ANNUAL REPORT 2016

Way
Forward
At Bank Alfalah,
we are determined
to continuously
transform our
business ethos
into success.
Being a dynamic
bank with a young
spirited attitude,
it is crucial to put
our principles into
action. For us, this
is what defines
ambition; this is
the Alfalah Way.
OUR WAY
CUSTOMER CONNECT
We want to inspire and help you find your own way in
going after what you want, just as we have. We do all
we can to understand and anticipate what will help
you achieve your ambitions.

LET’S INNOVATE
We constantly question the status quo to find new and
better ways to do things. With fresh eyes, we seek out
new ways to meet your needs and help you shape your
own path, through innovative products, insightful advice
and a ‘can-do’ attitude.

INSPIRING LEADERSHIP
We foster leadership, inspiring employees and customers to
do things differently and to succeed while delivering
sustainable results. We inspire and recognise young,
emerging talent in the country and provide them with
opportunities to showcase their work.
 OUR PROFILE

Bank Alfalah is the fifth largest private Bank in Pakistan with a network
of over 600 branches in more than 200 cities across Pakistan with
an international presence in Afghanistan, Bangladesh, Bahrain and
a representative office in the UAE. The Bank is owned and
operated by the Abu Dhabi Group. The International Finance
Corporation (IFC) of the World Bank partnered with the Bank in
2014, and holds a 15 percent stake in Bank Alfalah.

Incorporated as a public limited company on 21st June, 1992,

under the Companies Ordinance, 1984, Bank Alfalah commenced
banking operations from 1st November, 1997.

The Bank provides financial solutions to consumers, corporations,

institutions and governments through a broad spectrum of
products and services, including corporate and investment
banking, consumer banking and credit, securities brokerage,
commercial, SME, agri-finance, Islamic and asset financing.

JCR-VIS has assigned an entity rating of ‘AA+’ (double A plus) for

the long-term and ‘A1+’ (A one plus) for the short-term, with a
stable outlook. PACRA has assigned Bank Alfalah ‘AA’ (double A)
entity rating for the long-term and ‘A1+’ (A one plus) for the
short-term, with a positive outlook. The Bank is listed on the
Pakistan Stock Exchange.

The Bank has 97.91 percent shareholding in Alfalah Securities

(Private) Limited, which is engaged in the business of stock
brokerage, investment counselling and fund placements. The Bank
has 40.22 percent shareholding in Alfalah GHP Investment
Management Limited, which is registered as an Asset Management
Company and Investment Advisor under the Non-Banking Finance
Companies (Establishment and Regulation) Rules.
VISION VALUES
To inspire and empower people to do YOU
things differently and shape their own We always put the customer and their
path in life and business. needs front and centre.

MISSION YOUR NEEDS

We look at the market with fresh eyes to We do all we can do to understand and
find new opportunities, seek new ways of anticipate what will help our customers
enabling our customers to succeed and find their own way and achieve their
advance in the world of finance. ambitions.

YOUR WAY
We do things differently, challenging the
status quo to find new and better ways to
move ourselves and our customers
forward.

THE RIGHT WAY

We always act with integrity and
transparency in everything we do. It is the
cornerstone of our business and brand.
 C O NT EN T S

03 Company Information

05 Directors’ Profile

09 Senior Management

11 Chairman’s Message

13 Directors’ Report

27 Corporate Governance

43 Our Business

53 Sustainability

Financial Information

57 Financial Performance (Including Six Years Financial Summary)

69 Statement of Compliance with the Code of Corporate Governance (CCG)

72 Auditors‘ Review Report on the Statement of Compliance with the CCG

73 Report of Shariah Board

77 Management Statement of Compliance with Employees Stock Option Scheme

01
78 Independent Assurance Report to the Members on Management
Statement of Compliance with Employees Stock Option Scheme

79 Statement on Internal Controls

80 Unconsolidated Financial Statements 2016 (Including Auditors’ Report thereon)

189 Consolidated Financial Statements 2016 (Including Auditors’ Report thereon)

292 Pattern of Shareholding

305 Annexure - Employees Stock Option Scheme

307 Branch Network

312 Notice of the Annual General Meeting

318 Glossary

Form of Proxy

02
 COMPANY INFORMATION
Board of Directors Board Strategy and Finance Committee
HH Sheikh Nahayan Mabarak Al Nahayan Abdulla Khalil Al Mutawa
Chairman Chairman

Abdulla Nasser Hawaileel Al-Mansoori Khalid Mana Saeed Al Otaiba

Director Director

Abdulla Khalil Al Mutawa Efstratios Georgios Arapoglou

Director Director

Khalid Mana Saeed Al Otaiba Khalid Qurashi

Director Director

Efstratios Georgios Arapoglou Atif Bajwa

Director President/CEO and Director

Khalid Qurashi M. Iftikhar Shabbir

Director Secretary

Kamran Y. Mirza
Director Board Risk Management Committee
Atif Bajwa Mr. Khalid Mana Saeed Al Otaiba
President/CEO and Director Chairman

Abdulla Khalil Al Mutawa

Board Audit Committee Director

Kamran Y. Mirza Khalid Qurashi

Chairman Director

Abdulla Khalil Al Mutawa Atif Bajwa

Director President/CEO and Director

Khalid Mana Saeed Al Otaiba Farhan Ali

Director Secretary

Efstratios Georgios Arapoglou

Director Board Human Resources and Nomination
Committee
Tahir Khurshid
Secretary Abdulla Khalil Al Mutawa
Chairman

Khalid Mana Saeed Al Otaiba

Director

Kamran Y. Mirza
Director

Atif Bajwa
President/CEO and Director

Mian Ejaz Ahmad

Secretary

03
Central Management Committee Board Compensation Committee
Atif Bajwa Abdulla Khalil Al Mutawa
Chairman Chairman

Suhail Yaqoob Khan Khalid Mana Saeed Al Otaiba

Member Director

Mirza Zafar Baig Kamran Y. Mirza

Member Director

Faisal Farooq Khan Mian Ejaz Ahmad

Member Secretary

Khurram Hussain
Member Chief Financial Officer
Mehreen Ahmed Mirza Zafar Baig
Member

Rizwan Ata Company Secretary

Member
Mian Ejaz Ahmad
Saad Ur Rahman Khan
Member

Aly Mustansir Auditors

Member
KPMG Taseer Hadi & Co.
Chartered Accountants
Syed Ali Sultan
Member

Aasim Wajid Jawad

Member
B. A. Building
Imran Zafar I. I. Chundrigar Road
Member Karachi, Pakistan
bankalfalah.com
Khawaja Muhammad Ahmad
Member

Mohib Hasan Khan Share Registrar

Member
F. D. Registrar Services (SMC-Pvt) Limited
1705, 17th Floor, Saima Trade Tower-A
I. I. Chundrigar Road
Karachi, Pakistan

04
 DIRECTORS’ PROFILE
HH Sheikh Nahayan
Mabarak Al Nahayan
Chairman
His Highness Sheikh Nahayan Mabarak Al Nahayan is a prominent
member of the ruling family of Abu Dhabi, United Arab Emirates.
Currently, His Highness is UAE Cabinet Member and Minister of Culture
and Knowledge Development. Prior to his current responsibility, he
served as Minister of Culture, Youth, and Social Development and
Minister of Higher Education and Scientific Research.
Besides his ministerial responsibilities, he is also Chairman of the
General Authority of Youth and Sports Welfare. He has been playing a
leading and distinguished part in the educational advancements,
focusing on the role of education in achieving development and
progress. His Highness owns substantial business interests, hotels and
other investments in UAE, Pakistan, Africa, US and Central Asia. His
Highness also holds various offices as Chairman and Director of Boards
and Trusts along with Patronship of various local and foreign
organisations and affiliates. His direct and indirect business interests
spread throughout various industry sectors such as banking, telecom,
insurance, hospitality, healthcare, construction, project financing and
investment management. Moreover, he supports many charitable
institutions and devotes special attention to the disabled children as
the Honorary President of Abu Dhabi Future Center for Special Needs.
His Highness is also recipient of Pakistan's highest civilian award, the
‘Hilal-e-Pakistan’, which was conferred upon him in 2005 for his
contribution to the economic growth of Pakistan. His Highness received
his education from the British Midfield School until the higher secondary
level before joining Magdalen College at Oxford University, UK.

Abdulla Nasser
Hawaileel Al-Mansoori
Director

Mr. Abdulla Nasser Hawaileel Al Mansoori is a prominent businessman

of Abu Dhabi, UAE. He is Chairman of Al Nasser Holdings and Group
Companies. He was also Director of the National Investor, Abu Dhabi,
UAE. In the past, Mr. Hawaileel Al-Mansoori was Director of United
Arab Bank, Water & Electricity Department of Abu Dhabi, Director of
Projects, ADNOC, General Industries Corporation, Abu Dhabi, and
Director General and Vice Chairman of General Industrial Corporation,
Abu Dhabi. In addition, he held other Board positions and
Chairmanship of Abu Dhabi Ship Building Co., PJSC.
Mr. Abdulla Nasser Hawaileel holds a B.Sc. (Hons) Degree in Electrical
Engineering from Swansea University, UK.

05
Khalid Mana
Saeed Al Otaiba
Director

Mr. Khalid Mana Saeed Al Otaiba is the Office Manager of His

Excellency Dr. Mana Saeed Al Otaiba (Personal Advisor to His Highness,
the President of UAE).
He is also Deputy Chairman of Al Otaiba Group of Companies. Mr. Mana
is a Director of Alfalah Insurance Company Limited, Pakistan. He is also
Chairman of Liwa International Investment Tourism and Royal Mirage
Hotel & Resort Ltd, Morocco. He is also a Director of Ghantout
International.
Mr. Khalid Mana Saeed Al Otaiba holds a Bachelor of Arts & Science
Degree in International Economics from Suffolk University of
Massachusetts, Boston, USA.

Abdulla Khalil
Al Mutawa
Director

Mr. Abdulla Khalil Al Mutawa is the General Manager of H.E. Sheikh

Suroor Bin Mohammad Al Nahayan.
He is a Board Member of the UAE Banks Federation. He is also a
Director of the Abu Dhabi Commercial Bank Ltd, Director of Makhazen
Investment Company in Abu Dhabi, and Director of Alfalah Exchange
Company, Abu Dhabi.
Mr. Abdulla Khalil Al Mutawa is a former Director of Wateen Telecom
Limited, Pakistan and Warid Telecom (Pvt) Limited, Pakistan.
Mr. Abdulla Khalil Al Mutawa holds a B.Sc. Degree in Business
Administration from the University of North Carolina, USA.

06
 Kamran Y. Mirza
Director

Mr. Kamran Y. Mirza is the Chairman of Philip Morris (Pakistan) Ltd. and
Unilever Pakistan Foods Ltd. (UPFL). He is also serving as Director on
the Boards of Abbott Pakistan, International Steel (ISL),
Karwan-e-Hayat, Safari and Outdoor Club of Pakistan, and
Education Fund for Sindh. Mr. Mirza has been the Chairman of the
Export Processing Zone Authority from 2007 to 2009.
He has also served as Chairman of Pakistan Mercantile Exchange
Ltd. and Karachi Stock Exchange (KSE), President of Overseas
Investors Chamber of Commerce and Industry (OICCI), American
Business Council (ABC) and Pharma Bureau (Association of
Pharmaceutical Multinationals in Pakistan). He also served the
Pakistan Business Council, which is a think tank and a Business
Policy Advocacy Forum, as CEO and retired from this position in
December 2015.
Mr. Mirza is a Fellow Member of the Institute of Chartered
Accountants of Pakistan and the Institute of Chartered
Accountants, England and Wales.

Efstratios Georgios
Arapoglou
Director

Mr. Efstratios Georgios Arapoglou has extensive experience in

managing, growing, restructuring, acquiring and integrating banks and
financial institutions, in both developed and emerging markets. He has
been part of the Boards of Directors and Board Committees of high
profile listed companies in SE Europe and the Middle East.
Mr. Arapoglou also has experience in interacting with regulators, in
raising capital in international equity and debt capital markets, and in
developing and maintaining relationships with international
institutional investors.
Mr. Arapoglou completed BA in Mathematics from the University of
Athens, Greece, B.Sc in Naval Architecture & Ocean Engineering from
University of Glasgow, Scotland and MTech in Management from
Brunel University, Uxbridge, London.

07
Khalid Qurashi
Director

Mr. Khalid Qurashi is a retired banker with considerable international

banking experience. He has worked for 38 years with a major US
international bank, where his area of expertise was in corporate risk
management and profit centre/franchise management. He was
responsible for risk management for the Middle East, Africa and Turkey
operations. He contributed materially to overall institutional policy
debate and strategy formulation.
Before he took over responsibilities as a risk senior, he managed a
couple of large country franchises in the Middle East and Africa, where
the portfolio encompassed a wide spectrum ranging from large
corporates, to governments, to financial institutions as well as SMEs
and PE companies.
Mr. Qurashi has served on the Board of Directors of companies abroad
and holds a Master’s Degree in Administration from Karachi University.

Atif Bajwa
President/CEO and Director

Mr. Atif Bajwa has been the President and CEO of Bank Alfalah since
November 2011. Mr. Bajwa has diversified and rich experience in
banking and has held various senior positions. He has been the
President of the Abu Dhabi Group (Pakistan), President of MCB Bank
and Soneri Bank in Pakistan, Regional Head for Citigroup for the
Central and Eastern Europe region, Head of Consumer Banking for ABN
AMRO’s Asia Pacific region as well as Country Manager for ABN AMRO.
Mr. Bajwa is the President of the Pakistan Business Council (PBC). He is
also the former President of the Overseas Investors Chamber of
Commerce and Industry (OICCI) and is a Director on the Board of
various companies, including Pakistan International Airlines
Corporation Limited and Alfalah Insurance Company Limited.
Mr. Bajwa received his education at Columbia University, New York.

08
From Left to Right (front) From Left to Right (back)

Faisal Farooq Khan (Group Head - HR and Learning) Tahir Khurshid (Group Head - Audit and Inspection)
Aly Mustansir (Chief Marketing Officer) Rizwan Ata (Group Head - Islamic Banking)
Aasim Wajid Jawad (Head - Strategy) Riaz Hussain Hamdani (Chief Compliance Officer)
Khurram Hussain (Group Head - Retail Central and North and Consumer Banking) Mian Ejaz Ahmed (Head - Legal and Company Secretary)
Bashir Ahmed Sheikh (Group Head - Special Asset Management) Imran Zafar (Head - Merchant Banking)
From Left to Right (front) From Left to Right (back)
Atif Bajwa (President and CEO) Khawaja Muhammad Ahmad (Head - Operations)
Suhail Yaqoob Khan (Chief Risk Officer) Saad Ur Rahman Khan (Group Head - Corporate and Investment Banking)
Mirza Zafar Baig (Chief Financial Officer) Mehreen Ahmed (Group Head - Retail South and New Initiatives)
Ali Sultan (Group Head - Treasury and FI) Dr. Mushtaq A. Khan (Chief Economist)
Mohib Hasan Khan (Chief Information Officer)
 CHAIRMAN’S MESSAGE

Dear Shareholder, Bank Alfalah begins the new year committed to

remaining Pakistan’s most innovative and
I am pleased to be part of Bank Alfalah’s Board of progressive Bank. We trust that our new vision,
Directors. Bank Alfalah has emerged as one of the together with products and services that better
leading banks in Pakistan and we will continue to cater to our customers, will set a steady path for
progress and will keep investing in its highly progress.
customer-centric strategies. On behalf of the
Board, I would like to make clear our commitment In the coming year, we find several promising
to assisting the management as they build further opportunities at our disposal. Pakistan is at an
on our shared successes. important juncture, and a stronger banking system
is necessary to its emergence as a major regional
Pakistan’s macroeconomic outlook remains highly player. We will utilise technological innovation to
positive. GDP growth reached an 8-year high of extend our customer services and financial
4.7 percent, on the back of several promising solutions to different segments of Pakistan’s
developments. The government’s structural reform society. We believe that by understanding the
programmes, low fuel prices, a stable exchange particular needs of these various segments, we
rate, controlled inflation, improvements in the can offer customised services that will deepen the
security situation and in energy supply, as well as reach of the banking sector at this critical time
a robust fiscal position, all contributed to strong and grow our business.
growth. Economic activity spurred by CPEC is
poised to be a windfall, as the industrial sector Furthermore, our partnership with the
increased capacity in FY16 to accommodate this International Finance Corporation of the World
historic project, with large-scale manufacturing Bank is a significant, long-term strategic
exhibiting vigorous growth in the process. collaboration, which will strengthen Bank Alfalah’s
ability to provide a wider range and better access
The Asian Development Bank forecasts growth of to financial services, particularly for the unbanked
5.2 percent for 2017, as Pakistan surpassed the masses, thereby bolstering economic growth
previous ADB projection of 4.5 percent. Various within the country.
positive trends are identifiable for FY17: low
inflation, continuing fiscal consolidation and an On behalf of the Board of Directors, I would like
uptick in industrial growth driven by CPEC. As a to extend our thanks to the State Bank of
result, credit agencies have once more upgraded Pakistan for its continued support. As Pakistan
Pakistan’s ratings, and international media is enters a new phase of economic prosperity, Bank
taking notice of Pakistan’s economic resilience Alfalah stands prepared to help carve out ‘The
and potential. Way Forward’.

