million) which have been placed under non-performing

status as detailed below:

---------------------------------------- (Rupees in '000) -----------------------------------------

20162017

----------------------------------------------------------------------- (Rupees in '000) --------------------------------------------------------------------

Category of Classification

26



10.3.4 Particulars of provision against advances

Specific General Total Specific General Total

In local currency 25,185,168 296,411 25,481,579 28,963,336 257,162 29,220,498

In foreign currencies 15,040,516 3,210,058 18,250,574 9,117,608 3,039,114 12,156,722

40,225,684 3,506,469 43,732,153 38,080,944 3,296,276 41,377,220

10.4

Note 2017 2016

10.5 Particulars of write-offs

10.5.1 Against provisions 10.3 813,893 2,179,189

Directly charged to profit and loss account 187,443 97,781

1,001,336 2,276,970

10.5.2 Write-offs of Rs. 500,000 and above - Bank 10.6 627,618 1,901,454

Write-offs below Rs. 500,000 - Bank 278,674 215,421

Write-offs in subsidiaries 10.6 95,044 160,095

1,001,336 2,276,970

10.6 Details of loan write-offs of Rs. 500,000 and above

Note 2017 2016

10.7 Particulars of loans and advances to executives, directors,

associated companies etc.

Balance at the beginning of the year 22,573,442 13,348,184

Loans granted during the year 66,660,102 57,955,678

Repayments made during the year (80,990,003) (48,730,420)

(14,329,901) 9,225,258

Balance at the end of the year 8,243,541 22,573,442

11. OPERATING FIXED ASSETS

Capital work-in-progress 11.1 4,467,036 3,005,182

Property and equipment 11.2 44,820,475 35,203,552

Intangible assets 11.3 1,096,566 1,090,193

50,384,077 39,298,927

11.1 Capital work-in-progress

Civil works 3,662,319 2,454,913

Equipment 748,107 425,419

Software 56,610 124,678

Advances to suppliers and contractors - 172

4,467,036 3,005,182

20162017

------- (Rupees in '000) -------

---------------------------------------- (Rupees in '000) --------------------------------------------

------- (Rupees in '000) -------

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 by the Bank during the year ended

December 31, 2017 is given in Annexure 'B' to the unconsolidated financial statements. This includes amounts charged

off without prejudice to the Bank's right to recovery.

Due to disclosure restrictions in the local regulations of foreign subsidiaries, the names of parties written off cannot be

disclosed.

Exposure amounting to Rs. 7,283.300 million relating to certain facilities of Power Holding (Pvt.) Limited, which is a

government guaranteed loan, has not been classified as non-performing, pursuant to a relaxation given by SBP in this

respect. The relaxation is valid upto January 31, 2018.

27



11.2 Property and equipment

Cost / Revaluation Accumulated Depreciation

Owned

Freehold land 5,025,317 - 1,408,308 - 6,433,625 - - - - - 6,433,625 -

- - -

Leasehold land 16,240,938 1,302,649 4,353,002 86 21,883,262 1,337 - - 73 1,410 21,881,852 -

(13,413) - - -

Buildings on freehold land 4,470,087 3,996 14,661 576,105 4,935,576 448,235 70,602 - 52,808 442,372 4,493,204 2 - 5

- (129,273) (129,273)

Buildings on leasehold land 4,865,948 580,770 590,178 672 5,710,714 146,370 184,970 - 248 4,734 5,705,980 2.5 - 10

- (326,854) (326,854)

Leasehold improvements 3,476,092 645,480 - 30,452 4,147,158 2,077,189 357,202 - 30,501 2,461,886 1,685,272 10 - 20

(4,866) - (3,006) -

Furniture and fixtures 1,796,707 306,757 - 37,805 2,075,897 1,170,164 159,174 - 26,274 1,290,633 785,264 10 - 25

(65,372) - (64,979) -

Electrical, office and 10,979,816 1,982,527 - 64,809 11,677,083 8,053,745 1,307,154 - 43,320 8,057,378 3,619,705 10 - 67

computer equipment (1,350,069) - (1,346,841) -

Vehicles 566,997 45,910 - (162) 510,385 321,310 72,055 - (484) 294,812 215,573 20 - 25

(102,360) - (98,069) -

Total 47,421,902 4,868,089 6,366,149 709,767 57,373,700 12,218,350 2,151,157 - 152,740 12,553,225 44,820,475

(1,536,080) (456,127) (1,512,895) (456,127)

Cost / Revaluation Accumulated Depreciation

Owned

Freehold land 5,062,242 - - - 5,025,317 - - - - - 5,025,317 -

(36,925) - -

Leasehold land 15,675,141 565,799 - (2) 16,240,938 1,339 - - (2) 1,337 16,239,601 -

- - -

- -

Buildings on freehold land 5,211,937 6,580 - (748,430) 4,470,087 441,606 78,557 - (71,928) 448,235 4,021,852 2 - 5

- - -

-

Buildings on leasehold land 1,505,242 3,360,721 - (15) 4,865,948 69,121 77,254 - (5) 146,370 4,719,578 2.5 - 10

- - -

Leasehold improvements 3,024,253 464,143 - (12,304) 3,476,092 1,790,548 297,379 - (10,738) 2,077,189 1,398,903 10 - 20

- - -

Furniture and fixtures 1,556,403 274,495 - (24,531) 1,796,707 1,079,450 122,054 - (21,935) 1,170,164 626,543 10 - 25

(9,660) - (9,405) -

- -

Electrical, office and 8,972,445 2,119,869 - (43,164) 10,979,816 7,077,993 1,061,401 - (17,332) 8,053,745 2,926,071 10 - 67

computer equipment (69,334) - (68,317) -

Vehicles 524,891 122,615 - (2,308) 566,997 316,433 78,347 - (3,294) 321,310 245,687 20 - 25

(78,201) - (70,176) -

Total 41,532,554 6,914,222 - (830,754) 47,421,902 10,776,490 1,714,992 - (125,234) 12,218,350 35,203,552

(194,120) (147,898)

2017

Exchange /

Other

adjustments

At

December

31, 2017

Net book

value at

December

31, 2017

Charge for

the year /

(deprec-

iation on

deletions)

Surplus on

revaluation /

(reversal of

accumulated

depreciation)

Surplus on

revaluation /

(reversal of

accumulated

depreciation)

Reversal due

to

revaluation

Reversal due

to

revaluation

------------------------------------------------------------------------------------------------------ (Rupees in '000) ------------------------------------------------------------------------------------------------------

At January

1, 2017

Exchange /

Other

adjustments

At

December

31, 2016

2016

Annual rate

of deprec-

iation %

At January

1, 2017

Additions /

(deletions)

Exchange /

Other

adjustments

At

December

31, 2017

Annual rate

of deprec-

iation %

Net book

value at

December

31, 2016

Exchange /

Other

adjustments

At January

1, 2016

Additions /

(deletions)

At

December

31, 2016

Charge for

the year /

(depreciation

on deletions)

------------------------------------------------------------------------------------------------------ (Rupees in '000) ------------------------------------------------------------------------------------------------------

At January

1, 2016

28



11.3 Intangible assets

Software 4,536,006 435,013 105,676 4,537,089 3,445,813 436,392 97,906 3,440,523 1,096,566 10 - 33.33

(539,606) (539,588)

Software 4,244,143 381,520 (86,858) 4,536,006 3,147,153 383,371 (82,783) 3,445,813 1,090,193 10 - 33.33

(2,799) (1,928)

11.4 Revaluation of properties

2017 2016

Freehold land 745,657 745,657

Leasehold land 3,187,670 1,898,434

Buildings on freehold land 1,347,946 1,043,291

Buildings on leasehold land 4,240,426 3,816,412

11.5 Carrying amount of temporarily idle properties of the Group 62,572 81,790

11.6 The cost of fully depreciated assets still in use

Furniture and fixtures 487,255 420,351

Electrical, office and computer equipment 5,204,108 4,951,484

Vehicles 84,442 137,171

Leasehold improvements 656,845 311,214

Softwares 1,989,239 2,079,282

8,421,889 7,899,502

11.7 Details of disposals of operating fixed assets

The information relating to operating fixed assets disposed off during the year is given in Annexure 'C' and is an integral

part of these consolidated financial statements.

Accumulated Amortization

------- (Rupees in '000) -------

-------------------------------------------------------------------- (Rupees in '000) --------------------------------------------------------------------

At

December

31, 2016

Exchange /

other

adjustments

Exchange /

other

adjustments

At

December

31, 2016

Accumulated Amortization

-------------------------------------------------------------------- (Rupees in '000) --------------------------------------------------------------------

Cost

Net book value

at December

31, 2016

Annual rate of

amortization %At January

1, 2016

Additions /

(deletions)

Net book value

at December

31, 2017

Annual rate of

amortization %

2017

2016

At January

1, 2017

Additions /

(deletions)

Exchange /

other

adjustments

At

December

31, 2017

At January

1, 2017

Charge for

the year /

(reversal on

deletion)

Cost

Exchange /

other

adjustments

At

December

31, 2017

At January

1, 2016

Charge for

the year /

(reversal on

deletion)

The properties of UBL UK were last revalued by independent professional valuer, Quantum Valuation LLP, as at

December 31, 2015. The total surplus arising against the revaluation of fixed assets as at December 31, 2017 amounts to

Rs. 1,334.752 million.

The properties of the Bank have been revalued by independent professional valuers as at December 31, 2017. The

revaluation was carried out by M/s. Engineering Pakistan Int'l (Pvt) Ltd., M/s. M. J. Surveyors (Pvt) Ltd., M/s Harvestor

Services (Pvt) Ltd., and M/s Iqbal A. Nanjee & Co. (Pvt) Ltd. on the basis of professional assessment of present market

values which resulted in an increase in surplus by Rs. 6,366.149 million. The total surplus arising against revaluation of

fixed assets as at December 31, 2017 amounts to Rs. 26,424.375 million.

Had there been no revaluation, the carrying amount of revalued assets of the group at December 31 would have been as

follows:

29



Note 2017 2016

12. OTHER ASSETS

Income / mark-up accrued in local currency 22,925,680 23,810,291

Income / mark-up accrued in foreign currency 8,637,162 5,881,332

31,562,842 29,691,623

Advance taxation - net of provision for taxation 12.1 17,599,231 10,484,223

Receivable from staff retirement fund 632,808 376,634

Receivable from other banks against telegraphic transfers and demand drafts 270,941 758,923

Unrealized gain on forward foreign exchange contracts 2,798,197 683,803

Rebate receivable - net 529,870 893,968

Unrealized gain on derivative financial instruments 19.3.1 & 24.2 76,884 204,498

Suspense accounts 567,060 459,240

Stationery and stamps on hand 100,836 117,189

Non banking assets acquired in satisfaction of claims 1,786,011 2,343,457

Advances, deposits, advance rent and other prepayments 1,345,180 1,243,934

Others 4,290,996 2,740,613

61,560,856 49,998,105

Provision held against other assets 12.2 (6,574,655) (4,818,584)

Other assets - net of provision 54,986,201 45,179,521

12.1

------- (Rupees in '000) -------

The tax returns for overseas branches have been filed upto the year ended December 31, 2016 under the provisions of the

laws prevailing in the respective countries, and are deemed as assessed unless opened for reassessment.

For UBL UK, UBTL, UBL FM and UET income tax returns have been filed up to the accounting year ended December 31,

2016 and for USAG these returns have been filed up to the accounting year ended December 31, 2014 under the provisions

of the laws prevailing in the respective countries and are deemed as assessed unless opened for reassessment by the tax

authorities. Additionally, tax clearance has been issued for UBL UK, UBTL and USAG till the accounting year 2016, 2015

and 2014 respectively. There are no material tax contingencies in any of the subsidiaries.

The tax authorities have also carried out monitoring for Federal Excise Duty, Sales tax and withholding taxes covering period

from year ended 2007 to 2016. Consequently, various addbacks and demands were raised creating a total demand of Rs.

919 million (2016: Rs. 1,245 million). The Bank has filed appeals against all such demands and is confident that these would

be decided in the favour of the Bank.

The tax returns for Azad Kashmir (AK) and Gilgit Baltistan (GB) Branches have been filed upto the tax year 2017 (financial

year 2016) under the provisions of section 120(1) read with section 114 of the Ordinance and in compliance with the terms

of the agreement between banks and the Azad Kashmir Council in May 2005. The returns filed are considered as deemed

assessment orders under the law.

The income tax authorities have issued amended assessment orders for the tax years 2003 to 2017, and created additional

tax demands (including disallowances of provisions made prior to Seventh Schedule) of Rs.12,928 million (2016: Rs.13,723

million), which have been fully paid as required under the law. The Bank has filed appeals before the various appellate

forums against these amendments. Where the appellate authorities have allowed relief on certain issues, the assessing

authorities have filed appeals before higher appellate forums. Where the appellate authorities have not allowed relief the

Bank has filed appeals before higher appellate forums. The management of the Bank is confident that the appeals will be

decided in favour of the Bank.

The Income Tax returns of the Bank have been filed up to the tax year 2017 (accounting year ended December 31, 2016)

and were deemed to be assessed under section 120 of the Income Tax Ordinance, 2001 (Ordinance) unless amended by

the Commissioner of Inland Revenue.

30



Note 2017 2016

12.2 Provision against other assets

Opening balance 4,818,584 4,825,077



Charge for the year 110,799 161,419

Reversals (64,911) (17,511)

30 45,888 143,908

Transfers in - net 1,547,266 817,630

Amounts written off (31,444) (963,143)

Closing balance 6,574,655 4,818,584

13. CONTINGENT ASSETS

There were no contingent assets as at the statement of financial position date.

14. BILLS PAYABLE

In Pakistan 12,968,512 11,041,529

Outside Pakistan 424,466 717,483

13,392,978 11,759,012

15. BORROWINGS

In Pakistan 496,743,625 181,622,033

Outside Pakistan 20,338,534 24,243,098

517,082,159 205,865,131

15.1 Particulars of borrowings



517,082,159 205,865,131

15.2 Details of borrowings

Secured

Borrowings from the State Bank of Pakistan under:

Export refinance scheme 15.3 19,375,930 14,702,567

Refinance facility for modernization of SMEs 15.4 10,250 19,550

Long term financing facility 15.5 17,312,481 11,955,687

36,698,661 26,677,804

Repurchase agreement borrowings 15.6 453,224,580 154,967,594

489,923,241 181,645,398

Unsecured

Call borrowings 15.7 10,167,645 14,381,809

Overdrawn nostro accounts 577,014 318,275

Other borrowings 15.8 16,414,259 9,519,649

27,158,918 24,219,733

517,082,159 205,865,131

15.3

15.4

The Bank has entered into an agreement with the SBP for extending export finance to customers. As per the terms of the

agreement, the Bank has granted the SBP the right to recover the outstanding amounts from the Bank at the date of

maturity of the finances by directly debiting the Bank's current account maintained with the SBP. These borrowings are

repayable within six months, latest by June 2018. These carry mark-up at rates ranging from 1.00% to 2.00% per annum

(2016: 1.00% to 2.00% per annum).

These borrowings have been obtained from the SBP under a scheme to finance modernization of Small and Medium

Enterprises by providing financing facilities for setting up of new units, purchase of new plant and machinery for Balancing,

Modernization and Replacement (BMR) of existing units and financing for import / local purchase of new generators upto a

maximum capacity of 500 KVA. These borrowings are repayable latest by October 2019 and carry mark-up at a rate of

6.25% per annum (2016: 6.25% per annum).

------- (Rupees in '000) -------

31



15.5

15.6

15.7

15.8

2017 2016

16. DEPOSITS AND OTHER ACCOUNTS

Customers

Fixed deposits 367,785,188 329,853,639

Savings deposits 388,150,655 373,194,772

Sundry deposits 29,508,244 22,534,114

Margin deposits 5,552,140 4,414,357

Current accounts - remunerative 6,014,299 10,521,315

Current accounts - non-remunerative 491,259,317 431,909,304

1,288,269,843 1,172,427,501

Financial Institutions

Remunerative deposits 57,065,974 59,218,925

Non-remunerative deposits 20,822,097 14,145,190

77,888,071 73,364,115

1,366,157,914 1,245,791,616

16.1 Particulars of deposits and other accounts



1,366,157,914 1,245,791,616

17. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE

Minimum

lease

payments

Not later than one year 2,343 249 2,094

Later than one year and not later than five years 2,281 - 2,281

4,624 249 4,375

Minimum

lease

payments

Not later than one year 1,966 158 1,808

Later than one year and not later than five years 1,967 217 1,750

3,933 375 3,558

These borrowings have been obtained from the SBP for providing financing facilities to exporters for adoption of new

technologies and modernization of their plant and machinery. These borrowings are repayable latest by December 2027.

These carry mark-up at rates ranging from 2.00% to 9.70% per annum (2016: 2.00% to 10.90% per annum).

Finance charges

for future periods

Principal

Outstanding

These repurchase agreement borrowings are secured against Pakistan Investment Bonds and Treasury Bills and carry mark-

up at rates ranging from 5.75% to 5.85% per annum (2016: 5.50% to 5.90% per annum). These borrowings are repayable

latest by February 2018. The carrying value of securities given as collateral against these borrowings is given in note 9.1.

These are unsecured borrowings carrying mark-up at rates ranging from 0.1% to 5.8% per annum (2016: 0.25% to 5.85%

per annum), and are repayable latest by March 2018.

-------------------- (Rupees in '000) --------------------

2017

Finance charges

for future periods

Principal

Outstanding

-------------------- (Rupees in '000) --------------------

These borrowings carry mark-up at rates ranging from 2.57% to 4.80% per annum (2016: 2.00% to 4.74% per annum), and

are repayable latest by January 2018.

These represent finance leases entered into for the lease of franking machine. At the end of the lease period, the ownership

of the leased assets shall be transferred to the Group on payment of the residual values of the leased assets. The cost of

operating and maintaining the leased assets is borne by the Group. The liabilities are secured by demand promissory notes,

security deposits, and the franking machines which have been obtained under these leasing arrangements. The rate used

for discounting future lease payments is 12.39% per annum (2016: 12.39% per annum). The amount of future minimum

lease payments, and the periods during which they become due are as follows:

------- (Rupees in '000) -------

2016

32



Note 2017 2016

18. DEFERRED TAX LIABILITY - NET

Deferred tax liability - net 18.1 2,980,466 5,230,571

18.1 Movement in temporary differences during the year

2017

Deductible temporary differences on

- Tax losses recognized by subsidiary 316,918 79,758 46,713 443,389

- Workers' Welfare Fund 618,785 283,046 - 901,831

- Provision against off-balance sheet items,

post retirement employee benefits,

advances and others 4,013,939 (2,569,563) (140,633) 1,303,743

4,949,642 (2,206,759) (93,920) 2,648,963

Taxable temporary differences on

- Surplus on revaluation of fixed assets /

non-banking assets (960,433) 27,228 (276,774) (1,209,979)

- Surplus on revaluation of investments (8,152,824) - 4,479,294 (3,673,530)

- Share of profit from Associates (497,230) 34,787 - (462,443)

- Accelerated tax depreciation and others (569,726) (119,981) 406,230 (283,477)

(10,180,213) (57,966) 4,608,750 (5,629,429)

(5,230,571) (2,264,725) 4,514,830 (2,980,466)

2016

Deductible temporary differences on

- Tax losses recognized by subsidiary 638,562 (236,156) (85,488) 316,918

- Workers' Welfare Fund 533,741 89,081 (4,037) 618,785

- Provision against off-balance sheet items,

post retirement employee benefits,

advances and others 5,106,879 (1,155,733) 62,793 4,013,939

6,279,182 (1,302,808) (26,732) 4,949,642

Taxable temporary differences on

- Surplus on revaluation of fixed assets /

non-banking assets (1,089,359) 27,126 101,800 (960,433)

- Surplus on revaluation of investments (8,951,959) - 799,135 (8,152,824)

- Share of profit from Associates (426,142) (71,088) - (497,230)

- Accelerated tax depreciation (326,887) (248,062) 5,223 (569,726)

(10,794,347) (292,024) 906,158 (10,180,213)

(4,515,165) (1,594,832) 879,426 (5,230,571)

------------------------------ (Rupees in '000) ------------------------------

At January 1,

2017

Recognised

in profit and

loss account

OthersAt December

31, 2017

------- (Rupees in '000) -------

At January 1,

2016

Recognised

in profit and

loss account

OthersAt December

31, 2016

------------------------------ (Rupees in '000) ------------------------------

33



Note 2017 2016

19. OTHER LIABILITIES

Mark-up / return / interest payable in local currency 12,547,094 11,559,079

Mark-up / return / interest payable in foreign currency 1,857,981 1,419,182

14,405,075 12,978,261

Accrued expenses 4,612,561 4,999,679

Branch adjustment account 1,021,326 1,366,415

Deferred income 636,710 658,882

Unearned commission and income on bills discounted 1,500,844 799,739

Provision against off-balance sheet obligations 19.1 73,692 683,866

Unrealized loss on forward foreign exchange contracts 864,509 1,430,432

Payable to staff retirement fund 44,538 130,015

Deferred liabilities 19.2 3,380,920 3,401,628

Unrealized loss on derivative financial instruments 19.3.1 & 24.2 3,176 2,630

Workers' Welfare Fund payable 2,601,763 1,787,065

Insurance payable against consumer assets 331,840 241,621

Dividend payable 631,030 196,626

Others 1,140,862 686,289

31,248,846 29,363,148

19.1 Provision against off-balance sheet obligations

Opening balance 683,866 666,603

Exchange adjustments (11,077) (9,818)

(Reversal) / charge during the year 30 (599,097) 27,081

73,692 683,866

19.2 Deferred liabilities

Provision for post retirement medical benefits 37.1.4 1,463,703 1,328,199

Provision for compensated absences 1,225,727 1,438,941

Deferred liability for outsourced services 169,466 181,344

Deferred liability - overseas 522,024 453,144

3,380,920 3,401,628

19.3 Unrealized gain / (loss) on derivative financial instruments - net

Note 2017 2016 2017 2016

- Interest rate swaps 4,358,641 6,986,094 74,865 197,083

- Cross currency swaps - 522,051 - 5,459

- FX options 166,736 426,162 - -

- Forward purchase contracts of

government securities 7,870,890 4,998,400 (1,155) (2,391)

- Forward sale contracts of

government securities 1,478 3,553,866 (2) 1,717

19.3.1 12,397,745 16,486,573 73,708 201,868

------------------------------- (Rupees in '000) --------------------------------

------- (Rupees in '000) -------

Contract / Notional amount Unrealized gain / (loss)

34



2017 2016

Note

19.3.1 Unrealized gain / (loss) on derivative financial instruments - net

Unrealized gain on derivative financial instruments 12 76,884 204,498

Unrealized loss on derivative financial instruments 19 (3,176) (2,630)

24.2 73,708 201,868

20. SHARE CAPITAL

20.1 Authorized Capital

2017 2016 2017 2016

2,000,000,000 2,000,000,000 Ordinary shares of Rs.10 each 20,000,000 20,000,000

20.2 Issued, subscribed and paid-up capital

2017 2016 2017 2016

Fully paid-up ordinary shares of Rs.10 each

518,000,000 518,000,000 Issued for cash 5,180,000 5,180,000

706,179,687 706,179,687 Issued as bonus shares 7,061,798 7,061,798

1,224,179,687 1,224,179,687 12,241,798 12,241,798

20.3

20.4 Major shareholders (holding more than 5% of total paid-up capital)

Number of Percentage of Number of Percentage of

Name of shareholders shares held shareholding shares held shareholding

Bestway (Holdings) Limited 631,728,895 51.60% 631,728,895 51.60%

Bestway Cement Limited 93,649,744 7.65% 93,649,744 7.65%

2017 2016

20.5 Shares of the Bank held by its associates ------- (Number of shares) -------

UBL Asset Allocation Fund 225,900 114,200

UBL Stock Advantage Fund 1,645,800 1,153,000

1,871,700 1,267,200

----- Number of shares -----

--------- (Rupees in '000) ---------

Holders of GDRs are entitled, subject to the provisions of the depository agreement, to receive dividends, if any, and rank

pari passu with other equity shareholders in respect of such entitlement. However, the holders of GDRs have no voting

rights or other direct rights of shareholders with respect to the ordinary shares underlying such GDRs. Subject to the terms

and restrictions set out in the offering circular dated June 25, 2007, the deposited ordinary shares in respect of which the

GDRs were issued may be withdrawn by the GDR holders from the depository facility. Upon withdrawal, the holders will

rank pari passu with other ordinary shareholders in respect of voting powers. As at December 31, 2017, 1,318,827 (2016:

1,845,734) GDRs, representing 5,275,310 (2016: 7,382,938) shares were in issue.

----- Number of shares -----

20162017

------- (Rupees in '000) -------

In 2007, the Bank was admitted to the official list of the UK Listing Authority and to the London Stock Exchange

Professional Securities Market for trading of Global Depository Receipts (GDRs), each representing four ordinary shares

issued by the Bank. The GDRs constitute an offering in the United States only to qualified institutional buyers in reliance

on Rule 144A under the U.S Securities Act of 1933 and an offering outside the United States in reliance on Regulation S.

------- (Rupees in '000) -------

As at December 31, 2017, Bestway Group (Bestway) held 61.46% (2016: 61.46%) shareholding (including GDRs) of the

Bank.

