Commercial Banks: CRESCENT COMMERCIAL BANK LIMITED - Year Ended December 31, 2006 (Audited)
Subsequent to the year end, the shareholders of Crescent Commercial Bank Limited (CresBank) in the Extra Ordinary General Meeting (EOGM) held on February 9, 2007.
They have approved a special resolution to the effect that, subject to the approval of State Bank of Pakistan (SBP), Securities and Exchange Commission of Pakistan (SECP) and Saudi Arabian Monetary Agency (SAMA), The Board of Directors of the bank have been authorised to raise further capital of the bank by accepting an offer for subscription and allotting 600 million shares of par value of Rs 10 each against payment of Rs 6 billion at a subscription prices of Rs 10 per share to Samba Financial Group of Saudi Arabia, in a single tranche without right offering. The above has been stated in note 1.2 to the financial statements. Presently, the bank is in the process of obtaining relevant regulatory approvals from SBP, SECP and SAMA for the above mentioned capital injection.
CresBank, incorporated as a public limited company and listed on all the stock exchanges of Pakistan, is engaged in commercial banking and related services. The bank operates 18 branches (2005: 18 branches) in Pakistan through 709 employees, including 331 outsourced employees (2005: 495 employees including 214 outsourced employees). JCR-VIS has assigned a long term rating of BBB (Triple B) and a short term rating of A2 (A Two).
CresBank has the following Associate Companies: (i) Asian Stock Fund Limited, (ii) Crescent Leasing Corporation Limited, (iii) Crescent Steel & Allied Products Limited, (iv) Doha Bank, (v) Mashreqbank Psc, (vi) PICIC; (vii) Shakargang Mills Limited, (viii) Suraj Cotton Mills Limited, and (ix) The Crescent Textile Mills Limited.
Authorised capital of CresBank is Rs 3 billion, comprising 300 million shares of Rs 10 each. As on December 31, 2006 the paid up capital was Rs 2.769 billion which was held by 8,258 shareholders, of which 7,930 individuals (general public) held over 28% shares. The Directors, CEO, and their spouse and minor children held even less than 1% interest.
Doha Bank and Mashreqbank Psc had 10.01% and 13.31% interest respectively. Holding by other associated companies was at 15.11%. Rest of the shares were distributed among a number of corporate entities including banks and DFIs. Injection of fresh capital by Samba Financial Group of Saudi Arabia as described earlier would naturally change the whole complexion of the ownership of the bank. According to the Directors' Report, Samba will acquire approx. 68% interest in the bank.
The minimum paid up capital requirement (free of losses) prescribed by the SBP, to be achieved by the bank by December 31, 2006 is Rs 3 billion. The paid up capital of CresBank as on December 31, 2006 amounts to Rs 2.769 billion and the bank has accumulated losses of Rs 1.256 billion as at that date. Keeping in view the proposed capital injection of Rs 6 billion by Samba, the SBP through its letter dated January 26, 2007 has granted extension to the bank in meeting the aforementioned minimum capital requirement up till March 31, 2007. The Auditors, without qualifying their opinion, have also drawn attention to the paid up capital situation of the bank.
CresBank saw 16% decrease in its total assets to Rs 8.103 billion as on December 31, 2006 compared to Rs 9.618 billion on December 31, 2005. The decrease is largely due to 36% decrease in bank's Net Advances as on December 31, 2006 to Rs 2.395 billion (30 % of Total Assets) compared to Rs 3.724 billion (39% of TA) as on December 31, 2005. As on December 31, 2006 gross NPLs are Rs 1.987 billion (2005: Rs 2.073 billion). In percentage terms gross NPLs on December 31, 2006 are 49.5% of gross Advances (2005: 38.9% of GA). On Net basis, NPLs are 15.4% of Advances as on December 31, 2006 (2005: 12.5% of Advances). High level of NPLs could partly be due to CresBank's merger with other financial institutions in the past. The situation calls for serious remedial actions by the management.
According to note 40 to the financial statements, Capital Adequacy Ratio as on December 31, 2006 was 28.68% (2005: 21.91%) as against prescribed minimum equivalent to 8% of the risk weighted assets of the banking companyTotal mark up income of CresBank for the year 2006 increased by 3% to Rs 483 million compared to Rs 469 million for the previous year. However, mark up expensed for the year under review increased by 37% to Rs 552 million (2005: Rs 403 million) and as a result the bank had a negative margin of Rs 69 million (2005: Positive margin of Rs 66 million).