The Pakistan Government is working to capitalise

on these auspicious conditions, increasing
spending on infrastructure and improving tax HH SHEIKH NAHAYAN MABARAK AL NAHAYAN
collection. The country has strong economic
fundamentals and significant potential for growth,
and Bank Alfalah will play its due role in the
development.

11
 DIRECTORS’ REPORT

Dear Shareholder,

On behalf of the Board of Directors, I am pleased to

present the Directors' Report of the Bank along with
the audited financial statements and Auditors'
Report for the year ended 31st December, 2016.

Economic Review

The year 2016 proved significant in terms of the

progress made by most macroeconomic indicators.
The country’s economy maintained its momentum
towards a high growth trajectory over the course of
FY16 with GDP growth reaching an 8-year high of 4.7
percent. Key elements that provided impetus to
domestic demand included stability in the
macroeconomic environment, substantial
government spending on infrastructure, better
energy supplies, an improved security situation, and
a consistently low interest rate regime.

In the initial part of the year, FX inflows were

observed to be higher than outflows, leading to an
all-time high foreign exchange reserves level of US$ growth of 6.8 percent, surpassing the projection of
21 billion in May 2016. However, growing 6.4 percent. Construction activity has a positive
CPEC-related imports, declining exports, the outlook; recording a growth of 13.1 percent.
absence of the Coalition Support Fund, and a Additional support towards industrial sector growth
slowdown in remittances have pushed the current has come from CPEC-related projects, which have
account deficit to US$ 3.6 billion in the first half of created demand for construction and allied
FY17, from US$ 1.7 billion in the same period last industries. The spillovers of such growth were
year. This higher deficit was financed by an increase particularly noticeable in the large-scale
in bilateral and multilateral funding along with a manufacturing (LSM) industries.
pickup in investment flows. The overall surplus in the
balance of payments stands at US$ 0.2 billion at the The agriculture sector has remained under
end of the first half of FY17. considerable stress, mainly due to a decline in
cotton production, unfavourable weather conditions,
Year-on-year headline CPI inflation decelerated to as well as depressed commodity prices. The livestock
2.9 percent in FY16 from 4.5 percent in FY15. The sector, which accounts for more than half the
average inflation clocked in at 3.9 percent during agriculture sector, grew by 3.6 percent in FY16, as
the first half of FY17, lower than the earlier compared to 4.0 percent last year. Despite this
projections due to a smooth supply of perishable lower growth, the sector has witnessed a number of
items, a stable exchange rate, and the government’s encouraging developments lately, with the corporate
absorption of the impact of higher international oil sector stepping up for the development of
prices. Current trends suggest that the actual meat-processing facilities. The Pakistan Halal
inflation will be lower than the target rate of 6.0 Authority has been established by the government,
percent in FY17. and customs duty on the import of meat-processing
machinery has also been reduced, which is indicative
of the government’s focus on promoting trade and
With improvements to the security and energy
commerce in halal food products.
supply situation, the industrial sector saw healthy

13
Reduction in the SBP’s policy rate on two instances led credit. Benefiting from the low interest rates regime,
to an eventual reduction in the banks’ retail rates. This private businesses have been borrowing from the
measure, accompanied by a favourable business banking sector to upgrade and expand their business
environment, created demand for bank credit in FY16. processes. As per latest statistics, the private sector
Some of the expansion was aided by a decline in borrowed Rs. 375 billion in the first half of FY17, as
government borrowings from the banking system.
compared to Rs. 282.6 billion in the corresponding
Government borrowing stood at Rs. 787 billion in FY16
period of last year. Also, loans for fixed investments
as compared to Rs. 888 billion in FY15. FY16 also saw the
conclusion of the IMF programme, which accommodated increased by Rs. 134.1 billion in the first half of FY17,
the FX position and created room for lending through compared to an expansion of Rs. 83.8 billion witnessed
other IFIs and International Capital Markets. in the same period last year. Furthermore, demand for
consumer financing, especially for auto loans, also
Sound tax initiatives and curtailed current expenditures gathered pace during the first half of the year. The
had a promising impact on fiscal consolidation as the banking industry observed growth of 12.9 percent for its
budget deficit for FY16 (as a percent of the GDP) net domestic assets, as compared to 11.5 percent in 2015.
continued to fall for the fourth consecutive year and
stood at a seven year low of 4.6 percent. FBR tax The country witnessed the highest growth in currency in
collection recorded strong growth of over 20 percent, circulation since FY03. A lower preference for deposits was
and surpassed the target for the first time since FY10. predominately due to the imposition of a withholding tax
of 0.4 percent on non-cash banking transactions
On the back of these developments, international
(cross-cheques, demand drafts, pay orders, etc.)
agencies have upgraded the outlook for Pakistan’s
economy from stable to positive, which should further undertaken by non-filers. However, the overall sector
improve investor confidence. Pakistan’s credit rating was deposit presented growth of 20.4 percent in 2016, as
also upgraded to B3 from Caa1 by Moody’s in view of compared to growth of 11.2 percent in 2015.
Pakistan’s strengthening FX reserves and falling external
deficit. S&P ratings stood at B with a stable outlook. On the asset quality front, non-performing loans for the
sector remained flat at PKR 631 billion as at the quarter
The macroeconomic outlook remains positive. ended September 2016, as compared to PKR 630 billion for
However, the falling trend in exports needs to be the same period last year. NPLs declined as a percentage of
addressed and further avenues for foreign direct advances and remained at 11.3 percent in September 2016
investment need to be explored for a more as against 12.5 percent in 2015.
sustainable external sector. The country seems to be
well-positioned for such challenges, mainly due to the Auto financing and house financing dominated the consumer
implementation of infrastructure development and
financing portfolio for commercial banks in 2016. Islamic
energy projects under the China Pakistan Economic
Banking Institutions took the lead for house financing
Corridor (CPEC), a low inflation outlook, and
improving foreign exchange reserves. The resulting accounting for 54 percent of the total financing made.
improvement in economic sentiments should boost
credit uptake in 2017. With increased private sector lending, the Risk Weighted
Capital Adequacy Ratio of the industry as a whole stood at
While the global growth outlook for 2017 remains 16.8 percent in September 2016, as against 18.2 percent in
subdued, uncertainty is pervasive. The expected interest September 2015. Overall capital adequacy and liquidity
rate hike by the US Fed, the economic slowdown in indicators of the banking system have continued to show
China, the likely changes in the political landscape in signs of improvement.
Western Europe, and the aftermath of Brexit, will
continue to dominate sentiments in global financial and
commodity markets. The Bank’s Performance

The banking sector’s margins remained under pressure due

Banking Sector Review to the consistently low interest rate regime. Amidst this
scenario, the Bank followed a focused approach on
2016 provided some key challenges for the banking sector,
prudently managing its lending and investment strategy, with
primarily because of volatile global economic conditions,
an objective of maximising shareholder returns. We remain
periodic fiscal measures, and changing business
sentiments, which kept influencing the policy anchors. focused on serving our customers’ and clients’ needs to the
fullest, and providing an engine to help the economy grow.
The policy rates were further curtailed to 5.75 percent,
resulting in stress on interest rate margins. Building on the momentum gathered over the last few
years, the Bank has yet again delivered sound financial
A sizeable net retirement of government borrowing to results, with profits before taxation surpassing the Rs. 13
scheduled banks has helped increase private sector billion mark for the year.

14
 During the year 2016, aided by a sound credit evaluation Rs. 28.627 billion last year. Similarly, the Bank’s
process, the Bank continued its balanced growth in non-markup income levels also remained intact. With
advances portfolio across all business segments and in all lower net provisioning, the overall revenues after
important economic sectors. The growth rate of 13 percent provisions improved by 3.6 percent from Rs. 35.202
was in line with the Bank’s 5-year CAGR (at 13.4 percent as billion last year to Rs. 36.455 billion for 2016.
compared to industry’s 10 percent). With robust
management of non-performing loans, NPL ratio further During the course of the year, there was a stringent
improved to 4.8 percent and is amongst the lowest in the focus on cost initiatives. Resultantly, total non-markup
industry. Moreover, the Bank also improved its provision expenses were curtailed to Rs. 23.432 billion as against
coverage to 86 percent. Rs. 22.598 billion last year, restricted at 3.7 percent.

The Liquidity profile of the Bank has posted improvement As at 31st December, 2016, the Bank remains adequately
as reflected by a diversified deposit mix and increase in capitalised with a reported CAR of 13.18 percent.
liquid assets carried on the balance sheet. Over the course
of the year, the market share of deposits of the Bank
Credit Rating
has strategically been adjusted downward temporarily,
with a focus on improving deposit profile and managing JCR-VIS Credit Rating Company Limited has recently
spreads in a low interest rate environment, and in the
assigned an improved entity rating of ‘AA+’ (Double A Plus)
backdrop of intense competition for lending rates.
for the long-term and ‘A1+’ (A-One Plus) for the short-term,
with outlook assigned as ‘Stable’. These ratings were
Our proportion of non-remunerative current accounts in
assigned in February 2017, and are based on the position at
the deposit mix remains impressive, while depositor
September 2016.
concentration levels are continuously improving.
Capitalisation indicators have also strengthened over
time with increase in equity base on account of retained Furthermore, PACRA has also rated the Bank ‘AA’ (Double
profits; resultantly Tier-1 Capital stands increased. A) for the long-term and ‘A1+’ (A-One Plus) for the
short-term, and the outlook for the Bank remains‘Positive’.
The Bank’s profit before taxation for the year was
reported at Rs. 13.023 billion as against Rs. 12.604 billion The unsecured subordinated debt (Term Finance
last year, improving by 3 percent. Profit after tax was Certificates) of the Bank has been awarded a credit rating
reported at Rs. 7.900 billion as against Rs. 7.523 billion of AA- (Double A Minus). These ratings were assigned in
last year, improving by 5 percent. June 2016.

In line with the Bank’s strategy of improving its loan The assigned ratings reflect the Bank’s diversified
book, our Net Advances (net) at the year-end have operations, healthy financial risk profile, strong
been reported at Rs. 378.720 billion. At the year end, sponsors and existing market presence. These ratings
our gross advances to deposits ratio stands at 62 denote a very low expectation of credit risk, a strong
percent, one of the best in the industry. Our focus capacity for timely payment of financial commitments in
remains on improving asset quality, along with the long-term and the highest capacity for timely
increased Loan Loss Coverage. repayment in the short-term, respectively.

Period end Deposits remained flat at Rs. 640.944 billion,

mainly on account of the strategic reasons outlined Corporate Governance
above, but more importantly, the Bank’s Current
Deposits grew by an impressive 19 percent. At the year The revised Code of Corporate Governance 2012 for
end, the CASA mix stands at an impressive 83 percent as public listed companies by the SECP was promulgated as
against 75 percent last year. part of the listing regulations of the Stock Exchanges in
the year 2012. The Code of Corporate Governance forms
With a significant maturity of PIBs as well as maturity of part of the Rule Book of the Pakistan Stock Exchange
Bai Muajjal with the Government of Pakistan witnessed
Limited (PSX). The Bank has implemented significant
in the latter half of the year, the period end Investments
(net) have been reported at Rs. 389.093 billion as requirements of the revised Code, relevant for the year
against Rs. 423.100 billion reported last year. ended 31st December, 2016. A prescribed statement by
the management together with the Auditors’ Review
Despite lower spreads, the Bank’s net markup income Report thereon is annexed as part of the Annual Report.
remained at Rs. 28.770 billion for the year as against

15
Statement under Clause 5.9.11 (Corporate and Financial h) Summarised key operating and financial data of last six
Reporting Framework) of Chapter 5 of the PSX Rule Book: years have been presented as part of the Annual Report.

a) The financial statements, prepared by the management of i) Book value of investments and placements by Staff
the Bank, present the Bank’s state of affairs fairly, the Provident Fund and Staff Gratuity Fund based on the
result of its operations, cash flows and changes in equity. respective audited accounts is:
Staff Provident Fund Rs. 3,780.720 million (Dec 2016)
b) Proper books of accounts of the Bank have been Staff Gratuity Fund Rs. 1,794.265 million (Dec 2015)
maintained.
j) The number of Board and Board Committee meetings
c) Appropriate accounting policies have been consistently held during the year 2016 and the attendance by each
applied in preparation of financial statements and director is as given below.
accounting estimates are based on reasonable and
prudent judgement. k) As of date, Mr. Khalid Qurashi and Mr. Atif Bajwa have
completed, the Corporate Governance Leadership Skills
d) International Financial Reporting Standards, as applicable Programme offered by the Pakistan Institute of
Corporate Governance under the Directors Training
to banks in Pakistan, have been followed in preparation of
Programme. As at 31st December, 2016, the Bank is
financial statements, and any departures therefrom have
compliant in respect of the Director’s training
been adequately disclosed and explained.
requirement provided in the Code of Corporate
Governance.
e) The system of internal control is sound in design, and
has been effectively implemented and monitored.
l) The pattern of shareholding is attached with this report.

f) There are no significant doubts about the Bank’s ability m) There are no loans, TFCs, sukuks, or any other debt
to continue as a going concern. instruments in which the Bank is in default or likely to default.

g) There has been no material departure from the best n) Trading pattern in the shares of the Bank, by directors,
practices of corporate governance, as detailed in the
executives, their spouses and minor children have been
listing regulations duly adopted by the State Bank of
disclosed as part of the Annual Report.
Pakistan vide BSD Circular No. 5 dated 13th June, 2002.