35



Note 2017 2016

21. NON-CONTROLLING INTEREST

United National Bank Limited (UBL UK) 21.1 4,794,057 4,214,942

UBL Fund Managers Limited 16,462 12,751

4,810,519 4,227,693

21.1 Key financial information before intra group eliminations

Assets 76,936,191 66,522,162

Liabilities 64,779,488 56,297,741

Net Assets 12,156,703 10,224,421

Income (Mark-up & Non Mark-up) 2,540,816 2,868,660

Expenses (including provisions) (2,444,231) (1,863,326)

Profit for the year 96,585 1,005,334

22. SURPLUS ON REVALUATION OF ASSETS - NET OF DEFERRED TAX

Surplus / (deficit) arising on revaluation of assets - net of tax

Fixed assets / non-banking assets

- Group's share 27,007,532 20,714,664

- Non-controlling interest 958,856 827,457

22.1 27,966,388 21,542,121


- Group's share 5,896,699 14,601,472

- Non-controlling interest (277,531) (441,409)

22.2 5,619,168 14,160,063

Surplus / (deficit) arising on revaluation of assets of associates 660 3,353

33,586,216 35,705,537

22.1 Surplus on revaluation of fixed assets / non-banking assets

Surplus on revaluation of fixed assets / non-banking assets as at January 1 22,502,554 22,883,840

Revaluation of fixed assets / non-banking assets during the year 6,399,394 169,861


Transferred to unappropriated profit in respect of incremental

depreciation charged during the year - net of deferred tax (52,015) (51,626)

Related deferred tax liability on incremental depreciation charged

during the year 18.1 (27,228) (27,126)

6,673,813 (381,286)

29,176,367 22,502,554

Less: Related deferred tax liability on:

Less: Revaluation as on January 1 960,433 1,089,359

Less: Revaluation of fixed assets / non-banking assets during the year 216,535 (7,174)

Less: Exchange adjustments 60,239 (92,660)

Less: Incremental depreciation charged on related assets (27,228) (29,092)

18.1 1,209,979 960,433

27,966,388 21,542,121

22.2 Surplus / (deficit) on revaluation of available for sale securities

Market Treasury Bills (3,034) (9,729)


Listed shares 1,780,430 7,432,242

REIT Scheme - (5,420)

Term Finance Certificates, Sukuks, other bonds etc. 28,475 104,054

Foreign bonds 1,201,338 166,638

9,292,698 22,312,887

Related deferred tax liability 18.1 (3,673,530) (8,152,824)

5,619,168 14,160,063

------- (Rupees in '000) -------

36



Note 2017 2016

23. CONTINGENCIES AND COMMITMENTS

23.1 Direct credit substitutes

Contingent liabilities in respect of guarantees given favouring:

Government 15,500,693 10,418,980

Banking companies and other financial institutions 1,064,067 1,320,355

Others 5,425,848 6,209,086

21,990,608 17,948,421

23.2 Transaction-related contingent liabilities

Contingent liabilities in respect of performance bonds, bid bonds, warranties, etc. given favouring:

Government 128,096,424 114,871,452


Others 57,090,192 38,194,938

193,594,763 160,135,161

23.3 Trade-related contingent liabilities

Contingent liabilities in respect of letters of credit opened favouring:

Government 74,060,985 68,523,943


Others 112,409,643 99,848,165

195,203,112 174,884,972

23.4 Other contingencies

Claims against the Group not acknowledged as debts 23.4.1 12,918,162 12,490,082

23.4.1

23.4.2

23.4.3

------- (Rupees in '000) -------

Based on legal advice and / or internal assessments, management is confident that the matters will be decided in favour of

the Group and the possibility of any outcome against the Group is remote and accordingly no provision has been made in

these consolidated financial statements.

These mainly represent counter claims filed by the borrowers for restricting the Group from disposal of assets (such as

mortgaged / pledged assets kept as security).

Penalties amounting to Rs. 4.058 billion have been levied by the FE Adjudication Court of the State Bank of Pakistan

relating to alleged contraventions of the requirements of foreign exchange regulations with respect to issuance and

certification of E-Forms by the Bank to certain customers (exporters) who failed to submit the export documents

thereagainst. Consequently, foreign exchange on account of export proceeds have not been repatriated. The Bank

maintains that it fully discharged its liability, in accordance with the law and has filed a civil suit in the High Court of Sindh

challenging the levy of the penalty. The High Court has granted a stay on action being taken against the Bank. The

management, based on the advice from legal counsel, is confident that the view of the Bank will prevail and the Bank will

not be exposed to any loss on this account.

On November 10, 2016, a judgement was passed by the Supreme Court (SC) declaring the insertions of amendments in

WWF Ordinance through Finance Act 2008 as unlawful. The Board of Directors of UBL FM in their meeting held on May 29,

2013, had resolved that accumulated unrecorded WWF provision from the date of its application till May 29, 2013 on all

the funds under management amounting to Rs. 296.124 million will be borne by the Holding Company in case the said

accumulated amount is required to be paid to the Government authorities. The tax department has filed review petition

against the order of the SC which is currently pending.

37



23.4.4

23.4.5

23.4.6

23.5 For contingencies relating to taxation, refer note 12.1 and for an update on pension matter, refer note 48.2.

23.6 Commitments to extend credit

2017 2016

23.7 Commitments in respect of forward foreign exchange contracts

Purchase 242,093,757 216,641,748

Sale 213,172,200 193,057,693

23.8 Commitments in respect of derivatives

Interest rate swaps 4,358,641 6,986,094

Cross currency swaps - 522,051

FX options - purchased 83,368 213,081

FX options - sold 83,368 213,081

Forward purchase of government securities 7,870,890 4,998,400

Forward sale of government securities 1,478 3,553,866

The Group makes commitments to extend credit in the normal course of its business but these being revocable

commitments do not attract any significant penalty or expense if the facility is unilaterally withdrawn.

United Bank Limited Yemen (“UBL”) issued two Standby Letters of Credit (SBLCs) for USD 12 million (Rs. 1,325 million)

and USD 13 million (Rs. 1,435 million) in favour of Ministry of Oil and Minerals, Yemen (MOM) against the counter SBLCs

of a foreign bank. In March 2015, the counter party to the underlying performance agreement notified MOM of suspension

of the SBLCs due to force majeure. In September 2015, MOM filed a law suit against UBL at the Preliminary Commercial

Court in Sana’a, Yemen claiming payment of both SBLCs for the total sum of USD 25 million (Rs. 2,760 million).

During the course of the last year, no major debate was held as all hearings of the commercial case were adjourned to

subsequent dates, due to either non-appearance of legal counsel of MOM or non-submission of responses by MOM, as

required by legal counsel of UBL. As per provisions of Yemeni procedural law, if 60 days lapse from the last hearing without

the case being reinitiated/followed up by the plaintiff, the case shall be considered as if not filed and all procedures have to

be re-initiated afresh. In light of the foregoing provision of law, and non-follow up by MOM for over 60 days, UBL counsel

submitted a motion to dismiss the case. On September 25, 2017 the Honourable judge presiding over the commercial case

filed by MOM against UBL in Yemen, accepted UBL’s motion to drop the case. In light of the foregoing, the case filed by

MOM against UBL in Yemen stands dismissed. Although the case against UBL, Yemen has been dismissed by the

Honourable judge, the said dismissal is on the basis of a procedural lapse by MOM in pursuing the case, and not on the

actual merits. Hence MOM can reinitiate the case against UBL afresh.

The ICC Award has also been announced whereby ICC has accepted the request of Reliance to declare Force Mejure as

per the terms of the Production Sharing Agreement (PSA) between Reliance and MOM. In terms of the ICC Award, the

PSA stands cancelled.

Based on the legal advice of the Bank's legal counsel in Yemen and in view of facts surrounding the matter, management

is of the view that it is unlikely that there will be any financial impact on the Group.

UBL & its New York Branch have entered into a written Agreement in 2013 with the Federal Reserve Bank of New York

(FRBNY) to address certain compliance and risk management matters relating primarily to compliance with Anti Money

Laundering Regulations including the Banking Secrecy Act. Management is in the process of addressing the matters

highlighted in the Written Agreement and in the subsequent inspections. While the Bank seeks to comply with all possible

laws and regulations and at this stage there is no indication of any financial impact, it is not possible to ascertain the

eventual outcome of these matters.

------- (Rupees in '000) -------

Punjab Revenue Authority issued show cause notice to UBL Fund Managers Limited requiring them to pay sales tax under

Punjab sales tax on service act 2012 on management fee earned in Punjab from May 22, 2013. The Company has filed a

petition on July 8, 2015 in the High Court of Sindh. A favourable outcome of this petition is expected.

38



2017 2016

23.9 Commitments in respect of capital expenditure 1,987,978 2,755,836

24. DERIVATIVE INSTRUMENTS

With regard to derivatives, the RMC is authorized to:

-

- Review the Derivatives Business Policy and recommend approval to the BRCC / BoD.

- Review and approve derivatives product programs.

- Authorize changes in procedures and processes regarding derivatives and structured products.

Derivatives risk management

There are a number of risks undertaken by the Group, which need to be monitored and assessed.

Credit risk

Market risk

Derivatives are a type of financial contract, the value of which is determined by reference to one or more underlying assets

or indices. The major categories of such contracts include forwards, futures, swaps and options. Derivatives also include

structured financial products that have one or more of the characteristics of forwards, futures, swaps and options.

The Bank, as an Authorized Derivative Dealer (ADD), is an active participant in the Pakistan derivatives market and offers a

wide variety of derivatives products covering both hedging and market making to satisfy customers’ needs. Where required,

specific approval is sought from the SBP for each transaction.

------- (Rupees in '000) -------

The Group, as a policy, hedges back-to-back all Options transactions. In addition, the Group does not carry any exchange

risk on its Cross Currency Swaps portfolio as it hedges the exposure in the interbank market. To manage the interest rate

risk of Interest Rate Derivatives, the Group has implemented various limits which are monitored and reported by TMO on a

daily basis.

Review the derivatives business with reference to market risk exposure and assign various limits in accordance with

the risk appetite of the Bank.

Credit risk refers to the risk of non-performance or default by a party to a derivatives transaction, resulting in an adverse

impact on the Group’s profitability. Credit risk associated with derivatives transactions is categorized into settlement risk

and pre-settlement risk. Credit proposals for derivatives transactions are approved by the Credit Committee. The credit

exposure of each counterparty is estimated and monitored against approved counterparty limits by TMO on a daily basis.

The authority for approving policies lies with the Board of Directors (BoD) and the Board Risk and Compliance Committee

(BRCC). The Risk Management Committee (RMC) is responsible for ensuring compliance with these policies.

Overall responsibility for derivatives trading activity lies with the Treasury and Capital Markets Group. Measurement and

monitoring of market and credit risk exposure and limits and its reporting to senior management and the BoD is done by

Treasury Middle Office (TMO), which also coordinates with the business regarding approvals for derivatives risk limits.

Treasury Operations records derivatives activity in the Bank’s books, and handles its reporting to the SBP.

39



Liquidity risk

Derivatives transactions, usually being non-funded in nature, do not carry a specific funding liquidity risk.

Operational risk

24.1 Product analysis

With Banks for

Hedging 1 413,071 - - 6 83,368 - - - - 496,439

Market making 1 316,499 - - - - 5 7,870,890 2 1,478 8,188,867

2 729,570 - - 6 83,368 5 7,870,890 2 1,478 8,685,306

With other entities

Market making 5 3,629,071 - - 6 83,368 - - - - 3,712,439

Total

Hedging 1 413,071 - - 6 83,368 - - - - 496,439

Market making 6 3,945,570 - - 6 83,368 5 7,870,890 2 1,478 11,901,306

7 4,358,641 - - 12 166,736 5 7,870,890 2 1,478 12,397,745

With Banks for

Hedging 2 669,047 - - 4 213,081 - - - - 882,128

Market making 1 34,866 1 522,051 - - 1 4,998,400 2 3,553,866 9,109,183

3 703,913 1 522,051 4 213,081 1 4,998,400 2 3,553,866 9,991,311

With other entities

Market making 5 6,282,181 - - 4 213,081 - - - - 6,495,262

Total

Hedging 2 669,047 - - 4 213,081 - - - - 882,128

Market making 6 6,317,047 1 522,051 4 213,081 1 4,998,400 2 3,553,866 15,604,445

8 6,986,094 1 522,051 8 426,162 1 4,998,400 2 3,553,866 16,486,573

Total

Notional

Principal

The staff involved in the trading, settlement and risk management of derivatives are carefully trained to deal with the

complexities involved in the process. Adequate systems and controls are in place to carry out derivatives transactions

smoothly. Each transaction is processed in accordance with the product program or a transaction memo, which contains

detailed guidance on the accounting and operational aspects of the transaction to further mitigate operational risk. In

addition, TMO and the Compliance and Control Department are assigned the responsibility of monitoring any deviation from

policies and procedures. The Group’s Audit and Inspection group also reviews this function, with a regular review of

systems, transactional processes, accounting practices and end-user roles and responsibilities.

The Group uses a derivatives system which provides an end-to-end valuation solution, supports the routine transactional

process and provides analytical tools to measure various risk exposures, carry out stress tests and sensitivity analysis.

TMO produces various reports on a periodic basis which are reviewed by senior management. These reports provide

details of the derivatives business profile such as outstanding positions, profitability, risk exposures and the status of

compliance with limits.

Number of

contracts

Notional

principal

Number of

contracts

Notional

principal

Total

Notional

Principal

Number of

contracts

(Rupees in

'000)

(Rupees in

'000)

(Rupees in

'000)

(Rupees in

'000)

(Rupees in

'000)

(Rupees in

'000)

Notional

principal

Number of

contracts

Notional

principal

Number of

contracts

Notional

principal

Notional

principal

Number of

contracts

Notional

principal

(Rupees in

'000)

(Rupees in

'000)

(Rupees in

'000)

(Rupees in

'000)

(Rupees in

'000)

Number of

contracts

(Rupees in

'000)

Notional

principal

2017

Forward purchase

contracts of government

securities

Interest rate swaps

Forward purchase

contracts of government

securities

2016

Interest rate swaps

Number of

contracts

Notional

principal

The liquidity risk arises from the fact that in Pakistan, interest rate derivatives generally have a uni-directional demand, and

no perfect hedge is available. The Group mitigates its risk by limiting the portfolio in terms of tenor, notional and sensitivity

limits, and can also hedge its risk by taking on and off balance sheet positions in the interbank market, where available.

FX options

FX optionsCross currency swaps

Cross currency swapsForward sale contracts of

government securities

Forward sale contracts of

government securities

Number of

contracts

Notional

principal

Number of

contracts

40



24.2 Maturity analysis of derivatives

(Loss) Gain Net

Upto 1 month 4 90,234 - - -

1 to 3 months 11 6,760,752 (3,173) - (3,173)

3 to 6 months 3 216,000 - 6,807 6,807

1 to 2 years 6 4,835,194 (3) 64,161 64,158

2 to 3 years 1 316,500 - 5,432 5,432

5 to 10 years 1 179,065 - 484 484

26 12,397,745 (3,176) 76,884 73,708

(Loss) Gain Net

Upto 1 month 7 8,765,347 (2,391) 1,717 (674)

1 to 3 months 5 735,133 - 5,459 5,459

3 to 6 months 2 69,732 (239) 251 12

1 to 2 years 3 648,000 - 46,347 46,347

2 to 3 years 3 6,268,361 - 150,724 150,724

20 16,486,573 (2,630) 204,498 201,868

2017 2016

25. MARK-UP / RETURN / INTEREST EARNED

On loans and advances to customers 35,119,920 32,034,440

On lendings to financial institutions

Call money lending 148,823 172,303

Securities purchased under resale agreements 472,376 138,814

Bai Muajjal with SBP / other financial institutions 427,359 47,028

Other lendings to financial institutions 1,082,399 966,180

2,130,957 1,324,325

On investments in

Held for trading securities 1,993,227 1,087,718

Available for sale securities 39,741,486 36,041,435

Held to maturity securities 31,275,559 31,026,195

73,010,272 68,155,348

On deposits with financial institutions 318,746 240,931

110,579,895 101,755,044

26. MARK-UP / RETURN / INTEREST EXPENSED

On deposits 32,805,964 30,478,543

On securities sold under repurchase agreements 16,786,983 10,197,470

On other short term borrowings 2,436,719 1,858,211

On long term borrowings 458,087 399,711

52,487,753 42,933,935

27. GAIN ON SALE OF SECURITIES - NET

Federal government securities

Market Treasury Bills 18,585 11,461


3,631,305 3,518,932

Ordinary shares of listed companies 209,673 1,054,440

Other securities 956,708 1,036,209

4,797,686 5,609,581

2017

Remaining maturity Number of

contracts

Notional

principal

Unrealized

--------------------------------------------- (Rupees in '000) ------------------------------------------

------- (Rupees in '000) -------

2016

Remaining maturity Number of

contracts

Notional

principal

Unrealized

--------------------------------------------- (Rupees in '000) ------------------------------------------

41



Note 2017 2016

28. OTHER INCOME

Charges recovered 377,891 367,980

Rent on properties 245,731 249,644

Income from dealing in derivatives 32,793 93,351

Gain on sale of operating fixed assets - net 57,983 44,329

Gain on sale of Ijarah assets 96 44,685

Income from sale of non-banking asset 28.1 - 20,574

Gain on trading liabilities - net 65,834 95,701

780,328 916,264

28.1 The Group earned income of nil (2016: Rs. 20.574 million) against the sale of

following non-banking assets:

Commercial open plot situated in Faisalabad - 14,199

Agricultural open land situated in Lahore - 6,375

- 20,574

29. ADMINISTRATIVE EXPENSES

Salaries, allowances etc. 29.1 14,377,128 13,246,456

Charge for compensated absences 24,687 315,084

Medical expenses 713,410 616,182

Contribution to defined contribution plan 395,981 364,734

Charge / (reversal) in respect of defined benefit obligations 424,134 (65,929)

Rent, taxes, insurance, electricity etc. 4,672,149 4,398,243

Depreciation on operating fixed assets 11.2 2,151,157 1,714,992

Depreciation on Islamic financing against leased assets (Ijarah) 46.4 197,824 205,186

Amortization 11.3 436,392 383,371

Outsourced service charges including sales commission 4,631,033 4,626,193

Communications 1,373,600 1,171,152

Banking service charges 1,302,234 1,184,850

Cash transportation charges 895,500 653,789

Stationery and printing 647,618 688,689

Legal and professional charges 706,110 473,431

Advertisement and publicity 1,141,267 794,290

Repairs and maintenance 1,725,076 1,589,403

Travelling 335,884 297,343

Office running expense 859,939 776,902

Vehicle expense 203,078 185,223

Entertainment 224,402 252,832

Cartage, freight and conveyance 94,788 101,271

Insurance expense 137,516 137,922

Auditors' remuneration 29.2 105,495 102,658

Training and seminars 170,653 136,363

Brokerage expenses 25,994 19,041

Subscriptions 156,029 161,975

Donations 29.3 110,250 87,252

Non-executive Directors' fees 48,721 41,963

Zakat paid by overseas branch 75,828 283,971

Miscellaneous expenses 91,457 77,408

38,455,334 35,022,240

29.1

------- (Rupees in '000) -------

This includes accrual of employee benefits in the form of awards / bonus to all permanent staff including the Chief Executive

Officer and is determined on the basis of employees' evaluation and the entities' performance during the year. The

aggregate benefit determined in respect of all permanent staff amounted to Rs. 1,520.435 million (2016: Rs. 1,681.198

million).

42



29.2 Auditors' remuneration

KPMG Taseer A.F. Ferguson Overseas

Hadi & Co. & Co. Auditors

Audit fee - Bank 8,051 8,051 27,007 43,109

Audit fee - subsidiaries 69 747 24,775 25,591

Audit fee - EPZ branch 250 - - 250

Fee for tax and other certifications 9,925 5,724 11,434 27,083

Out of pocket expenses 4,629 3,863 970 9,462

22,924 18,385 64,186 105,495

KPMG Taseer A.F. Ferguson Overseas

Hadi & Co. & Co. Auditors

Audit fee - Bank 7,668 7,668 27,953 43,289

Audit fee - subsidiaries 61 874 23,331 24,266

Audit fee - EPZ branch 250 - - 250

Fee for tax and other certifications 7,237 5,455 15,294 27,986

Out of pocket expenses 3,429 2,792 646 6,867

18,645 16,789 67,224 102,658

29.3 Details of donations 2017 2016

Donations individually exceeding Rs. 0.1 million

Namal Education Foundation 50,000 50,000

Memon Medical Institute Hospital 15,000 -

Lahore University of Management Sciences 10,000 10,000

Murshid Hospital & Healthcare Center 7,000 -

Forman Christian College 5,000 5,000

Shalamar Hospital 5,000 5,000

Indus Earth Trust - 4,943

Hilal-e-Ahmer 4,975 -

Abdul Sattar Edhi Foundation - 4,600

Bahauddin Zakaria University 3,840 3,840

NFC Institute of Engineering & Technology 1,554 -

District Hospital, Gwadar 1,195 -

Nasra Schools 1,260 -

Akhuwat 1,000 -

Hisaar Foundation 1,000 -

SOS Children's Villages of Pakistan 980 980

Marie Adelaide Leprosy Centre 850 850

Patients Aid Foundation 500 -

Developments in Literacy (Fundraiser) 500 -

The Citizens Foundation - 500

Shaukat Khanum Memorial Hospital - 500

The Kidney Center Post Graduate Training Institute - 300

Old Associates of Kinnaird Society Karachi 250 250

Swiss Muslim Society, Switzerland 161 160

Swiss-Asian Chamber of Commerce 160 -

Swiss Pakistan Society - 159

Rotary Club of Karachi Metropolitan - 150

Donations individually not exceeding Rs. 0.1 million 25 20

110,250 87,252

29.3.1 Donations were not made to any donee in which a Director or his spouse had any interest.

------------------------------------- (Rupees in '000) -------------------------------------

------- (Rupees in '000) -------

2017

------------------------------------- (Rupees in '000) -------------------------------------

Total

Total

2016

43



Note 2017 2016

30. OTHER PROVISIONS / WRITE OFFS - NET

Provision against other assets - net 12.2 45,888 143,908

(Reversal of provision) / charge against off balance sheet items 19.1 (599,097) 27,081

Other provisions 164,140 60,379

(389,069) 231,368

31. WORKERS' WELFARE FUND

The Bank has made full provision for Workers' Welfare Fund based on profit for the respective years.

2017 2016

32. OTHER CHARGES

Penalties imposed by the SBP 59,431 69,082

Other penalties 257 736

59,688 69,818

2017

Domestic Azad Kashmir Overseas Total

33. TAXATION

Current 14,189,308 446,329 65,706 14,701,343

Prior years 465,216 - (2,496,881) (2,031,665)

Deferred 914,830 14,374 1,335,521 2,264,725

15,569,354 460,703 (1,095,654) 14,934,403

2016

Domestic Azad Kashmir Overseas Total

Current 13,093,795 414,484 1,797,458 15,305,737

Prior years 1,700,754 - 550,658 2,251,412

Deferred 1,316,612 6,476 271,744 1,594,832

16,111,161 420,960 2,619,860 19,151,981

2017 2016

33.1 Relationship between tax expense and accounting profit

Accounting profit for the year 41,130,992 47,154,283

Tax on income @ 35% (2016: 35%) 14,395,847 16,503,999

Tax effect of items that are either not included in determining taxable

profit or taxed at reduced rates (permanent differences) (176,398) (47,369)

Tax - prior years (net of deferred tax) 727,266 2,267,889

Tax on share of profit from associates (34,787) 70,937

Others 22,475 356,525

Tax charge 14,934,403 19,151,981

----------------------------------------- (Rupees in '000) -----------------------------------------

----------------------------------------- (Rupees in '000) -----------------------------------------

------- (Rupees in '000) -------

------- (Rupees in '000) -------

------- (Rupees in '000) -------

The Supreme Court of Pakistan vide its order dated November 10, 2016 has held that the amendments made in the law

introduced by the Federal Government for the levy of Workers' Welfare Fund were not lawful. The Federal Board of

Revenue has filed review petitions against this order which are currently pending.

Legal advice obtained on the matter indicates that consequent to filing of these review petitions, the judgment may not

currently be treated as conclusive. Accordingly, the Bank maintains its provision in respect of WWF.

Under the Workers' Welfare Ordinance, 1971, the Bank has accrued Workers' Welfare Fund at 2% of profit before tax

as per the financial statements or declared income as per the income tax return, whichever is higher.

44



Note 2017 2016

34. EARNINGS PER SHARE

Profit after tax attributable to equity shareholders of the Bank 26,190,302 27,782,758

Weighted average number of ordinary shares 1,224,179,687 1,224,179,687

Earnings per share - basic and diluted 21.39 22.70

34.1

2017 2016

35. CASH AND CASH EQUIVALENTS

Cash and balances with treasury banks 6 161,119,170 133,467,502

Balances with other banks 7 35,549,112 32,267,304

196,668,282 165,734,806

35.1 Reconciliation of movement of liabilities to cash flows arising from financing activities

Bills

payableBorrowings

Deposits and

other

accounts

Other

liabilities

Share

capitalReserves

Unappropriated

profit

--------------------------------------------- (Rupees in '000) -------------------------------------------------

Balance as at January 1, 2017 11,759,012 205,865,131 1,245,791,616 29,366,706 12,241,798 42,615,188 68,939,008

Changes from financing cash flows

Dividend Paid - - - - - - (15,479,932)

Other Changes - - - - - - -

Liability-related

Changes in bills payable 1,633,966 - - - - - -

Changes in borrowings - 311,217,028 - - - - -

Changes in deposits and other accounts - - 120,366,298 - - - -

Changes in other liabilities

- Cash based - - - 1,449,579 - - -

- Dividend payable - - - 434,404 - - (434,404)

- Non-cash based - - - 2,532 - - -

Transfer of profit to reserve - - - - - 2,556,595 (2,556,595)

Transaction cost on issuance of right shares - - - - - - -

Total Liability related other changes 1,633,966 311,217,028 120,366,298 1,886,515 - 2,556,595 (2,990,999)

Total Equity related other changes - - - - - 2,031,733 26,183,636

Balance as at December 31, 2017 13,392,978 517,082,159 1,366,157,914 31,253,221 12,241,798 47,203,516 76,651,713

EquityLiabilities

------------ (Rupees) ------------

----- (Number of shares) -----

------- (Rupees in '000) -------

------- (Rupees in '000) -------

Diluted earnings per share has not been presented separately as the Group does not have any convertible instruments in

issue as at December 31, 2017 or 2016.

45



2017 2016

36. STAFF STRENGTH

Permanent 11,628 10,196

On contract 160 120

Group's own staff strength 11,788 10,316

Outsourced 3,748 4,412

Total 15,536 14,728

37. DEFINED BENEFIT PLANS

37.1 The Bank (Holding Company)

37.1.1 General description

37.1.2 Number of Employees under the scheme

The number of employees covered under the following defined benefit schemes are:

2017 2016

Pension fund 6,798 6,829

Gratuity fund 9,394 7,984

Benevolent fund 4,051 4,386

Post retirement medical benefit scheme 9,804 9,839

37.1.3 Principal actuarial assumptions

The actuarial valuations were carried out as at December 31, 2017 using the following significant assumptions:

2017 2016

Discount rate / expected rate of return on plan assets 8.25% 8.00%

Expected rate of salary increase 6.25% 6.00%

Expected rate of increase in pension 2.25% 2.00%

Expected rate of increase in medical benefit 2.25% 2.00%

---------- Per annum ----------

The pension fund, benevolent fund and post retirement medical benefit schemes include 5,600 (2016: 5,499), 2,124 (2016:

2,214) and 8,064 (2016: 7,861) members respectively who have retired or whose widows are receiving the benefits.

The Bank operates a funded pension scheme established in 1975. The Bank also operates a funded gratuity scheme for

new employees and for those employees who have not opted for the pension scheme. The Bank also operates a

benevolent fund scheme and provides post retirement medical benefits to eligible retired employees. The benevolent fund

scheme and the post-retirement medical scheme cover all regular employees of the Bank who joined the Bank pre-

privatization. The liabilities of the Bank in respect of these schemes are determined based on actuarial valuations carried

out using the Projected Unit Credit Method. Actuarial valuations of the defined benefit schemes are carried out every year

and the latest valuation was carried out as at December 31, 2017.