Non-mark up income of the bank for 2006 was 28% lower at Rs 84 million (2005: Rs 117 million) while administrative expenses, etc were 42% higher at Rs 729 million (2005: Rs 510 million). By making a deferred tax adjustment of Rs 260 million, the bank closed the year with After-Tax Loss at Rs 609 million (2005: Loss of Rs 744 million). The Directors in their Report attribute the loss mainly to attrition in deposits, delay in the launch of asset programme and increase in administrative costs. Performance statistics are given below.
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Performance Statistics (Audited)
(Rs million)
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Balance Sheet (As on Dec. 31,) 2006 2005
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Total Assets: 8,104 9,619
Cash, balances with banks: 915 950
Investments-Net: 2,153 2,161
Advances-Net: 2,395 3,724
Borrowing from fin. Institutions: 442 1,259
Deposits, other accounts: 5,578 5,985
Total Liabilities: 6,600 7,987
Net Assets: 1,504 1,632
Share Capital: 2,770 2,216
Reserves & Un-app. Profit: -1,213 -605
Equity: 1,557 1,611
Surplus on Revalue, Assets: -53 21
Equity incl. Revalue Surplus: 1,504 1,632
Advances-Gross: 4,013 5,332
Gross NPLs: 1,987 2,073
Total Provision: 1,618 1,608
Conting. & Commitments: 2,152 3,510
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Ratios: 2006 2,005
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Cash & bank/Total Assets: 11% 10%
Investments/Total Assets: 27% 22%
Advance-Net/Total Assets: 30% 39%
NPLs/Advances-Gross: 49.5% 38.9%
Net NPLs/Advances Net: 15.4% 12.5%
Provision for NPLs/Advances-Gross: 40.3% 30.2%
Deposits/Total Assets: 69% 62%
Total Liabilities/Total Assets: 81.4% 83.0%
Equity incl. R. Surplus/
Total Assets: 18.6% 17.0%
Deposits/Equity incl.
R.Surplus-Times: 3.71 3.67
Advances/Deposits: 43% 62%
Investments/Deposits: 39% 36%
Conting.& Comm./Equity-Times: 1.43 2.15
Book Value (incl.R.Surplus)/Share: 5.43 7.36
KSE Price/Share ( 25-06-07) Rs: 22.95 -
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Income Statement (Y end Dec. 31) 2006 2005
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Markup- interest earned: 483 469
Markup- interest expensed: 552 403
Net Markup-int. income/(Loss): -69 66
Provisions and write offs: 135 395
Net markup income (aft.
Prov.)/Loss): -204 -329
Total non-markup income: 84 117
Income bef. Admn. Exp./(Loss): -120 -212
Admin Expenses, etc: 728 511
Profit before Taxation/(Loss): -869 -740
Current & deferred tax: -260 4
Profit after taxation/(Loss): -609 -744
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Ratios: (Annual Basis) 2006 2005
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Markup earned/Total Assets: 6.0% 4.9%
Net Markup Income/TA: -0.9% 0.7%
Net markup (aft. Prov.) Income/TA: -2.5% -3.4%
Non-Markup Income/TA: 1.0% 1.2%
Income (Loss) before Ad. Ex./TA: -1.5% -2.2%
Admin Expenses/TA: 9.0% 5.3%
Profit (Loss) before Taxation/TA: -10.7% -7.7%
Profit (Loss) after taxation/TA: -7.5% -7.7%
Profit (Loss) after tax/
Total Equity: -40.5% -45.6%
EPS- (year-end paid up) - Rs: -2.20 -3.36
Price/Earning Ratio: -10.44 -
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Cash flow Summary 2006 2005
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Net Cash flow, Operations: -333 -250
Net Cash flow, Investing: -247 135
Net Cash flow, financing: 545 -29
Change in Net Liquidity: -35 -144
Net Liquidity at beginning: 950 1,094
Net Liquidity at end: 915 950
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COMPANY INFORMATION: : Chairman: Shamim Ahmad Khan; President & CEO: Shehzad Naqvi; Director: Ahsan M. Saleem; Auditors: A.F. Ferguson & Co, Chartered Accountants; Legal Advisors: 1- Mohsin Tayebaly & Co, Advocates & Legal Consultants; 2- Hasan & Hasan, Advocates; Head Office: 6th Floor, SIDCO Avenue Centre, Maulana Deen Muhammad Wafai Road, Karachi; Registered Office: 24, Maulvi Tamizuddin Khan Road, Ground Floor, Bahria Complex-1, Karachi; Web Address: www.cresbank.com