Board of Board Board Strategy Board Human Board Risk Board

Name of Director Directors Audit and Finance Resources and Management Compensation
Committee Committee Nomination Committee Committee
Committee
No. of Meetings held 5 7 7 5 5 1

HH Sheikh Hamdan
3 N/A N/A N/A N/A N/A
Bin Mubarak Al Nahayan
Mr. Abdulla Nasser
4 N/A N/A N/A N/A N/A
Hawaileel Al Mansoori

Mr. Abdulla Khalil Al Mutawa 5 7 7 5 5 1

Mr. Khalid Mana Saeed Al Otaiba 5 7 7 5 5 1

Mr. Efstratios Georgios Arapoglou 5 7 7 N/A N/A N/A

Mr. Khalid Qurashi 5 N/A 7 N/A 5 N/A

Mr. Kamran Y. Mirza 5 7 N/A 5 N/A 1

Mr. Atif Bajwa 5 N/A 7 4 5 N/A

Risk Management
Despite declining exports and a widening trade deficit
With gradual improvement in several key as mentioned earlier, key developments such as revision
macroeconomic indicators in the year 2016, overall in Pakistan’s credit rating by Standard and Poor (S&P)
business sentiment remained buoyant. This was evident from B- to B and MSCI’s decision to upgrade PSX to
in the rising stock market index that enabled investors Emerging Market status were instrumental in keeping
to earn 46 percent return (PSE 100) on an annual basis. the mood upbeat in business circles.

16
 OPERATING RESULTS
Rupees in Millions
2016 2015
Balance Sheet
Shareholders’ Equity 49,185 42,425
Total Deposits 640,944 640,189
Total Assets 917,457 902,608
Advances – net 378,720 334,159
Investments – net 389,093 423,100

Profit and Loss Account

Profit before Taxation 13,023 12,604
Taxation (5,123) (5,081)
Profit after Taxation 7,900 7,523

Basic earnings per share Rs. 4.96 Rs. 4.73

Diluted earnings per share Rs. 4.93 Rs. 4.73

Given the focus around CPEC and improving business Banking were already using this functionality.
confidence, fixed investment in the economy is poised Being a responsible corporate citizen, Bank Alfalah
to increase in 2017 and become the key catalyst for has integrated a sustainable finance approach in its
GDP growth in the years ahead. Cement and steel lending activities. In this regard, the Environmental
sectors are already beginning to reap CPEC’s benefits. and Social Management System (ESMS) Framework is
The recently announced textile package of Rs. 180 an integral part of the credit approval process and all
billion promises to help in halting the slump in textile relevant credit proposals require clearance of the E&S
exports, but efficient implementation will be key. Officer prior to approval of the competent authority.
Recently the World Bank also revised upwards the
The Environmental and Social Risk Management Unit
GDP growth estimate for Pakistan to 5.2 percent for
is responsible for identifying, vetting and approving
fiscal 2017 and 5.5 percent for 2018, which augurs well projects from an ESRM perspective. This role also
for the country’s economy. entails coordination with provincial Environmental
Protection Agencies (EPA) to remove ambiguities
However, there are some serious challenges to this related to the EPA approval requirements and to
positive outlook. As mentioned earlier, while the educate the clients. Bank Alfalah is also assisting SBP
industrial sector grew by a healthy 6.8 percent during to promote ESRM practices across the banking
the year, the important textile industry has continued industry. The Bank firmly believes that the integration
to struggle. Furthermore, the agricultural sector has of financial, social and environmental considerations
largely remained subdued due to weak commodity into its decision-making would enable higher and
prices. Public debt is still high and the tax-to-GDP sustainable gains for all stakeholders.
ratio remains among the lowest in the region. Loss
making state owned entities have not shown Other key developments included automation of
significant improvement and their privatisation plan various key functions and solutions; such as in-house
does not seem a priority. Capital Adequacy Ratio (CAR) calculator for Risk
Weighted Assets (RWAs) calculation across Pan
Pakistan branches, automated monitoring of the
During the course of the year, Bank Alfalah’s credit
annual credit plan, regulatory stress testing for credit
approval process was completely automated for
risk, and rating model validation for various business
country operations by rolling out the Bank’s
segments. The Bank also made progress towards
indigenous loan origination and risk rating system
achieving greater sophistication and meeting Basel III
(CIIRS) in Islamic Banking and Agriculture Finance advanced approaches standards by furthering
business segments. Corporate Banking and Retail infrastructural support for development of PD model.

17
Cyber security is a key risk for the banking industry, Existing policies and procedures are reviewed on a
and during the year SBP issued a series of IT Security regular basis and improved from time to time, when
mandates for payment security on public-facing required. The Board has constituted its
internet channels, payment card security and subcommittees for oversight of the overall Risk
protection against cyber-attacks. In response, the Management Framework, Finance and Strategy, which
Bank established an Internet Banking Security meet at regular intervals to ensure adequacy of
Framework along with a supporting action plan to governance.
meet the regulatory requirements with 6-monthly
updates required to be provided to the Board to track The Board endorses the management’s evaluation on
progress against the action plan. Significant effectiveness of the overall internal controls,
enhancements were also incorporated into the IT including ICFR, as detailed in the Statement of
Security Risk Management policies and procedures. Internal Controls.

The Bank also engaged a reputed external consultant

who carried out comprehensive external and internal Corporate Social Responsibility
penetration testing and independent assessment of
the Bank’s information security controls environment. At Bank Alfalah, we believe that our success and the
success of our customers go hand in hand. We aim to
The Operational Risk Unit continued to perform
conduct business by creating shared values for our
regular control assessment on loss/near-miss
customers, shareholders and communities, responsibly. For
incidents and helping the Bank to fine tune the
operational policies/procedures and product us, CSR is an instrument of positive change and continues
guidelines. Enhancements in the indigenously to be one of the most important aspects of our business.
developed operational loss data base and KRI systems
continued with the aim to improve timely capturing Our CSR programme is a magnification of our outreach
and reporting of incidents under the operational risk to a multitude of individuals and households. We are
assessment framework. These initiatives would also firm in our commitment to operate within ethical
help the Bank to meet the requirements of loss data framework and contribute to the socioeconomic
reporting of the Regulator to be initiated after the development, and improve the quality of life of the local
end of 1st quarter 2017. Furthermore, the Bank has communities and society at large.
completed its third year under the Basel III
operational risk’s advanced approach namely
Alternative Standardised Approach (ASA).

The Market risk and Liquidity risk functions continued

their active vigilance of the Bank’s balance sheet.
Both these units operate under detailed Board
approved guidelines, which are further complemented
by management level limits. During 2016, a number of
procedures were revamped and strengthened to
better address the evolving market and/or liquidity
risks. Moreover, the Bank is actively working on the
implementation of SBP’s Basel III guidelines on
Liquidity risk.

Internal Controls

The Management is responsible for maintaining a sound

system of internal controls to ensure efficiency and
effectiveness of operations, compliance with legal
requirements and reliability of financial reporting.
Adequate systems, processes and controls have been put in
place to identify and mitigate the risk of failure to achieve
the overall objectives of the Bank.

These controls encompass the policies and procedures

that are approved by the Board of Directors – and their
compliance and effectiveness – which is verified by an
independent Internal Audit Department reporting
directly to the Board Audit Committee.

18
 Over the years, Bank Alfalah has been active in giving back expected in the coming years. This will require the support
to the society. We are working to become a strategic asset of a robust operating platform backed by a strong capital
for increasing industry competitiveness and a socially base.
responsive corporate culture. We are an active participant
in contributing towards the welfare of society and work The Board, after due deliberations and with the above
with various partner organisations on a series of objectives in mind, has decided to recommend retention of
programmes in a range of sectors. earnings for the year. Accordingly, no dividend payout has
been recommended for this year. With a stronger capital
base, we firmly believe that the Bank shall be able to
Subsidiary Companies deliver greater returns to the shareholders over the
medium to long-term.
The Bank has 97.91 percent shareholding in Alfalah
Securities (Private) Limited, which is engaged in the
business of stock brokerage, investment counselling and External Audit
fund placements. The Bank also has 40.22 percent
shareholding in Alfalah GHP Investment Management Based on the consent received from the Bank’s existing
Limited, which is registered as an Asset Management auditors M/s KPMG Taseer Hadi & Co., Chartered
Company and Investment Advisor under the Non-Banking Accountants, to continue to act as auditors of the Bank, if
Finance Companies (Establishment and Regulation) Rules. so appointed, the Audit Committee has suggested their
name to be appointed as external auditors of the Bank for
the next year.
Dividend
The external auditors have confirmed that they have
The Bank remains committed to achieving its strategic been given a satisfactory rating under the Quality
goals. With continued investment in people, products and Control Review Programme of the Institute of Chartered
digital distribution, we are confident that the Bank will Accountants of Pakistan, and that the firm and all their
continue to participate in attractive growth opportunities partners are compliant with the International Federation

19
of Accountants' (IFAC) Guidelines on Code of Ethics, as Acknowledgement
adopted by the Institute of Chartered Accountants of
Pakistan, and meet the requirements for appointment On behalf of the Bank, I would once again like to thank the
under all applicable laws. State Bank of Pakistan, the Ministry of Finance and other
regulatory authorities for their continuous guidance and
The external auditor’s re-appointment shall be subject to support, our valued shareholders and customers for their
approval in the forthcoming Annual General Meeting. counsel and continued patronage.

I deeply value, appreciate and acknowledge the

Future Outlook commitment, dedication and hard work of our employees,
both locally and overseas. It is your passion to do things
differently, and your promise and determination to act with
The world is changing at a very fast pace, but this is what integrity and transparency in everything you do that has
makes our jobs and lives more exciting. At Bank Alfalah, we made it possible for us to live our values, and deliver on
saw opportunity in the change; we re-thought and the promise made to our stakeholders. The Alfalah way, is
re-shaped our business to become more agile and the way forward!
innovative.

Since inception, Bank Alfalah has emerged as one of the

country’s leading banks with a keen focus on
entrepreneurship and innovation.

Atif Bajwa
We always try to seek out new ways of enabling our
Director and Chief Executive Officer
customers to succeed and we deem it our responsibility to
23rd February, 2017
bring the local financial industry at par with the best of our Abu Dhabi
global counterparts.

20
21
22
 Board of Board Board Strategy Board Human Board Risk Board
Name of Director Directors Audit and Finance Resources and Management Compensation
Committee Committee Nomination Committee Committee
Committee
No. of Meetings held 5 7 7 5 5 1

HH Sheikh Hamdan
3 N/A N/A N/A N/A N/A
Bin Mubarak Al Nahayan
Mr. Abdulla Nasser
4 N/A N/A N/A N/A N/A
Hawaileel Al Mansoori

Mr. Abdulla Khalil Al Mutawa 5 7 7 5 5 1

Mr. Khalid Mana Saeed Al Otaiba 5 7 7 5 5 1

Mr. Efstratios Georgios Arapoglou 5 7 7 N/A N/A N/A

Mr. Khalid Qurashi 5 N/A 7 N/A 5 N/A

Mr. Kamran Y. Mirza 5 7 N/A 5 N/A 1

Mr. Atif Bajwa 5 N/A 7 4 5 N/A

23
2015 2016

42,425 49,185

640,189 640,944

902,608 917,457
334,159 378,720

423,100 389,093

12,604 13,023
(5,081) (5,123)
7,523 7,900

4.73 4.96
4.73 4.93

24
25
26
CORPORATE
GOVERNANCE
 ORGANISATIONAL STRUCTURE

Board of Directors

Board HR and Board Risk

Board Audit Board Strategy and Board Compensation
Nomination Management
Committee Finance Committee Committee
Committee Committee

Chief Executive
Officer

Audit and Inspection Legal Affairs

CEO’s Secretariat

Corporate, Investment
Human Resource Special Assets
Banking and Risk Management
and Learning Management
International Business

Retail Central
Compliance and North and Strategy Finance
Consumer Banking

Retail Banking South

Operations Information Technology
and New Initiatives

Marketing and
Islamic Banking Group
Brand Management

Treasury and
Merchant Banking
Financial Institutions

28
 SHARI’AH BOARD
Dr. Mufti Khalil Ahmad Aazami, Chairperson

Dr. Mufti Khalil Ahmad Aazami is a renowned Shari’ah Scholar in Islamic Banking industry.

He joined Bank Alfalah Islamic Banking in 2003 as a Shari’ah Advisor and is now serving as Chairperson Shari’ah Board.
Dr. Aazami graduated from Jamia Darul Uloom, Karachi. He obtained Shahadat-ul-Aalamia (Masters in Arabic and Islamic
Studies) and Al-T’akhassus fi al-Iftaa’ (Specialisation in Islamic Jurisprudence and Fatwa) from Jamia Darul Uloom,
Karachi and holds a Doctorate Degree in ‘Islamic Jurisprudence’ from Karachi University.

He has also served as an Advisor/Shari’ah Board Member in different financial institutions, including Takaful Pakistan
Limited (2005-2014) and Alfalah GHP Islamic Fund (2007-2014).

Dr. Aazami has 18 years of research experience related to Islamic Finance and other Shari’ah related subjects. He is an
author of numerous publications.

He is also an experienced lecturer and trainer in the field of Islamic Finance, Economics, Fiqh, Islamic Financial Laws and
General Islamic Science. He is involved as Faculty member - Jamia Darul Uloom, Karachi since 1999 and has been
associated with the Centre for Islamic Economics, Karachi, National Institute of Banking and Finance – SBP and Sheikh
Zaid Islamic Research Centre - University of Karachi.

Mufti Mohib ul Haq Siddiqui, Member

Mufti Mohib ul Haq Siddiqui graduated from Jamia Darul Uloom, Karachi.

He obtained Shahadat-ul-Aalamia (Masters in Arabic and Islamic Studies) and Al-T’akhassus fi al-Iftaa’ (Specialisation in
Islamic Jurisprudence and Fatwa) qualifications from Jamia Darul Uloom, Karachi.

He has substantial and diversified experience in the field of Islamic Finance and has served several financial institutions
as a member of Shari’ah Boards.

He currently works as Chairperson Shari’ah Board at Faysal Bank Ltd and is also a member of the State Bank of Pakistan’s
Committee for Shari’ah review, standardisation of Islamic products and processes, and formalisation of AAOIFI Shari’ah
standards for the Pakistan banking industry.

Mr. Siddiqui has served as Shari’ah Scholar/Facilitator at the following institutions:

• Shari’ah Advisor - Faysal Bank Ltd since 2011

• Member Shari’ah Board - Takaful Pakistan Ltd since 2006
• Member Shari'ah Board - JS Islamic Fund since 2003
• Faculty member - Jamia Darul Uloom, Karachi since 2003
• Faculty member - Centre for Islamic Economics, Karachi since 2004
• Visiting Faculty member - NIBAF and PAF-KIET (Karachi Institute of Economics and Technology)

Mufti Ovais Ahmed Qazi, Resident Member

Mufti Ovais Ahmed Qazi graduated from Jamia Darul Uloom, Karachi.

He obtained Shahadat-ul-Aalamia (Masters in Arabic and Islamic Studies) and Al-T'akhassus fi al-lftaa’ (Specialisation in
Islamic Jurisprudence and Fatwa) qualifications from Jamia Darul Uloom, Karachi and holds a Master’s Degree in
Business Administration from the Institute of Business Management, Karachi.

Mr. Qazi has also served Bank Alfalah Islamic Banking as Assistant Shari’ah Advisor since April 2013. Prior to his time at
Bank Alfalah, he worked as a Shari’ah Consultant at Burque Corporation (Pvt) Ltd.