------------ (Number) ------------

------------ (Number) ------------

46



37.1.4 Reconciliation of (receivable from) / payable to defined benefit plans

Note

Pension

fund

Gratuity

fund

Benevolent

fund

Post-

retirement

medical

benefit

Pension

fund

Gratuity

fund

Benevolent

fund

Post-

retirement

medical

benefit

Present value of obligations 2,698,870 728,822 429,243 1,463,703 2,932,255 652,457 453,193 1,328,199

Fair value of plan assets (3,176,096) (711,571) (494,386) - (3,077,541) (711,805) (501,671) -

(Receivable) / payable (477,226) 17,251 (65,143) 1,463,703 (145,286) (59,348) (48,478) 1,328,199

37.1.5 Movement in defined benefit

obligations

Obligations at the beginning of the year 2,932,255 652,457 453,193 1,328,199 3,034,259 625,414 466,964 1,188,710

Current service cost 8,196 106,921 6,630 4,250 8,518 108,203 7,691 4,211

Interest cost 123,653 52,899 35,702 111,493 130,399 56,784 38,786 107,169

Benefits paid by the Bank (456,036) (131,663) (69,152) (138,529) (507,085) (111,140) (70,819) (128,259)

Return allocated to other funds 37.1.8.2 98,242 - - - 148,998 - - -

Re-measurement loss / (gain) (7,440) 48,208 2,870 158,290 117,166 (26,804) 10,571 156,368

Obligations at the end of the year 2,698,870 728,822 429,243 1,463,703 2,932,255 652,457 453,193 1,328,199

37.1.6 Movement in fair value of

plan assets

Fair value at the beginning of the year 3,077,541 711,805 501,671 - 2,884,308 652,318 899,017 -

Interest income on plan assets 233,079 57,468 39,434 - 266,470 59,104 77,332 -

Contribution by the Bank 1,595 103,679 2,468 - 332,855 111,594 2,814 -

Contribution by the employees - - 2,468 - - - 2,814 -

Amount paid by the fund to the Bank (179,066) (163,857) (56,965) - (522,251) (133,843) (496,542) -

Re-measurements gain / (loss) 42,947 2,476 5,310 - 116,159 22,632 16,236 -

Fair value at the end of the year 3,176,096 711,571 494,386 - 3,077,541 711,805 501,671 -

37.1.7 Movement in (receivable) / payable

under defined benefit schemes

Opening balance (145,286) (59,348) (48,478) 1,328,199 149,951 (26,904) (432,053) 1,188,710

Mark-up receivable on Bank's balance with the fund (12,645) (658) (1,068) - (4,193) (492) (475) -

Charge / (reversal) for the year (2,988) 102,352 430 115,743 21,445 105,883 (33,669) 111,380

Contribution by the Bank (1,595) (103,679) (2,468) - (332,855) (111,594) (2,814) -

Amount paid by the Fund to the Bank 179,066 163,857 56,965 - 522,251 133,843 496,542 -

Benefits paid by the Bank (456,036) (131,663) (69,152) (138,529) (507,085) (111,140) (70,819) (128,259)

Remeasurement loss / (gain) recognised in

OCI during the year (37,742) 46,390 (1,372) 158,290 5,200 (48,944) (5,190) 156,368

Closing balance (477,226) 17,251 (65,143) 1,463,703 (145,286) (59,348) (48,478) 1,328,199

37.1.8 Charge for defined benefit plans

37.1.8.1 Cost recognised in profit and loss

Current service cost 8,196 106,921 6,630 4,250 8,518 108,203 4,877 4,211

Net interest on defined benefit asset / liability (109,426) (4,569) (3,732) 111,493 (136,071) (2,320) (38,546) 107,169

Return allocated to other funds 98,242 - - - 148,998 - - -

Employees' contribution - - (2,468) - - - - -

(2,988) 102,352 430 115,743 21,445 105,883 (33,669) 111,380

37.1.8.2

Pension

fund

Gratuity

fund

Benevolent

fund

Post-

retirement

medical

benefit

Pension

fund

Gratuity

fund

Benevolent

fund

Post-

retirement

medical

benefit

37.1.9 Re-measurements recognised in

OCI during the year

Loss / (gain) on obligation

- Financial assumptions (1,877) 1,099 (2,748) (1,704) 140,079 (3,922) 9,445 182,530

- Experience adjustments (5,563) 47,109 5,618 159,994 (22,913) (22,882) 1,126 (26,162)

Return on plan assets over interest income (42,947) (2,476) (5,310) - (116,159) (22,632) (16,236) -

Adjustment for mark-up 12,645 658 1,068 - 4,193 492 475 -

Total re-measurements recognised in OCI (37,742) 46,390 (1,372) 158,290 5,200 (48,944) (5,190) 156,368

2017 2016

------------------------------------------------------------------------ (Rupees in '000) ------------------------------------------------------------------------

20162017

------------------------------------------------------------------------ (Rupees in '000) ------------------------------------------------------------------------

This represents return allocated to those employees who exercised the conversion option offered in the year 2001, as

referred to in note 5.11.1.

47



37.1.10 Components of plan assets

Pension fund Gratuity fundBenevolent

fundPension fund Gratuity fund

Benevolent

fund

Cash and cash equivalents - net of

current liabilities 15,421 6,018 2,403 13,559 2,767 1,688

Ordinary shares 133,055 8,098 20,458 169,105 10,407 23,704

Term finance certificates 72,289 143,061 8,178 81,013 6,239 10,619

Mutual Funds units - 18,275 - - - -

Pakistan Investment Bonds 1,414,048 446,196 192,907 1,414,882 398,146 192,283

Special Savings Certificates 1,541,283 89,923 270,440 1,398,982 281,346 273,377

Others - - - - 12,900 -

3,176,096 711,571 494,386 3,077,541 711,805 501,671

######## (441,759) (856,535) ######## (409,974) (836,962)

37.1.10.1

37.1.11 Sensitivity analysis


fund

Post retire-

ment medical

benefit

Increase in discount rate by 1 % (80,665) (47,929) (23,062) (143,511)

Decrease in discount rate by 1 % 91,531 54,676 25,955 172,762

Increase in expected future increment in salary by 1% - 58,902 - -

Decrease in expected future increment in salary by 1% - (52,413) - -

Increase in expected future increment in pension by 1% 83,295 - - -

Decrease in expected future increment in pension by 1% (73,931) - - -

Increase in expected future increment in medical benefit by 1% - - - 163,227

Decrease in expected future increment in medical benefit by 1% - - - (138,843)

37.1.12 Expected contributions to be paid to the funds in the next financial year


fund

Post retire-

ment medical

benefit

Expected contribution - 129,818 - 118,719

Expected (reversal) / charge for the year (32,009) 129,818 (1,160) 118,719

37.1.13 Maturity profile


fund

Post retire-

ment medical

benefit

The weighted average duration of the obligation (in years) 6.13 7.01 5.14 9.80

2017 2016

----------------------------------------------- (Rupees in '000) -----------------------------------------------

2017

2017

2018

Although the analysis does not take account of the full distribution of expected cash flows, it does provide an

approximation of the sensitivity of the assumptions shown.

Sensitivity analysis has been performed by varying one assumption keeping all other assumptions constant and

calculating the impact on the present value of the defined benefit obligations under the various employee benefit

schemes. The increase / (decrease) in the present value of defined benefit obligations as a result of a change in each

assumption is summarized below:

The Bank contributes to the pension and gratuity funds according to the actuary's advice. Contribution to the

benevolent fund is made by the Bank as per the rates set out in the benevolent fund scheme. Based on actuarial

advice, management estimates that the expected contribution and charge / (reversal) for the year ending December 31,

2017, would be as follows:

------------------------------- (Rupees in '000) ---------------------------

The funds primarily invest in government securities and accordingly do not carry any significant credit risk. These are

subject to interest rate risk based on market movements. Investment in term finance certificates are subject to credit

risk and interest rate risks, while equity securities are subject to price risk. These risks are regularly monitored by

Trustees of the employee funds.

-------------------------------------------------------------- (Rupees in '000) --------------------------------------------------------------

48



37.1.14 Funding Policy

37.2 United National Bank Limited Pension and Life Assurance Scheme for U.K Employees.

2017 2016

Discount rate 2.40% 2.60%

Rate of revaluation of pension in deferment 2.40% 2.60%

Expected rate of pension increase 3.00% 3.40%

Retail price inflation 3.40% 3.40%

Consumer price inflation 2.60% 2.60%

37.2.1 The assets and liabilities of the scheme noted below relate to those employees for whom UBL UK has a funding liability.

Return (Rupees in Return (Rupees in

'000) '000)

Insurance policy 2.60% 889,924 2.60% 691,462

Market value of assets 889,924 691,462

Present value of defined benefit obligation (913,927) (816,435)

Gross pension liability (24,003) (124,973)

Related deferred tax relief 4,075 21,240

Net pension liability (19,928) (103,733)

2017 2016

37.2.2 Movement in surplus / (deficit) during the year

Obligation at the beginning of the year (124,973) (34,780)

Interest expense (3,397) (1,422)

Remeasurement gain / (loss) 113,584 (96,970)

Exchange adjustment (9,217) 8,199

Deficit in scheme at the end of the year (24,003) (124,973)

Related deferred tax relief 4,075 21,240

Obligation at the end of the year (19,928) (103,733)

No Directors were members of the defined benefit scheme during the year or as at December 31, 2017.

The last full actuarial valuation of the scheme was carried out by a qualified actuary. The major assumptions used by the

actuary in the latest update as of December 31, 2017 are as follows:

---------- Per annum ----------

The Bank endeavours to ensure that liabilities under the various employee benefit schemes are covered by the Fund on

any valuation date having regards to the various actuarial assumptions such as projected future salary increase, expected

future contributions to the fund, projected increase in liability associated with future service and the projected investment

income of the Fund.

As part of the Shareholders’ Agreement (“the Agreement”) signed on November 9, 2001 between UBL UK and its

shareholders, United Bank Limited and National Bank of Pakistan (NBP), it was agreed that UBL UK may participate as

an associated employer in the United Bank Limited Pension and Life Assurance Scheme (“the Scheme”) with effect from

November 19, 2001, the date of completion of transfer of the businesses from the Bank and NBP into UBL UK (the

Completion Date). The Scheme is classified as a defined benefit scheme providing benefits based on final pensionable

salary.

Under the terms of the Agreement, UBL UK is responsible for the funding requirements of the active members whose

employment was transferred to UBL UK on the Completion Date and for any new members admitted to the scheme after

the Completion Date. United Bank Limited remains responsible for the funding of the deferred members upto the

Completion Date. The scheme is closed for new members and the accrual of benefits has ceased from January 1, 2010.

Full actuarial valuations using the Projected Unit Credit Method are obtained triennially and updated at each statement of

financial position date.

------- (Rupees in '000) ----

2017 2016

49



2017 2016

37.2.3 Analysis of the amount credited / (debited) to net interest income

Expected return on pension scheme assets 18,749 25,309

Interest on pension scheme liabilities (22,146) (26,731)

Net expense (3,397) (1,422)

37.2.4 Sensitivity Analysis

2017

Rupees in '000

Increase in discount rate by 1 % (60,829)

Decrease in discount rate by 1 % 134,629

Increase in expected inflation rate by 1% 47,560

Decrease in expected inflation rate by 1% 22,662

Increase in life expectancy by 1 year 41,000

Decrease in life expectancy by 1 year 7,156

37.3 UBL Fund Managers Limited

37.3.1 Principal actuarial assumptions

2017 2016

Discount rate 7.75% 9.25%

Expected rate of return on plan assets 8.00% 9.25%

Expected rate of salary increase 7.75% 9.25%

37.3.2 Reconciliation of payable to defined benefit plan

Present value of defined benefit obligations 48,483 58,634

Fair value of plan assets (48,987) (56,686)

Payable (504) 1,948

37.3.3 Movement in defined benefit obligation

Obligation at the beginning of the year 58,634 60,482

Current service cost 12,515 11,180

Interest cost 5,766 5,872

Benefits paid (30,045) (21,574)

Remeasurement gain 1,613 2,674

Obligation at the end of the year 48,483 58,634

------- (Rupees in '000) ----

UFML operates a funded gratuity scheme. The liability of UFML in respect of this scheme is determined based on an

annual actuarial valuation carried out using the Projected Unit Credit Method. The latest valuation was carried out as at

December 31, 2017. The main assumptions used in the actuarial valuation are as follows:


calculating the impact on the present value of the defined benefit obligation under the benefit scheme. The increase /

(decrease) in the present value of defined benefit obligation as a result of a change in each assumption is summarized

below:



------- (Rupees in '000) ----

---------- Per annum ----------

50



2017 2016

37.3.4 Movement in the fair value of plan assets

Fair value of plan assets at the beginning of the year 56,686 59,887

Return on plan assets 5,594 5,819

Contributions to the plan 18,865 9,964

Benefits paid (30,045) (21,574)

Remeasurement (loss) / gain (2,113) 2,590

48,987 56,686

37.3.5 Composition of plan assets

Debt securities 12,674 23,178

Cash 23,566 2,772

Mutual Funds 3,759 12,457

Equity securities 8,988 18,279

48,987 56,686

37.3.6 Charge for defined benefit plan

Current service cost 12,515 11,180

Interest cost 5,766 5,872

Return on plan assets (5,594) (5,819)

12,687 11,233

Actual return on plan assets 1,934 7,435

37.3.7 Movement in net liability recognised

Opening net payable 1,948 595

Expense recognised 12,687 11,233

Contribution to the fund made during the year (18,865) (9,964)

Remeasurement gain - net 3,726 84

Closing net (receivable) / payable (504) 1,948

37.3.8 Maturity profile and expected future contribution

37.3.9 Sensitivity Analysis

2017

Rupees in '000

Increase in discount rate by 1 % 44,190

Decrease in discount rate by 1 % (44,190)

Increase in salary increment rate by 1% 53,231

Decrease in salary increment rate by 1% (53,231)

Based on actuarial advice, management estimates that the expected contribution and charge for the year ended

December 31, 2018, would be Rs. 14.072 million and Rs. 14.072 million, respectively. The weighted average duration of

the obligation as of December 31, 2017 is 10 years.



----- (Rupees in '000) ------


calculating the impact on the present value of the defined benefit obligation under the defined benefit scheme. The

increase / (decrease) in the present value of defined benefit obligation as a result of a change in each assumption is

summarized below:

51



38 OTHER EMPLOYEE BENEFITS

38.1 Defined contribution plan

38.2 Employee Motivation and Retention Scheme

38.3 Employee Stock Option Scheme

39. COMPENSATION OF DIRECTORS AND EXECUTIVES

2017 2016 2017 2016 2017 2016

Fees - - 48,721 41,963 25,218 28,263

Managerial remuneration 201,483 129,907 - - 5,518,461 5,684,800

Charge for defined benefit plan 732 1,638 - - 1,025,765 449,837

Charge for defined contribution plan 4,167 3,630 - - 198,216 159,243

Rent and house maintenance 4,361 4,191 - - 816,131 717,026

Utilities 1,456 1,407 - - 384,992 341,790

Medical 22 - - - 184,502 168,775

Conveyance - - - - 469,262 453,535

Others 4,011 3,394 - - 1,441,237 329,951

216,233 144,167 48,721 41,963 10,063,784 8,333,220

Number of persons 2 1 10 8 2,145 1,936

UBL Bank (Tanzania) Limited operates a contributory provident fund scheme. The employer and employee each

contribute 10% of the basic salary to the funded scheme every month.

UFML operates a contributory provident fund scheme. The employer and employee each contribute 10% of the basic

salary to the funded scheme every month.

In addition to the above, all Executives including the Chief Executive Officer of the Bank, are also entitled to certain short

and long term employee benefits which are disclosed in note 38.2 to these consolidated financial statements.

The Bank's President / Chief Executive Officer and certain Executives are provided with use of Bank maintained cars and

household equipment.

The Bank operates a contributory provident fund scheme for 7,394 (2016: 7,981) employees who are not in the pension

scheme. The employer and employee each contribute 8.33% of the basic salary to the funded scheme every month.

---------------------------------------------------------- (Rupees in '000) ----------------------------------------------------------

The amount paid to President / Chief Executive Officer of the Bank includes an amount of Rs. 51.364 million paid during

the year as severance cost on cessation of employment to the outgoing President / Chief Executive Officer.

ExecutivesPresident / Chief

Executive OfficerDirectors

UBL Fund Managers has an incentive scheme for its top performing employees in the form of share options under the

policy of Employee Stock Option Scheme (ESOS). The options give a right to subscribe ordinary shares of the Company

to the extent of the lower of two million shares or five percent of the share Capital of the company as of the grant date.

The scheme is divided into three phases and options are exercisable at their respective exercise price determined from

time to time according to methodology provided in approved scheme. Each phase give a right to eligible employees to

acquire options after a vesting period of two years, in two tranches i.e. 50% of the vested options are exercisable upon

completion of vesting period, while remaining 50% can be exercised after one year. The last phase was completed in

2016 in which 18,121 shares were issued pursuant to exercise of the share options.

The Bank has a long term motivation and retention scheme for its employees. The liability of the Bank in respect of the

scheme for each year, if any, is fixed, and is accounted for in the year to which the scheme relates. The scheme is

managed by separate Trusts formed in respect of each year. During the year, Rs. nil (2016: Rs. 38.748 million) and Rs. nil

(2016: Rs. 1.437 million) were received by the Executives and the Chief Executive respectively from the scheme. No new

Trust was set up during the current year.

52



40. FAIR VALUE OF FINANCIAL INSTRUMENTS

40.1

Level 1: Fair value measurements using quoted prices (unadjusted) in active markets for identical assets or liabilities.

On balance sheet financial instruments Level 1 Level 2 Level 3 Total

Financial assets measured at fair value

- Investments

Government Securities (T-bills, PIBs, GoP Sukuks

and Eurobonds) 679,318,633 - 679,318,633 - 679,318,633

Foreign Bonds - sovereign 38,490,598 - 38,490,598 - 38,490,598

Foreign Bonds - others 19,352,217 - 19,352,217 - 19,352,217

Ordinary shares of listed companies 18,318,667 18,318,667 - - 18,318,667

Debt securities (TFCs) 382,425 - 382,425 - 382,425

Investment in REIT 458,590 458,590 - - 458,590

Investment in Associates 4,243,644 - 4,243,644 - 4,243,644

760,564,774 18,777,257 741,787,517 - 760,564,774

Financial assets not measured at fair value

- Investments (HTM, unlisted ordinary shares,

preference shares) 364,356,526 - - - -

1,124,921,300 18,777,257 741,787,517 - 760,564,774

Off balance sheet financial instruments

Forward purchase and sale of foreign exchange contracts 455,265,957 - 1,933,688 - 1,933,688

Interest rate swaps 4,358,641 - 74,865 - 74,865

Cross currency swaps - - - - -

FX options - purchased and sold (net) 166,736 - - - -

Forward purchase of government securities 7,870,890 - (1,155) - (1,155)

Forward sale of government securities 1,478 - (2) - (2)

The fair value of quoted securities other than those classified as held to maturity, is based on quoted market price. Quoted

securities classified as held to maturity are carried at cost. The fair value of unquoted equity securities, other than

investments in associates, is determined on the basis of the break-up value of these investments as per their latest

available audited financial statements.

The fair value of unquoted debt securities, fixed term loans, other assets, other liabilities, fixed term deposits and

borrowings cannot be calculated with sufficient reliability due to the absence of a current and active market for these

assets and liabilities and reliable data regarding market rates for similar instruments.

In the opinion of the management, the fair value of the remaining financial assets and liabilities are not significantly

different from their carrying values since these are either short-term in nature or, in the case of customer loans and

deposits, are frequently repriced.

The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in

making the measurements:

----------------------------------(Rupees in '000)---------------------------------

The table below analyses financial instruments measured at the end of the reporting period by the level in the fair value

hierarchy into which the fair value measurement is categorised:

Carrying /

Notional value

Fair value

2017

Level 2: Fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the

assets or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: Fair value measurements using input for the asset or liability that are not based on observable market data (i.e.

unobservable inputs).

53



Level 1 Level 2 Level 3 Total

On balance sheet financial instruments

Financial assets measured at fair value

- Investments

Government Securities (T-bills, PIBs, GoP Sukuks

and Eurobonds) 399,604,148 - 399,604,148 - 399,604,148

Foreign Bonds - sovereign 33,743,383 - 33,743,383 - 33,743,383

Foreign Bonds - others 18,317,632 - 18,317,632 - 18,317,632

Ordinary shares of listed companies 22,220,692 22,220,692 - - 22,220,692

Debt securities (TFCs) 583,011 - 583,011 - 583,011

Investment in REIT 453,170 453,170 - - 453,170

Investment in Associates 7,977,617 - 7,977,617 - 7,977,617

482,899,653 22,673,862 460,225,791 - 482,899,653

Financial assets not measured at fair value

- Investments (HTM, unlisted ordinary shares,

preference shares) 355,362,621 - - - -

838,262,274 22,673,862 460,225,791 - 482,899,653

Off balance sheet financial instruments

Forward purchase and sale of foreign exchange contracts 409,699,441 - (746,629) - (746,629)

Interest rate swaps 6,986,094 - 197,083 - 197,083

Cross currency swaps 522,051 - 5,459 - 5,459

FX options - purchased and sold (net) 426,162 - - - -

Forward purchase of government securities 4,998,400 - (2,391) - (2,391)

Forward sale of government securities 3,553,866 - 1,717 - 1,717

40.2

40.3 Valuation techniques used in determination of fair values within level 2 and level 3.

Debt Securities

Derivatives

The fair valuation techniques include forward pricing and swap models using present value calculations.

Operating fixed assets and non-banking assets acquired in satisfaction of claims

The fair value of Federal Government securities is determined using the prices / rates available on Mutual Funds

Association of Pakistan (MUFAP) and the fair value of other corporate and foreign government securities is determined

using the rates from Reuters / Bloomberg.

Land, buildings and non-banking assets acquired in satisfaction of claims are revalued on a periodic basis using

professional valuers. The valuation is based on their assessment of the market value of the assets. The effect of changes

in the unobservable inputs used in the valuations cannot be determined with certainty, accordingly, a qualitative disclosure

of sensitivity has not been presented in these consolidated financial statements.

Carrying /

Notional value

Fair value

Certain categories of operating fixed assets (land and buildings) and non-banking assets acquired in satisfactions of

claims are carried at revalued amounts (level 3 measurement) determined by professional valuers based on their

assessment of the market values as disclosed in note 11 and note 12 respectively.

2016

----------------------------------(Rupees in '000)---------------------------------

54



41. SEGMENT DETAILS WITH RESPECT TO BUSINESS ACTIVITIES

Corporate

finance

Trading and

salesRetail banking

Commercial

banking

Asset

managementOthers

Inter segment

elimination

Total income 728,028 29,624,475 33,772,871 14,961,920 1,274,486 2,486,149 -

Total expenses 83,459 1,385,182 30,529,217 7,966,874 573,892 1,178,313 -

Profit before tax 644,569 28,239,293 3,243,654 6,995,046 700,594 1,307,836 -

Segment return on assets (ROA) 94.6% 1.7% 0.2% 0.8% 37.9% - -

Segment cost of funds 0.0% 4.6% 2.6% 4.0% - - -

Corporate

finance

Trading and

salesRetail banking

Commercial

banking

Asset

managementOthers

Inter segment

elimination

Total income 687,888 35,783,872 30,845,096 14,539,492 1,111,336 2,045,063 -

Total expenses 98,333 2,570,479 27,324,741 6,824,313 640,878 399,720 -

Profit before tax 589,555 33,213,393 3,520,355 7,715,179 470,458 1,645,343 -

Segment return on assets (ROA) 101.1% 2.3% 0.2% 1.1% 26.8% - -

Segment cost of funds 0.0% 4.6% 2.6% 4.0% - - -

Corporate

finance

Trading and

salesRetail banking

Commercial

banking

Asset

managementOthers

Inter segment

elimination

Segment assets (gross of NPLs provisions) 1,349,731 1,230,568,302 1,244,897,036 625,655,607 1,591,685 135,172,316 (1,093,648,494)

Segment non performing loans (NPLs) 674,163 1,003,160 10,312,357 40,851,377 - 66,591 -

Segment provision held against NPLs 515,863 1,002,844 8,425,423 30,249,465 - 32,089 -

Segment liabilities 222,650 1,171,670,458 1,266,830,240 574,811,057 182,495 10,798,332 (1,093,648,494)

Corporate

finance

Trading and

salesRetail banking

Commercial

banking

Asset

managementOthers

Inter segment

elimination

Segment assets (gross of NPLs provisions) 1,121,938 940,381,710 1,092,053,721 542,138,463 1,455,741 110,454,439 (987,782,808)

Segment non performing loans (NPLs) 674,671 1,603,361 11,703,125 31,998,971 - 64,814 -

Segment provision held against NPLs 507,379 1,584,978 9,100,204 26,851,681 - 36,702 -

Segment liabilities 233,008 859,587,557 1,123,240,517 496,531,403 206,715 5,996,644 (987,782,808)

Segment assets and liabilities include inter segment balances.

Transactions between reportable segments are based on an appropriate transfer pricing mechanism using agreed rates.

42. TRUST ACTIVITIES

43. RELATED PARTY TRANSACTIONS

------------------------------------------------------------------ (Rupees in '000) ------------------------------------------------------------------

The Group enters into transactions with related parties in the normal course of business. Contributions to and accruals in

respect of staff retirement benefits and other benefit plans are made in accordance with the actuarial valuations / terms of the

contribution plan. Remuneration to the executives / officers is determined in accordance with the terms of their appointment.

Details of transactions with related parties during the year, other than those which have been disclosed elsewhere in these

consolidated financial statements, are as follows:

------------------------------------------------------------------ (Rupees in '000) ------------------------------------------------------------------

The Group is not engaged in any significant trust activities. However, it acts as custodian for some of the Term Finance

Certificates it arranges and distributes on behalf of its customers.

For the year ended December 31, 2017

For the year ended December 31, 2016

------------------------------------------------------------------ (Rupees in '000) ------------------------------------------------------------------

------------------------------------------------------------------ (Rupees in '000) ------------------------------------------------------------------

The Group has related party transactions with its associates, employee benefit plans and its Directors and executive officers

(including their associates).

