Commercial Banks: SAUDI PAK COMMERCIAL BANK LIMITED - Year Ended 31-12-2006
Saudi Pak Commercial Bank Limited (SaudiPak Bank), incorporated in Pakistan on April 4, 1994 as a public limited company under the Companies Ordinance, 1984, commenced commercial operations on May 7, 1995.
Its shares are quoted on all the stock exchanges in Pakistan. Majority control and management of SaudiPak Bank is with Saudi Pak Industrial and Agricultural Investment Company (Private) Limited (Sapico) which is the holding company of the bank.
Saudi Pak Insurance Company Limited and J.K. Sons (Pvt) Limited are its associated companies. SaudiPak Bank operates through 50 branches (2005: 50 branches) in Pakistan. Total staff strength as on December 31, 2006 was 1,426 including 413 outsourced (2005: 981 including 112 outsourced).
The Directors report that the JCR-VIS Credit Rating Company has assigned long term rating of "A-" (Single A Minus) to the bank, whereas the short term rating is "A-2" (A Two). Both ratings are with a "Negative Outlook".
According to the notes to the financial statements, the bank has not increased its paid up share capital (net of losses) to Rs 3 billion up to December 31, 2006 as required by BSD Circular No 6 of 2005. The Board of Directors in their meeting held on November 27, 2006 announced issue of 30% right shares at par. The proceeds of right share amounting to Rs 1,154.250 million will be received by March17, 2007. After issuance of right shares, the paid up share capital of the bank would amount to Rs 5,000.750 million.
On December 31, 2006 the authorised capital of SaudiPak Bank was Rs 10 billion, comprising 1,000 million shares of Rs 10/- each. As on December 31, 2006 the paid up capital of Rs 3.847 billion was held by 4,808 shareholders, of which 2,721 individuals hold over 28% shares.
Sapico, the holding company already owns 59% shares and according to the notes to the financial statements, transfer of more shares is in process thus raising its holding to nearly 68%. The directors, CEO, their spouse and minor children hold about 1% voting interest. The rest of the shares are distributed among a number of corporate entities including banks and DFIs.
SaudiPak Bank saw 24% increase in its Total Assets to Rs 59 billion as on December 31, 2006 compared to Rs 48 billion on December 31, 2005. During the period under review, Advances increased by 49% to Rs 29 billion (2005: Rs 19.5 billion), Investments grew by 26% to Rs 15.7 billion (2005: Rs 12.4 billion) and Deposits rose by 32% to Rs 49 billion (2005: Rs 37 billion). As percentage of Total Assets, Deposits are rather high at 83% (2005: 78%), whereas Equity including Surplus on Revaluation of Assets is 6.6% of Total Assets (2005: 8% of TA). The increase in paid up capital through 30% right issue at par is a step in the right direction.
According to note 39 to the financial statements, Capital Adequacy Ratio of the bank as on December 31, 2006 was 9.53% (2005: 15.91%) as against prescribed minimum equivalent to 8% of the risk weighted assets of the banking company.
SaudiPak Bank's Advances as on December 31, 2006 at Rs 29 billion are 49% of Total Assets (2005: 41% of TA). As on December 31, 2006, gross NPLs at Rs 4,635 million (2005: Rs 4,496 million) are quite high. In percentage terms gross NPLs on December 31, 2006 were 14.7% of gross Advances (2005: 20.8% of GA). On net basis, NPLs as on December 31, 2006 work out to 7.34% (2005: 12.18%). Provision has been made as required.
The president/CEO of SaudiPak Bank in his Message says that recovery of NPLs is another area where all out efforts are made. According to him, since the approval of Classified Accounts Reduction Plan by the Board in July 2005, a number of recovery suits, involving substantial amount have been filed against defaulters. In addition, sizeable cash recoveries were made and advances were regularized as part of the portfolio cleansing process.
Total mark up income of SaudiPak Bank for the year ended December 31, 2006 increased by 41% to Rs 3,702 million compared to Rs 2,632 million for the previous year. However, mark up expense for the period increased by 76% to Rs 3,261 million (2005: Rs 1,840 million). This reduced the profitability margins. Moreover, substantial provision was also made this year for doubtful loans. Therefore, net mark up income (after mark up expensed and provisions) for the year under review decreased by 89% to only Rs 33 million (2005: Rs 298 million).