29 Annual Report 2016

 BOARD COMMITTEES AND
TERMS OF REFERENCE

Board Audit Committee

• To oversee the integrity of the accounting and financial reporting Committee Members
processes and the Bank’s compliance with legal and regulatory Kamran Y. Mirza
requirements Chairman

Abdulla Khalil Al Mutawa

• To review and recommend approval of periodic financial statements of Member
the Bank to the Board
Khalid Mana Saeed Al Otaiba
Member
• To ensure an independent and objective Internal Audit Function
covering all activities and functions of the Bank with emphasis on risk Efstratios Georgios Arapoglou
Member
management and internal control

• To oversee the Shari’ah Audit Function and Credit Risk Reviews (CRR)
of the corporate portfolio as per the Board’s approved CRR policy

• To ensure that Internal Audit activities conform to international

standards

• To review and monitor implementation of the Annual Audit Plan on

periodical basis

• To ensure that compliance of audit observations is given due

importance by the management, and any significant delay in their
compliance is timely reported to the appropriate management level

• To review the scope and terms of reference of the External Auditors,

to ensure that it is in accordance with regulatory requirements, and
recommend their appointment, retention or removal to the Board
along with engagement fees etc. to the Board

• To review and evaluate the effectiveness of the Bank’s overall control

environment and systems, including information technology security
and controls and the contingency planning process

30
 Board Human Resources and Nomination Committee

• To ensure that HR policies and practices are in line with market Committee Members
dynamics and business objectives of the Bank Abdulla Khalil Al Mutawa
Chairman
• To design competitive compensation programmes that attract, retain
and motivate staff to achieve business objectives of the organisation, Khalid Mana Saeed Al Otaiba
while enhancing and sustaining shareholder value Member

• To review and recommend the HR policies of the Bank to the Board, Kamran Y. Mirza
and ensure development of new policies to help attract, retain, Member
develop and motivate talent
Atif Bajwa
• To review the Management Structure/Organogram of the Bank Member

• To review and recommend the selection/appointment/re-appointment,

evaluation, compensation, increments, performance bonuses, fringe
benefits, including retirement benefits and terms and conditions of
service agreement of the CEO to the Board

• To review and recommend to the Board the selection, evaluation and

compensation of key executives of the Bank as defined in the State
Bank of Pakistan’s Fit and Proper Test Criteria (’SBP’s FPT’)

• To review and confirm the job descriptions of key executives, review

and recommend the appointment and promotions of all key executives
and General Managers to the Board

• To review and recommend to the Board succession planning policies

for the CEO, key executives and General Managers

• To periodically examine the Bank’s compensation strategy

• To investigate and recommend resolutions to the Board of major

violations of the code of business conduct and ethics that may relate
to personnel or internal controls relating to human resource policies or
benefits

• To consider/review and recommend to the Board, the remuneration to

be paid to the non-executive Directors of the Bank for attended Board
and Board Committee meetings

• To look after any other matters relating to Human Resource

Management

31
Board Strategy and Finance Committee

• To assist the Board in performing its functions and responsibilities Committee Members
with focus on policy-making and general direction, supervision, within Abdulla Khalil Al Mutawa
the framework of applicable Regulations and without involvement in Chairman
the day to day operations of the Bank
Khalid Mana Saeed Al Otaiba
• To review all matters relating to Strategy and Finance, as well as all Member
other matters not specifically covered in the Terms of Reference of
other Board specialised committees Efstratios Georgios Arapoglou
Member
• To review the strategic plan of the Bank, annual business and capital
expenditure budgets and periodic reviews of the Bank’s performance, Khalid Qurashi
vis-a-vis approved budget, major capital expenditure, acquisitions, Member
investments (including strategic investments and equity investments),
etc. Atif Bajwa
Member
• To oversee aspects of capital management, including issuance of
shares to raise further capital, issuance of Term Finance Certificates,
issuance of cash/stock dividend and capital injection decisions for
overseas operations

• To review and approve capital expenditure as per thresholds defined

• To review and recommend annual branch network expansion plans,

including plans for existing overseas operations, setting-up
companies/operations/offices in new overseas locations for approval
to the Board

• To review and recommend nomination of members from the Senior

Management team on Board of Directors of the Bank’s subsidiaries and
associates (if BOD approval is required)

• To review and recommend appointment of Shari’ah Advisor for Islamic

Banking operation of the Bank in Pakistan and overseas, and terms of
his contract or renewal/revision for approval of the Board

• To review and recommend matters relating to the shareholders and

related parties to the Board, in consultation with the Chairman

• To review and recommend the Management’s strategy for establishing

communication with shareholders, as well as the corporate strategy of
the Bank for approval of the Board

32
 Board Risk Management Committee

• To establish and maintain a system to oversee risk management Committee Members

policies and principles Khalid Mana Saeed Al Otaiba
Chairman
• To review the adequacy and effectiveness of the risk management
process across the Bank Abdulla Khalil Al Mutawa
Member
• To establish and maintain a risk management framework to identify
risks and to evaluate the alignment and effectiveness of risk Khalid Qurashi
management activities Member

• To review the Bank’s strategy from a risk perspective and ensure that it Atif Bajwa
is prepared in accordance with the Bank’s policies Member

• To approve the Bank's overall risk appetite and delineating risk

tolerance in relation to credit market, liquidity and operational
activities, approve the exposure limits in relation to risk management
strategies, and review compliance with these limits

• To ensure a system to identify any exceptions to the appetite/limits

and the risk management policies and procedures, and to take timely
corrective measures

• To review Risk Management Information System reports, evaluate the

findings and the appropriateness of the remedial measures, and direct
necessary actions, besides approving the Credit related policies,
Internal Risk Rating policy and recommending the same for Board
approval

• To approve the Terms of Reference of the Bank’s Central Credit

Committee (CCC)

33
Board Compensation Committee

• To select eligible employees from time to time, to be granted options Committee Members
under the Scheme, as per the terms of the Public Companies Abdulla Khalil Al Mutawa
(Employees Stock Option Scheme) Rules, 2001, and the Bank’s Chairman
approved Employee Stock Option Scheme
Khalid Mana Saeed Al Otaiba
• To determine the share entitlement to be offered to each designated Member
employee selected from time to time
Kamran Y. Mirza
• To determine the time when an option may be granted and any Member
conditions that must be satisfied by eligible employees and/or
designated employees before an option is offered

• To determine the exercise price, as per the terms of the scheme, and
the share entitlement in respect of which option may be granted to
designated employees

• To develop a suitable policy and system to ensure that there is no

violation of the insider trading provisions of the Securities and
Exchange Ordinance, 1969, and the Securities and Exchange
Commission of Pakistan Act, 1997

• To oversee any other matters relating to Human Resource Management

34
 Roles and Responsibilities of the Chairman

The Chairman of the Board acts as a leading figure for both the Board of Directors as well as the management; who is
entrusted with numerous responsibilities and roles ranging from monitoring Board level decision making activities to
safeguarding the Bank’s commercial interests.

Other responsibilities include:

• Serving as a leader and driving agent of the Board of Directors (BoD), monitoring and managing all of its activities,
aligning Board’s goals and decisions with that of management. The Chairman also ensures that the Board stays on
the right direction with respect to achieving its objectives;
• Presiding over the Board’s meetings and general meetings, and ensuring that these meetings are executed
productively and key agenda is discussed along with a valuable conclusion/decision. The Chairman also oversees
the Board’s key decision- making activities; and
• Exercising powers and authorities that are vested in and conferred to him under Terms of Reference of Board
Committees as approved by the Board of Directors.

Roles and Responsibilities of the President/CEO

The Chief Executive Officer at Bank Alfalah also plays a critical and significant role and is entrusted with numerous
responsibilities, subject to control and supervision of the Board of Directors.

Key responsibilities include:

• Managing and administering the affairs of the Bank in accordance with laws, rules, regulations, and the Memorandum and
Articles of Association of the Bank;
• Complying with and arranging for implementation and compliance within the Bank, of all policies, procedures and
manuals approved by the Board of Directors and any directives given by the Board of Directors or Board
Committee(s);
• Preparation of plans for growth and expansion of Bank’s operations in Pakistan and abroad, and submitting the
same for consideration and approval of the Board of Directors;
• To appoint, promote, transfer, suspend or dismiss employees of the Bank and fix their remuneration and other
entitlements in accordance with the policies and procedures approved by the Board of Directors; and
• To deal with, represent and act on behalf of the Bank before the State Bank of Pakistan, Securities and Exchange
Commission of Pakistan, Federal and Provincial Ministries, Government departments, local bodies, corporations,
courts, stock exchanges and any other competent authority.

35
Annual Evaluation of Board’s Performance

The Board of Directors at Bank Alfalah is responsible for devising strategies that help the Bank in reaching its desired
goals, monitoring overall performance of the Bank, providing management with strategic direction, and ensuring
management’s compliance with the Code of Corporate Governance and Ethical Conduct.

In order to ensure that interests of stakeholders in the Bank are well-protected and timely achieved, the Board plays
a pivotal role as a fiduciary to act and communicate with management on their behalf.

The roles and responsibilities as specified by regulatory ordinances like The Companies Ordinance, 1984, Banking
Companies Ordinance, 1962, and State Bank’s Prudential Regulations are well-defined in the established Code of
Corporate Governance.

To evaluate and monitor the performance of the Board, and to ensure that desired purpose is effectively achieved, a
descriptive evaluation criteria has been established at Bank Alfalah, which takes into account numerous criteria to
assess the functions and behaviours of the Board of Directors and Board Committees.

Key performance indicators or criteria that are in place to benchmark the Board’s performance include:

Strategic Direction: To ensure that the Board is actively involved in setting and devising key strategies that provide
the Bank with futuristic directions going forward, and all of the management proposals, challenges, assumptions and
alternatives are duly considered prior to deciding such strategy.

Management’s Performance: To ensure that the management’s performance and its progress towards achieving its set
targets is periodically monitored by the Board members.

Internal Controls: To oversee and ensure that appropriately designed internal control framework is in place and is routinely
tested to address all types of key risks.

Audit and Compliance: To ensure that there is an active compliance function in the Bank, and to monitor its compliance
with external laws and regulations and internal codes, and to monitor the organisation’s abidance by audit principles.

Understanding of Corporate Governance and Conduct Code: To ensure that the Directors fully understand the
Bank’s agreed policies on Corporate Governance and Ethics.

Understanding of Roles and Responsibilities: To ensure that the Board has a clear understanding of the Bank’s goals,
vision and mission statements.

Committee Composition: To ensure that each of the Board Committees is appropriately structured to effectively
achieve its underlying goals and objectives, and its key functions are also clear and well-defined.

The Board of Directors, along with numerous other functions and responsibilities, also holds a duty of care and duty of
loyalty towards the Bank to act honestly in the interests of the Bank, and exercise its roles with complete integrity and care.

The evaluation framework established assesses the Board’s performance on numerous criteria, including those described
above. A well-founded scoring scale is used to rate the Board’s performance.

Over the past years, the Board of Directors at Bank Alfalah has efficiently fulfilled their vested roles and
responsibilities towards stakeholders and management to steer the Bank towards the right direction and ensure
maximum shareholder value.

36
 CUSTOMERS
Being customer-centric, drives us to continuously engage with our customers and deliver services that
surpass their expectations. The customer is the focus of the Bank’s core values. The reason for such
an engagement is to inspire and help our customers to find their way in pursuing what they want.
Developing a deeper understanding of their evolving needs and offering innovative products,
insightful advice with a ‘can do’ attitude has contributed greatly in achieving this objective. Our
SME Toolkit, Wealth Management Services and Islamic Banking operations, and Digital Banking
platforms exhibit our commitment towards customer centricity and our determination to
enhance financial inclusion.

We have always aimed to maintain continuous visibility of service performance across various
product streams, branch network and other service touch points to ensure that we meet our
service commitments towards our customers. Further, such engagements are not only
limited to the interactions made through our branch network, but are extended across
multiple channels like call centres, social media, surveys, awareness sessions, roadshows
and various other advertising campaigns.

EMPLOYEES
We have always believed that investing in human capital is the key to achieving the
Bank’s strategic objectives. The Bank ensures that employees are kept motivated
and committed through productive trainings, development programmes,
appreciation via various platforms and engagement in activities other than
the core business operations. Besides developing the professional skills of
individuals, the Bank promotes an environment of learning and
self-satisfying lifestyle through initiatives such as:

• Periodic Employee Engagement Surveys

• Adventure and Lifestyle Societies
• Recognition of Success Stories of individuals
• Learning and Development Programmes
• Trainings and Development
• Assistance Schemes for Professional Qualifications to
Top Performers
• CEO’s Club and Chevron Awards

The Bank acknowledges the contributions of female employees. The Bank takes pride in being an equal
opportunity employer.

37
 STAKEHOLDER ENGAGEMENT

SHAREHOLDERS/INSTITUTIONAL INVESTORS
One of our significant goals is to deliver long-term value to our shareholders. Shareholders’ trust
sets the strategic direction of any institution and their support further facilitates achievement of
key objectives. Engagements through AGMs and EOGMs certify that the shareholders actively
participate to ensure that the business is sustainable in the years to come. Press Releases and
Annual Reports (quarterly, semi-annually and annually) are disseminated timely to ensure
shareholder engagement at all times.

MEDIA
An influential media presence is key for stakeholder and public communication. Moreover,
valuable customer feedback through social media platforms, workshops and seminars
provides the Bank with guidance on areas where we can improve our reach and
services for the customers.

Frequency of Engagement: Financial reports, press releases, social media

platforms, advertisements, website, interviews, workshops and seminars held
periodically promote a positive image of the Bank.

REGULATORY BODIES
To ensure sound business operations, regulatory compliance
and a transparent legal environment, engagement at the
regulators’ level is carried out as per pre-determined and
on-demand basis. Engagement channels include periodic
reporting and meetings held with the regulators, both locally
as well as overseas, or their authorised representatives. The
Bank has always appreciated the support of the State
Bank of Pakistan, Securities and Exchange
Commission of Pakistan, Pakistan Stock Exchange and
other regulatory bodies.

ANALYSTS
Analysts are an important channel, as they play a significant role in directing the investments
of investors based on information provided to them. Therefore, it is essential that the
information communicated to them is transparent and authentic.

Frequency of Engagement: The Bank has over the years adopted a regular practice of
engaging its investors and analysts over periodic briefings on the financial performance of
the Bank, so as to enhance investors’ confidence and to improve transparency.