As at December 31, 2017


55



43.1 RELATED PARTY TRANSACTIONS

Directors

Key

management

personnel

Associates

Other

related

parties

Directors

Key

management

personnel

AssociatesOther related

parties

Lendings to financial institutions

Other lendings to financial institutions - - - - - - 375,000 -

Investments

Opening balance - - 7,977,617 3,895,328 - - 8,801,941 3,917,745

Investment made during the year - - 1,365,953 - - - 1,324,688 -

Investment redeemed / disposed off during the year - - (5,399,374) - - - (2,883,927) (22,417)

Equity method adjustments - - 299,448 - - - 734,915 -

Closing balance - - 4,243,644 3,895,328 - - 7,977,617 3,895,328

Provision for diminution in value of investments - - - 98,414 - - - 114,844

Advances

Opening balance 2,339 367,645 2,155,149 16,907,691 706 404,436 2,155,149 7,907,012

Addition during the year 11,574 149,324 - 65,331,493 18,822 126,368 - 59,472,460

Repaid during the year (8,610) (296,736) - (79,612,942) (17,189) (186,873) - (50,471,781)

Transfer in / (out) - net - (14,865) - (136) - 23,714 - -

Closing balance 5,303 205,368 2,155,149 2,626,106 2,339 367,645 2,155,149 16,907,691

Provision held against advances - - 2,155,149 - - - 2,155,149 -

Other Assets

Interest mark-up accrued 26 8 - 82,071 7 67 4,144 235,602

Receivable from staff retirement funds - - - 632,808 - - - 376,634

Prepaid insurance - - 13,201 - - - 5,236 -

Remuneration receivable from management of funds - - 85,289 - - - 86,615 -

Sales load receivable - - 26,527 - - - 12,267 -

Formation cost receivable - - 5,286 - - - 2,363 -

Other receivables - - 46,736 30,164 - - 10,655 30,164

Provision against other assets - - - 30,164 - - - 30,164

Borrowings

Opening balance - - - 167,100 - - - -

Borrowings during the year - - 474,532 512,650 - - - 167,100

Settled during the year - - - (679,750) - - - -

Closing balance - - 474,532 - - - - 167,100

Deposits and other accounts

Opening balance 7,714,425 241,070 8,882,657 2,196,112 7,934,549 134,394 6,658,891 1,822,423

Received during the year 30,436,836 1,716,576 260,731,569 176,340,118 25,536,998 1,563,279 129,962,337 115,760,189

Withdrawn during the year (32,458,694) (1,772,424) (255,237,324) (174,752,255) (25,757,122) (1,452,113) (127,738,571) (115,386,860)

Transfer in / (out) - net 7,996 (118,975) (6,952,995) (708,121) - (4,490) - 360

Closing balance 5,700,563 66,247 7,423,907 3,075,854 7,714,425 241,070 8,882,657 2,196,112

Other Liabilities

Interest / mark-up payable on deposits and borrowings 40,412 47 42,810 27,740 86,513 35 29,777 4,454

Payable to staff retirement fund - - - 44,538 - - - 130,015

Unearned income - - - 11,462 - - - 10,420

Contingencies and Commitments

Letter of guarantee - - 24,884 - - - 23,574 -

Forward foreign exchange contracts purchase - - - - - - - 198,737

Forward foreign exchange contracts sale - - - - - - - 203,148

Cross Currency Swap - - - - - - 522,051 -

Directors Key

management

personnel

Associates Other

related

parties

Directors Key

management

personnel

Associates Other related

parties

Mark-up / return / interest earned - 10,503 11,831 490,962 10 13,097 28,098 502,333

Commission / charges recovered 94 367 35,460 14,572 242 533 39,948 23,535

Dividend received - - 156,874 480,242 - - 309,761 791,303

Net gain on sale of securities - - 339,789 - - - 532,303 -

Remuneration from management of fund - - 974,183 - - - 735,053 -

Sales Load - - 187,644 - - - 135,018 -

Other income - 1,909 18,303 12,716 - 2,621 6,461 12,514

Mark-up / return / interest paid 126,120 1,824 541,214 64,187 218,848 1,675 255,670 34,176

Remuneration paid - 1,499,492 - - - 1,426,869 - -

Post employment benefits - 63,486 - - - 61,373 - -

Non-executive directors' fee 48,721 - - - 41,963 - - -

Net charge for defined contribution plans - - - 395,981 - - - 364,734

Net charge / (reversal) for defined benefit plans - - - 115,878 - - - (325,739)

Other expenses - - 2,552 129,510 - - 55,621 120,737

Insurance premium paid - - 443,179 - - - 239,944 -

Insurance claims settled - - 206,675 - - - 112,467 -

---------------------------------------------------------------- (Rupees in '000) ----------------------------------------------------------------

2017 2016

---------------------------------------------------------------- (Rupees in '000) ----------------------------------------------------------------

2017 2016

56



44. CAPITAL ADEQUACY

44.1

44.2 Capital Management

Statutory minimum capital and capital adequacy requirements

Tier 1 capital comprises of Common Equity Tier 1 (CET 1) and Additional Tier 1 (AT 1) capital.

AT 1 capital includes instruments meeting the prescribed SBP criteria e.g. perpetual non-cumulative preference shares.

The deductions from Tier 1 capital include mainly:

i) Book value of goodwill / intangibles;

ii) Shortfall in provision;

iii) Deficit on revaluation of available for sale investments - AFS & fixed assets;

iv) Defined benefit pension fund asset;

v) Investment in own shares;

vi) Reciprocal cross holdings in equity capital instruments of other banks, financial institutions and insurance companies;

vii) Investment in mutual funds above a prescribed ceiling;

viii) Threshold deductions applicable from 2014 on deferred tax assets and certain investments;

ix)

i) Reciprocal cross holdings in other capital instruments of other banks, financial institution and insurance companies;

ii)

10% of investments in majority capital instruments or other financial subsidiaries not consolidated in the statement of

financial position during transition phase.

CET 1 capital includes fully paid-up capital, balance in share premium account, reserve for issuance of bonus shares,

general reserves,minority interest as per the financial statements and net unappropriated profits.

Banks are also required to maintain a minimum Capital Adequacy Ratio (CAR) of 10.0% plus capital conservation buffer of

1.275% of the risk weighted exposures of the Bank. Further, under Basel III instructions, Banks are also required to maintain

a Common Equity Tier 1 (CET 1) ratio and Tier 1 ratio of 6.0% and 7.5%, respectively, as at December 31, 2017. As at

December 31, 2017 the Bank is fully compliant with prescribed ratios as the Bank’s CAR is 15.11% whereas CET 1 and Tier

1 ratios both stood at 11.03% and 11.04%. The Bank and its individually regulated operations have complied with all capital

requirements throughout the year.

The State Bank of Pakistan (SBP) through its BPRD Circular No. 6 dated August 15, 2013 has issued Basel III Capital

instructions for Banks / DFIs. The revision to the previously applicable Capital Adequacy regulations pertain to components of

eligible capital and related deductions. The amendments have been introduced with an aim to further strengthen the existing

capital related rules. Basel III instructions have become effective from December 31, 2013; however, there is a transitional

phase during which the complete requirements would become applicable with full implementation by December 31, 2019.

The SBP through its BSD Circular No. 07 dated April 15, 2009 has prescribed the minimum paid-up capital (net of

accumulated losses) for Banks to be raised to Rs.10,000 million by the year ending December 31, 2015. The paid-up capital

of the Bank for the year ended December 31, 2017 stood at Rs.12,241.798 million (2016: Rs.12,241.798 million) and is in

compliance with SBP requirements.

The Bank’s capital adequacy is reported using the rules and ratios provided by the State Bank of Pakistan. The capital

adequacy ratio is a measure of the amount of a Bank's capital expressed as a percentage of its risk weighted assets (RWAs).

Banking operations are categorized as either Trading Book or Banking Book and RWAs are determined according to specific

treatments as per the requirements of SBP that measure the varying levels of risk attached to on balance sheet and off-

balance sheet exposures. Under the current capital adequacy regulations, credit risk and market risk exposures are

measured using the Standardized Approach and operational risk is measured using the Basic Indicator Approach. Credit risk

mitigants are also applied against the Bank’s exposures based on eligible collateral.

The Bank performs its Internal Capital Adequacy Assessment Process (ICAAP) as per the guidelines provided by the SBP.

The ICAAP has been approved by the Bank’s Board of Directors and submitted to the SBP. The Bank additionally covers

risks not yet included under Pillar I, so as to carry adequate capital to cater for any future business requirements.

The objective of managing capital is to safeguard the Bank's ability to continue as a going concern. It is the policy of the Bank

to maintain a strong capital base so as to maintain investor, depositor and market confidence and to sustain future

development of the business. The Bank aims to maintain an optimum level of capital along with maximizing shareholders’

return as we consider a sound capital position as more appropriate as opposed to leverage supporting business growth.

Tier 2 capital includes general provisions for loan losses, surplus on the revaluation of fixed assets, fixed income financial

instruments (AFS) and equity investments (AFS), foreign exchange translation reserves and subordinated debts (meeting the

revised eligibility criteria). The deductions from Tier 2 include mainly:

10% of investments in majority capital instruments or other financial subsidiaries not consolidated in the statement of

financial position, during transition phase.

57



44.3 Capital Adequacy Ratio (CAR) disclosure template:2017 2016

Amount Amount

Common Equity Tier 1 capital (CET1): Instruments and reserves

1 Fully Paid-up Capital/ Capital deposited with SBP 12,241,798 12,241,798

2 Balance in Share Premium Account - -

3 Reserve for issue of Bonus Shares - -

4 Discount on Issue of shares - -

5 General/ Statutory Reserves 29,860,453 27,303,858

6 Gain/(Losses) on derivatives held as Cash Flow Hedge - -

7 Unappropriated/unremitted profits/ (losses) 76,651,713 68,939,008

8 Minority Interests arising from CET1 capital instruments issued to third parties by consolidated bank

subsidiaries (amount allowed in CET1 capital of the consolidation group) 2,758,604 2,966,274

9 CET 1 before Regulatory Adjustments 121,512,568 111,450,938

10 Total regulatory adjustment applied to AT1 capital (Note 44.3.1) 2,308,149 1,944,067

11 Common Equity Tier 1 119,204,419 109,506,871

Additional Tier 1 (AT 1) Capital

12 Qualifying Additional Tier-1 capital instruments plus any related share premium - -

13 of which: Classified as equity - -

14 of which: Classified as liabilities - -

15 Additional Tier-1 capital instruments issued to third parties by consolidated subsidiaries (amount

allowed in group AT 1) 317,029 225,035

16 of which: instrument issued by subsidiaries subject to phase out - -

17 AT1 before regulatory adjustments - -

18 Total regulatory adjustment applied to AT1 capital (Note 44.3.2) (246,172) (225,035)

19 Additional Tier 1 capital after regulatory adjustments - -

20 Additional Tier 1 capital recognized for capital adequacy 70,857 -

21 Tier 1 Capital (CET1 + admissible AT1) (11+20) 119,275,276 109,506,871

Tier 2 Capital

24 Qualifying Tier 2 capital instruments under Basel III plus any related share premium - -

25 Tier 2 capital instruments subject to phaseout arrangement issued under pre-Basel 3 rules - -

26 Tier 2 capital instruments issued to third parties by consolidated subsidiaries (amount allowed in group

tier 2) 292,584 375,009

27 of which: instruments issued by subsidiaries subject to phase out - -

28 General provisions or general reserves for loan losses-up to maximum of 1.25% of Credit Risk

Weighted Assets 3,506,469 3,296,276

29 Revaluation Reserves (net of taxes) 29,785,632 27,723,423

30 of which: Revaluation reserves on fixed assets 24,783,985 16,675,959

31 of which: Unrealized gains/losses on AFS 5,001,647 11,047,464

32 Foreign Exchange Translation Reserves 17,343,063 15,311,330

33 Undisclosed/Other Reserves (if any) - -

34 T2 before regulatory adjustments 50,927,748 46,706,038

35 Total regulatory adjustment applied to T2 capital (Note 44.3.3) 246,172 490,803

36 Tier 2 capital (T2) after regulatory adjustments 50,681,576 46,215,235

37 Tier 2 capital recognized for capital adequacy 43,928,861 42,855,367

38 Portion of Additional Tier 1 capital recognized in Tier 2 capital - -

39 Total Tier 2 capital admissible for capital adequacy 43,928,861 42,855,367

40 TOTAL CAPITAL (T1 + admissible T2) (21+39) 163,204,137 152,362,238

41 Total Risk Weighted Assets (RWA) {for details refer Note 44.6} 1,080,404,219 1,023,690,975

Capital Ratios and buffers (in percentage of risk weighted assets)

42 CET1 to total RWA 11.03% 10.70%

43 Tier-1 capital to total RWA 11.04% 10.70%

44 Total capital to total RWA 15.11% 14.88%

45 Bank specific buffer requirement (minimum CET1 requirement plus capital conservation buffer plus any

other buffer requirement) 7.28% 6.65%

46 of which: capital conservation buffer requirement 1.28% 0.65%

47 of which: countercyclical buffer requirement - -

48 of which: D-SIB or G-SIB buffer requirement - -

49 CET1 available to meet buffers (as a percentage of risk weighted assets) 3.76% 4.19%

National minimum capital requirements prescribed by SBP

50 CET1 minimum ratio 6.00% 6.00%

51 Tier 1 minimum ratio 7.50% 7.50%

52 Total capital minimum ratio 10.00% 10.00%

------------------------ (Rupees in '000) --------------------

58



2016

Regulatory Adjustments and Additional Information Amount Amounts

subject to Pre-

Basel III

treatment

Amount

44.3.1 Common Equity Tier 1 capital: Regulatory adjustments

1 Goodwill (net of related deferred tax liability) - -

2 All other intangibles (net of any associated deferred tax liability) 1,232,566 1,139,131

3 Shortfall in provisions against classified assets - -

4 Deferred tax assets that rely on future profitability excluding those arising from

temporary differences (net of related tax liability)- -

5 Defined-benefit pension fund net assets 248,157 248,157 56,662

6 Reciprocal cross holdings in CET1 capital instruments of banking, financial and

insurance entities

617,241 361,203

7 Cash flow hedge reserve - -

8 Investment in own shares/ CET1 instruments 210,185 169,045

9 Securitization gain on sale - -

10 Capital shortfall of regulated subsidiaries - -

11 Deficit on account of revaluation from bank's holdings of fixed assets/ AFS - -

12 Investments in the capital instruments of banking, financial and insurance

entities that are outside the scope of regulatory consolidation, where the bank

does not own more than 10% of the issued share capital (amount above 10%

threshold)- -

13 Significant investments in the common stocks of banking, financial and

insurance entities that are outside the scope of regulatory consolidation (amount

above 10% threshold)- -

14 Deferred Tax Assets arising from temporary differences (amount above 10%

threshold, net of related tax liability)- -

15 Amount exceeding 15% threshold - -

16 of which: significant investments in the common stocks of financial entities - -

17 of which: deferred tax assets arising from temporary differences - -

18 National specific regulatory adjustments applied to CET1 capital - -

19 Investments in TFCs of other banks exceeding the prescribed limit - -

20 Any other deduction specified by SBP (mention details) - -

21 Adjustment to CET1 due to insufficient AT1 and Tier 2 to cover deductions - 218,026

22 Total regulatory adjustments applied to CET1 (sum of 1 to 21) 2,308,149 1,944,067

44.3.2 Additional Tier-1 : regulatory adjustments

23 Investment in mutual funds exceeding the prescribed limit [SBP specific adjustment] - 49,611

24 Investment in own AT1 capital instruments - -

25 Reciprocal cross holdings in Additional Tier 1 capital instruments of banking,

financial and insurance entities- -




threshold)- -

27 Significant investments in the capital instruments of banking, financial and

insurance entities that are outside the scope of regulatory consolidation- -

28 Adjustments to Additional Tier 1 due to insufficient Tier 2 to cover deductions - -

29 Portion of deduction applied 50:50 to Tier-1 and Tier-2 capital based on pre-

Basel III treatment which, during transitional period, remain subject to deduction

from Additional Tier-1 capital246,172 246,172 393,696

30 Total regulatory adjustment applied to AT1 capital (sum of 23 to 29) 246,172 443,307

2017

------------------------ (Rupees in '000) --------------------

59



2016

Regulatory Adjustments and Additional Information Amount Amounts

subject to Pre-

Basel III

treatment

Amount

44.3.3 Tier 2 Capital: regulatory adjustments

31 Portion of deduction applied 50:50 to Tier-1 and Tier-2 capital based on pre-

Basel III treatment which, during transitional period, remain subject to deduction

from tier-2 capital246,172 246,172 393,696

32 Reciprocal cross holdings in Tier 2 instruments of banking, financial and

insurance entities- -

33 Investment in own Tier 2 capital instrument - -




threshold)- -

35 Significant investments in the capital instruments issued by banking, financial

and insurance entities that are outside the scope of regulatory consolidation- -

36 Total regulatory adjustment applied to T2 capital (sum of 31 to 35) 246,172 393,696

2017 2016

44.3.4 Additional Information Amount Amount

Risk Weighted Assets subject to pre-Basel III treatment

37 Risk weighted assets in respect of deduction items (which during the transitional

period will be risk weighted subject to Pre-Basel III Treatment)- -

(i) of which: deferred tax assets - -

(ii) of which: Defined-benefit pension fund net assets - -

(iii) of which: Recognized portion of investment in capital of banking,

----------financial and insurance entities where holding is less than 10% of the ------

----------issued common share capital of the entity - -

(iv) of which: Recognized portion of investment in capital of banking, financial --

---------and insurance entities where holding is more than 10% of the issued --------

---------common share capital of the entity - -

Amounts below the thresholds for deduction (before risk weighting)

38 Non-significant investments in the capital of other financial entities - -

39 Significant investments in the common stock of financial entities - -

40 Deferred tax assets arising from temporary differences (net of related tax liability) - -

Applicable caps on the inclusion of provisions in Tier 2

41 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to

standardized approach (prior to application of cap)- -

42 Cap on inclusion of provisions in Tier 2 under standardized approach - -

43 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to

internal ratings-based approach (prior to application of cap)- -

44 Cap for inclusion of provisions in Tier 2 under internal ratings-based approach

- -

------------------- Rupees in '000 --------------------

2017

------------------------ (Rupees in '000) --------------------

60



44.4 Capital Structure Reconciliation

Step 1

Balance Sheet

as per

published

financial

statements

Under

regulatory

scope of

consolidation

Assets

Cash and balances with treasury banks 161,119,170 161,119,170

Balances with other banks 35,549,112 35,549,112

Lending to financial institutions 35,893,920 35,893,920

Investments 1,124,921,300 1,124,921,300

Advances 642,506,720 642,506,720

Operating fixed assets 50,384,077 50,384,077

Deferred tax assets - net - -

Other assets 54,986,201 54,986,201

Total assets 2,105,360,500 2,105,360,500

Liabilities & Equity

Bills payable 13,392,978 13,392,978

Borrowings 517,082,159 517,082,159

Deposits and other accounts 1,366,157,914 1,366,157,914

Sub-ordinated loans - -

Liabilities against assets subject to finance lease 4,375 4,375

Deferred tax liability - net 2,980,466 2,980,466

Other liabilities 31,248,846 31,248,846

Total liabilities 1,930,866,738 1,930,866,738

Share capital 12,241,798 12,241,798

Reserves 47,203,516 47,203,516

Unappropriated profit 76,651,713 76,651,713

Total equity attributable to equity holders of the Bank 136,097,027 136,097,027

Non-controlling interest 4,810,519 4,810,519

140,907,546 140,907,546

Surplus on revaluation of assets - net of deferred tax 33,586,216 33,586,216

Total liabilities and equity 2,105,360,500 2,105,360,500

--------- (Rupees in '000) ---------


61



44.4 Capital Structure (Contd.)

Step 2

Balance Sheet

as per

published

financial

statements

Under

regulatory

scope of

consolidation

Reference

Assets



Lendings to financial institutions 35,893,920 35,893,920

Investments 1,124,921,300 1,124,921,300

of which: Non-significant capital investments in capital of other financial

institutions exceeding 10% threshold - -

a

of which: significant capital investments in financial sector entities exceeding

regulatory threshold - -

b

of which: Mutual Funds exceeding regulatory threshold - - c

of which: reciprocal crossholding of capital instrument 617,241 617,241 d

of which: Investment in own shares/ CET1 instruments 210,185 210,185 e

Advances 642,506,720 642,506,720

shortfall in provisions/ excess of total EL amount over eligible provisions ----

---------- under IRB

- - f

general provisions reflected in Tier 2 capital 3,506,469 3,506,469 g

Fixed Assets 50,384,077 50,384,077

of which: Goodwill - - j

of which: Intangibles 1,232,566 1,232,566 k

Deferred Tax Assets - -

of which: DTAs excluding those arising from temporary differences - - h

of which: DTAs arising from temporary differences exceeding regulatory threshold - - i

Other assets 54,986,201 54,986,201

of which: Defined-benefit pension fund net assets 248,157 248,157 l

Total assets 2,105,360,500 2,105,360,500

Liabilities & Equity

Bills payable 13,392,978 13,392,978

Borrowings 517,082,159 517,082,159

Deposits and other accounts 1,366,157,914 1,366,157,914

Sub-ordinated loans - -

of which: eligible for inclusion in AT1 - - m

of which: eligible for inclusion in Tier 2 - - n

Liabilities against assets subject to finance lease 4,375 4,375

Deferred tax liabilities 2,980,466 2,980,466

of which: DTLs related to goodwill - - o

of which: DTLs related to intangible assets - - p

of which: DTLs related to defined pension fund net assets - - q

of which: other deferred tax liabilities 2,980,466 2,980,466 r

Other liabilities 31,248,846 31,248,846

Total liabilities 1,930,866,738 1,930,866,738

Share capital 12,241,798 12,241,798

of which: amount eligible for CET1 12,241,798 12,241,798 s

of which: amount eligible for AT1 - - t

Reserves 47,203,516 47,203,516

of which: portion eligible for inclusion in CET1(provide breakup) 29,860,453 29,860,453 u

of which: portion eligible for inclusion in Tier 2 17,343,063 17,343,063 v

Unappropriated profit/ (losses) 76,651,713 76,651,713 w

Minority Interest 4,810,519 4,810,519

of which: portion eligible for inclusion in CET1 2,758,604 2,758,604 x

of which: portion eligible for inclusion in AT1 317,029 317,029 y

of which: portion eligible for inclusion in Tier 2 292,584 292,584 z

Surplus on revaluation of assets 33,586,216 33,586,216

of which: Revaluation reserves on Property 27,847,175 27,847,175 aa

of which: Unrealized Gains/Losses on AFS 5,619,828 5,619,828

In case of Deficit on revaluation (deduction from CET1) - - ab

Total liabilities and equity 2,105,360,500 2,105,360,500

--------- (Rupees in '000) ---------


62



44.4 Capital Structure (Contd.)

Step 3

Component of

regulatory

capital

reported by

bank

Source based

on reference

number from

step 2

Common Equity Tier 1 capital (CET1): Instruments and reserves (Rupees in '000)

1 Fully Paid-up Capital/ Capital deposited with SBP 12,241,798

2 Balance in Share Premium Account -

3 Reserve for issue of Bonus Shares -

4 General/ Statutory Reserves 29,860,453

5 Gain/(Losses) on derivatives held as Cash Flow Hedge -

6 Unappropriated/unremitted profits/(losses) 76,651,713 (w)

7 Minority Interests arising from CET1 capital instruments issued to third party by consolidated

bank subsidiaries (amount allowed in CET1 capital of the consolidation group) 2,758,604 (x)

8 CET 1 before Regulatory Adjustments 121,512,568

Common Equity Tier 1 capital: Regulatory adjustments

9 Goodwill (net of related deferred tax liability) - (j) - (o)

10 All other intangibles (net of any associated deferred tax liability) 1,232,566 (k) - (p)

11 Shortfall of provisions against classified assets - (f)

12 Deferred tax assets that rely on future profitability excluding those arising from temporary

differences (net of related tax liability) - {(h) - (r)} * x%

13 Defined-benefit pension fund net assets 248,157 {(l) - (q)} * x%

14 Reciprocal cross holdings in CET1 capital instruments 617,241 (d)

15 Cash flow hedge reserve -

16 Investment in own shares/ CET1 instruments 210,185

17 Securitization gain on sale -

18 Capital shortfall of regulated subsidiaries -

19 Deficit on account of revaluation from bank's holdings of property/ AFS - (ab)

20 Investments in the capital instruments of banking, financial and insurance entities that are

outside the scope of regulatory consolidation, where the bank does not own more than 10% of

the issued share capital (amount above 10% threshold) - (a) - (ac) - (ae)

21 Significant investments in the capital instruments issued by banking, financial and insurance

entities that are outside the scope of regulatory consolidation (amount above 10% threshold)

- (b) - (ad) - (af)

22 Deferred Tax Assets arising from temporary differences (amount above 10% threshold, net of

related tax liability) - (i)

23 Amount exceeding 15% threshold -

24 of which: significant investments in the common stocks of financial entities -

25 of which: deferred tax assets arising from temporary differences -

26 National specific regulatory adjustments applied to CET1 capital -

27 Investment in TFCs of other banks exceeding the prescribed limit -

28 Any other deduction specified by SBP (mention details) -

29 Regulatory adjustment applied to CET1 due to insufficient AT1 and Tier 2 to cover deductions

-

30 Total regulatory adjustments applied to CET1 (sum of 9 to 25) 2,308,149

Common Equity Tier 1 119,204,419

Additional Tier 1 (AT 1) Capital

31 Qualifying Additional Tier-1 instruments plus any related share premium -

32 of which: Classified as equity - (t)

33 of which: Classified as liabilities - (m)

34 Additional Tier-1 capital instruments issued by consolidated subsidiaries and held by third

parties (amount allowed in group AT 1) 317,029 (y)

35 of which: instrument issued by subsidiaries subject to phase out -

36 AT1 before regulatory adjustments 317,029

(s)

(u)

63



Component of

regulatory

capital

reported by

bank

Source based

on reference

number from

step 2

(Rupees in '000)

Additional Tier 1 Capital: regulatory adjustments

37 Investment in mutual funds exceeding the prescribed limit (SBP specific adjustment) -

38 Investment in own AT1 capital instruments -

39 Reciprocal cross holdings in Additional Tier 1 capital instruments -



the issued share capital (amount above 10% threshold) - (ac)


entities that are outside the scope of regulatory consolidation - (ad)

42 Portion of deduction applied 50:50 to core capital and supplementary capital based on pre-Basel

III treatment which, during transitional period, remain subject to deduction from tier-1 capital

246,172

43 Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover deductions

-

44 Total of Regulatory Adjustment applied to AT1 capital 246,172

45 Additional Tier 1 capital -

46 Additional Tier 1 capital recognized for capital adequacy 70,857

Tier 1 Capital (CET1 + admissible AT1) 119,275,276

Tier 2 Capital

47 Qualifying Tier 2 capital instruments under Basel III - (n)

48 Capital instruments subject to phase out arrangement from tier 2 (Pre-Basel III instruments) -

49 Tier 2 capital instruments issued to third party by consolidated subsidiaries (amount allowed in

group tier 2) 292,584 (z)

50 of which: instruments issued by subsidiaries subject to phase out -

51 General Provisions or general reserves for loan losses-up to maximum of 1.25% of Credit Risk

Weighted Assets 3,506,469 (g)

52 Revaluation Reserves eligible for Tier 2 -

53 of which: portion pertaining to Property 24,783,985

54 of which: portion pertaining to AFS securities 5,001,647

55 Foreign Exchange Translation Reserves 17,343,063 (v)

56 Undisclosed/Other Reserves (if any) -

57 T2 before regulatory adjustments 50,927,748

Tier 2 Capital: regulatory adjustments

58 Portion of deduction applied 50:50 to core capital and supplementary capital based on pre-Basel

III treatment which, during transitional period, remain subject to deduction from tier-2 capital

246,172

59 Reciprocal cross holdings in Tier 2 instruments -

60 Investment in own Tier 2 capital instrument -



the issued share capital (amount above 10% threshold) - (ae)


entities that are outside the scope of regulatory consolidation - (af)

63 Amount of Regulatory Adjustment applied to T2 capital 246,172

64 Tier 2 capital (T2) 50,681,576

65 Tier 2 capital recognized for capital adequacy 43,928,861

66 Excess Additional Tier 1 capital recognized in Tier 2 capital -

67 Total Tier 2 capital admissible for capital adequacy 43,928,861

TOTAL CAPITAL (T1 + admissible T2) 163,204,137

portion of (aa)

64



44.5 Main Features Template of Regulatory Capital Instruments

Main Features Common Shares

1 Issuer United Bank Limited

2 Unique identifier (e.g. PSX Symbol or Bloomberg identifier etc.) On PSX “UBL” and on Bloomberg

“UBLS”.