Administrative expense saw 50% increase during the year under review. The bank had pre-tax loss of Rs 425 million (2005: Pre tax profit Rs 120 million). However, due to adjustments in income tax for deferred tax, the year 2006 was closed with reduced After-tax Loss at Rs 319 million (2005: After tax profit Rs 65 million). Performance statistics are given below.
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Performance Statistics (Audited)
(Rs Million)
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Balance Sheet (As on December 31,) 2006 2005
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Total Assets: 59,112 47,749
Cash, balances with banks: 4,608 3,448
Investments-Net: 15,702 12,465
Advances-Net: 29,022 19,514
Borrowing from fin. Institutions: 4,237 5,481
Deposits, other accounts: 49,015 37,136
Total Liabilities: 55,203 43,942
Net Assets: 3,909 3,807
Share Capital: 3,847 3,847
Reserves & Un-app. Profit: -959 -641
Equity: 2,888 3,206
Surplus on Revalue, Assets: 1,021 601
Equity incl. Revalue Surplus: 3,909 3,807
Advances-Gross: 31,527 21,633
Gross NPLs: 4,635 4,496
Total Provision: 2,505 2,119
Conting. & Commitments: 21,557 16,955
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Ratios:
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Cash & bank/Total Assets: 8% 7%
Investments/Total Assets: 27% 26%
Advance-Net/Total Assets: 49% 41%
NPLs/Advances-Gross: 14.7% 20.8%
NPLs-net/Advances-net: 7.3% 12.2%
Provisions./Advances-Gross: 7.9% 9.8%
Deposits/Total Assets: 83% 78%
Total Liabilities/Total Assets: 93% 92%
Total Liabilities/Total Equity-X: 14.1 11.5
Total Equity/Total Assets: 6.6% 8.0%
Deposits/Equity-Times: 12.5 9.8
Advances/Deposits: 59% 53%
Investments/Deposits: 32% 34%
Conting. & Comm./Equity-Times: 5.51 4.45
Book Value per Share: 10.16 9.90
Quoted share price (9-04-07) - Rs: 18.75 -
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Income Statement (Y end December 31,) 2006 2005
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Markup-interest earned: 3,702 2,632
Markup-interest expensed: 3,261 1,849
Net Markup-interest income: 441 783
Provisions and write offs: 408 485
Net mark up income (aft. Prov.): 33 298
Total non-markup income: 706 660
Income bef. Admn. Exp.: 739 958
Admin Expenses, etc: 1,142 762
Profit/(Loss) before Tax: -424 141
Current & deferred tax: -105 76
Profit/(Loss) after tax: -319 65
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Ratios: (Annual Basis)
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Markup earned/Total Assets: 6.3% 5.5%
Net Markup Income/TA: 0.7% 1.6%
Net markup (aft. Prov.)/TA: 0.1% 0.6%
Non-Markup Income/TA: 1.2% 1.4%
Income before Admn. Exp./TA: 1.3% 2.0%
Admin Expenses/TA: 1.9% 1.6%
Profit/(Loss) before Tax/TA: -0.7% 0.3%
Profit/(Loss) after Tax/TA: -0.5% 0.1%
Profit/(Loss) after Tax/Equity: -8.2% 1.7%
EPS- (year-end paid up) - Rs: -0.83 0.17
Price/earnings ratio - Times: -22.61 -
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Cash flow Summary 2006 2005
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Net Cash flow, Operations: 3,433 3,684
Net Cash flow, Investing: -3,475 -3,090
Net Cash flow, financing: -1 1,597
Change in Net Liquidity: -43 2,191
Net Liquidity at beginning: 6,608 4,417
Net Liquidity at end: 6,565 6,608
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COMPANY INFORMATION: : Chairman: Muhammad Rashid Zahir; President & CEO: Mansoor Masood Khan; Director: Basheer A. Chowdry; Company Secretary: Asif Zubair; Auditors: Anjum Asim Shahid Rahman, Chartered Accountants; Tax Consultants: A.F. Ferguson & Company, Chartered Accountants; Legal Advisors: Cornelius Lane & Mufti; Registered Office: 19th floor, Saudi Pak Tower, Islamabad; Central Office: Saudi Pak Building I.I. Chundrigar Road, Karachi; Web Address: www.saudipakbank.com