38
 Human Resources and Learning Group (HRLG) Management Trainees Programme

To enrich Bank Alfalah’s talent pool, the Management

Introduction Trainee Batch of 2016 was taken onboard through
In 2016, Human Resources and Learning Group (HRLG) participation in job fairs and recruitment drives. The
undertook initiatives aligned with the renewed Vision, Management Trainees of Batch 2016 are currently
Mission and Values of Bank Alfalah, primarily focusing on posted in their respective groups after completion of
employee engagement, staff development and a high two project-based rotations and classroom trainings,
performance-oriented culture, integrating efficiency and whereas for the Batch of 2015, 3-year career paths have
innovation into our core processes. been formulated which aim at developing the mid-level
leadership pipeline.
Brand Catalyst Programme
Succession Planning
HRLG successfully launched and executed the Brand
Catalyst Programme in which brand catalysts conducted Conforming to the revised policy of SBP, succession plans
were prepared by identifying successors internally and
roadshows in different cities across Pakistan to
externally to ensure strong bench strength at all levels.
communicate the new vision, mission, values and
behaviours to Bank Alfalah employees.
Learning and Core Development
Branch Outreach Programme HR Learning team executed key learning initiatives
HRLG launched the Branch Outreach Programme, an during 2016 to map Bank Alfalah’s competency
initiative whereby our senior HR managers visited framework through diverse delivery. In 2016, 1,138
various Bank Alfalah branches across Pakistan to discuss content-rich learning opportunities spanning 1,805
and assess staff development and the work environment. plus training days were extended to employees at all
levels. Experiential learning via Project and National
Employee Engagement Survey Internship Programme under the PM’s Youth Training
Scheme to Specialised Business Units and branch
Bank Alfalah launched an Employee Engagement Survey
networks, was also achieved.
in 2016. This survey will help the Bank in further
strengthening its performance by seeking direct
To facilitate the learning chain, strategic linkages with
feedback from all its employees.
the Australian Institute of Management, LUMS and IMS
Peshawar were established, thereby extending
Bank Alfalah Societies
international qualifications to high-potential staff. In
Bank Alfalah Societies include Health and Lifestyle, Music line with our agenda of putting people first, we have
and Talent, and Adventure and Photography Societies. The incorporated a powerful portfolio of certification
Bank Alfalah Masters League – a fun-filled cricket programmes for front-end staff and Islamic Banking (IB)
tournament – was successfully organised in Lahore, Karachi Certification for IB RMs and BMs to broaden their
and Islamabad, which fostered employee well-being and capabilities, thus ensuring greater customer satisfaction.
received an overwhelming response. Through this platform,
other initiatives such as the Music Talent Hunt and the All IB trainers are certified nationally and internationally
Head Office Table Tennis Tournament also piqued a great with the content accredited by FAA and CIE. We are the
deal of interest amongst employees. first Bank in the market to achieve this feat. PSTD

39
awarded a Gold Medal to Bank Alfalah in recognition of efficiency, and facilitate timely responsiveness to market
our efforts to nurture and harness human performance developments. To ensure sound and cost-effective IT
through best practices. systems, a detailed and comprehensive IT management
policy has been put in place, engineered by the IT team
Rewards and Recognition under the supervision of the IT Steering Committee.
In 2016, standardised balanced scorecards for Retail
Banking were rolled out resulting in enhanced IT management policy underlines working areas,
objectivity in performance evaluation. including Strategic Alignment, Value Delivery, Resource
Management, Risk Management and Performance
In addition, Alfalah Sales Performance Incentives and Measures, in accordance with the Bank’s financial and
Rewards (ASPIRe) was launched with an objective of technological accountability.
bolstering sales across the branch network, and
The Bank’s IT Group is entrusted to ensure seamless quality,
incentivising Branch Managers through variable
management and value of technology used in the Bank and to
quarterly payouts.
ensure technological harmonisation across the organisation to
deliver exceptional value.
To recognise high performers, another successful event
of the CEO Club 2016 was held, awarding employees
All IT related functional units are managed by the Chief
from various functions across the Bank for exceptional Information Officer, who reports directly to the Chief
performance over the years. Executive Officer and works in close coordination with
the IT Steering Committee.
Integrated Human Capital Management Software

To make HR policies, processes and initiatives effective, an The CIO oversees the entire IT framework, policies and
integrated Human Capital Management software was initiated controls, keeps the Bank abreast of all technological
enabling HRLG to connect all cross-functional processes and developments in the banking sector, and ensures that
departments. This will result in improving business processes in the Bank is equipped with innovative, world-class and
line with the global best practices, ensure controls, and achieve robust IT solutions to outperform competition. The CIO
efficiency and adherence to regulations and policies. is also responsible for monitoring, improving and
strengthening the IT governance framework by
The first phase was successfully implemented with providing guidance and valuable strategic insight.
automation of all major processes, i.e., Recruitment,
HR Operations (Enrolment, Confirmation, Exits, In 2016, the IT Group was reorganised, realigned and
Promotions, Contract Renewals, etc.), Disciplinary reinforced to effectively spearhead the implementation
Actions, Transfers and Rotations, Leaves Management, of the Bank’s IT strategy with special focus on customer
Work Structures (Organisational Management), Payroll service excellence, operational excellence and
and Self-Service. information security, enhanced through digitisation and
the adoption of innovative technologies.
HRLG Way Forward in 2017
IT Steering Committee (ITSC)
In the year 2017, HRLG will continue to focus on
productivity, innovation and efficiency-making strategic The Bank’s IT Steering Committee has been
investments in our human capital platform, which is a
constituted as a sub-committee of the Central
fundamental pillar in contributing towards the Bank’s
Management Committee to provide guidance,
performance, delivery and success.
strategic direction and governance to the IT team in
rolling out various IT-related initiatives and projects
in the Bank.
IT Governance Policy
The key objectives include:
At Bank Alfalah, IT Governance Policy aims to ensure
that Senior Management, with the approval of the • To improve the quality, management and value of
Board, formulates and effectively implements the technology in use
overall IT strategy to ensure strategic alignment
between business needs and IT systems. Effective IT • To align the IT Strategic Plan and the Master
governance aims at transforming IT systems to fulfil Project Plan, their relevant initiatives, with the
the needs and expectations of the business and its Business Strategy and required SBP guidelines
customers.
• To ensure that all technology requirements
The Bank realises the importance of efficient IT systems related to approved projects are carried out
that support core competencies, increase overall effectively and efficiently

40
 • The Committee is chaired by the CEO. It regularly such discretion, the factors to be considered by the Bank
monitors overall IT performance and progress, and shall include, without limitation, the seriousness of
institutes appropriate actions to achieve desired allegations, its credibility, and the extent to which the
results allegation can be confirmed or corroborated by relevant
sources/evidences.
Core functional responsibilities of the ITSC are:
Process of Whistle Blowing
• Formulation and review of the IT Strategy Plan to ensure
that an effective strategy and approach is in place to Any person with a complaint should promptly report it in
ensure alignment with the overall goals of the Bank writing to the Group Head, Audit and Inspection. The
• Review and implementation of IT policies and Board Audit Committee addresses reported concerns or
procedures complaints regarding corporate practices, internal
controls or frauds, etc. through Group Head, Audit and
• Oversight of the scope of IT related projects in
Inspection. Complaints lodged by whistleblowers will be
order to ensure that project timelines are realistic
handled keeping in view the nature, materiality and
and achievable, regular review of technology spent
seriousness of the allegations levied.
versus plan, exploring new technology and
All the complaints are presented to the Board Audit
evaluation of appropriateness, priorities, and
Committee for a decision. However, considering the
review and execution of various IT projects based
on business requirements, changing regulatory gravity and magnitude of the complaint, the Group
practices and organisational issues Head, Audit and Inspection is authorised to initiate
immediate investigation in the matter specified under
the policy. The employees can access Whistle Blowing
Whistle Blowing Policy and Procedures Policy through the Bank’s Employee Portal.

Integrity is amongst Bank Alfalah’s most important core Number of Instances Reported to Audit Committee
values. At Bank Alfalah, we encourage every employee to
work with absolute honesty and professional integrity, Ten whistles were blown during the year 2016 and details
thereof were submitted to the Board Audit Committee.
creating an environment of trust and transparency
within the Bank. Misconduct, malpractices and breach of
trust endanger the Bank’s reputation. Investors’ Grievance Policy
To create a culture based on integrity and openness, Bank Alfalah Limited (BAFL) is a public limited bank
Bank Alfalah has developed a comprehensive Whistle listed on the Pakistan Stock Exchange (PSX) and ensures
Blowing Policy. timely disclosure of all material information to its
shareholders through the Exchange. The Bank also
strives to remain proactive in providing its current and
The core purpose of the Whistle Blowing Policy is to
potential shareholders with quality services and access
provide a secure platform to any person having genuine
to information.
suspicions about any wrongdoings to reveal the facts
without fear of any repercussions or retaliation. It is the
For this purpose, the Bank has a two-pronged strategy
responsibility of all Directors, Officers, Senior Management
i.e. a fully functional Investor Relations (IR) department
and Employees to comply with the Whistle Blowing Policy.
ensures that all material developments are
communicated to investors via statutory announcements
The scope includes complete disclosure about all types of
and quarterly result briefings.
unethical, fraudulent activities and misconducts that impact
Bank’s operations, financial performance and/or reputation.
The presentation material of these briefings is readily
available on the website for investors to access. In
Any person, who blows a whistle in good faith, shall not
addition, designated personnel in the IR department are
suffer harassment, retaliation or adverse consequences.
available to address any queries or take meetings from
It is the responsibility of the Bank’s Management that
investors to discuss in detail the impact of external and
he/she should be provided with complete protection.
internal developments on the Bank’s operations,
profitability and/or share price.
An employee who retaliates against someone who has
blown a whistle in good faith is subject to disciplinary The other part of the strategy pertains to the operational
action up to and including termination of employment. logistics where Bank’s in-house staff and contracted third
parties (Share Registrar etc.) strive for timely
A whistleblower may even be rewarded, if any dissemination of dispatch material to shareholders.
significant/critical issue is raised by him. In exercise of However, in the event of any grievances arising from

41
shareholders, there is dedicated staff in the Company The objectives of our underlying policies are to ensure
Secretariat to address all such concerns. The contact that the Bank is recognised as a professionally run and
details of the designated people are prominently successfully managed institution with high ethical
displayed in the relevant section of the Bank’s website. standards.
The shareholders can reach out with their complaints
A detailed statement of Code of Ethics and Business
electronically, over the phone or in writing, and the
Practices is in place and is signed off by every employee
same are addressed promptly by the Bank.
and submitted to the Bank’s Human Resource and
Learning Group on an annual basis. The Code of Ethics is
Policy for Safety of Records also readily available on the Bank’s website.
The Code contains detailed guidelines which aim to
Management at Bank Alfalah has implemented facilitate the Bank’s employees to:
comprehensive and dedicated policies and controls for
• Conduct business with honesty, transparency and
effectively managing, recording and controlling its
integrity in a professional manner
massive database that includes valuable as well as
confidential information like customer records, • Understand and comply with the legal/regulatory
employee documents, business records, and legal and requirements and internal policies and procedures of
operational documents. the Bank
• Exhibit exemplary personal conduct towards the
Core aspects of these policies include voucher Bank, its employees and customers and maintain the
management, physical document maintenance, electronic
desired decorum both during office hours and at
data, movement on record, retention of record on
other times
premises, destruction of records and data management.
Besides emphasising adherence to legal/regulatory
requirements and internal policies and procedures of the
Business Ethics and Code of Conduct Bank, the Code contains specific guidelines with reference
to managing conflicts of interest, political affiliations,
Integrity and honesty is at the heart of our business and
brand. Our internal ethical standards and code of conduct, KYC, gifts and entertainment, corporate ethical
business conduct are the results of shared moral policies, fraud, theft, illegal activities, etc.
convictions.

42
OUR BUSINESS
Retail Banking institutions, government organisations, NGOs and
large corporates.
Our Retail Banking provides a full suite of tailor-made
Launch of Bank Alfalah Premier: In 2016, Wealth
financial products and services for our customers.
Management embarked on a new journey and it marks
Capitalising on its growing footprint, we have been able to
the launch of Bank Alfalah Premier, which includes two
develop stable relationships with our customers.
physical touch points in the form of lounges within
existing branches at Khayaban-e-Shahbaz in Karachi
With a footprint of over 600 branches in over 200 cities
and Tufail Road in Lahore.
and more than 650 ATMs covering 150 cities across the
country, we are well within reach for our customers.
At Bank Alfalah Premier, our focus is on
understanding the unique needs of the affluent
Bank at Work
client segment and creating innovative solutions
Bank at Work is a broadly defined term that covers tailored to meet these needs.
the aspect of providing convenience of banking
products and services for clients from within the Our Premier Lounges offer unparalleled banking
comfort of their offices. experience with dedicated Relationship Managers that
help our clients prioritise their goals and create
Bank Alfalah’s existing product menu offers a bespoke financial strategy in line with their
comprehensive offering through an electronic cash sophisticated needs.
management suite, competitive trade and advances
products, and a complete range of deposits, consumer Key elements that make our value proposition unique
finance, Bancassurance and payroll account services to and market leading include, but are not limited to,
meet the banking requirements for organisations and seamless onboarding experience with instant account
their employees. opening and a personalised Alfalah Premier Visa
Signature Debit Card, customised joining gifts,
Having a well-established footprint across the country, Espresso coffee counters within lounges along with
the Bank has made significant advancements in the top notch alliances created specifically for this
branchless banking segment through its Mobile Wallet segment. As a result of these, Bank Alfalah Premier has
and Pension Cards. a powerful story to tell in the priority banking space.

Similarly, the Bank’s investment in its Alternate We aim to continue this success in the future by focusing
Distribution Channel has given us a strong digital on innovation, maintaining strong alliances with our
identity in the form of mobile app and internet banking, service providers and creating cross-functional synergies
off-site ATMs and digital corners at branches. This has within the Bank.
allowed us to present a complete suite of banking
convenience to all segments of the economy; servicing Roadmap for 2017 also includes building scale by
public and private sector organisations and the general deployment of additional customer touch points in the
public at large. form of Premier Lounges in major cities; Islamabad,
Lahore and Karachi.
The Bank at Work unit is a culmination of all banking
services bundled into a comprehensive proposition for Customer Experience
institutional clients; offering the Bank’s complete At Bank Alfalah, we keep our customers at the heart of
product and service suite along with off-site our business as depicted in our values.
deployments at client’s premises for banking
convenience. Our priority is to deal with the customers in a fair and
transparent manner, impart awareness to take informed
Wealth Management decisions, and at the same time deliver upon our
committed standards. Towards this end, Bank Alfalah
Investment Services run an open architecture model continues to work upon several tangents, which are:
where funds from Alfalah Investments, UBL Fund
Managers and NBP Fullerton Asset Management are Consumer Protection Policy: We have a comprehensive
currently part of our product suite. Conventional and Consumer Protection Policy that encompasses broad
Shari’ah compliant funds are offered at Bank Alfalah to guidelines for management of customers throughout
cater to individual risk appetite and financial needs. their lifecycle ranging from product development, sales
Our product suite includes Income, Balanced and practices, marketing activities, communication protocols
Equity based funds. Investment Services caters to all and handling of customers.
client segments, including individuals, educational

44
 Voice of Customer Programme: We have a robust Voice of Complaint Management Unit: The Complaint Resolution
Customer Programme (VOC) under which customer at Bank Alfalah is to ensure due diligent complaint
surveys are done to proactively understand our customer closures while maintaining high FTC (Fair Treatment of
needs and their service experience. Customers) standards.

Quality Assurance: The Bank has a comprehensive Quality In 2016, the Bank directly received a total of 73,259
Assurance Platform to monitor Key Service Indicators complaints which were resolved in an average of 5
relevant to the various lifecycle elements of the working days. Furthermore, we at Bank Alfalah conduct
robust root-cause analysis to facilitate/drive
customers. Our existing monitoring spectrum spreads
continuous improvement in tandem with the business
across all products, channels and support units with
and product management teams via various avenues as
dedicated concentration on Digital Channels, Branch
elaborated above.
Banking, Consumer Finance and Centralised Operations.
Home Remittance
Knowledge Initiatives: We drive a robust knowledge
enhancement programme focused towards increasing our Based on the needs of our customers, Bank Alfalah is
staff awareness levels on products, processes and focusing on partnering with renowned brands to enhance
customer handling techniques. our home remittance correspondent network, while
further strengthening our existing relationships to
maximise penetration of our value proposition for
Market Competition Scan: The Bank continuously carries
remitters. At the same time, technological advancement
out competitive scans on various aspects and explores
is the cornerstone of the Bank’s core strategy, hence
global researches/reviews to understand the key drivers system integration and channelising remittances via
behind best market practices. secured VPN/API connectivity provides system access to
our agents, even after business hours and during
Process Re-engineering/Automation: Based on holidays. The surge in remittance partners and business
strategical inputs emanating from complaints and other arrangements in major send markets will give us a major
programmes mentioned above, the Bank invests towards boost in volumes to our Home Remittance business.
process re-engineering and automation initiatives, with a
view towards making our delivery to our customers Bancassurance
quick, convenient and reliable. One of the testament to In collaboration with leading insurance companies,
our service commitment came in 2016 at the first Bank Alfalah provides customised Bancassurance
‘Pakistan Banking Awards’ when Bank Alfalah bagged the solutions to meet the savings, education, marriage,
‘Best Customer Franchise Award’. retirement and protection needs of its customers.