3 Governing law(s) of the instrument Relevant Capital Market Laws

Regulatory treatment

4 Transitional Basel III rules Common Equity Tier 1

5 Post-transitional Basel III rules Common Equity Tier 1

6 Eligible at solo/ group/ group&solo Group & Standalone

7 Instrument type Ordinary Shares

8 Amount recognized in regulatory capital (Currency in PKR thousands, as

of reporting date)

12,241,798

9 Par value of instrument Rs 10 each

10 Accounting classification Shareholders' equity

11 Original date of issuance 1959

12 Perpetual or dated Perpetual

13 Original maturity date No maturity

14 Issuer call subject to prior supervisory approval Not applicable

15 Optional call date, contingent call dates and redemption amount Not applicable

16 Subsequent call dates, if applicable Not applicable

Coupons / dividends

17 Fixed or floating dividend/ coupon Not applicable

18 coupon rate and any related index/ benchmark Not applicable

19 Existence of a dividend stopper No

20 Fully discretionary, partially discretionary or mandatory Fully discretionary

21 Existence of step up or other incentive to redeem No

22 Noncumulative or cumulative Not applicable

23 Convertible or non-convertible Non Convertible

24 If convertible, conversion trigger(s) Not applicable

25 If convertible, fully or partially Not applicable

26 If convertible, conversion rate Not applicable

27 If convertible, mandatory or optional conversion Not applicable

28 If convertible, specify instrument type convertible into Not applicable

29 If convertible, specify issuer of instrument it converts into Not applicable

30 Write-down feature Not applicable

31 If write-down, write-down trigger(s) Not applicable

32 If write-down, full or partial Not applicable

33 If write-down, permanent or temporary Not applicable

34 If temporary write-down, description of write-up mechanism Not applicable

35 Position in subordination hierarchy in liquidation (specify instrument type

immediately senior to instrument)

Common equity (ranks after all

creditors including depositors)

36 Non-compliant transitioned features Not applicable

37 If yes, specify non-compliant features Not applicable

Disclosure template for main features of regulatory capital instruments

65



44.6 Capital Adequacy Ratio

Risk weighted exposures

2017 2016 2017 2016

Credit risk

On-Balance sheet

Sovereign 7,304,295 6,901,721 73,042,950 69,017,213

Public Sector entities 1,714,490 978,715 17,144,899 9,787,149

Banks 5,611,813 5,409,570 56,118,128 54,095,702

Corporate 32,853,251 31,385,534 328,532,508 313,855,343

Retail 3,140,810 2,128,835 31,408,096 21,288,345

Residential Mortgages 146,777 140,495 1,467,766 1,404,945

Past Due loans 1,872,665 1,319,284 18,726,651 13,192,843

Listed equity investments 146,579 174,629 1,465,785 1,746,290

Unlisted equity investments 16,862 12,095 168,624 120,947

Commercial Entity 55,872 55,872 558,720 558,720

Operating Fixed Assets 4,915,151 3,823,609 49,151,512 38,236,093

Significant investment 492,344 295,272 4,923,442 2,952,717

Other assets 2,102,502 1,487,981 21,025,017 14,879,810

60,373,411 54,113,612 603,734,098 541,136,117

Off-Balance sheet

Non-market related 12,130,937 10,546,716 121,309,365 105,467,159

Market related 243,045 187,064 2,430,454 1,870,638

12,373,982 10,733,780 123,739,819 107,337,797

Market Risk

Interest rate risk 12,287,106 13,911,239 153,588,829 175,248,050

Equity position risk 3,114,395 4,223,190 38,929,942 48,560,325

Foreign Exchange risk 1,118,053 927,897 13,975,663 11,957,413

16,519,554 19,062,326 206,494,434 235,765,788

Operational Risk 11,714,869 10,054,603 146,435,868 139,451,273

100,981,816 93,964,321 1,080,404,219 1,023,690,975

* Based on minimum capital requirement excluding capital conservation buffer.

Capital Adequacy Ratio

Total eligible regulatory capital held 163,204,137 152,362,238

Total risk weighted assets 1,080,404,219 1,023,690,975

CET1 to total RWA 11.03% 10.70%

Tier-1 capital to total RWA 11.04% 10.70%

Total capital to total RWA 15.11% 14.88%

Capital requirements * Risk weighted assets

--------------------------------- (Rupees in '000) ---------------------------------

66



44.7 Credit risk - General disclosures

Types of exposure and ECAIs used

Fitch Moody’s S & P PACRA JCR-VIS

ECA

scores

Corporates - P - P P -

Banks P P P P P -

Sovereigns - - - - - P

Public sector enterprises - - - P P -

Mapping to SBP Rating Grades

Long Term Rating Grades mapping


ECA

scores

AAA Aaa AAA AAA AAA 0

AA+ Aa1 AA+ AA+ AA+ 1

AA Aa2 AA AA AA

AA- Aa3 AA- AA- AA-

A+ A1 A+ A+ A+ 2

A A2 A A A

A- A3 A- A- A-

BBB+ Baa1 BBB+ BBB+ BBB+ 3

BBB Baa2 BBB BBB BBB

BBB- Baa3 BBB- BBB- BBB-

BB+ Ba1 BB+ BB+ BB+ 4

BB Ba2 BB BB BB

BB- Ba3 BB- BB- BB-

B+ B1 B+ B+ B+ 5

B B2 B B B 6

B- B3 B- B- B-

7

Short Term Rating Grades mapping


F1 P-1 A-1+ A-1+ A-1+

F1 P-1 A-1 A-1 A-1

F2 P-2 A-2 A-2 A-2

F3 P-3 A-3 A-3 A-3

Others Others Others Others Others

4

1

For all exposures, the selected ratings are translated to the standard rating grades given by the SBP. The mapping

tables used for converting ECAI ratings to SBP rating grades are given below:

SBP Rating grade

S3

2

3

Caa1 and

below

5

S1

S2

CCC+ and

below

CCC+ and

below

CCC+ and

below6

S4

S1

SBP Rating Grade

CCC+ and

below

67



44.8 Credit exposures subject to Standardized Approach

Rating

category / risk

weights

Amount

outstanding

Deduction

CRMNet amount

Amount

outstanding

Deduction

CRMNet amount

Cash and cash equivalents - 13,996,190 - 13,996,190 18,186,617 - 18,186,617

Claims on Federal and Provincial Governments and

SBP, denominated in PKR - 848,000,473 452,896,285 395,104,188 497,451,486 128,836,359 368,615,127

Foreign currency claims on SBP arising out of statutory

obligations in Pakistan - 9,861,122 - 9,861,122 9,135,162 - 9,135,162

Claims on other sovereigns and on 1 1,575,573 - 1,575,573 3,911,519 - 3,911,519

Government of Pakistan or provincial 2 31,589,539 - 31,589,539 27,915,202 - 27,915,202

governments or SBP denominated in 3 6,611,474 - 6,611,474 3,753,370 - 3,753,370

currencies other than PKR 4,5 19,248,479 - 19,248,479 15,623,420 - 15,623,420

6 26,336,672 - 26,336,672 30,622,712 - 30,622,712

Unrated 4,665,818 4,665,818 - -

90,027,555 - 90,027,555 81,826,223 - 81,826,223

Corporates 0 - - - - - -

1 81,936,427 829,713 81,106,714 57,666,917 867 57,666,050

2 42,514,689 92,711 42,421,978 24,694,145 19,648 24,674,497

3,4 6,894,118 1,328,580 5,565,538 1,497,260 - 1,497,260

5,6 - - - - - -

Unrated-1 257,116,199 23,386,532 233,729,667 251,897,327 27,370,889 224,526,438

Unrated-2 125,570,435 6,265,130 119,305,305 116,409,462 78,875 116,330,587

514,031,868 31,902,666 482,129,202 452,165,111 27,470,279 424,694,832

Claims on banks with maturity less than 3 months 1,2,3 1,043,568 - 1,043,568 857,134 - 857,134

and denominated in foreign currency 4,5 1,106 - 1,106 - - -

6 199,683 - 199,683 154,216 - 154,216

Unrated 623,749 - 623,749 3,191,629 - 3,191,629

1,868,106 - 1,868,106 4,202,979 - 4,202,979

Banks - others 0 - - - - - -

1 112,967,688 50,459,505 62,508,183 118,674,349 60,202,146 58,472,203

2,3 48,519,845 - 48,519,845 47,112,599 - 47,112,599

4,5 15,655,831 - 15,655,831 11,155,865 - 11,155,865

6 311,855 - 311,855 6,066,960 - 6,066,960

Unrated 46,671,713 4,629 46,667,084 36,357,516 - 36,357,516

224,126,932 50,464,134 173,662,798 219,367,289 60,202,146 159,165,143

Public sector enterprises 0 - - - - - -

1 37,134,144 14,720,942 22,413,202 23,912,438 12,736,928 11,175,510

2,3 15,493,120 5,511,702 9,981,418 10,690,051 5,503,637 5,186,414

4,5 - - - - - -

6 - - - - - -

Unrated 116,208,041 93,185,453 23,022,588 90,347,819 73,513,237 16,834,582

168,835,305 113,418,097 55,417,208 124,950,308 91,753,802 33,196,506

Retail portfolio 75% 50,032,514 6,397,977 43,634,537 33,881,001 3,836,605 30,044,396

Claims fully secured by Residential mortgage 35% 4,193,617 - 4,193,617 4,014,129 - 4,014,129

54,226,131 6,397,977 47,828,154 37,895,130 3,836,605 34,058,525

Equity investments

- Listed 100% 1,465,785 - 1,465,785 1,746,290 - 1,746,290

- Unlisted 150% 112,416 - 112,416 80,631 - 80,631

- Commercial Entity (Holding greater than 10%) 1000% 55,872 - 55,872 55,872 - 55,872

1,634,073 - 1,634,073 1,882,793 - 1,882,793

Past due loans secured against mortgage of residential property:

- less than 20% provided 100% - - - 24,786 - 24,786

- greater than 20% provided 50% - - - 50,443 - 50,443

- - - 75,229 - 75,229

Past due loans - others

- Less than 20% provided 150% 8,843,913 - 8,843,913 4,722,399 - 4,722,399

- Between 20% to 50% provided 100% 4,672,597 - 4,672,597 5,572,258 - 5,572,258

- More than 50% provided 50% 1,576,369 - 1,576,369 973,957 - 973,957

15,092,879 - 15,092,879 11,268,614 - 11,268,614

Significant investment 250% 1,969,377 - 1,969,377 1,181,087 - 1,181,087

Fixed assets 100% 49,151,513 - 49,151,513 38,236,093 - 38,236,093

Others 100% 21,422,613 - 21,422,613 15,430,977 - 15,430,977

2,014,244,137 655,079,159 1,359,164,978 1,513,255,098 312,099,191 1,201,155,907

Credit Risk: Disclosures with respect to Credit Risk Mitigation for Standardized Approach

No credit risk mitigation benefit is taken in the Trading Book.

The Group has adopted the Comprehensive Approach of Credit Risk Mitigation for the Banking Book. Under this approach,

cash, lien on deposits, government securities and eligible guarantees etc. are considered as eligible collateral. The Group

has in place detailed guidelines with respect to the valuation and management of each of these types of collateral. Where

the Group's exposure to an obligor is secured by eligible collateral, the Group reduces its exposure for the calculation of

capital requirement by the realizable amount of the collateral, adjusted for any applicable haircuts.

For each asset class, the risk weights as specified by the SBP or corresponding to the SBP rating grades are applied to the

net amount for the calculation of Risk Weighted Assets.

2017 2016

Exposures

------------------------------- (Rupees in '000) -----------------------------------

68



44.9 Leverage Ratio

The Basel III leverage ratio is defined as the capital measure (the numerator) divided by the exposure measure (the

denominator), with this ratio expressed as a percentage:

Leverage Ratio = Tier 1 capital (after related deductions)

Total Exposure

2017 2016

On-Balance Sheet Assets



Lendings to financial institutions 35,893,920 35,484,586

Investments 1,124,057,886 837,458,009

Advances 642,506,720 537,782,146

Operating fixed assets 49,151,513 38,159,796

Deferred tax assets - -

Financial Derivatives (A.1) 2,432,665 1,051,736

Other assets 52,572,720 44,410,797

Total Assets (A) 2,103,283,706 1,660,081,876

Derivatives (On-Balance Sheet)

Interest Rate 75,350 283,750

Equity - -

Foreign Exchange & gold 2,357,315 767,986

Precious Metals (except gold) - -

Commodities - -

Credit Derivatives (protection brought & sold) - -

Any other derivatives - -

Total Derivatives (A.1) 2,432,665 1,051,736

Off-Balance Sheet Items excluding derivatives

Direct Credit Substitutes (i.e. Acceptances, general guarantees for indebtness etc.) 47,997,736 46,175,376

Performance-related Contingent Liabilities (i.e. Guarantees) 141,070,063 110,083,787

Trade-related Contingent Liabilities (i.e. Letter of Credits) 169,738,033 146,191,503

Lending of securities or posting of securities as collaterals 451,301,561 153,557,471

Undrawn committed facilities (which are not cancellable) 60,461,972 45,085,158

Unconditionally cancellable commitments 8,765,075 9,694,433

Commitments in respect of operating leases - -

Commitments for the acquisition of operating fixed assets 1,987,978 2,755,836

Other commitments - -

Total Off-balance sheet items excluding Derivatives (B) 881,322,418 513,543,564

Commitments in respect of Derivatives - Off Balance Sheet Items

(Derivatives having negative fair value are also included)

Interest Rate 20,953 34,582

Equity - -

Foreign Exchange & gold 2,297,258 2,044,746

Precious Metals (except gold) - -

Commodities - -

Credit Derivatives (protection sold and bought) - -

Other derivatives - -

Total Derivatives (C) 2,318,211 2,079,328

Tier-1 Capital 119,275,276 109,506,871

Total Exposures (sum of A,B and C) 2,986,924,335 2,175,704,768

Leverage Ratio 3.99% 5.03%

------------ (Rupees in '000) ------------

The State Bank of Pakistan (SBP) through its BPRD Circular No. 06 of 2013 has issued instructions regarding

implementation of parallel run of leverage ratio reporting and its components from December 31, 2013 to December 31,

2017. During this period, the final calibration, and any further adjustments to the definition, will be completed, with a view to

set the leverage ratio as a separate capital standard on December 31, 2018. Banks are required to disclose the leverage

ratio from December 31, 2016.

The Leverage ratio of the Bank for the year ended December 31, 2017 stood at 3.99% (2016: 5.03%) and is in compliance

with SBP minimum requirement of 3%. The decrease in leverage ratio by 100 bps is mainly due to balance sheet growth in

asset expansion through higher REPO funding.

69



45. RISK MANAGEMENT

- Determining guidelines relating to the Bank’s risk appetite.

-

-

- Developing systems and resources to review the key risk exposures of the Bank.

- Approving credits and granting approval authority to qualified and experienced individuals.

- Reviewing the adequacy of credit training across the Bank.

- Organizing portfolio reviews focusing on quality assessment, risk profiles, industry concentrations etc.

- Setting systems to identify significant portfolio indicators, problem credits and level of provisioning required.

- Establish an extensive Information Security (IS) Program and governance structure to manage the Security of the

Information assets.

45.1 Credit risk

Individual credit authorities are delegated to credit officers by the Group Executive - Risk & Credit Policy (authorized by

BoD), according to their seasoning / maturity. Approvals for Consumer loans are centralized, while approval authorities

for International, Corporate, Commercial, SME and Agri exposures are delegated at a Country / Regional level. Further

more, credit authorities are also delegated to business teams in various regions for Commercial, SME & Agri lending. All

credit policy functions domestic & international are centrally organized.

Concentrations of credit risk exist if clients are engaged in similar activities, or are located in the same geographical

region, or have comparable economic characteristics such that their ability to meet contractual obligations would be

similarly affected by changes in economic, political or other conditions. The Bank manages, limits and controls

concentrations of credit risk to individual counterparties and groups, and to industries, where appropriate. Limits are also

applied to portfolios or sectors where the Bank considers it appropriate to restrict credit risk concentrations, or to areas

of higher risk, or to control the rate of portfolio growth.

The credit risk management process is driven by the Bank's Risk Management Policy, Credit Policy for Corporate,

Commercial, SME & Agri and Credit Manual, which provides policies and procedures in relation to credit initiation,

approval, documentation and disbursement, credit maintenance and remedial management.

This section presents information about the Group’s exposure to and its management and control of risks, in particular,

the primary risks associated with its use of financial instruments such as credit, market, liquidity and operational risks.

Credit risk is the risk that a customer or counterparty may not settle an obligation for full value, either when due or at any

time thereafter. This risk arises from the potential that a customer's or counterparty’s willingness or ability to meet such

an obligation is impaired, resulting in an economic loss to the Group.

The Bank has an integrated risk management structure in place. The Board Risk and Compliance Committee (BRCC)

oversees the entire risk management process of the Bank. Furthermore, Risk Management Committee has been formed

which looks at all risks collectively at senior management level. The committee is chaired by the President and comprises

of Heads of all Risk areas, Finance, Business etc. The Risk and Credit Policy Group is responsible for the development

and implementation of all risk policies as approved by the BRCC / BoD. The group is organized into the functions of

Market & Treasury Risk, Financial Institution Risk, Credit Policy, Research & Operational Risk, Consumer Credit Policy,

Credit Risk Management, Basel II, IT security and International Risk. Each risk function is headed by a senior manager

who reports directly to the Group Executive, Risk and Credit Policy. The role of the Risk and Credit Policy Group

includes:

Reviewing policies / manuals and ensuring that these are in accordance with BRCC / BoD approved risk

management policies.

Recommending risk management policies in accordance with the Prudential Regulations, Basel II / III framework and

international best practices.

70



45.2 Segmental information

45.2.1 Segments by class of business(Rupees in '000) Percent (Rupees in '000) Percent (Rupees in '000) Percent

Chemical and pharmaceuticals 13,804,379 2.01% 4,087,675 0.30% 3,581,890 0.40%

Agri business 61,821,555 9.01% 19,396,745 1.42% 51,088 0.01%

Textile spinning 19,632,554 2.86% 434,937 0.03% 4,776,919 0.53%

Textile weaving 8,064,605 1.18% 295,862 0.02% 5,336,393 0.59%

Textile composite 29,260,256 4.26% - 0.00% 4,651,051 0.52%

Textile others 15,508,311 2.26% 1,546,564 0.11% 2,771,727 0.31%

Cement 5,420,193 0.79% 323,334 0.02% 4,570,879 0.51%

Sugar 23,037,545 3.36% 1,323,257 0.10% 320,855 0.04%

Shoes and leather garments 2,774,178 0.40% 422,621 0.03% 382,135 0.04%

Automobile and transportation equipment 20,054,488 2.92% 16,884,948 1.24% 6,835,452 0.76%

Financial 51,732,599 7.54% 24,036,633 1.76% 587,089,173 65.20%

Insurance - 0.00% 23,186,513 1.70% - 0.00%

Electronics and electrical appliances 13,407,774 1.95% 4,665,750 0.34% 3,936,529 0.44%

Production and transmission of energy 140,056,248 20.41% 52,238,109 3.82% 60,219,220 6.69%

Paper and allied 3,364,088 0.49% 760,452 0.06% 2,495,350 0.28%

Surgical and metal 6,497 0.00% 4,062,357 0.30% 85,103 0.01%

Contractors 5,964,159 0.87% 13,168,350 0.96% 23,280,267 2.59%

Wholesale traders 26,004,633 3.79% 29,511,276 2.16% 4,166,394 0.46%

Fertilizer dealers 16,219,433 2.36% 5,327,313 0.39% 2,915,454 0.32%

Sports goods 45,499 0.01% 89,923 0.01% - 0.00%

Food industries 26,122,327 3.81% 7,390,881 0.54% 1,998,862 0.22%

Airlines 9,706,217 1.41% 3,485,898 0.26% 217,879 0.02%

Cables 1,041,023 0.15% 247,769 0.02% 599,911 0.07%

Construction 29,334,128 4.27% 28,869,881 2.11% 24,323,202 2.70%

Containers and ports - 0.00% 200,253 0.01% - 0.00%

Engineering 16,440,176 2.40% 6,066,427 0.44% 15,990,043 1.78%

Glass and allied 499,906 0.07% 128,702 0.01% 187,578 0.02%

Hotels 1,981,164 0.29% 7,982,047 0.58% 131,577 0.01%

Infrastructure - 0.00% 2,696,025 0.20% - 0.00%

Media - 0.00% 432,939 0.03% - 0.00%

Polyester and fiber 3,982,326 0.58% 4,163 0.00% 1,089,130 0.12%

Telecommunication 19,791,165 2.88% 3,431,404 0.25% 21,812,712 2.42%

Individuals 61,531,995 8.97% 848,880,057 62.14% 2,735,356 0.30%

Others 59,629,452 8.69% 254,578,849 18.63% 113,920,339 12.65%

686,238,873 100.00% 1,366,157,914 100.00% 900,472,468 100.00%

(Rupees in '000) Percent (Rupees in '000) Percent (Rupees in '000) Percent

Chemical and pharmaceuticals 11,247,768 1.94% 3,338,397 0.27% 2,911,636 0.37%

Agri business 57,054,693 9.85% 13,134,793 1.05% 52,778 0.01%

Textile spinning 18,055,669 3.12% 413,205 0.03% 4,255,496 0.54%

Textile weaving 6,691,939 1.16% 319,156 0.03% 1,933,418 0.24%

Textile composite 25,607,196 4.42% - 0.00% 3,365,109 0.42%

Textile others 15,360,036 2.65% 2,404,673 0.19% 2,205,971 0.28%

Cement 5,182,402 0.89% 2,410,307 0.19% 1,890,002 0.24%

Sugar 6,376,894 1.10% 2,388,205 0.19% 315,140 0.04%

Shoes and leather garments 2,458,083 0.42% 787,972 0.06% 327,094 0.04%

Automobile and transportation equipment 17,623,146 3.04% 6,933,424 0.56% 7,471,237 0.94%

Financial 38,303,236 6.61% 16,487,005 1.32% 515,680,612 64.89%

Insurance - 0.00% 24,925,732 2.00% - 0.00%

Electronics and electrical appliances 14,791,263 2.55% 4,734,848 0.38% 675,306 0.08%

Production and transmission of energy 106,533,155 18.39% 45,995,522 3.69% 49,314,330 6.21%

Paper and allied 3,848,787 0.66% 589,635 0.05% 1,706,322 0.21%

Surgical and metal 7,034 0.00% 4,602,057 0.37% 77,526 0.01%

Contractors 8,141,350 1.41% 8,731,584 0.70% 26,609,262 3.35%

Wholesale traders 20,697,988 3.57% 34,608,114 2.78% 6,175,513 0.78%

Fertilizer dealers 18,005,581 3.11% 556,736 0.04% 4,874,513 0.61%

Sports goods 41,990 0.01% 80,479 0.01% - 0.00%

Food industries 23,920,294 4.13% 7,865,701 0.63% 1,908,394 0.24%

Airlines 12,739,537 2.20% 2,550,346 0.20% 783,838 0.10%

Cables 782,524 0.14% 457,963 0.04% 626,743 0.08%

Construction 29,943,339 5.17% 21,213,565 1.70% 15,062,235 1.90%

Containers and ports - 0.00% 151,778 0.01% 1,282,181 0.16%

Engineering 13,863,026 2.39% 3,421,095 0.27% 11,760,689 1.48%

Glass and allied 501,930 0.09% 160,710 0.01% 149,988 0.02%

Hotels 1,852,660 0.32% 726,332 0.06% 2,092,784 0.26%

Infrastructure 308,706 0.05% 1,716,401 0.14% - 0.00%

Media - 0.00% 774,621 0.06% - 0.00%

Polyester and fiber 4,527,773 0.78% 6,308 0.00% 948,722 0.12%

Telecommunication 15,659,911 2.70% 9,817,664 0.79% 21,033,604 2.65%

Individuals 57,262,128 9.89% 783,360,533 62.88% 3,954,457 0.50%

Others 41,769,328 7.21% 240,126,755 19.28% 105,251,710 13.24%

579,159,366 100.00% 1,245,791,616 100.00% 794,696,610 100.00%

2016

Deposits Gross advances Contingencies and

commitments

2017

Contingencies and

commitments Gross advances Deposits

71



45.2.1.1

45.2.2 Segment by sector


Public / Government 201,414,715 29.35% 179,896,292 13.17% 106,128,242 11.79%

Private 484,824,158 70.65% 1,186,261,622 86.83% 794,344,226 88.21%

686,238,873 100.00% 1,366,157,914 100.00% 900,472,468 100.00%


Public / Government 153,653,795 26.53% 146,930,185 11.79% 96,756,329 12.18%

Private 425,505,571 73.47% 1,098,861,431 88.21% 697,940,281 87.82%

579,159,366 100.00% 1,245,791,616 100.00% 794,696,610 100.00%

45.2.3 Details of non performing advances and specific provisions by class of business segment

Classified

advances

Specific

provision

held

Classified

advances

Specific

provision

held

Chemical and pharmaceuticals 148,319 148,319 148,244 148,244

Agri business 426,525 321,387 380,707 256,571

Textile spinning 4,108,702 4,108,702 4,156,868 4,156,868

Textile weaving 318,110 317,384 408,409 408,409

Textile composite 3,997,470 3,970,378 4,288,595 3,982,674

Textile others 2,815,147 2,809,019 4,000,574 3,995,053

Sugar 80,712 80,712 848,069 776,819

Shoes and leather garments 1,958,526 1,010,093 689,772 689,772

Automobile and transportation equipment 215,997 215,319 173,155 172,705

Financial 2,656,533 2,656,455 2,114,153 1,596,722

Electronics and electrical appliances 2,884,904 1,557,519 1,260,205 471,505

Production and transmission of energy 5,506,846 4,823,734 6,140,951 5,052,753

Paper and allied 599,466 265,191 163,708 163,708

Wholesale traders 4,412,121 2,938,015 3,541,543 2,538,281

Fertilizer dealers 65,759 65,759 67,623 67,623

Food industries 5,816,657 3,486,299 2,441,732 2,049,338

Construction 2,338,183 2,286,551 2,662,638 2,582,150

Engineering 1,134,465 67,145 1,203,086 135,766

Hotels 589,060 589,060 475,494 475,494

Polyester and fiber 1,577,051 1,577,051 1,699,294 1,699,294

Individuals 5,119,250 3,001,350 5,462,826 3,433,197

Others 6,137,845 3,930,242 3,717,296 3,227,998

52,907,648 40,225,684 46,044,942 38,080,944

45.2.4 Details of non performing advances and specific provision by sector

Classified

advances

Specific

provision

held

Classified

advances

Specific

provision

held

Public / Government 1,089,630 22,313 1,089,630 22,313

Private 51,818,018 40,203,371 44,955,312 38,058,631

52,907,648 40,225,684 46,044,942 38,080,944

Advances under Production and transmission of energy category include Rs. 68,334.655 million (2016: Rs. 52,634.931 million) secured by way of

guarantee from the Government of Pakistan.