45
Bank Alfalah’s Bancassurance solutions are specially So far, over 300,000+ debit cards have been issued by Bank
designed to help our customers protect and secure a Alfalah branches. Around 290,000 pensioners received
stable future for their loved ones. Our Bancassurance pensions in their EOBI wallet accounts in the month of
bundle is available under Conventional and Islamic February 2017. Till date, Bank Alfalah has successfully
Banking umbrellas to cater to our diverse client base. disbursed Rs. 5.5 billion in these digital wallets.

The Bank has also facilitated in contribution collection

Branchless Banking for nearly 26,000 registered employers and till date has
collected a sum of Rs. 4.29 billion.
As a Bank, we are enthusiastic advocates of digital
technology in Pakistan. Overtime, we have struck Celebration of 1 million BISP Beneficiaries
numerous deals within and outside the industry to
In its milestone achievement, Bank Alfalah celebrated the
digitise products and services infrastructure to introduce
registration of 1 million BISP beneficiaries with the Bank.
added ease and convenience to customers. The Government of Pakistan initiated the Benazir Income
Support Programme (BISP) in order to provide basic
The Bank maintains a comprehensive ecosystem financial assistance to the poorest families countrywide.
comprising of digital products and services meant to
facilitate widespread financial inclusion in Pakistan. Bank Alfalah BISP operates through 37 camp sites spread
all across Pakistan, including far-flung districts of Gilgit,
Hunza, Skardu, Dir, FATA, Barkhan, Ghotki, Turbat and
2016 has been a game changing year for the Branchless
Azad Jammu & Kashmir.
Banking Division of Bank Alfalah. The year marked
achievements that have brought Bank Alfalah a step • BISP Cards issued: 1,011,836
closer to its goal of financial inclusion, and has led to • Total Amount Disbursed: PKR 63.6 billion
forming of several strategic partnerships and creation of
innovative solutions that are aimed at changing the The Payroll Carded Wallet
digital payments landscape of Pakistan.
Bank Alfalah Branchless Banking rolled out the payroll
solution around the end of 2015. The solution was
The EOBI Initiative
targeted at the non-management staff of corporate
The year 2016 marked a change in the pension payment companies, who were previously receiving their dues in
landscape of Pakistan as Bank Alfalah and EOBI joined the form of cash.
hands to digitise the pension payment method and
streamline the contribution collection mechanism for Having embarked on this journey to convert payouts in
registered employers in Pakistan. cash into digital means, Bank Alfalah Branchless Banking
has successfully signed up 40 corporate companies and
Bank Alfalah, after securing the mandate for disbursing has issued over 15,000 payroll wallets for
pensions to EOBI pensioners, digitised the overall non-management staff in these companies during 2016.
pension payment system and made it efficient, Till date, Bank Alfalah has successfully disbursed over
convenient and more accessible to pensioners. The Bank Rs. 736 million in these wallets.
has introduced digital wallets, powered by a UnionPay
We have more than 50 payroll companies in the pipeline
International Debit Cards. The solution introduces
to be launched in 2017, comprising of over 200,000+
convenience in the lives of pensioners as it allows them
employees of various organisations.
to withdraw their pensions from any of the 9,000+ ATMs
located all across Pakistan. Bank Alfalah and Punjab Beverages Company collaborate
to digitise Supply Chain Payments
Bank Alfalah has opened its entire branch network for
Bank Alfalah has signed an agreement with Punjab
pensioner registration across Pakistan since May 2016. To
Beverages Company (PBC) to initiate a pilot to digitise
expand and expedite the pension disbursement process for
the last mile retailer in the PBC supply chain. The main
EOBI pensioners, Bank Alfalah had also set up special camps
objective of the project is to digitise incentive payouts
in Thatta, Tando Mohammad Khan and Khewra to issue EOBI
and expense reimbursements made by PBC to its
debit cards to pensioners of the far-flung areas of lower
distributors and retailers.
Sindh and the Salt Range, Punjab. Over 800 cards were
issued in these camps. Going forward, the Bank has plans to
This collaboration has resulted in the introduction of a
set up camps in several areas to facilitate pensioners, co-branded PBC and Bank Alfalah Debit Card, powered
including Sui and Azad Jammu & Kashmir. by UnionPay International.

46
 Development of a digital payment ecosystem partnership With the launch of S-Paisa, individuals across Azad
with PBC will act as a catalyst to extend the financial Jammu & Kashmir and Gilgit-Baltistan will be able to
outreach and convenience to retailers in the supply engage in money transfers, payment of utility bills and
chain. This will make the payouts real-time and cashless performing mobile top-ups. Offering these basic
as opposed to days and cash intensive management that over-the-counter services brings Bank Alfalah one step
it currently takes to reach the distributors and retailers. closer to financially empowering segments of the country
where financial access was limited.
This supply chain digitisation initiative has been supported
by Karandaaz based on an agreement to provide digitise The SCO agreement will prove to be instrumental in
supply chain payments and conversion of cash transactions opening multiple business avenues along CPEC and also
to mobile wallet based transactions in Pakistan. in building deeper relationships with the armed forces.
Going forward, this strategic alliance is likely to prove
Interoperability between Bank Alfalah and EasyPaisa to tremendously fruitful in offering Bank Alfalah with
boost Financial Inclusion in Pakistan multiple opportunities to cross sell its existing portfolio.

In 2016, Bank Alfalah signed a historic deal with the Similarly, the initial experiences in these areas can draw
country’s first and largest branchless banking service our attention to the diverse financial needs of the
provider, EasyPaisa to bring the unbanked population of population, and hence allow us to capitalise on these
the country within the fold of financial inclusion. needs by designing specific products to target these
areas.
The agreement is the first of its kind in Pakistan’s
Branchless Banking industry and will pave the way for Introduction of the co-branded wallet solution
interoperability in this sector, thus further strengthening
Bank Alfalah has worked on a co-branded wallet solution
digital payments in the country.
in 2016, where the issuance of mobile wallets is done in
partnership with various organisations that require a
In order to dispense top-of-the-line banking services,
wallet solution for their client base. This one of a kind
Bank Alfalah and EasyPaisa are collaborating to benefit
solution features a mobile wallet tagged to a co-branded
from their shared expertise to promote financial
debit card that is powered by UnionPay International.
inclusion and interoperability as well as to support all
G2P initiatives, OTC and wallet transactions in Pakistan.
Currently the space is dominated by closed-loop wallet
solutions, which do not bring the funds in the financial
Bank Alfalah and EasyPaisa are the torchbearers of
net. Bank Alfalah has taken an initiative to provide a
digital technology in the banking and financial sector.
solution where closed-loop wallets are opened up with
Both the institutions have launched comprehensive
proper KYC of the customers and the ability to transact
digital ecosystems featuring numerous products and
across networks.
services in order to promote digital banking for greater
ease and access of their respective customer base.
In addition to functioning like regular mobile wallets, the
co-branded proposition such as special discounts, loyalty
They employ cutting-edge innovation to bring the best
programmes and other unique features. This exciting
digital products and services to their customers for
product has been well-received by several big names in
added convenience, ease and access in carrying out
the market, including Cinepax Cinemas, Lootlo.pk, Nestle,
banking transactions.
ISIC, Muller & Phipps and many other companies, who are
Bank Alfalah and SCO to launch Branchless Banking set to rollout their co-branded wallets in partnership
Service in AJK and Gilgit-Baltistan with Bank Alfalah in 2017.

Bank Alfalah has joined hands with Special

Communications Organisation (SCO) for the launch of its Small and Medium Enterprises (SME)
branchless banking service in Azad Jammu & Kashmir and Business
Gilgit-Baltistan.
We embarked upon a journey of transformation almost
A brand envisioned as ‘S-Paisa’, Bank Alfalah’s branchless
four years ago, a journey to change the landscape of SME
banking offering is aimed to empower more than 6
Business in Pakistan. It was a well-deliberated and
million people of Azad Jammu & Kashmir and
thought-out strategy to bank the unbanked, and start
Gilgit-Baltistan through state-of-the-art, convenient and
business relationships, which will stretch over the entire
secure branchless banking services.
lifecycle of the business. Our business and service
The partnership with SCO will put Bank Alfalah’s branchless propositions revolved around a strong business model, a
banking services at the forefront in these regions, and will wide variety of products suite, and an effective advisory
financially empower the unbanked in these areas. services programme.

47
The basic fundamentals were put in place and receive strong acceptance from the businesses and the tool
foundations were laid to spearhead the ‘SME Banking’ received over 160,000 online hits.
space in the banking industry of Pakistan. This was a tall
and challenging task to surf against the tide, where most This year marks a new beginning for SME Banking at
of the financial institutions were shy to lend to SMEs, Bank Alfalah, where we leverage on the strong
Bank Alfalah introduced cash flow based lending foundations set, and further strengthen the strong mark
products to the industry. Our products were focused on that we have made in the banking industry of Pakistan.
unique propositions, which were unheard of in the
industry. Bank Alfalah was the first Bank to introduce
unsecured products to its SME clients and lead the way Consumer Finance
towards easy access to credit for all SMEs.
The core of Consumer Finance lies in our continuous
efforts to identify, deeply understand and satiate our
2016 was an exciting and fruitful year; we have grown customers evolving personal financial needs. As the low
in the past consistently as well, but we had set interest rate regimen continued in 2016, a greater
ourselves a challenging budget and even more demand for consumer finance assets came into play.
challenging aspiration, and we have exceeded the Therefore, we at Bank Alfalah, through careful research
expectations across all segments. Our SME portfolio and planning, put together a customer focused strategy
grew by an astounding 60% in 2016 with significant to capitalise on the opportunity for our consumers.
focus on new customer acquisition.
Built to Last
Our process-driven, ‘Built to Last’ consumer business
model makes us strive towards service excellence and
product innovation. During 2016, we enhanced our cards
product suite, and introduced the country’s first
Signature Debit Card and Premier Platinum Card, offered
Balance Transfer Funds facility to Personal Loan
customers, and initiated large industry partnerships with
a one bank, one client view. On the back of this model,
our business continued its solid financial performance by
showing double digit growth and maintaining its upward
trajectory with a remarkable 29% overall compounded
annual growth rate. The market widely acknowledged and
recognised our focus and efforts.

Alfalah Cards
Value chain has always been the nucleus of our strategy
and we onboarded some reputed anchors with sizeable Alfalah Cards, our flagship business, maintained its position
deals in 2016. With the course set right, we are moving as a market leader, being the largest issuer and acquirer of
towards making a strong headway in Value Chain credit cards in Pakistan. Credit cards acquisition showed a
Financing solution. We have set our foot on an phenomenal growth of 43%. With a commitment towards
opportunity which has endless possibilities, from enhancing customer value, Alfalah pursued various
transactional banking to financing solutions. We will activation, spend and reward campaigns, forming exciting
penetrate further in the preferred industries and clients alliances and partnerships with the determination to cater
to explore more solutions and services. to a diverse client base. American Express is another
product in the pipeline, which will provide our customers
Our newly launched initiatives on collection and recovery with an opportunity to avail a globally recognised and
for Small Enterprises customers also showed great accepted product. On the cards merchant acquiring side,
promise and we were able to recover significant amount Bank Alfalah continued to push boundaries, collaborating
from our non-performing customers. Where we have with the telecom sector to offer innovative payment
strong thrust on growing our SME portfolio, we also have services. The business line showed a 9.5% growth,
put in place strong controls and collection mechanisms upholding its position as the market leader. Our services
to guard the health of our portfolio. show our commitment towards fulfilling our obligations and
providing world-class services to our clients.
Non-Financial Advisory services form the backbone of our
Alfalah Auto Loan
SME Strategy. We interacted with over 2,000 SMEs through
our awareness and market storming sessions. We also Alfalah Auto Loan business line continued to soar in
ventured with Karachi University to form the first of its kind 2016, achieving immense growth in volumes and a 27%
partnership to encourage entrepreneurs with startup year-on-year growth in balances. Additionally, the
businesses. This ensures strong foundation and helping business continued to focus on customer turnaround
entrepreneurs live their dreams. Our SME Toolkit continued to time competitiveness through responding to customers’

48
 needs and expectations, aligning product offerings and
customising service solutions. Auto Loan business also
successfully increased the product outreach for
customers through expanding retail and corporate
banking branch network, providing customised/tailored
solutions for Institutional Sales. During the year, the
business partnered with leading manufacturers and
insurance companies to offer best in class proposition
for its valued customers, which leveraged the Bank’s
vision for providing world-class experience. Overall, the
business results manifest continuing commitment to
exceed customers’ expectations by providing value at the
most affordable rates with distinguished services.

Home Finance
Home Finance business line has expanded from its
Islamic Banking Windows, we have one of the leading
controlled growth strategy, given the low interest rate
Islamic Banking offerings in Pakistan.
environment and government’s keenness towards
growing the housing sector. Home Finance showed
With a full range of Shari’ah Compliant Islamic Banking
enormous growth of 38% in new acquisitions
solutions for corporate and consumer banking
(year-on-year) with a shift from selective sales strategy
customers, the Bank is geared towards exploring new
to solicitation through cross-sell channels, and
markets with a view to diversify its client base and
tremendous improvement in collection and recovery
provide innovative financial solutions. During the year,
channels. Additionally, greater emphasis was placed in
few liability and asset products were restructured across
providing customers with bundled solutions whilst
segments to enhance the scope of our existing product
maintaining internal operational efficiency, risk
portfolio, while new and innovative Islamic Banking
management capabilities and control structure.
products were launched.
Personal Loan
New product launches included Alfalah Islamic Premium
Bank Alfalah Personal Loan is one of the latest additions Term Deposit to cater to high net worth clients in line
to our comprehensive product suite. With its soft launch with SBP’s pool management framework, Alfalah Islamic
in June 2015, personal loans was made fully available to Wealth Management services enabling customers to
customers and became an integral part of consumer manage their investment needs through investments in
finance operations in 2016. Alfalah GHP’s Shari’ah compliant funds, and Alfalah
Transact (Cash Management) to cater to the collection
With a well-developed service architecture in place, Bank and payment needs of corporate clients.
Alfalah expanded its sales footprint to 16 cities nationwide
and emerged as the fourth largest player in market in terms
of new acquisitions. Balance Transfer Funds facility was also Financial Markets
made available to customers, allowing them to transfer and
convert their outstanding loans into one loan at affordable The Bank’s treasury continued to be an active player in
rates with convenient payment options. the financial market. We have an experienced and
energetic team enabling us to be competitive and
Moving forward, in 2017 we aim to strengthen our efficient in our dealing activities in the areas of
world-class consumer banking model through emphasis Interbank Money Markets and FX Markets and Sales.
on product innovation, costs rationalisation and Being a primary dealer, the treasury was also
operational efficiency. Our strategic intent is to instrumental in providing liquidity and investment
accomplish this through automation and digitisation, and options to both interbank and corporate customers.
providing superior product and value propositions that
Foreign Exchange Markets
enhance customer experience.
The Bank maintained a strong presence in the domestic spot
and forward Foreign Exchange Markets. We actively traded
Islamic Banking in all major currencies, which allowed us to quote narrow
bid offer spreads to our customers and to keep them
Understanding that people are different, and so are their updated about market developments.
needs, our Islamic Banking operations cater to the
unique needs of our customers by offering a complete Sales maintained its customer centric focus in 2016.
range of innovative Shari’ah compliant products. With a Several product awareness sessions and roadshows
network of 158 dedicated branches and more than 120 were conducted across Pakistan. Numerous

49
interactive sessions were conducted on key issues Accounts to access investment opportunities in Pakistan
faced by the economy and the opportunities available and also use foreign exchange hedging facility to
in the market. manage their foreign exchange exposures.

Our team is committed to offering the Bank’s clientele, Asset Liabilities Management
diverse, flexible and innovative solutions to cater to their
The treasury is preparing its infrastructure that is
financial needs. Our in-house research and regular client
designed to meet the challenges of Basel III
calls have enabled us to keep our customers up to date
implementation with specific emphasis on liquidity and
with market developments, which in turn help them make
interest rate risks. In this context, systems are being
timely and informed decisions.
aligned to ensure that real time information is available
Institutional Sales to the treasury to reduce unremunerated Nostro
balances, while at the same time Liquidity Coverage
Our Institutional Sales desk caters to the financing and Ratios and Net Stable Funding Ratios are managed.
trading needs of the Bank’s diversified client base,
particularly, in sectors like Asset Management Islamic Treasury
Companies, Insurance Companies, DFIs, Microfinance
Bank Alfalah-IBG registered a selective growth in its
Banks, Leasing Companies and Corporates.
balance sheet during 2016 where the increase in the
commercial assets largely corresponded with the growth
Launch of Electronic Trading Platform of Government
Securities in liabilities.

Bank Alfalah is the first Bank in Pakistan to launch Islamic Treasury remained very active in the Islamic
Electronic Trading Portal ‘EIPS’ for the Bank’s retail Treasury space as it mainly relied on the primary
clientele, which allows individual investors to invest in auctions for the acquisition of GoP Ijara Sukuks in the
Treasury Bills (T-Bills), Pakistan Investment Bonds (PIBs) first half of 2016, whilst it deployed its maturing
and Ijara Sukuk issued by Government of Pakistan. liquidity (from Bai-Muajjal with MoF) in interbank
market at competitive rates in the absence of fresh
Strategic Alliance issuance of Ijara Sukuks. Despite substantial maturity
of SLR eligible Bai-Muajjal with MoF in 4Q ’16, the
The Bank continued to benefit from the opportunities
Bank successfully complied with SBP’s statutory
arising out of China Pakistan Economic Corridor (CPEC)
liquidity requirements.
by onboarding several new clients and by signing a
strategic Memorandum of Understanding ‘MOU’ with
ICBC Pakistan. Merchant Banking
Fixed Income Portfolio Our Merchant Banking Group enhances product
2016 was an important year for the banking industry of propositions for our clients and captures opportunities
Pakistan as around PKR 1.2 trillion of high yielding in the areas of Public Markets Investing, Capital Markets,
Principle Investments, Strategic Advisory, Structured
Pakistan Investment Bonds (PIBs) matured in the month
Products, Special Situations and Islamic Solutions.
of July. Bank Alfalah ran a significant short position
throughout 2016 in view of declining interest rate
scenario and replaced the maturing PIBs with fresh
issues. Through this strategy, Bank Alfalah was able to Corporate and Investment Banking
limit the impact of shrinking spreads in declining interest
rate environment. Our Corporate and Investment Banking business provides
premier quality financial services to top-tier clients
The treasury also actively managed the interest rate and across the country. We aim to contribute towards the
liquidity risk of foreign currencies in the countries where sustainable growth of our clients by providing them
the Bank operates. Liquidity contingency planning and innovative, diverse and flexible banking solutions,
strong partnership with international institutions has tailor-made to their specific financing needs.
enabled the treasury to build a diversified and
cost-effective international bond portfolio with We offer a holistic range of solutions designed to allow
instruments that qualify for High Quality Liquid Assets our clients the freedom to choose from a wide array of
generating attractive returns. financing options. Our services include long-term and
short-term lending with flexibility for structured
The fixed income activity has a broad spectrum that products; a complete array of trade finance facilities;
covers proprietary and client trading, repurchase flexible options for cash management through transaction
relationships with on- and off-shore financial banking; options for raising funds through our Capital
institutions, and custody arrangements. International Market services, and possibilities for syndications through
investors make use of Special Convertible Rupee our Investment Banking and Advisory services.

50
 Innovation

Alfa

In line with its customer-centric approach, Bank

Alfalah launched a state-of-the-art mobile
banking app called Alfa. The app enables our
customers to keep track of their accounts,
transfer funds, locate branches and ATMs, and do
a lot more, while on the move using their mobile
phones.

Bank Alfalah continues to deliver high quality and a superior

customer experience to all our customers. We are consistently working
towards elevating the customer experience and the launch of Alfa is yet
another testament to that commitment.

As we keep up with the changing trends and strive to make our banking adapt to
our customers’ evolving lifestyles, Alfa brings people’s banking needs to mere touches
and taps, allowing them to stay connected to their bank accounts, while on the go.

Alfalah Orbit Rewards

Alfalah Orbit Rewards is the first programme of its kind in Pakistan’s banking industry. Points
can be earned on product sign-ups and transactions, there is a tier structure, a digital redemption
catalogue, and real-time purchase and transfer. Payments can be made using points through the app
and Internet Banking.

9
3
Rising Talent Platform
Bank Alfalah has always supported entrepreneurs and individuals with
the potential to contribute to the country’s economic growth. Through
the Rising Talent Platform, we encourage and provide meaningful
opportunities to deserving and talented youth. This Platform also aims
to enhance the image of Pakistan by showcasing stories of optimism
and ingenuity.

This initiative is a true manifestation of Bank Alfalah’s philosophy of

looking forward. This Platform has been instrumental in recognising
budding talent in the fields of fashion, film and innovation.

51
Awards and Achievements
The following awards and achievements highlight the outstanding banking and financial services
by Bank Alfalah.

1. Bank Alfalah Most Popular Auto Financing Bank

2. Best Bank for Auto Finance Award
3. Global Islamic Finance Best Islamic Banking Window 2013, 2014 and 2015
4. Global Islamic Finance Shari’ah Authenticity Award 2015
5. Best Islamic Banking Window 2015 by CFA Society of Pakistan
6. Global Islamic Finance Best Research and Development 2015
7. Consumer Choice Awards Best Credit and Debit Card 2016
8. Consumer Choice Awards Best Corporate Credit Card 2016
9. International Finance Magazine Best Credit Cards Offerings 2016
10. Pakistan Society of Training and Development Best Corporate Credit Card 2016
11. Institute of Bankers Pakistan and Dawn Best Customer Franchise 2015 and 2016
12. CFA Society of Pakistan Best Investor Relations 2013, 2014 and 2016
13. CFA Society of Pakistan Corporate Finance House of the Year – Equity and Advisory 2015
14. People Choice Awards Most Popular Bank for Conventional Auto Finance 2015

52
 SUSTAINABILITY

25 Annual Report 2016

Corporate Social Responsibility
Our approach towards energy conservation and the
Over the years, Bank Alfalah has been active in giving
preservation of the environment is driven by a long-term
back to the society. As we continue to build responsible
strategy of adopting eco-friendly and cost-effective
business practices across the Bank, there is an
alternatives at all levels of operations.
opportunity to raise the impact of CSR and
philanthropic programmes. Some of these environment-friendly measures are
described below.
We believe in creating a more powerful business model,
which supports programmes that solve societal problems, Installation of Solar Panels at ATMs
while also creating value for the Bank.
With an ongoing energy deficit and countrywide power
Building on our past philanthropic investments, the shutdowns, it was essential to aid the ATMs with a power
priority areas for Bank Alfalah include education, health, backup solution and like all peer banks, heavy duty
social welfare, environmental sustainability, leadership generators were installed at the ATMs.
development, and promotion of sports, arts and culture.
However, keeping in mind the harmful emissions from
KPSS Secondary School by Alif Noon Parents Foundation diesel operated generators, an initiative to adopt a more
eco-friendly and cost-effective alternative has been in
Alif Noon Parents Foundation (ANPF) is a non-profit
force since then.
organisation. The first school of ANPF under the name of
KPSS Secondary School has been serving the community This comprised of installing solar panels in 153
since the beginning of the year 2015-16. It is a branches where the generators are shut down during
state-of-the-art school in Saigolabad, Chakwal. non-banking hours. This not only reduced the
consumption of scarce fuel, but ultimately contributed
Deaf Reach Schools and Training Centres
to the reduced carbon footprints.
Family Educational Services Foundation’s (FESF) Deaf
Going forward, the Bank intends to include more
Reach programme provides academic and vocational
branches within this scope. In case of power outages,
education to deaf children and youth, particularly in
solar systems can provide uninterrupted backup for
rural areas with little access to formal education or
about 5 to 6 hours, which adds to the reduced operating
vocational training, and with focus on educational
cost. This initiated Bank Alfalah’s journey towards a
access for deaf female students.
healthier environment.
Network of Organisations Working with People with
Right-sizing of Generator Units
Disabilities, Pakistan (NOWPDP)
Right-sizing of high capacity generators and replacing
Network of Organisations Working with People with
them with low capacity generators was valuable to the
Disabilities, Pakistan (NOWPDP) aims to provide a
cause of energy conservation. This not only proved
common platform for all disability organisations in
instrumental in minimising the hazardous impact of such
Pakistan to come together and bring about an
generators, but also curtailed energy wastage, which
impactful change.
was one of the drawbacks of such plants.
Karachi Vocational Training Centre (KVTC)
Conversion to LED Lights
Karachi Vocational Training Centre (KVTC) is a
Our commitment towards the eco-system was further
rehabilitation centre for Intellectually Challenged (IC)
realised when we installed LED lights at Bank Alfalah’s
persons, including children, teens and adults. It
Head Office. This led to a drastic reduction in electricity
provides a comprehensive and goal-oriented
consumption by approximately 26%. In view of the
rehabilitation programme for people with Special
encouraging results, LED lights were also installed in
Educational Needs (SEN) in Pakistan, ensuring their
Shadin Manzil and select branches in Lahore.
gainful employment.

Energy Conservation Initiative to integrate Sustainable Finance

Approach in Credit Evaluation and
The people at Bank Alfalah firmly believe that minimising Approval Process
the unnecessary usage of energy at all levels across the
organisation is fundamental for improved efficiency.
The Bank has integrated a sustainable finance approach
For this purpose, various campaigns and drills on ‘energy in its lending activities. In this regard, an Environmental
conservation at workplace’ are carried out. These and Social Management System (ESMS), duly approved
include curtailed energy consumption and deploying by the Board of Directors, has been put into place in
solar powered ATMs to reduce the impact of carbon
close coordination with IFC.
emissions from such sources.

54
 The ESMS Framework essentially requires that any identification via potential threats and vulnerabilities as
relevant lending opportunity is to be reviewed and well as a mitigation strategy to address those identified
evaluated against: risks. At Bank Alfalah, a thorough and comprehensive
BCP has been placed which comprises of all the relevant
 IFC Exclusion List measures that shall be taken to avoid adverse events.
The document is periodically reviewed and aligned with
 Applicable national laws on environment, health,
the changing business environment that the Bank
safety and social issues
operates in.
 IFC Performance Standards
The most important and noteworthy aspect of Business
This Framework is an integral part of the credit approval
Continuity is testing; testing is the validation of
process and all relevant credit proposals require documentation and processes given in the Business
clearance of E&S Officer prior to approval of the Continuity Process recovery procedures, manual
competent authority. The E&S Desk, part of Risk workarounds, server build procedures, resource listings
Management Division and headed by a Senior Risk and call trees.
Officer with environmental and social risk management
qualifications, is responsible for identifying, vetting and The disaster Recovery Framework incorporates three
approving projects from an ESRM perspective. primary notions, namely:

This role also entails coordination with provincial Recovery Time Objective (RTO): The period of time within
which the process should be recovered after an outage.
Environmental Protection Agencies (EPA) to remove
ambiguities related to the EPA approval requirements
Recovery Point Objective (RPO): The point in time to
and to educate the clients. Bank Alfalah is also which data must be restored in order to perform the
assisting State Bank of Pakistan (SBP) to promote process. RPO is the basis on which a data backup
ESRM practices across the banking industry. The Bank strategy is developed.
firmly believes that the integration of financial, social
and environmental considerations into its Maximum Tolerable Downtime (MTD): The period of time within
decision-making would enable higher and sustainable which the process must be recovered after an outage.
gains for all stakeholders.
The efforts to date constitute the development of a
Comprehensive Business Continuity Management
Framework through various BCP documents, including:
Business Continuity and Disaster Recovery
1. Business Continuity Policy Document
Business Continuity Planning (BCP) is planning which 2. Business Continuity Plan Document
identifies the organisation's exposure to internal and 3. Disaster Recovery Plan
external threats, and synthesises hard and soft assets to 4. Recovery Strategy Document (for each Department)
provide effective prevention and recovery for the 5. Implementation Plan Document
organisation, whilst maintaining competitive advantage 6. Training Plan Document
and value system integrity. 7. Testing Plan Document

The purpose of the Business Continuity Plan is to

establish procedures whereby the critical business
processes at the Bank can be restored in a timely and
orderly manner and can be operated on an interim basis,
thereby helping to ensure that all critical business
functions continue in case of a disaster. The Business
Continuity Plan is intended to be used by BCP teams and
all concerned staff as an action guide in the event of a
disruption, providing a pre-planned response to a
disaster event.

Business continuity is meant to minimise the effects

of a major incident affecting the operations of the Bank.
These include chores such as Project Management,
System Backups, Change Control and Helpdesk. BCP is
an uninterrupted process which assures that the Bank
remains fortified against all possible threats.

Business Impact Analysis (BIA) is key to Bank Alfalah’s

Business Continuity Plan (BCP). It includes risk

55
FINANCIAL
INFORMATION

46
SIX YEARS FINANCIAL PERFORMANCE

Total Assets (Rs. in Bn) Deposits (Rs. in Bn)

CAGR 14.40% CAGR 9.82%
917 903 641 640
606

743 526

457
611
401
537
468

2016 2015 2014 2013 2012 2011 2016 2015 2014 2013 2012 2011

Total Net Income (Rs. in Bn) Expenses (Rs. in Bn)

CAGR 13.16% CAGR 10.51%
23.4
36.5 22.6
35.2
20.7

29.2
17.3
25.2 15.5
25.9 14.2
24.0

2016 2015 2014 2013 2012 2011 2016 2015 2014 2013 2012 2011

Shareholder’ Equity (Rs. in Bn) Profit Before Tax (Rs. in Bn)

CAGR 16.81% CAGR 19.10%
13.0
12.6
49.2

42.4
37.8 8.5

28.3 6.8 6.8

25.5
22.6 5.4

2016 2015 2014 2013 2012 2011 2016 2015 2014 2013 2012 2011

Advances - Gross (Rs. in Bn) Investment at Cost (Rs. in Bn)

CAGR 13.13% CAGR 17.43%
419
396
381
350
312 324
276
252
214 225
193
171

2016 2015 2014 2013 2012 2011 2016 2015 2014 2013 2012 2011

57
GRAPHICAL PRESENTATION

Net Assets
Rs. 60,125
Net Assets 12.69%

Liabilities 0.95%

Liabilities Assets
Rs. 857,332 Rs. 917,457
Assets 1.65%

0% 2% 4% 6% 8% 10% 12% 14%

Statement of Financial Position Variance from Prior Year

(Rs. in Mn)

PBT
Rs. 13,023

Profit before Tax 3.33%

Net Markup Income
Rs. 28,770 Operating Expenses 3.69%

Non Markup Income 0.07%

Net Provisions -48.26%

Net Provisions
Rs. 1,183 Net Markup Income 0.50%
Operating Expenses
Rs. 23,432 Non Markup Income -50% -40% -30% -20% -10% 0%
Rs. 8,868
Profit and Loss Variance from Prior Year
(Rs. in Mn)

Financing Financing
Rs. (3,166) Rs. (3,127)

Operating Operating
Rs. (29,355) Rs. 103,243

Investing Investing
Rs. 27,665 Rs. (72,611)

Cash Flows - 2016 Cash Flows - 2015

(Rs. in Mn) (Rs. in Mn)