Gross advances Deposits Contingencies and

commitments

2016

Contingencies and

commitments

2017

Gross advances Deposits

---------------------------- (Rupees in '000) ----------------------------

---------------------------- (Rupees in '000) ----------------------------

2017 2016

2017 2016

72



45.2.5 Geographical segment analysis

Pakistan operations 41,156,175 1,724,001,243 110,642,996 497,949,337

Middle East (419,001) 319,455,085 43,838,832 325,427,656

United States of America (18,138) 5,388,061 2,544,829 941,817

Export Processing Zones 99,374 2,436,770 610,599 2,813,236

Europe 588,538 100,618,324 16,078,528 84,195,614

Africa (275,956) 5,140,725 777,978 238,920

(25,183) 433,038,965 63,850,766 413,617,243

41,130,992 2,157,040,208 174,493,762 911,566,580

Pakistan operations 41,504,595 1,303,920,300 104,778,419 435,466,159

Middle East 4,226,809 299,091,186 41,366,373 288,267,417

United States of America 37,206 11,573,555 2,462,422 16,326

Export Processing Zones 71,955 1,534,998 512,510 4,171,030

Europe 1,486,169 85,769,378 13,658,646 91,241,254

Africa (172,451) 5,487,230 950,854 152,506

5,649,688 403,456,347 58,950,805 383,848,533

47,154,283 1,707,376,647 163,729,224 819,314,692

Total assets employed include intra group items of Rs. 51,679.708 million (2016: Rs. 45,634.387 million).

Contingencies and commitments include intra group items of Rs. 11,094.112 million (2016: Rs. 24,618.082 million).

45.3 Market risk

The functions of the Market Risk Management unit are as follows:

- To keep the market risk exposure within the Group’s risk appetite as assigned by the BoD and the BRCC.

-

-

-

2017

2016

Contingencies

and commitments

Market risk is the risk that the fair value of a financial instrument will fluctuate due to movements in market prices. It results

from changes in interest rates, exchange rates and equity prices as well as from changes in the correlations between

them. Each of these components of market risk consists of a general market risk and a specific market risk that is driven

by the nature and composition of the portfolio.

Measuring and controlling market risk is usually carried out at a portfolio level. However, certain controls are applied,

where necessary, to individual risk types, to particular books and to specific exposures. Controls are also applied to

prevent any undue risk concentrations in trading books, taking into account variations in price, volatility, market depth and

liquidity. These controls include limits on exposure to individual market risk variables as well as limits on concentrations of

tenors and issuers.

Contingencies

and commitments

Profit / (loss)

before taxation

Total assets

employed

Net assets

employed---------------------------- (Rupees in '000) ----------------------------

To review new product proposals and propose / recommend / approve procedures for the management of their market

risk. Various limits are assigned to different businesses on a product / portfolio basis. The products are approved

through product programs, where risks are identified and limits and parameters are set. Any transactions / products

falling outside these product programs are approved through separate transaction / product memos.

To maintain a comprehensive database for performing risk analysis, stress testing and scenario analysis. Stress

testing activities are performed on a quarterly basis on both the Banking and Trading books.

To develop, review and upgrade procedures for the effective implementation of market risk management policies

approved by the BoD and BRCC.

Trading activities are centered in the Treasury and Capital Markets Group which facilitates clients and also runs proprietary

positions. The Group is active in the cash and derivative markets for equity, interest rate and foreign exchange.

The Market and Treasury Risk division performs market risk management activities. Within this division, the Market Risk

Management unit is responsible for the development and review of market risk policies and processes, and is involved in

research, financial modeling and testing / implementation of risk management systems, while Treasury Middle Office is

responsible for implementation and monitoring of market risk and other policies, escalation of deviations to senior

management, and MIS reporting.

Profit / (loss)

before taxation

Total assets

employed

Net assets

employed---------------------------- (Rupees in '000) ----------------------------

73



45.3.1 Foreign Exchange Risk

Pakistan Rupee 1,660,166,748 1,467,444,023 (30,679,274) 162,043,451

US Dollar 251,149,701 148,391,760 (102,455,656) 302,285

Pound Sterling 35,785,788 47,268,963 21,872,240 10,389,065

Japanese Yen 22,843 6,824 (11,770) 4,249

Euro 5,278,669 12,841,609 7,290,575 (272,365)

UAE Dirham 100,489,537 190,893,870 89,151,353 (1,252,980)

Bahraini Dinar 13,708,941 22,243,314 9,037,609 503,236

Qatari Riyal 25,724,415 29,296,607 4,230,555 658,363

Other Currencies 13,033,858 12,479,768 1,564,368 2,118,458

2,105,360,500 1,930,866,738 - 174,493,762

Pakistan Rupee 1,250,819,452 1,074,555,586 (23,292,889) 152,970,977

US Dollar 218,150,084 139,687,442 (74,146,176) 4,316,466

Pound Sterling 32,762,012 43,144,872 16,837,838 6,454,978

Japanese Yen 26,051 7,217 (11,749) 7,085

Euro 5,000,171 11,331,663 6,490,327 158,835

UAE Dirham 98,810,370 160,743,995 61,312,602 (621,023)

Bahrain Dinar 13,468,415 20,218,063 6,309,942 (439,706)

Qatari Riyal 26,785,382 31,840,101 4,916,279 (138,440)

Other Currencies 15,920,323 16,484,097 1,583,826 1,020,052

1,661,742,260 1,498,013,036 - 163,729,224

45.3.2 Equity position risk

45.3.3 Yield / interest rate risk

Liabilities

Off - balance

sheet items

Net currency

exposure

2017

Off - balance

sheet items

Net currency

exposure

Assets Liabilities

The Group's reporting currency is the Pakistan Rupee, but its assets, liabilities, income and expenses are denominated in

multiple currencies. From time to time, TCM proactively hedges foreign currency exposures resulting from its market

making activities, subject to pre-defined limits.

The Group is an active participant in the cash and derivatives markets for currencies and carries currency risk from these

trading activities, conducted primarily by the Treasury and Capital Markets Group (TCM). These trading exposures are

monitored through prescribed stress tests and sensitivity analyses.

Interest rate risk is the risk that fair value of a financial instrument will fluctuate as a result of changes in interest rates,

including changes in the shape of yield curves. Interest rate risk is inherent in many of the Group's businesses and arises

from mismatches between the contractual maturities or the re-pricing of on and off balance sheet assets and liabilities. The

interest rate sensitivity profile is prepared on a quarterly basis based on the re-pricing or contractual maturities of assets

and liabilities.

Interest rate risk is monitored and managed by performing periodic gap analysis, sensitivity analysis and stress testing

and taking appropriate actions where required.

Equity position risk is the risk that the fair value of a financial instrument will fluctuate due to changes in the prices of

individual stocks or the levels of equity indices. The Group’s equity book comprises of held for trading (HFT) and available

for sale (AFS) portfolios. The objective of the HFT portfolio is to make short-term capital gains, whilst the AFS portfolio is

maintained with a medium term view of earning both capital gains and dividend income. Product program manuals have

been developed to provide guidelines on the objectives and policies, risks and mitigants, limits and controls for the equity

portfolios of the Group.

----------------------------------- (Rupees in '000) -----------------------------------

Foreign Exchange Risk is the risk that the fair value of a financial instrument will fluctuate due to changes in foreign

exchange rates. Exposures are monitored by currency to ensure that they remain within the established limits for each

currency. Exposures are also monitored on an overall basis to ensure compliance with the Bank’s SBP approved Foreign

Exchange Exposure Limit.

----------------------------------- (Rupees in '000) -----------------------------------

2016

Assets

74



45.3.4

Upto 1 monthOver 1 month

to 3 months

Over 3

months to 6

months

Over 6

months to 1

year

Over 1 year

to 2 years

Over 2 years

to 3 years

Over 3 years

to 5 years

Over 5 years

to 10 years

Over 10

years

%

On-balance sheet financial instruments

Assets

Cash and balances with treasury banks 0.03% 161,119,170 14,646,863 - - - - - - - - 146,472,307

Balances with other banks 1.87% 35,549,112 7,404,479 4,404,142 3,866,128 1,500,506 - - - - - 18,373,857

Lendings to financial institutions 5.27% 35,893,920 10,987,602 7,633,400 10,416,355 2,783,462 2,460,071 - 1,544,891 - - 68,139

Investments 7.39% 1,124,921,300 303,771,816 195,403,414 14,637,397 55,144,057 151,469,659 94,253,289 169,436,786 112,514,819 4,901,555 23,388,508

Advances 6.20%

Performing 629,824,756 196,234,199 233,201,863 144,311,102 18,350,315 11,761,016 8,120,289 10,628,039 3,916,941 3,300,992 -

Non-performing 12,681,964 - - - - - - - - - 12,681,964

Other assets - 36,613,980 - - - - - - - - - 36,613,980

2,036,604,202 533,044,959 440,642,819 173,230,982 77,778,340 165,690,746 102,373,578 181,609,716 116,431,760 8,202,547 237,598,755

Liabilities

Bills payable - 13,392,978 - - - - - - - - - 13,392,978

Borrowings 5.35% 517,082,159 444,348,792 41,735,972 7,939,440 2,674,198 19,816,546 - - - - 567,211

Deposits and other accounts 2.63% 1,366,157,914 547,230,264 80,239,501 58,004,251 28,556,481 17,430,819 13,908,163 62,023,404 6,445,041 - 552,319,990

Liabilities against assets subject to finance lease 12.39% 4,375 4,375 - - - - - - - - -

Other liabilities - 23,642,619 - - - - - - - - - 23,642,619

1,920,280,045 991,583,431 121,975,473 65,943,691 31,230,679 37,247,365 13,908,163 62,023,404 6,445,041 - 589,922,798

On-balance sheet gap 116,324,157 (458,538,472) 318,667,346 107,287,291 46,547,661 128,443,381 88,465,415 119,586,312 109,986,719 8,202,547 (352,324,043)

Net non financial assets 58,169,605

Total net assets 174,493,762

Off-balance sheet financial instruments

Interest Rate Derivatives - Long position 4,358,641 - - 168,000 - 3,874,141 316,500 - - - -

Interest Rate Derivatives - Short position (4,358,641) - (1,358,641) (3,000,000) - - - - - - -

Cross Currency Swap - Long position - - - - - - - - - - -

Cross Currency Swap - Short Position - - - - - - - - - - -

FX Options - Long position 83,368 45,117 38,251 - - - - - - - -

FX Options - Short position (83,368) (45,117) (38,251) - - - - - - - -

Forward Purchase of Government Securities 7,870,890 7,870,890 - - - - - - - - -

Forward Sale of Government Securities (1,478) (1,478) - - - - - - - - -

Foreign currency forward purchases 242,093,757 112,945,973 80,219,991 45,266,129 3,661,664 - - - - - -

Foreign currency forward sales (213,172,200) (100,641,876) (67,735,327) (39,020,675) (5,774,322) - - - - - -

Off-balance sheet Gap 36,790,969 20,173,509 11,126,023 3,413,454 (2,112,658) 3,874,141 316,500 - - - -

Total Yield / Interest Rate Risk Sensitivity Gap 153,115,126 (438,364,963) 329,793,369 110,700,745 44,435,003 132,317,522 88,781,915 119,586,312 109,986,719 8,202,547 (352,324,043)

Cumulative Yield / Interest Rate Risk Sensitivity Gap (438,364,963) (108,571,594) 2,129,151 46,564,154 178,881,676 267,663,591 387,249,903 497,236,622 505,439,169 153,115,126

Total

Exposed to yield / interest rate risk

------------------------------------------------------------------------------------------------------------------------- (Rupees in '000) -------------------------------------------------------------------------------------------------------------------------

Mismatch of interest rate sensitive assets and liabilities

Effective

yield /

interest

rate

2017

Non-interest

bearing

financial

instruments

75



Upto 1 monthOver 1 month

to 3 months

Over 3

months to 6

months

Over 6

months to 1

year

Over 1 year

to 2 years

Over 2 years

to 3 years

Over 3 years

to 5 years

Over 5 years

to 10 years

Over 10

years

%

On-balance sheet financial instruments

Assets

Cash and balances with treasury banks 0.01% 133,467,502 8,617,552 - - - - - - - - 124,849,950

Balances with other banks 1.56% 32,267,304 6,479,240 4,042,907 6,105,480 157,950 - - - - - 15,481,727

Lendings to financial institutions 4.48% 35,484,586 4,482,293 19,974,251 3,594,074 628,141 4,703,225 1,305,313 797,289 - - -

Investments 8.29% 838,262,274 32,008,960 70,906,278 23,418,437 47,679,201 133,340,965 114,144,267 194,270,133 188,005,624 3,754,207 30,734,202

Advances 6.36%

Performing 529,818,148 96,189,418 300,988,029 78,221,138 14,594,457 7,617,408 6,893,431 9,941,694 6,500,088 7,781,646 1,090,839

Non-performing 7,963,998 - - - - - - - - - 7,963,998

Other assets - 29,050,873 - - - - - - - - - 29,050,873

1,606,314,685 147,777,463 395,911,465 111,339,129 63,059,749 145,661,598 122,343,011 205,009,116 194,505,712 11,535,853 209,171,589

Liabilities

Bills payable - 11,759,012 - - - - - - - - - 11,759,012

Borrowings 5.28% 205,865,131 163,868,034 29,335,431 8,211,316 3,026,274 99,944 - - - - 1,324,132

Deposits and other accounts 2.69% 1,245,791,616 525,060,099 65,711,576 51,670,330 23,050,231 12,083,593 16,231,546 58,183,740 897,089 - 492,903,412

Liabilities against assets subject to finance lease 12.39% 3,558 3,558 - - - - - - - - -

Other liabilities - 23,216,829 - - - - - - - - - 23,216,829

1,486,636,146 688,931,691 95,047,007 59,881,646 26,076,505 12,183,537 16,231,546 58,183,740 897,089 - 529,203,385

On-balance sheet gap 119,678,539 (541,154,228) 300,864,458 51,457,483 36,983,244 133,478,061 106,111,465 146,825,376 193,608,623 11,535,853 (320,031,796)

Net non financial assets 44,050,685

Total net assets 163,729,224

Off-balance sheet financial instruments

Interest Rate Derivatives - Long position 6,986,094 - 634,181 69,732 - 648,000 5,634,181 - - - -

Interest Rate Derivatives - Short position (6,986,094) - (1,282,181) (5,069,732) - - (634,181) - - - -

Cross Currency Swap - Long position 522,051 - 522,051 - - - - - - - -

Cross Currency Swap - Short Position (522,051) - (522,051) - - - - - - - -

FX Options - Long position 213,081 143,248 69,833 - - - - - - - -

FX Options - Short position (213,081) (143,248) (69,833) - - - - - - - -

Forward Purchase of Government Securities 4,998,400 4,998,400 - - - - - - - - -

Forward Sale of Government Securities (3,553,866) (3,553,866) - - - - - - - - -

Foreign currency forward purchases 216,641,748 70,744,568 89,813,685 43,763,031 12,320,464 - - - - - -

Foreign currency forward sales (193,057,693) (72,843,078) (72,389,202) (36,849,566) (10,975,847) - - - - - -

Off-balance sheet Gap 25,028,589 (653,976) 16,776,483 1,913,465 1,344,617 648,000 5,000,000 - - - -

Total Yield / Interest Rate Risk Sensitivity Gap 144,707,128 (541,808,204) 317,640,941 53,370,948 38,327,861 134,126,061 111,111,465 146,825,376 193,608,623 11,535,853 (320,031,796)

Cumulative Yield / Interest Rate Risk Sensitivity Gap (541,808,204) (224,167,263) (170,796,315) (132,468,454) 1,657,607 112,769,072 259,594,448 453,203,071 464,738,924 144,707,128

Non-interest

bearing

financial

instruments

------------------------------------------------------------------------------------------------------------------------- (Rupees in '000) -------------------------------------------------------------------------------------------------------------------------

Total

Exposed to yield / interest rate risk

2016Effective

yield /

interest

rate

76



45.4 Liquidity Risk

Liquidity risk is the risk that the Group may be unable to meet its obligations or to fund increases in assets as they fall due without incurring unacceptable cost or losses.

The Assets and Liabilities Management Committee (ALCO) of the Group is responsible for the oversight of liquidity management and meets on a monthly basis or more frequently, if required.

45.4.1 Maturities of assets and liabilities - based on working prepared by the Assets and Liabilities Management Committee (ALCO) of the Group

Total Upto 1 monthOver 1 month

to 3 months

Over 3 months

to 6 months

Over 6 months

to 1 year

Over 1 year to

2 years

Over 2 years to

3 years

Over 3 years to

5 years

Over 5 years to

10 yearsOver 10 years

Assets

Cash and balances with treasury banks 161,119,170 93,449,859 2,654,124 2,601,148 3,765,496 5,238,298 4,019,487 6,373,987 10,278,978 32,737,793

Balances with other banks 35,549,112 21,714,772 4,603,105 3,866,128 5,365,107 - - - - -

Lendings to financial institutions 35,893,920 10,906,848 1,626,255 10,258,087 2,651,886 4,634,979 2,590,888 3,224,977 - -

Investments 1,124,921,300 341,326,637 149,878,710 10,411,870 73,819,428 150,829,999 93,048,128 171,508,017 115,484,962 18,613,549

Advances - Performing 629,824,756 170,750,144 93,807,929 62,148,850 59,140,146 52,174,096 50,250,895 74,560,333 46,800,251 20,192,112

Advances - Non-performing 12,681,964 - - - - - - - - 12,681,964

Operating fixed assets 50,384,077 4,122,597 1,737,644 2,628,476 319,766 579,893 1,404,375 2,206,987 2,623,194 34,761,145

Other assets 54,986,201 3,845,687 9,884,969 3,242,398 21,012,245 5,052,405 3,114,319 5,441,771 2,835,374 557,033

2,105,360,500 646,116,544 264,192,736 95,156,957 166,074,074 218,509,670 154,428,092 263,316,072 178,022,759 119,543,596

Liabilities

Bills payable 13,392,978 2,974,865 2,174,339 2,130,939 6,112,835 - - - - -

Borrowings 517,082,159 444,871,333 39,591,848 10,618,924 3,052,380 1,594,065 2,017,847 1,797,851 13,276,930 260,981

Deposits and other accounts 1,366,157,914 209,294,930 131,669,845 93,842,654 94,191,914 119,346,962 88,100,250 110,458,440 151,733,516 367,519,403

Liabilities against assets subject to finance lease 4,375 4,375 - - - - - - - -

Deferred tax liability 2,980,466 368,525 - - 652,985 652,985 652,985 652,986 - -

Other liabilities 31,248,846 13,423,889 3,945,431 3,825,199 1,333,462 1,487,242 895,629 982,402 951,644 4,403,948

1,930,866,738 670,937,917 177,381,463 110,417,716 105,343,576 123,081,254 91,666,711 113,891,679 165,962,090 372,184,332

Net assets 174,493,762 (24,821,373) 86,811,273 (15,260,759) 60,730,498 95,428,416 62,761,381 149,424,393 12,060,669 (252,640,736)

Represented by:

Share capital 12,241,798

Reserves 47,203,516

Unappropriated profit 76,651,713

Non-controlling interest 4,810,519

Surplus on revaluation of assets 33,586,216

174,493,762

2017

The Group’s approach to liquidity management is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without

incurring unacceptable losses or risking sustained damage to business franchises. A centralized approach is adopted, based on an integrated framework incorporating an assessment of all material known and

expected cash flows and the availability of collateral which could be used to secure additional funding if required. The framework entails careful monitoring and control of the daily liquidity position, and regular

liquidity stress testing under a variety of scenarios. These encompass both normal and stressed market conditions, including general market crises and the possibility that access to markets could be impacted

by a stress event affecting some part of the Group’s business.

Assets and Liabilities having contractual maturity dates are bucketed as per their respective maturities. The maturity profile of non-contractual deposits and bills payable is estimated using an Exponentially

Weighted Moving Average model based on data for the last seven years. The maturity profile of certain non-contractual assets and liabilities which are related to specific assets and liabilities follows the maturity

profile of the underlying asset or liability. The maturity profile of other non-contractual assets and liabilities is expected to follow historical patterns of behaviour. The methodology and the assumptions used to

derive the maturity profile of non-contractual assets and liabilities have been approved by ALCO.

-------------------------------------------------------------------------------------------------------- (Rupees in '000) --------------------------------------------------------------------------------------------------------

77




to 3 months

Over 3 months

to 6 months

Over 6 months

to 1 year

Over 1 year to

2 years

Over 2 years to

3 years

Over 3 years to

5 years

Over 5 years to

10 yearsOver 10 years

Assets

Cash and balances with treasury banks 133,467,502 78,553,081 4,041,134 3,960,472 5,733,293 4,936,702 3,418,617 5,421,144 15,990,082 11,412,977

Balances with other banks 32,267,304 20,311,261 5,692,613 6,105,480 157,950 - - - - -

Lendings to financial institutions 35,484,586 3,764,942 16,650,242 3,566,375 928,141 5,252,936 4,830,387 225,825 265,738 -

Investments 838,262,274 58,546,234 70,434,696 9,350,459 67,793,137 134,435,595 103,700,582 198,684,110 173,990,684 21,326,777

Advances - Performing 529,818,148 117,257,799 123,406,951 51,360,029 26,143,508 18,139,502 27,908,578 72,663,481 71,963,244 20,975,056

Advances - Non-performing 7,963,998 - - - - - - - - 7,963,998

Operating fixed assets 39,298,927 3,822,450 1,148,514 1,755,526 266,389 559,163 560,123 5,477,600 1,880,420 23,828,742

Other assets 45,179,521 6,064,071 5,283,509 20,959,866 11,466,627 86,938 24,686 24,043 251,497 1,018,284

1,661,742,260 288,319,838 226,657,659 97,058,207 112,489,045 163,410,836 140,442,973 282,496,203 264,341,665 86,525,834

Liabilities

Bills payable 11,759,012 3,013,849 2,204,387 2,160,388 4,380,388 - - - - -

Borrowings 205,865,131 164,458,645 18,440,413 8,591,028 3,261,913 186,168 194,690 817,585 9,426,000 488,689

Deposits and other accounts 1,245,791,616 159,067,193 143,546,009 94,667,250 110,838,254 94,108,459 89,076,170 117,197,229 256,183,661 181,107,391

Liabilities against assets subject to finance lease 3,558 3,558 - - - - - - - -

Deferred tax liability 5,230,571 538,877 - - 1,172,886 1,172,886 1,172,886 1,173,036 - -

Other liabilities 29,363,148 10,757,095 2,160,321 464,337 2,460,228 1,123,745 1,017,112 1,114,490 4,902,255 5,363,565

1,498,013,036 337,839,217 166,351,130 105,883,003 122,113,669 96,591,258 91,460,858 120,302,340 270,511,916 186,959,645

Net assets 163,729,224 (49,519,379) 60,306,529 (8,824,796) (9,624,624) 66,819,578 48,982,115 162,193,863 (6,170,251) (100,433,811)

Represented by:


Reserves 42,615,188




163,729,224

-------------------------------------------------------------------------------------------------------- (Rupees in '000) --------------------------------------------------------------------------------------------------------

2016

78



45.4.2 Maturities of assets and liabilities - based on contractual maturity of the assets and liabilities of the Group


to 3 months

Over 3

months to 6

months

Over 6

months to 1

year

Over 1 year to

2 years

Over 2 years

to 3 years

Over 3 years

to 5 years

Over 5 years

to 10 yearsOver 10 years

Assets

Cash and balances with treasury banks 161,119,170 161,119,170 - - - - - - - -

Balances with other banks 35,549,112 20,812,124 5,453,105 3,866,128 1,553,154 3,864,601 - - - -

Lendings to financial institutions 35,893,920 10,554,600 2,104,355 9,345,758 3,564,215 4,860,071 2,670,887 2,794,034 - -

Investments 1,124,921,300 338,528,067 180,814,367 6,949,893 56,163,923 115,890,439 130,647,801 173,647,160 115,246,874 7,032,776

Advances 642,506,720 170,750,142 93,807,929 62,148,850 59,140,146 52,174,096 50,250,895 74,560,333 46,800,251 32,874,078

Operating fixed assets 50,384,077 4,122,595 1,737,644 2,628,476 319,766 579,893 1,404,375 2,206,987 2,623,194 34,761,147

Other assets 54,986,201 25,478,480 6,894,879 2,718,240 19,201,782 119,906 38,020 40,226 32,487 462,181

2,105,360,500 731,365,178 290,812,279 87,657,345 139,942,986 177,489,006 185,011,978 253,248,740 164,702,806 75,130,182

Liabilities

Bills payable 13,392,978 13,392,978 - - - - - - - -

Borrowings 517,082,159 443,547,077 41,423,435 9,615,645 2,873,683 1,456,730 1,364,212 1,432,538 14,735,325 633,514

Deposits and other accounts 1,366,157,914 1,108,028,059 88,932,584 51,346,692 32,142,199 34,900,693 22,607,290 21,006,361 7,107,109 86,927

Liabilities against assets subject to

finance lease 4,375 4,375 - - - - - - - -

Deferred tax liability - net 2,980,466 2,980,466 - - - - - - - -

Other liabilities 31,248,846 27,864,749 3,176 - - - - - - 3,380,921

1,930,866,738 1,595,817,704 130,359,195 60,962,337 35,015,882 36,357,423 23,971,502 22,438,899 21,842,434 4,101,362

Net assets 174,493,762 (864,452,526) 160,453,084 26,695,008 104,927,104 141,131,583 161,040,476 230,809,841 142,860,372 71,028,820

Represented by:


Reserves 47,203,516




174,493,762

The maturity profile presented below has been prepared as required by IFRS on the basis of contractual maturities, except for products that do not have a contractual maturity which are

shown in the first bucket.

2017

--------------------------------------------------------------------------------------------------- (Rupees in '000) ---------------------------------------------------------------------------------------------------

79




to 3 months

Over 3

months to 6

months

Over 6

months to 1

year

Over 1 year to

2 years

Over 2 years

to 3 years

Over 3 years

to 5 years

Over 5 years

to 10 yearsOver 10 years

Assets

Cash and balances with treasury banks 133,467,502 133,467,502 - - - - - - - -

Balances with other banks 32,267,304 20,311,261 5,692,613 6,105,480 157,950 - - - - -

Lendings to financial institutions 35,484,586 4,078,736 16,650,242 3,252,452 928,141 5,252,937 5,194,313 127,765 - -

Investments 838,262,274 77,325,735 56,674,756 19,533,357 48,273,596 137,334,485 113,925,510 192,851,237 188,492,158 3,851,440

Advances 537,782,146 118,070,073 123,406,951 51,360,029 25,937,442 17,588,451 27,908,578 72,608,324 71,963,244 28,939,054

Operating fixed assets 39,298,927 3,822,450 1,148,515 1,755,526 266,389 559,163 560,123 5,477,600 1,880,420 23,828,741

Other assets 45,179,521 25,121,956 4,601,010 2,596,190 11,466,627 75,234 24,686 24,043 251,497 1,018,278

1,661,742,260 382,197,713 208,174,087 84,603,034 87,030,145 160,810,270 147,613,210 271,088,969 262,587,319 57,637,513

Liabilities

Bills payable 11,759,012 11,759,012 - - - - - - - -

Borrowings 205,865,131 162,382,069 18,517,209 9,051,421 2,762,490 118,277 198,880 2,703,803 9,729,395 401,587

Deposits and other accounts 1,245,791,616 1,001,622,789 93,831,449 53,957,345 26,351,247 33,529,655 12,058,600 23,820,379 620,152 -

Liabilities against assets subject to

finance lease 3,558 3,558 - - - - - - - -

Deferred tax liability - net 5,230,571 5,230,571 - - - - - - - -

Other liabilities 29,363,148 25,568,879 281,444 69,012 9,622 - - - - 3,434,191

1,498,013,036 1,206,566,878 112,630,102 63,077,778 29,123,359 33,647,932 12,257,480 26,524,182 10,349,547 3,835,778

Net assets 163,729,224 (824,369,165) 95,543,985 21,525,256 57,906,786 127,162,338 135,355,730 244,564,787 252,237,772 53,801,735

Represented by:


Reserves 42,615,188




163,729,224

--------------------------------------------------------------------------------------------------- (Rupees in '000) ---------------------------------------------------------------------------------------------------

2016

80



45.4.3 Liquidity Coverage Ratio

Total

unweighted1

value

(average)

Total weighted2

value (average)

-------(Rupees in '000) ---------1 Total high quality liquid assets (HQLA) 414,579,250

2 Retail deposits and deposits from small business customers of which:

2.1 stable deposit - -

2.2 Less stable deposit 820,412,073 82,041,207

3 Unsecured wholesale funding of which:

3.1 Operational deposits (all counterparties) 263,429 65,857

3.2 Non-operational deposits (all counterparties) 382,106,697 227,845,124

3.3 Unsecured debt - -

4 Secured wholesale funding - 1,108,867

5 Additional requirements of which:

5.1 Outflows related to derivative exposures and other collateral requirements 112,817 112,817

5.2 Outflows related to loss of funding on debt products - -

5.3 Credit and Liquidity facilities - -

6 Other contractual funding obligations 69,550,397 6,955,040

7 Other contingent funding obligations 323,929,880 16,196,494

8 TOTAL CASH OUTFLOWS 334,325,406

CASH INFLOWS

9 Secured lending - -

10 Inflows from fully performing exposures 133,763,198 76,418,926

11 Other cash inflows 14,831,063 2,269,533

12 TOTAL CASH INLFOWS 78,688,459

TOTAL HQLA 414,579,250

TOTAL NET CASH OUTFLOWS 255,636,947

LIQUIDITY COVERAGE RATIO 162.18%

1 Unweighted values must be calculated as outstanding balances maturing or callable within 30 days (for inflows and outflows)

2 Weighted values must be calculated after the application of respective haircuts (for HQLA) or inflow and outflow rates (for inflows and outflows)

3

HIGH QUALITY LIQUID ASSETS

Total Adjusted Value

Adjusted values must be calculated after the application of both (i) haircuts and inflow and outflow rates and (ii) any applicable caps i.e. cap on

level 2B and level 2 assets for HQLA and cap on inflows.

Liquidity Risk Management framework is guided by BoD (Board of Directors) and BRCC (Board Risk and Credit

Committee). Global ALCO and International ALCO supervise the liquidity risk management as per their TORs. Market &

Treasury Risk Division is responsible to propose, recommend and institutionalize liquidity risk management policy which is

approved by the Board.

Asset & Liability Committee (ALCO) is responsible for reviewing and approving the liquidity risk limits, ensuring the liquidity

risk management practices are in line with the defined strategy. ALCO is also responsible to recommend Liquidity Risk

policy for approval to BRCC / BOD.

Liquidity risk is defined as the risk that a bank does not have sufficient financial resources to meet its obligation and

commitments as they fall due and have no other choice to secure funds at a higher cost. The Bank ensures to maintain a

diversified portfolio of liquid assets and funding base. Sources of funding comprise of a good mix of core deposits. All

liquidity limits including deposit concentration is reviewed in ALCO on a periodic basis. The Bank performs its Liquidity

stress test on a periodic basis in order to ensure that sufficient liquidity is always available in order to fulfill Bank’s financial

commitment. Stress testing technique is also used to identify the potential impact of extreme yet plausible events or

movements on the value of a portfolio. Stress testing scenarios are developed in guidance provided by the regulator. The

Bank also has in place approved Liquidity Contingency Plan. Further Liquidity Risk Management is quantified by Liquidity

coverage ratio and Net Stable funding ratio as communicated by the Regulator. Liquidity Coverage Ratio (LCR) refers to

the highly liquid assets held by the bank to meet its short term obligations. LCR is used as a tool to manage liquidity risk.

LCR has two components:High Quality Liquid Asset (HQLA) and total net cash outflows. HQLA comprises of those assets

that can be readily sold or employed as collateral for obtaining fund. HQLA structure has been divided into 1) cash and

treasury balance, 2) marketable securities, 3) corporate debt securities with credit rating, 4) non-financial equity shares.

81



45.4.4 Net Stable Funding Ratio

LR IX

No MaturityBelow 6

months

6 months to

below 1 year

1 year and

above 1 year

ASF Item

1 Capital:

2 Regulatory capital 110,649,879 - - - 110,649,879

3 Other capital instruments 40,892,332 - - - 40,892,332

4 Retail deposits and deposit from small business

customers:

5 Stable deposits - - - - -

6 Less stable deposits - 396,139,205 88,860,593 804,247,453 721,963,866

7 Wholesale funding:

8 Operational deposits - - - - -

9 Other wholesale funding - 491,850,396 3,052,380 17,747,689 253,691,789

10 Other liabilities: - - - - -

11 NSFR derivative liabilities - - - - -

12 All other liabilities and equity not included in other

categories 42,698,667 - 652,985 1,958,956 1,436,842

13 Total ASF 1,128,634,708

RSF Item

14 Total NSFR High Quality Liquid Assets (HQLA) - - - - -

15 Deposits held at other financial institutions for operational

purposes - - - - -

16 Performing loans and securities:

17 Performing loans to financial institutions secured by

Level 1 HQLA - 6,931,953 - - 693,195

18 Performing loans to financial institutions secured by

non-Level 1 HQLA and unsecured performing loans

to financial institutions - 10,098,279 3,863,291 - 3,446,387

19 Performing loans to non-financial corporate clients,

loans to retail and small business customers, and

loans to sovereigns, central banks and PSEs, of

which: - - - 181,629,479 154,385,057

20With a risk weight of less than or equal to 35% under

the Basel II Standardised Approach for credit risk- - - 47,782,921 31,058,899

21 Securities that are not in default and do not qualify as

HQLA including exchange-traded equities. - - - 37,530,651 31,901,053

22 Other assets:

23 Physical traded commodities, including gold - - - - -

24 Assets posted as initial margin for derivative

contracts - - - - -

25 NSFR derivative assets - - - - -

26 NSFR derivative liabilities before deduction of

variation margin posted - - - - -

27 All other assets not included in the above categories 627,823,150 454,410,776 331,241,881 303,655,584 839,284,716

28 Off-balance sheet items - - - 492,767,068 24,638,353

29 Total RSF 1,086,955,065

30 Net Stable Funding Ratio (%) 103.83%

*

----------------------------------- (Rupees in '000) -----------------------------------

Unweighted Value By Residual Maturity *

The unweighted value by residual maturity is based on working prepared by Assets and Liabilities Management Committee (ALCO) of the

Bank.

Weighted

Value

Net Stable Funding Ratio (NSFR) is used to reduce funding risk over a longer time horizon by requiring banks to fund their

activities with sufficiently stable sources of funding in order to mitigate the risk of future funding stress. The NSFR limits

overreliance on short-term wholesale funding, encourages better assessment of funding risk across all on and off balance

sheet items and promotes funding stability. The ratio is defined as the amount of available stable funding (ASF), relative to

the amount of required stable funding (RSF).

82



45.5 Operational risk

46. ISLAMIC BANKING BUSINESS

The Bank operates 93 (2016: 47) Islamic Banking branches and 156 (2016: 141) Islamic Banking windows.

Note 2017 2016

--------- (Rupees in '000) ---------

ASSETS



Due from financial institutions 46.2 3,694,215 12,726,452

Investments 25,401,968 13,104,677

Islamic financing and related assets 46.3 22,110,626 7,284,386

Operating fixed assets 299,950 155,843

Due from Head Office - 9,365,555

Other assets 421,843 143,903

Total Assets 63,908,160 47,970,201

LIABILITIES

Bills payable 400,973 238,126

Due to financial institutions 1,500,000 -

Deposits and other accounts

Current accounts - non remunerative 25,163,438 9,752,775

Current accounts - remunerative 1,293,692 2,520,018

Saving accounts 11,839,659 2,994,848

Term deposits 982,345 1,299,848

Deposits from financial institutions - remunerative 20,462,360 28,773,229

Deposits from financial institutions - non remunerative 34,505 -

59,775,999 45,340,718

Due to Head Office 61,035 -

Other liabilities 327,658 721,401

62,065,665 46,300,245

NET ASSETS 1,842,495 1,669,956

REPRESENTED BY:

Islamic Banking Fund 2,181,000 2,181,000

Accumulated losses (362,502) (609,289)

1,818,498 1,571,711

Surplus on revaluation of assets 23,997 98,245

1,842,495 1,669,956

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from

external events.

The Operational Risk Division is primarily responsible for the oversight of operational risk management across the Group.

The operational risk management framework of the Group is governed by the Operational Risk Management Policy and

Procedures, while the implementation is supported by an operational risk management system and designated operational

risk coordinators within different units across the Group. The framework is in line with international best practices, flexible

enough to implement in stages and permits the overall approach to evolve in response to organizational learning and

future requirements.

Loss data, collected through a well defined program, is evaluated and processes are reviewed for improvements in

mitigation techniques. Periodic workshops are conducted for Risk & Control Self Assessment and key risk exposures are

identified and assessed against existing controls to evaluate improvement opportunities. Key Risk Indicators are also

defined for monitoring of risk exposures. New products, systems, activities and processes, are subject to comprehensive

operational risk assessments, before implementation.

Business Continuity Plans have been implemented across the Group, clearly defining the roles and responsibilities of

respective stakeholders, and covering recovery strategy, IT and structural backups, scenario and impact analyses and

testing directives. The outsourcing policy has also been augmented to address risks associated with such arrangements.

The statement of financial position of the Bank's Islamic Banking branches as at December 31 is as follows:

83



The profit and loss account of the Bank's Islamic Banking branches for the year ended December 31 is as follows:

2017 2016

--------- (Rupees in '000) ---------

Return earned 2,885,492 2,053,224

Return expensed 1,757,642 1,412,390

Net return 1,127,850 640,834

Provision against loans and advances - net 2,593 1,469

Reversal of provision for diminution in value of investments - net - (2,182)

2,593 (713)

Net return after provisions 1,125,257 641,547

Other Income

Fee, commission and brokerage income 81,376 67,432

Income from dealing in foreign currencies 18,143 12,683

(Loss) / Gain on sale of securities - net (438) 4,299

Other income 18,067 47,802

Total other income 117,148 132,216

1,242,405 773,763

Other Expenses

Administrative expenses 984,160 849,931

Other provisions - net 11,458 131

Total other expenses 995,618 850,062

Profit / (Loss) for the year 246,787 (76,299)

Accumulated losses brought forward (609,289) (532,990)

Accumulated losses carried forward (362,502) (609,289)

Remuneration to Shariah Board and Advisor 6,477 6,058

46.1 Charity Fund

Opening balance 648 2,342

Addition during the year 793 1,404

Payments during the year (1,320) (3,098)

Closing balance 121 648

46.2

46.3 Islamic financing and related assets Note 2017 2016

--------- (Rupees in '000) ---------

Financings

Murabaha 720,017 242,391

Musharaka running finance 15,000,000 -

Ijarah 46.4 490,963 620,848

Diminishing Musharaka 4,358,154 6,203,709

20,569,134 7,066,948

Advances

Advances and receivables against Ijarah 53,539 120,828

Advances for Diminishing Musharaka 1,255,734 87,892

Advances for Murabaha 88,165 21,998

1,397,438 230,718

Profit and other receivables against financings and advances 234,234 74,308

Gross Islamic financing and related assets 22,200,806 7,371,974

Provision against financings and advances (90,180) (87,588)

22,110,626 7,284,386

This includes Bai Muajjal arrangement entered into with SBP and with various financial institutions whereby the Bank sold

sukuks having carrying value of Rs 2,948.799 million (2016: Rs. 11,073.312 million) on deferred payment basis. The

average return on these transactions is 5.44% per annum (2016: 5.60% per annum). The balances are due to mature

latest by June 2018.

84



46.4 Ijarah

2017

Cost Accumulated Depreciation

---------------------------------------------------------------- (Rupees in '000) -----------------------------------------------------

1,039,790 140,103 925,124 418,942 197,824 434,161 490,963

(254,769) (182,605)

2016

Cost Accumulated Depreciation

---------------------------------------------------------------- (Rupees in '000) -----------------------------------------------------

1,191,438 258,436 1,039,790 476,868 205,186 418,942 620,848

(410,084) (263,112)

46.5 Disclosures for profit and loss distribution and pool management

Ameen Daily Munafa Account (ADMA) Pool

Special Pool(s)

Treasury Pool(s)

General Pool

The Mudarib’s share for the year ended December 31, 2017 is Rs. 594.34 million (25.0% of distributable profit). Of this, an

amount of Rs. 180.74 million (30.4% of Mudarib share) was distributed back to depositors as Hiba. The rate of profit

earned on average earning assets was 6.11% per annum and the rate of profit paid on average deposits was 3.70% per

annum.

Charge /

(Depreciation

on deletions)

UBL Ameen (the Mudarib) maintains following pools which accept deposits on the basis of Mudaraba from depositors

(Rabbulmaal). Pool funds are invested in Islamic modes of financing and investments. The profit earned on the pool is

therefore susceptible to the same market and credit risks as discussed in note 45 to the consolidated financial statements.

The ADMA pool consists of deposits for the ADMA product. The net return on the pool is arrived at after deduction of direct

costs from the gross return earned on the pool. From the net return, profit is paid to the Mudarib in the ratio of the

Mudarib’s equity in the pool to the total pool. The balance represents the distributable profit.

Separate pool(s) are created where the customers desire to invest in high yield assets. These pool(s) rates are higher than

the general pool depending on the assets. In case of loss in special pool, the loss will be borne by the Special pool

members. The net return on the pool is arrived at after deduction of direct costs from the gross return earned on the pool.

From the net return, profit is paid to the Mudarib in the ratio of the Mudarib’s equity in the pool to the total pool. The

balance represents the distributable profit.

At January 1,

2016

For all pools, the Mudarib’s share is deducted from the distributable profit to calculate the profit to be allocated to

depositors. The allocation of the profit to various deposit categories is determined by the amount invested in that category

relative to the total pool, as well as by the weightage assigned to the various deposit categories.

Treasury pool(s) are managed on the basis of Musharakah, Mudarabah and Wakalah, wherein UBL Ameen and FI share

actual return earned by the pool according to pre-defined profit sharing ratio and Wakalah fee.

The General pool consists of all other remunerative deposits. UBL Ameen (the Mudarib) accept deposits on the basis of

Mudaraba from depositors (Rabbulmaal). The net return on the pool is arrived at after deduction of direct costs from the

gross return earned on the pool. The entire net return after paying equity share to Mudarib is considered as distributable

profit of the pool.

Net book value

at December

31, 2017

Charge /

(Depreciation

on deletions)

Net book value

at December

31, 2016

At December

31, 2016

At December

31, 2017

Additions /

(Deletions)

At January 1,

2017

At January 1,

2017

At December

31, 2017

At January 1,

2016

At December

31, 2016

Additions /

(Deletions)

85



2017 2016

--------- (Rupees in '000) ---------

46.6 Deployment of Mudaraba based deposits by class of business

Chemical and pharmaceuticals 769,053 660,178

Agri business 1,513,718 1,683,908

Textile 65,769 1,878,541

Sugar 15,173,178 -

Financial 9,765,643 15,640,744

Food industries 505,996 511,211

Engineering 788,210 506,268

Hotel - 3,213

Plastic 151,298 33,347

Individuals 1,220,035 370,273

Production and Transmission of energy 10,598,235 9,280,999

Government of Pakistan Securities 15,969,260 5,190,245

Others 686,414 181,592

57,206,809 35,940,519

47. YEMEN OPERATIONS

48. NON-ADJUSTING EVENT AFTER THE BALANCE SHEET DATE

48.1 The Board of Directors of the Holding Company in its meeting held on February 19, 2018 has proposed a cash dividend in

respect of 2017 of Rs.4 per share (2016: Rs.4 per share). In addition, the Directors have also announced a bonus issue of

nil (2016: nil). These appropriations will be approved in the forthcoming Annual General Meeting. The consolidated financial

statements for the year ended December 31, 2017 do not include the effect of these appropriations which will be accounted

for in the consolidated financial statements for the year ending December 31, 2018.

As a result of political and economic crisis, liquidity crisis for both local and foreign currency aggravated. During the crisis,

in the initial phase of the war the Central Bank of Yemen (CBY) kept the exchange parity unchanged, however in April

2016, the Central Bank devalued Yemeni Riyal and revised the US$ to Riyal parity from YER 214.89 to YER 250.25

(16.45% devaluation). In the middle of August, 2017, Central Bank of Yemen–Aden Headquarter changed exchange rate

mechanism from fixed rate to floating rate. Effective August 15, 2017 CBY Aden abolished exchange rate of YER

250.25/US$ and instructed all financial institutions to use market rate published by CBY, Aden. Since then CBY Aden

devalued YER to current levels of YER 393/US$ while CBY Sana’a has maintained the earlier exchange rate regime and

parity of YER 250.25/US$. Despite devaluation, Yemeni Riyal continued to lose its value in the open market and is

currently traded at a further lower parity. The Group has taken multiple steps to cover for the losses emanating from this

currency devaluation which will be continued going forward to contain the exchange risk.

Out of the 3 branches in Yemen, UBL is currently operating with 2 branches in Sana’a and Hodeida under close

supervision of executives at the Business Continuity Plan (BCP) office, Karachi. The Branch in Aden is closed due to

restricted access to the premises in which it is located. Customers of Aden branch are being served from the other two

branches. To support the team in Yemen branches, the Camp Office situated in Karachi, Pakistan is in continuous

coordination with the team in Yemen to ensure that they are provided unstinted support and assistance whenever required.

The management has taken appropriate measures to support the sustainability of the Group’s business as may be required

in the prevalent circumstances and is of the view that as such there is no issue on going concern on UBL Yemen

operations in the foreseeable future.

Ever since the crises started, the Group’s risk is being managed very closely with a clear strategy to de-risk the Yemen

Book as far as practicable. As a result of this the Group has been able to reduce its clean exposure substantially, however

prevailing liquidity crisis and recent devaluation of YER has adversely affected the book. Going forward, the strategy is to

continuously reduce Group’s credit exposure without executing any new business and continue maintaining investments in

local currency sovereign bonds.

86



48.2

49. DATE OF AUTHORIZATION

50. GENERAL

50.1 Comparatives

50.2 Figures have been rounded off to the nearest thousand rupees unless otherwise stated.




Comparative information has been reclassified, rearranged or additionally incorporated in these consolidated financial

statements for the purposes of better presentation.

The Bank is a party to a Suo Moto case No. 20/2016 and Constitution Petition No. 45 of 2016 in the Honourable Supreme

Court of Pakistan. Through these cases, the Honourable Supreme Court has taken up the matter relating to pension

arrangements of certain banks which were previously under the control of the Federal Government. Various applications

had been filed by ex-employees of those banks in Suo Moto case contesting the freezing of their pensions and

discontinuation of its indexation. The Bank maintains that being a private employer, it is not under any legal obligation to

increase the pension of the employees and that post privatization, the new management gave multiple notices up to

December 31, 2003 to allow employees to convert their end of service benefits from Pension Fund to Gratuity Fund.

During the course of hearing of the above cases, the Supreme Court of Pakistan indicated that the concerned Banks may,

on their own, consider increasing the pension of their ex-employees. The Bank understands that although it is not legally

liable to change the benefit plan however, purely on humanitarian basis and for the betterment of its ex-employees from a

prospective date and future indexation mechanism, it has prepared and submitted a proposal before the Honourable

Supreme Court of Pakistan whereby minimum pension has been fixed to Rs. 5,250/- with 5% increase every year. In

response to the proposal submitted by the Bank, the Supreme Court of Pakistan in its hearing held on February 13, 2018

has ordered, at its discretion, fixation of minimum pension of Rs 8,000/- per month with 5 percent indexation on an annual

basis and that the said increase would be on a prospective basis. Detailed Judgement has not been received till date. In

the meantime, the Bank has also initiated an exercise to assess the impact of the revision which, among other things,

includes life verification process of the pensioners. Based on initial actuarial estimates, the impact of increase in pension

will range between Rs 3.4 billion to Rs 5.9 billion. The estimated amount can only be finalised after receipt of written court

order and completion of life verification exercise. Suitable amendments in the pension plan will be made accordingly. As

required under the approved accounting standards, the impact of the revision will be accounted for in the financial

statements of the Bank as past service cost in the financial year 2018 once the plan is formally approved.

These consolidated financial statements were authorized for issue on February 19, 2018 by the Board of Directors of the

Holding Company.

87

Consolidated Financial Statements

1) Particulars of investments held in listed companies and Modaraba

Investee

Number of

shares /

certificates

held

Paid up value

per share /

certificate

Total paid up

value Cost

(Rupees)


Investments in ordinary shares

Agritech Limited 15,975,876 10 159,759 559,228

DP World 6,926 2,010 13,919 19,885

Engro Corporation Limited 1,935,000 10 19,350 597,627

Engro Fertilizers Limited 6,669,000 10 66,690 603,631

Fatima Fertilizer Company Limited 22,400,000 10 224,000 569,358

Fauji Cement Limited 16,500,000 10 165,000 578,292

Fauji Fertilizer Company Limited 17,750,000 10 177,500 1,996,503

Fauji Fertilizer Bin Qasim Limited 46,699,000 10 466,990 1,894,542

Ghani Gases Limited 15,586,048 10 155,860 356,703

Gharibwal Cement Limited 5,950,000 10 59,500 281,959

Hub Power Company Limited 38,189,500 10 381,895 1,819,518

Hum Network Limited 3,654,000 1 3,654 59,243

Indus Dyeing & Manufacturing Company Limited 484,890 10 4,849 533,428

Kohat Cement Limited 1,895,000 10 18,950 390,240

Kohinoor Spinning Mills Limited 3,580,000 5 17,900 61,892

Kot Addu Power Company Limited 79,422,000 10 794,220 3,688,420

Lucky Cement Limited 830,000 10 8,300 592,327

Nishat Chunian Power Limited 18,306,500 10 183,065 349,216

Oil & Gas Development Company Limited 3,940,000 10 39,400 593,890

Pakistan Telecommunication Company Limited 27,338,000 10 273,380 598,914

Pakistan Petroleum Limited 3,707,600 10 37,076 596,559

Pakistan State Oil Limited 1,800,000 10 18,000 579,373

Saif Power Limited 10,237,000 10 102,370 339,456

Soneri Bank Limited 22,291,500 10 222,915 337,311

Pak Oilfields Limited 824,950 10 8,250 364,789

PICIC Growth Fund 600 10 6 10

1st Fidelity Leasing Modaraba 997 10 10 26

18,362,340

Investments in Real Estate Investment Trust

Dolmen City REIT 41,690,000 10 416,900 458,590

Investments in preference shares

Masood Textile Mills Limited 3,666,668 10 36,667 36,667

JSC Alliance Bank 95,720 3,705 354,648 354,648

391,315

Annexure 'A' as referred to in note 9.7 of the Group's

---------------------- (Rupees in '000) ----------------------



2) Particulars of investments held in unlisted companies

Investee

Percentage

of holding

(%)

Number of

shares /

certificates

held

Break-up

value per

share

Paid up

value per

share

Cost

Based on

audited

accounts as

at

Name of Chief

Executive

Rupees Rupees (Rupees

'000)

Shareholding more than 10%

Pakistan Agricultural Storage &

Services Corporation Limited18.3% 5,500 228,378 1,000 5,500 31-Mar-17

Muhammad Khan

Khichi

Pakistan Mortgage and Refinance

Company Limited

10.2% 1,530,000 10 10 15,300 31-Dec-16 N.Kokularupon

Narayanasamy

Shareholding upto 10%

World Bridge Connect Inc. 9.9% 1,979,295 Not

available

Not

available

77,606 Not available Not available

First Women Bank Limited 2.2% 7,698,441 10 10 21,100 31-Dec-16 Tahira Raza

National Institutional Facilitation

Technologies (Pvt.) Limited9.1% 2,266,607 24.62 10 1,526 30-Jun-17 Haider Wahab

National Investment Trust Limited 8.3% 79,200 9,419 100 100 30-Jun-17 Manzoor Ahmed

News-VIS Credit Information

Services (Pvt.) Limited4.7% 32,500 1 10 325 30-Jun-17 Faheem Ahmad

Techlogix International Limited 4.2% 4,455,829 6.71 5 50,702 31-Dec-16

Salman Akhtar &

Kewan Khawaja (Co

Chief Executive)

Kay Textile Mills Limited Not available 377,800 Not

available

Not

available

3,778 Not available Not available

SME Bank Limited 1.7% 3,975,003 - 10 26,950 31-Dec-16 Ihsan ul Haq Khan

SWIFT 0.0% 25 495,821 16,532 2,905 31-Dec-16 Gottfried Leibbrandt

MasterCard Incorporated 0.0% 461 580 427 - 31-Dec-16 Ajay Banga

Cinepax Limited 8.4% 5,037,200 33 10 50,372 30-Jun-17 Hashim Raza

The Benefit Company B.S.C 1.0% 311 172,024 29,284 2,343 31-Dec-16 Abdul Wahed

AlJanahi

Tri Star Shipping Company 0.0% 15,000 - - 250 Not available Not available

258,757



3) Particulars of bonds

PrincipalInterest /

Profit

(Rupees in '000)


Government of Pakistan Sukuk

Government of Pakistan XVIII At Maturity Bi-annually 5.59% 6,040,936

Government of Pakistan XIX At Maturity Bi-annually 5.24% 5,904,326

Government of Pakistan Ijarah Sukuk - XVI At Maturity Bi-annually Cut off yield of 6M T-Bills minus 50 bps 4,000,000

Islamic Republic of Pakistan 2019 - Sukuk At Maturity Bi-annually 6.75% 1,104,173

Islamic Republic of Pakistan 2021 - Sukuk At Maturity Bi-annually 5.50% 2,052,838

19,102,273

Government of Pakistan - Eurobonds

Islamic Republic of Pakistan - 2019 - Eurobond At Maturity Bi-annually 7.250% 2,203,012

Islamic Republic of Pakistan - 2019 - Eurobond At Maturity Bi-annually 6.750% 232,086




16,768,510

Foreign bonds - sovereign

Angola 2019 At Maturity Quarterly 7.000% 316,848

Arab Republic of Egypt 2020 At Maturity Bi-annually 5.750% 818,000

Arab Republic of Egypt 2025 At Maturity Bi-annually 5.880% 885,546

Government of Dubai Bond 2020 At Maturity Bi-annually 7.750% 1,654,268

Government of Dubai Bond 2022 At Maturity Quarterly 6.450% 1,467,526

Kingdom of Bahrain Bond 2020 At Maturity Bi-annually 5.500% 1,150,637

Kingdom of Bahrain Bond 2026 At Maturity Bi-annually 7.000% 2,809,685

Kingdom of Jordan 2026 At Maturity Bi-annually 6.125% 1,428,591

Kingdom of Jordan 2027 At Maturity Bi-annually 5.750% 441,478

Republic of Kenya At Maturity Bi-annually 5.875% 1,587,223

Republic of Nigeria 2023 At Maturity Bi-annually 6.375% 1,091,132

Kingdom of Oman 2026 At Maturity Bi-annually 5.255% 885,139

Republic of Portugal 2024 At Maturity Bi-annually 5.125% 495,775

Republic of Sri Lanka Bond 2020 At Maturity Bi-annually 6.250% 1,086,840

Republic of Sri Lanka Bond 2021 At Maturity Bi-annually 6.250% 864,236

Republic of Sri Lanka Bond 2022 At Maturity Bi-annually 5.875% 1,420,372


Republic of Turkey 2022 At Maturity Bi-annually 6.250% 1,892,918

Republic of Turkey 2026 At Maturity Bi-annually 4.875% 551,549

Republic of Vietnam At Maturity Bi-annually 4.800% 330,870

State of Qatar Bond 2030 At Maturity Bi-annually 9.750% 2,770,873

Turkey Sukuks 2021 At Maturity Bi-annually 4.251% 44,167

United Republic of Tanzania At Maturity Bi-annually 7.452% 1,251,809

UK Government 2018 At Maturity Bi-annually 1.250% 754,726

UK Government 2018 At Maturity Bi-annually 1.000% 747,113

UK Government 2018 At Maturity Bi-annually 0.000% 3,130,171


Abu Dhabi Government 2027 At Maturity Bi-annually 3.125% 552,656

Abu Dhabi Government 2018 At Maturity Bi-annually 1.000% 750,385

Azerbaijan 2032 At Maturity Bi-annually 3.500% 473,543

Counsel of Europe Develepment Bank 2022 At Maturity Bi-annually 0.625% 892,596

State of Qatar Bond 2022 At Maturity Bi-annually 3.250% 327,321

Republic of Zambia2022 At Maturity Bi-annually 5.375% 738,523

Sultanate of Oman 2024 At Maturity Bi-annually 4.397% 333,889


US Government Bonds 2026 At Maturity Bi-annually 1.500% 651,554

38,492,705

Investee

Terms of Redemption

Rate of Interest / ProfitOutstanding

Amount



PrincipalInterest /

Profit

(Rupees in '000)

Foreign bonds - others

AK Bank 2022 At Maturity Bi-annually 5.000% 440,924


Bank of Ceylon At Maturity Bi-annually 5.325% 529,117

Bank of Ceylon 2018 At Maturity Bi-annually 6.875% 239,867

CBQ Finance 2019 At Maturity Bi-annually 7.500% 497,560

Dubai Electricity and Water Authority 2018 At Maturity Bi-annually 3.000% 3,532,985

Dubai Electricity and Water Authority 2020 At Maturity Bi-annually 7.375% 1,574,868

EMAAR 2019 At Maturity Bi-annually 8.500% 89,124

Ezdan Sukuk Company Limited At Maturity Bi-annually 4.375% 138,030

Garanti 2022 At Maturity Bi-annually 5.250% 330,056

ICD Sukuk 2027 At Maturity Bi-annually 5.000% 1,651,615

IPIC GMTN 2022 At Maturity Bi-annually 5.500% 214,582

Jebel Ali Free Zone Authority 2019 At Maturity Bi-annually 7.000% 1,014,901

PTA Bank 2018 At Maturity Bi-annually 6.375% 313,102

Qatari Diar QSC 2020 At Maturity Bi-annually 5.000% 276,493

Breket Bonds 2019 At Maturity Bi-annually 6.250% 217,836

Bhakti Investment 2018 At Maturity Bi-annually 5.875% 665,821

BTG Pactual Bond 2023 At Maturity Bi-annually 5.500% 365,088

Diamond Bank 2019 At Maturity Bi-annually 8.750% 888,214

Ezdan Sukuk 2022 At Maturity Bi-annually 4.875% 333,129

Halk Bank 2021 At Maturity Bi-annually 5.000% 1,167,803

Iceland Bondco Plc 2025 At Maturity Bi-annually 4.625% 603,014

Isbank 2021 At Maturity Bi-annually 5.375% 57,033

Isbank 2024 At Maturity Bi-annually 6.125% 681,495

Lippo Karawaci 2022 At Maturity Bi-annually 7.000% 87,621

National Saving 2018 At Maturity Bi-annually 8.875% 593,543

Tskb Bank 2019 At Maturity Bi-annually 5.375% 85,345

Tupras A.S. 2024 At Maturity Bi-annually 4.500% 278,373

Turk Eximbank 2022 At Maturity Bi-annually 4.250% 110,885

Turk Eximbank 2023 At Maturity Bi-annually 5.375% 22,931

Turkiye Vakiflr 2018 At Maturity Bi-annually 3.750% 111,389

Yepi Kredi Bk 2024 At Maturity Bi-annually 5.850% 556,489

Zenith Bank 2022 At Maturity Bi-annually 7.375% 453,753

18,150,879


Government of Pakistan - Eurobonds





6,564,140

Government of Pakistan Sukuk

Islamic Republic of Pakistan 2019 - Sukuk At Maturity Bi-annually 6.750% 221,823

221,823

Sukuks

Al Baraka Bank (Pakistan) Limited Bi-annually Bi-annually 6M KIBOR plus 125bps 142,857

Fatima Fertilizer Company Limited Bi-annually Bi-annually 6M KIBOR plus 110bps 681,600

K-Electric Limited Bi-annually Quarterly 3M KIBOR plus 100 bps 2,250,000

Neelum Jehlum Hydropower Company (Pvt) Limited Bi-annually Bi-annually 6M KIBOR plus 113bps 3,575,000

Pakistan International Airlines Limited* Bi-annually Bi-annually 6M KIBOR plus 175 bps 890,000

Sitara Peroxide Limited Monthly Monthly 1M KIBOR plus 100 bps 118,110

Sui Northern Gas Pipelines Limited Bi-annually Bi-annually 6M KIBOR plus 110bps 943,763

Sui Southern Gas Company Limited Bi-annually Bi-annually 6M KIBOR plus 110bps 800,000

WAPDA Bonds - Sukuk III At Maturity Bi-annually 6M KIBOR plus 100bps 242,857

WAPDA Bonds - Dassu At Maturity Bi-annually 6M KIBOR plus 145bps 868,060

10,512,247

Investee

Terms of Redemption


Amount

3) Particulars of bonds (Contd.)



PrincipalInterest /

Profit

(Rupees in '000)


Arab Republic of Egypt 2020 At Maturity Bi-annually 5.750% 1,268,224

Arab Republic of Egypt 2025 At Maturity Bi-annually 5.875% 1,414,339

Bahrain 2026 At Maturity Bi-annually 7.000% 1,319,611



Qatar Government Bonds 2030 At Maturity Bi-annually 9.750% 1,065,501

Republic of Kenya 2019 At Maturity Bi-annually 5.875% 1,217,810

Republic of Portugal 2024 At Maturity Bi-annually 5.125% 495,775






Republic of Tanzania At Maturity Bi-annually 7.452% 557,414

Republic of Tanzania At Maturity Bi-annually 7.586% 87,523



Turkey Sukuks 2021 At Maturity Bi-annually 4.251% 44,167

Republic of Kenya 2024 At Maturity Bi-annually 6.875% 218,049

Kingdom of Bahrain Bond 2026 At Maturity Bi-annually 7.000% 475,847

Republic of Nigeria At Maturity Bi-annually 6.375% 350,836

Republic of Ghana 2022 At Maturity Bi-annually 9.250% 350,332



15,208,115

Foreign securities - others


Bank of Ceylon At Maturity Bi-annually 5.325% 357,388

Ezdan Sukuk Company Limited At Maturity Bi-annually 4.375% 138,030

Garanti 2022 At Maturity Bi-annually 5.250% 324,653

JSC Alliance Bank - US $ Discount Bonds At Maturity Quarterly 10.500% 239,493

Boparan Finance At Maturity Bi-annually 5.500% 599,424

Debenhams Plc At Maturity Bi-annually 5.250% 611,531

House Of Fraser At Maturity Bi-annually 6.341% 594,743

Jaguar Ld Rover At Maturity Bi-annually 5.000% 305,421

Pgh Capital Ltd At Maturity Bi-annually 5.750% 629,204

Pizza Express At Maturity Bi-annually 6.625% 623,165

Premier Foods At Maturity Bi-annually 6.500% 766,406

Talktalk Tg At Maturity Bi-annually 5.375% 468,573

6,098,955

JSC Alliance Bank - US $ Recovery Notes At Maturity N/A N/A 340,333

6,439,288

*These sukuks are classified, however, no provision has been maintained as these are secured by Government of Pakistan guarantee.

4) Particulars of Debentures

Principal Interest

(Rupees in '000)

Private Sector

Effef Industries Limited Overdue Overdue 11.00% 1,017

Effef Industries Limited Overdue Overdue 14.00% 379

Khyber Textile Mills Limited Overdue Overdue 14.00% 394

Morgah Valley Limited Overdue Overdue 11.00% 316

Morgah Valley Limited Overdue Overdue 14.00% 160

2,266

Investee

Terms of Redemption


Amount

InvesteeTerms of Redemption

Rate of InterestOutstanding

Amount

3) Particulars of bonds (Contd.)



5) Particulars of investments in term finance certificates

Investee

No. of

Certificates

held

Paid up value

per certificate

Total Paid up

value

Outstanding

Amount Name of Chief Executive

(Rupees)


Unlisted

Azgard Nine Limited 12,944 5,000 64,720 64,720 Ahmed H. Shaikh

Pakistan International Airlines Corporation TFC* 1,700 5,000 8,500 8,498 Musharraf Rasool Cyan

73,218

Listed


MCB Bank Limited TFC (formerly NIB Bank Ltd) 30,000 5,000 150,000 149,790 Imran Maqbool

Bank Alfalah Limited TFC 24,200 5,000 121,000 120,783 Nauman Ansari

368,188

441,406

Held to Maturity

Unlisted

Pakistan International Airlines Corporation TFC* 408,867 5,000 2,044,335 1,276,685 Musharraf Rasool Cyan

Security Leasing Corporation Limited 40,000 5,000 200,000 30,807 Farah Azeem

Al-Azhar Textile Mills Limited 14 774,670 10,845 5,418 Mirza Aurangzeb Baig

Bentonite (Pakistan) Limited 14 268,894 3,765 3,417 Khalid Shakeel

Cast-N-Link Products Limited 16 1,064,039 17,025 2,549 Nisar Ahmed

Standard Chartered Bank Pakistan 75,000 5,000 375,000 375,000 Shahzad Dada


Askari Commercial Bank Limited 120,000 5,000 600,000 599,280 Syed Majeedullah Husaini

WAPDA 300,000 5,000 1,500,000 3,461,313 Retired Lt- Gen Muzammil Hussain

5,815,584

Listed

Bank Alfalah Limited 48,600 5,000 243,000 242,562 Nauman Ansari

MCB Bank Limited TFC (formerly NIB Bank Ltd) 30,000 5,000 150,000 149,790 Imran Maqbool

Soneri Bank Limited 83,833 5,000 419,165 418,830 Muhammad Aftab Manzoor

811,182

6,626,766

*These TFCs are classified, however, no provision has been maintained as these are secured by Government of Pakistan guarantee.

6) Particulars of participation term certificates

(Rupees)

Morgah Valley Limited 16 29,250 468 437 Air Marshal (R) A. Rahim Khan

Name of Chief Executive

------------- (Rupees in '000) -------------

------------- (Rupees in '000) -------------

Investee

No. of

Certificates

held

Paid up value

per certificate

Total Paid up

value

Outstanding

Amount



7) Quality of investments classified as available for sale (AFS)

Investee Market Value Credit Rating

(Rupees in '000)

Investments in ordinary shares

Agritech Limited 77,803 Unrated

DP World 19,114 Baa3

Engro Corporation Limited 531,641 AA

Engro Fertilizers Limited 451,625 AA-

Fatima Fertilizer Company Limited 691,712 AA-

Fauji Cement Limited 412,665 Unrated

Fauji Fertilizer Company Limited 1,659,682 AA

Fauji Fertilizer Bin Qasim Limited 1,404,203 Unrated

Ghani Gases Limited 238,467 A-

Gharibwal Cement Limited 143,455 A-

Hub Power Company Limited 3,475,245 AA+

Hum Network Limited 29,853 A+

Indus Dyeing & Manufacturing Company Limited 212,823 A+

Kohat Cement Limited 269,014 A

Kohinoor Spinning Mills Limited 11,313 Unrated

Kot Addu Power Company Limited 4,280,846 AA+

Lucky Cement Limited 429,450 Unrated

Nishat Chunian Power Limited 602,467 A-

Oil & Gas Development Company Limited 641,393 AAA

Pakistan Telecommunication Company Limited 359,749 Unrated

Pakistan Petroleum Limited 763,432 Unrated

Pak Oilfields 490,235 Unrated

Pakistan State Oil Limited 527,598 AA

Saif Power Limited 296,156 A+

Soneri Bank Limited 298,705 AA-

PICIC Growth Fund 15 Unrated

1st Fidelity Leasing Modaraba 3 Unrated

18,318,664

Investments in Real Estate Investment Trust

Dolmen City REIT 458,590 AM2

Investee Cost Credit Rating

(Rupees in '000)

Investments in preference shares

Masood Textile Mills Limited 36,667 Unrated

JSC Alliance Bank 354,648 Caa2

391,315

Investments in unlisted shares

Shareholding more than 10%

Pakistan Agricultural Storage & Services Corporation Limited 5,500 Unrated

Pakistan Mortgage and Refinance Company Limited 15,300 AA

Shareholding upto 10%

World Bridge Connect Inc. 77,606 Unrated

First Women Bank Limited 21,100 A-

National Institutional Facilitation Technologies (Pvt.) Limited 1,526 Unrated

National Investment Trust Limited 100 AM2+

News-VIS Credit Information Services (Pvt.) Limited 325 Unrated

Techlogix International Limited 50,702 Unrated

Kay Textile Mills Limited 3,778 Unrated

SME Bank Limited 26,950 B

SWIFT 2,905 Unrated

MasterCard Incorporated - A2

Cinepax Limited 50,372 Unrated

The Benefit Company B.S.C 2,343 Unrated

Tri Star Shipping Company 250 Unrated

258,757



7) Quality of investments classified as available for sale (AFS) (Contd.)

Particulars Market Value Credit Rating

(Rupees in '000)

Federal Government Securities

Market Treasury Bills 302,515,945 Unrated - Government Securities

Pakistan Investment Bonds 235,845,961 Unrated - Government Securities

538,361,906

Government of Pakistan Ijarah Sukuk

Government of Pakistan Ijarah Sukuk - XVIII 6,044,400 Score7

Government of Pakistan Ijarah Sukuk - XIX 5,896,460 Score7

Government of Pakistan Ijarah Sukuk - XVI 4,028,400 Score7

Islamic Republic of Pakistan 2019 - Sukuk 1,145,955 Score7

Islamic Republic of Pakistan 2021 - Sukuk 2,044,051 Score7

19,159,266

Government of Pakistan - Euro bond

Islamic Republic of Pakistan - 2019 - Euro Bond 2,255,694 Score7

Islamic Republic of Pakistan - 2019 - Euro Bond 230,353 Score7




17,325,329


Angola 2019 323,224 Score5

Arab Republic of Egypt 2020 845,917 Score6

Arab Republic of Egypt 2025 919,844 Score6

Government of Dubai Bond 2020 1,729,796 Score2

Government of Dubai Bond 2022 1,558,080 Score2

Kingdom of Bahrain Bond 2020 1,155,336 Score4

Kingdom of Bahrain Bond 2026 2,817,349 Score4

Kingdom of Jordan 2026 1,431,548 Score5

Kingdom of Jordan 2027 442,003 Score5

Republic of Kenya 1,636,715 Score6

Republic of Nigeria 2023 1,137,490 Score5

Kingdom of Oman 2026 891,562 Score3

Republic of Portugal 2024 521,900 Unrated

Republic of Sri Lanka Bond 2020 1,128,396 Score6

Republic of Sri Lanka Bond 2021 893,783 Score5

Republic of Sri Lanka Bond 2022 1,507,540 Score6

Republic of Sri Lanka Bond 2026 903,386 Score6

Republic of Turkey 2022 1,925,895 Score4

Republic of Turkey 2026 545,188 Score4

Republic of Vietnam 354,212 Score5

State of Qatar Bond 2030 2,893,753 Score3

Turkey Sukuks 2021 44,639 Score4

United Republic of Tanzania 1,299,595 Score6

UK Government 2018 753,393 AA

UK Government 2018 749,647 AA

UK Government 2018 3,130,271 AA

UK Government 2018 2,901,677 AA

Abu Dhabi Government 2027 545,066 AA

Abu Dhabi Government 2018 749,647 AA

Azerbaijan 2032 488,057 BB+

Counsel of Europe Development Bank 2022 882,459 AA+

State of Qatar Bond 2022 321,878 AA-

Republic of Zambia 2022 712,551 B

Sultanate of Oman 2024 332,586 BBB-

Sultanate of Oman 2027 113,486 BBB-

US Government Bonds 2026 619,806 AAA

39,207,675



7) Quality of investments classified as available for sale (AFS) (Contd.)

Particulars Market Value Credit Rating

(Rupees in '000)

Foreign bonds - others

AK Bank 2022 443,467 Ba1

AK Bank 2018 27,896 Ba1

Bank of Ceylon 528,354 B1

Bank of Ceylon 2018 239,565 B+

CBQ Finance 2019 495,591 A2

Dubai Electricity and Water Authority 2018 3,539,002 BBB+

Dubai Electricity and Water Authority 2020 1,663,155 BBB+

EMAAR 2019 93,502 Baa3

Ezdan Sukuk Company Limited 126,717 Ba1

Garanti 2022 333,092 BBB-

ICD Sukuk 2027 1,643,977 Unrated

IPIC GMTN 2022 212,703 aa2

Jebel Ali Free Zone Authority 2019 1,041,019 BBB-

PTA Bank 2018 317,800 BB

Qatari Diar QSC 2020 289,899 Unrated

Breket Bonds 2019 213,254 BB

Bhakti Investment 2018 599,724 CC

BTG Pactual Bond 2023 364,615 B-

Diamond Bank 2019 854,205 B-

Ezdan Sukuk 2022 307,470 BB-

Halk Bank 2021 1,112,026 BB

Iceland Bondco Plc 2025 572,910 B

Isbank 2021 56,527 BB

Isbank 2024 677,544 BB

Lippo Karawaci 2022 86,846 B+

National Saving 2018 590,581 B+

Tskb Bank 2019 84,867 BB+

Tupras A.S. 2024 273,136 BB+

Turk Eximbank 2022 108,982 BB+

Turk Eximbank 2023 22,603 BB+

Turkiye Vakiflr 2018 111,263 BB

Yepi Kredi Bk 2024 554,691 BB

Zenith Bank 2022 452,839 B

18,039,822

Term finance certificates

Listed

Azgard Nine Limited 97,615 Defaulted

MCB Bank Limited TFC (formerly NIB Bank Ltd) 152,120 A+

Bank Alfalah Limited TFC 122,931 AA-

372,666

Unlisted

Azgard Nine Limited 64,720 Defaulted

Pakistan International Airlines Corporation TFC 8,498 Defaulted

73,218

Disposals of operating fixed assets during the year 2017

Cost Accumulated

depreciation

Book value Sale

proceeds

Mode of

disposal

Particulars of Buyers

or cost of more than Rs. 1,000,000

Land & Building

Freehold Land

Plot No 16 Jhelum 13,413 - 13,413 15,000 Auction Mr.Naseer Ahmed

Vehicles

Mercedes Benz E 200 9,545 7,731 1,814 3,866 Buy Back Syed Javed - Employee

Mercedes Benz S500L 27,961 25,165 2,796 10,000 Auction Asim Iqbal

Honda Civic VTEC 2,605 1,993 612 1,578 Auction Zia Ul Haq

### Honda Accord 6,206 5,585 621 2,566 Auction Asim Iqbal

### Suzuki Cultus VXRi 1,084 650 434 720 Auction UBL Insurers Limited

### Suzuki APV 1,370 1,233 137 994 Auction Saeed Ur Rehman

### Toyota Corolla 1,389 1,250 139 917 Auction Nusrat Iqbal

### Toyota Corolla 1,389 1,250 139 981 Auction Muhammad Atif Essani

### Toyota Corolla 1,389 1,250 139 979 Auction Muhammad Arif

### Toyota Corolla 1,511 1,360 151 1,166 Auction Said Faqir

### Toyota Corolla 1,502 1,352 150 1,177 Auction Wasim Mirza

Toyota Corolla 1,453 1,308 145 1,135 Auction Numeri Abrar

Toyota Corolla 1,453 1,308 145 1,010 Auction Muhammad Atif Essani



Toyota Corolla 1,453 1,308 145 1,057 Auction Isha Enterprises

### Toyota Corolla 1,460 1,314 146 1,151 Auction Said Faqir

### Toyota Corolla 1,453 1,308 145 1,114 Auction Numeri Abrar

### Toyota Corolla 1,453 1,308 145 1,071 Auction Saleem Ahmed Siddiqui


### Toyota Corolla 1,502 1,502 - 1,101 Auction Isha Enterprises

### Toyota Corolla 1,502 1,502 - 1,189 Auction Numeri Abrar

### Toyota Corolla 1,510 1,510 - 1,097 Auction Muhammad Imran Younus

### Toyota Corolla 1,502 1,502 - 1,089 Auction Saleem Ahmed Siddiqui



### Toyota Corolla 1,502 1,502 - 1,140 Auction Saeed Ur Rehman

### Toyota Corolla 1,570 1,413 157 1,105 Auction Syed Zuhaib Ahmed

### Toyota Corolla 1,581 1,423 158 1,297 Auction Imad Iqbal Abbasi

82,695 73,643 9,052 45,010

Electrical, office and

computer equipment

ATM Machine 1,039 1,039 - 65 Auction NCR Corporation





Generator 1,782 1,782 - 850 Auction UBL Insurers Limited

Generator 1,954 1,954 - 300 Auction UBL Insurers Limited

8,831 8,831 - 1,475

Items having book value of less than Rs. 250,000

and cost of less than Rs. 1,000,000

Others 1,970,747 1,970,009 738 19,701

Total 2,075,686 2,052,483 23,203 81,186

Annexure 'C' as referred to in note 11.7 of Group's


--------------(Rupees in '000)--------------

Items having book value of more than Rs. 250,000

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT DECEMBER 31, 2017

2017 2016

ASSETS


Balances with other banks 321,953 292,231

Lendings to financial institutions 325,075 321,368

Investments 10,187,917 7,591,773

Advances

Performing 5,704,046 4,798,330

Non-performing - net of provision 114,855 72,126

5,818,901 4,870,456

Operating fixed assets 456,306 355,913

Deferred tax asset - net - -

Other assets 497,986 409,171

19,067,323 15,049,668

LIABILITIES

Bills payable 121,294 106,496

Borrowings 4,682,986 1,864,430

Deposits and other accounts 12,372,691 11,282,587

Subordinated loans - -

Liabilities against assets subject to finance lease 40 32

Deferred tax liability - net 26,993 47,371

Other liabilities 283,007 265,929

17,487,011 13,566,845

NET ASSETS 1,580,312 1,482,823

REPRESENTED BY:

Share capital 110,869 110,869

Reserves 427,501 385,947

Unappropriated profit 694,199 624,350

Total equity attributable to the equity holders of the Bank 1,232,569 1,121,166


1,276,136 1,159,454

Surplus on revaluation of assets - net of deferred tax 304,176 323,369

1,580,312 1,482,823

These figures have been converted at Rs. 110.4172 per US Dollar from the audited financial statements.

------------- (US Dollars in '000) -------------

CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2017

2017 2016

Mark-up / return / interest earned 1,001,473 921,551

Mark-up / return / interest expensed 475,358 388,834

Net mark-up / return / interest income 526,115 532,717

Provision against loans and advances - net 17,001 5,657

Reversal of provision against lendings to financial institutions - net (75) (140)

Provision for diminution in value of investments - net 6,519 8,134

Bad debts written off directly 1,698 886

25,143 14,537

Net mark-up / return / interest income after provisions 500,972 518,180

Non mark-up / return / interest income

Fee, commission and brokerage income 134,327 130,211

Dividend income 15,702 20,616

Income from dealing in foreign currencies 19,473 17,713

Gain on sale of securities - net 43,451 50,804

Unrealized gain / (loss) on revaluation of investments classified as held for trading 20 (11)

Other income 7,067 8,298

Total non mark-up / return / interest income 220,040 227,631

721,012 745,811

Non mark-up / return / interest expenses

Administrative expenses 348,273 317,181

Other provisions / write offs - net (3,524) 2,095

Workers' Welfare Fund 7,378 8,423

Other charges 541 632

Total non mark-up / return / interest expenses 352,668 328,331

Share of profit of associates 4,163 9,575

Profit before taxation 372,507 427,055

Taxation - Current 133,144 138,617

- Prior (18,400) 20,390

- Deferred 20,511 14,444

135,255 173,451

Profit after taxation 237,252 253,604

Attributable to:

Equity shareholders of the Bank 237,195 251,616

Non-controlling interest 57 1,988

237,252 253,604

Earnings per share - basic and diluted 0.19 0.21

These figures have been converted at Rs. 110.4172 per US Dollar from the audited financial statements.

--------- (US Dollars in '000) --------

------------ (US $) ------------

Documents

United Bank Limited · Chief Executive Officer Attributable to equity shareholders of the Bank Sub total Non-controlling Interest ... Blue Area, Islamabad and at UBL Head Office,