58
SIX YEARS FINANCIAL SUMMARY

2016 2015 2014 2013 2012 2011

Profit & Loss Account

Mark-up / return / interest earned Rs. Mn 57,245 61,438 55,378 43,961 46,080 44,298
Mark-up / return / interest expensed Rs. Mn 28,474 32,811 33,505 27,066 27,500 25,687
Non Fund based income Rs. Mn 8,868 8,862 8,876 8,279 7,281 5,368
Total Income Rs. Mn 66,113 70,299 64,254 52,240 53,361 49,666
Operating Expenses Rs. Mn 23,432 22,598 20,702 17,313 15,519 14,215
Operating Profit before tax and provision Rs. Mn 14,206 14,891 10,048 7,861 10,342 9,764
Provisions / wirte-offs Rs. Mn 1,183 2,287 1,534 1,054 3,559 4,330
Profit before taxation Rs. Mn 13,023 12,604 8,514 6,807 6,783 5,434
Profit after taxation Rs. Mn 7,900 7,523 5,641 4,676 4,556 3,503

Statement of Financial Position

Authorised capital Rs. Mn 23,000 23,000 23,000 23,000 23,000 23,000
Paid up Capital Rs. Mn 15,952 15,898 15,872 13,492 13,492 13,492
Reserves Rs. Mn 15,896 14,164 12,338 7,274 5,636 4,100
Unappropriated Profit Rs. Mn 17,337 12,363 9,614 7,500 6,374 5,025
Shareholders' equity Rs. Mn 49,185 42,425 37,824 28,266 25,502 22,617
Surplus on revaluation of assets - net of tax Rs. Mn 10,940 10,928 6,995 3,636 4,558 2,937
Net Assets Rs. Mn 60,125 53,353 44,819 31,902 30,060 25,554
Total Assets Rs. Mn 917,457 902,607 743,128 611,427 536,569 468,294
Earning Assets Rs. Mn 818,135 809,511 664,925 523,420 465,870 402,033
Gross Advances Rs. Mn 395,863 350,351 311,507 276,039 252,173 213,640
Advances - net of Provision Rs. Mn 378,720 334,159 297,256 262,992 237,760 200,712
Non Performing Loans Rs. Mn 19,019 18,455 19,412 17,947 22,182 19,097
Investments at cost Rs. Mn 381,458 419,329 324,336 225,035 193,473 170,850
Investments - Net Rs. Mn 389,093 423,100 324,319 219,690 189,487 166,532
Total Liabilities Rs. Mn 857,332 849,254 698,309 579,526 506,509 442,740
Deposits & Other Accounts Rs. Mn 640,944 640,189 605,963 525,526 457,044 401,233
Borrowings Rs. Mn 178,311 172,393 55,233 23,115 21,228 18,169

Profitability Ratios:
Profit before tax ratio % 22.75 20.52 15.37 15.48 14.72 12.27
Gross Yield on Average Earning Assets % 7.03 8.33 9.32 8.89 10.62 11.69
Gross Spread % 50.26 46.60 39.50 38.43 40.32 42.01
Non Interest income to total income % 13.41 12.61 13.81 15.85 13.65 10.81
Return on equity (ROE) % 17.35 19.14 18.86 18.04 19.46 16.37
Return on average assets (ROA) % 0.89 0.95 0.85 0.83 0.92 0.81
Cost to income ratio % 62.26 60.28 67.32 68.77 60.01 59.28

Investment Ratios:
Earnings per share Rs. 4.96 4.73 4.09 3.41 3.38 2.60
Diluted EPS Rs. 4.93 4.73 4.09 3.41 3.38 2.60
Breakup value per share (excl. surplus on rev.) Rs. 30.83 26.69 23.83 20.95 18.90 16.76
Net assets per share Rs. 37.69 33.56 28.24 23.65 22.28 18.94

Market Ratios:
Cash Dividend % - 10 20 20 20 18
Dividend Yield ratio ( based on cash dividend) % - 3.47 5.73 7.40 11.89 15.56
Dividend Payout ratio % - 21.14 48.90 58.65 59.17 67.31
Price to book value ratio Times 1.01 0.86 1.24 1.14 0.76 0.60
Price to earning ratio Times 7.65 6.09 8.53 7.93 4.98 4.33
Dividend cover ratio Times - 4.73 2.05 1.71 1.69 1.49

59
 2016 2015 2014 2013 2012 2011

Share Information
Market value per share - Dec 31 (Closing Rate) Rs. 37.96 28.82 34.88 27.04 16.82 11.25
High - during the year Rs. 38.00 35.05 35.10 28.39 19.12 12.31
Low - during the year Rs. 23.90 23.82 24.91 14.75 11.14 8.75
Market Capitalisation Rs. Mn 60,554 45,818 55,363 36,481 22,693 15,178
No. of Shares outstanding 1,595 1,590 1,587 1,349 1,349 1,349

Assets Quality and Liquidity Ratios:

Gross Advances to deposits ratio % 61.76 54.73 51.41 52.53 55.17 53.25
Net Advances to Deposits ratio % 59.09 52.20 49.06 50.04 52.02 50.02
Net Investements to Deposits ratio % 60.71 66.09 53.52 41.80 41.46 41.50
Weighted Average Cost of Deposits % 2.91 3.76 4.91 4.64 5.43 5.85
NPLs to Gross Advances ratio % 4.80 5.27 6.23 6.50 8.80 8.94
Coverage ratio (specific provision / NPLs) % 86.06 83.73 70.07 69.32 62.54 64.57
Earnings assets to total assets ratio % 89.17 89.69 89.48 85.61 86.82 85.85
Deposits to Shareholders equity Times 13.03 15.09 16.02 18.59 17.92 17.74
Assets to Equity Times 18.65 21.28 19.65 21.63 21.04 20.71

Capital Adequacy
Tier 1 Capital Rs. Mn 42,550 36,850 33,399 25,251 23,813 21,640
Total Eligible Capital Rs. Mn 56,902 50,957 44,490 36,085 35,499 29,117
Risk Weighted Assets (RWA) Rs. Mn 431,628 384,122 348,833 299,297 281,662 250,933
Tier 1 to RWA % 9.86 9.59 9.57 8.44 8.45 8.62
RWA to Total Assets % 47.05 42.56 46.94 48.95 52.49 53.58
Capital Adequacy ratio % 13.18 13.27 12.75 12.06 12.60 11.60

Cash Flow Summary

Cash and cash equivalents at the beginning of the year Rs. Mn 93,596 65,880 97,880 85,556 69,927 62,151
Cash flow from operating activities Rs. Mn (29,355) 103,243 51,772 44,162 46,195 54,273
Cash flow from investing activities Rs. Mn 27,665 (72,611) (87,293) (30,172) (31,306) (45,660)
Cash flow from financing activities Rs. Mn (3,166) (3,127) 3,925 (2,368) 115 (418)
Exchange difference on translation of the net investment
Rs. Mn 11 211 (404) 702 625 (419)
in foreign branches
Increase in cash and cash equivalents Rs. Mn (4,845) 27,716 (32,000) 12,324 15,629 7,776
Cash and cash equivalents at the end of the year Rs. Mn 88,751 93,596 65,880 97,880 85,556 69,927

Trade
Imports - Volume Rs. Mn 415,187 400,879 374,901 370,556 322,633 286,550
Exports - Volume Rs. Mn 199,230 211,785 202,369 212,871 192,132 191,820

Others
No. of Branches 639 653 648 574 471 406
No. of Permanent Employees 7,615 7,565 7,509 6,853 6,666 6,931

60
SIX YEARS VERTICAL ANALYSIS
Statement of Financial Position / Profit & Loss

2016 2015 2014 2013 2012 2011

Rs in Mn % Rs in Mn % Rs in Mn % Rs in Mn % Rs in Mn % Rs in Mn %
STATEMENT OF FINANCIAL POSITION

ASSETS
Cash and balances with treasury banks 74,071 8% 62,369 7% 50,516 7% 61,205 10% 58,044 11% 50,883 11%
Balances with other banks 9,373 1% 16,552 2% 12,332 2% 34,764 6% 26,721 5% 17,424 4%
Lendings to financial institutions 30,149 3% 27,626 3% 18,313 2% 2,522 0% 877 0% 7,765 2%
Investments - net 389,093 42% 423,100 47% 324,319 44% 219,690 36% 189,487 35% 166,532 36%
Advances - net 378,720 41% 334,159 37% 297,256 40% 262,992 43% 237,760 44% 200,712 43%
Fixed assets 18,133 2% 17,242 2% 15,740 2% 14,835 2% 13,748 3% 13,389 3%
Deferred tax assets - 0% - 0% - 0% 1,204 0% 486 0% 542 0%
Other assets 17,917 2% 21,559 2% 24,652 3% 14,215 2% 9,446 2% 11,047 2%
917,457 100% 902,607 100% 743,128 100% 611,427 100% 536,569 100% 468,294 100%

LIABILITIES
Bills Payable 12,887 1% 9,734 1% 11,758 2% 9,543 2% 8,431 2% 5,403 1%
Borrowings 178,311 19% 172,393 19% 55,233 7% 23,115 4% 21,228 4% 18,169 4%
Deposits & other accounts 640,944 70% 640,189 71% 605,963 82% 525,526 86% 457,044 85% 401,233 86%
Subordinated loans 8,318 1% 9,983 1% 9,987 1% 9,991 2% 5,875 1% 7,149 2%
Deferred tax liabilities 2,650 0% 1,824 0% 853 0% - 0% - 0% - 0%
Other Liabilities 14,222 2% 15,131 2% 14,515 2% 11,350 2% 13,931 3% 10,786 2%
857,332 93% 849,254 94% 698,309 94% 579,526 95% 506,509 94% 442,740 95%
NET ASSETS 60,125 7% 53,353 6% 44,819 6% 31,902 5% 30,060 6% 25,554 5%

REPRESENTED BY :
Share capital 15,952 2% 15,898 2% 15,872 2% 13,492 2% 13,492 3% 13,492 3%
Reserves 15,896 2% 14,164 2% 12,338 2% 7,274 1% 5,636 1% 4,100 1%
Unappropriated profit 17,337 2% 12,363 1% 9,614 1% 7,500 1% 6,374 1% 5,025 1%
Share Holder's Equity 49,185 5% 42,425 5% 37,824 5% 28,266 5% 25,502 5% 22,617 5%
Surplus on revaluation of fixed assets - net of tax 10,940 1% 10,928 1% 6,995 1% 3,636 1% 4,558 1% 2,937 1%
Net Assets 60,125 7% 53,353 6% 44,819 6% 31,902 5% 30,060 6% 25,554 5%

PROFIT & LOSS ACCOUNT

Mark-up / return / interest earned 57,245 87% 61,438 87% 55,378 86% 43,961 84% 46,080 86% 44,298 89%
Mark-up / return / interest expensed (28,474) -43% (32,811) -47% (33,505) -52% (27,066) -52% (27,500) -52% (25,687) -52%
Net mark-up / interest income 28,770 44% 28,627 41% 21,873 34% 16,895 32% 18,580 35% 18,611 37%
Provision and Write-offs (1,183) -2% (2,287) -3% (1,534) -2% (1,054) -2% (3,559) -7% (4,330) -9%
Net mark-up / interest income after provisions 27,587 42% 26,340 37% 20,340 32% 15,841 30% 15,021 28% 14,281 29%
Non mark-up/interest Income 8,868 13% 8,862 13% 8,876 14% 8,279 16% 7,281 14% 5,368 11%
Non mark-up/interest expenses (23,432) -35% (22,598) -32% (20,702) -32% (17,313) -33% (15,519) -29% (14,215) -29%
Profit Before Taxation 13,023 20% 12,604 18% 8,514 13% 6,807 13% 6,783 13% 5,434 11%
Taxation (5,123) -8% (5,081) -7% (2,873) -4% (2,131) -4% (2,227) -4% (1,931) -4%
Profit After Taxation 7,900 12% 7,523 11% 5,641 9% 4,676 9% 4,556 9% 3,503 7%

61
SIX YEARS HORIZONTAL ANALYSIS
Statement of Financial Position / Profit & Loss

2016 16 vs 15 2015 15 vs 14 2014 14 vs 13 2013 13 vs 12 2012 12 vs 11 2011 11 vs 10

Rs in Mn % Rs in Mn % Rs in Mn % Rs in Mn % Rs in Mn % Rs in Mn %
STATEMENT OF FINANCIAL POSITION

ASSETS
Cash and balances with treasury banks 74,071 19% 62,369 23% 50,516 -17% 61,205 5% 58,044 14% 50,883 24%
Balances with other banks 9,373 -43% 16,552 34% 12,332 -65% 34,764 30% 26,721 53% 17,424 8%
Lendings to financial institutions 30,149 9% 27,626 51% 18,313 626% 2,522 188% 877 -89% 7,765 19%
Investments - net 389,093 -8% 423,100 30% 324,319 48% 219,690 16% 189,487 14% 166,532 47%
Advances - net 378,720 13% 334,159 12% 297,256 13% 262,992 11% 237,760 18% 200,712 -4%
Fixed assets 18,133 5% 17,242 10% 15,740 6% 14,835 8% 13,748 3% 13,389 -6%
Deferred tax assets - - - - - -100% 1,204 148% 486 -10% 542 0%
Other assets 17,917 -17% 21,559 -13% 24,652 73% 14,215 50% 9,446 -14.49% 11,047 -1%
917,457 2% 902,607 21% 743,128 22% 611,427 14% 536,569 15% 468,294 14%

LIABILITIES
Bills Payable 12,887 32% 9,734 -17% 11,758 23% 9,543 13% 8,431 56% 5,403 19%
Borrowings 178,311 3% 172,393 212% 55,233 139% 23,115 9% 21,228 17% 18,169 33%
Deposits & other accounts 640,944 0% 640,189 6% 605,963 15% 525,526 15% 457,044 14% 401,233 13%
Subordinated loans 8,318 -17% 9,983 0% 9,987 0% 9,991 70% 5,875 -18% 7,149 -6%
Deferred tax liabilities 2,650 45% 1,824 114% 853 0% - 0% - 0% - -100%
Other Liabilities 14,222 -6% 15,131 4% 14,515 28% 11,350 -19% 13,931 29% 10,786 17%
857,332 1% 849,254 22% 698,309 20% 579,526 14% 506,509 14% 442,740 14%
NET ASSETS 60,125 13% 53,353 19% 44,819 40% 31,902 6% 30,060 18% 25,554 15%

REPRESENTED BY :
Share capital 15,952 0% 15,898 0% 15,872 18% 13,492 0% 13,492 0% 13,492 0%
Reserves 15,896 12% 14,164 15% 12,338 70% 7,274 29% 5,636 37% 4,100 7%
Unappropriated profit 17,337 40% 12,363 29% 9,614 28% 7,500 18% 6,374 27% 5,025 108%
Share Holder's Equity 49,185 16% 42,425 12% 37,824 34% 28,266 11% 25,502 13% 22,617 15%
Surplus on revaluation of fixed assets - net of tax 10,940 0% 10,928 56% 6,995 92% 3,636 -20% 4,558 55% 2,937 14%
Net Assets 60,125 13% 53,353 19% 44,819 40% 31,902 6% 30,060 18% 25,554 15%

PROFIT & LOSS ACCOUNT

Mark-up / return / interest earned 57,245 -7% 61,438 11% 55,378 26% 43,961 -5% 46,080 4% 44,298 18%
Mark-up / return / interest expensed (28,474) -13% (32,811) -2% (33,505) 24% (27,066) -2% (27,500) 7% (25,687) 8%
Net mark-up / interest income 28,770 0% 28,627 31% 21,873 29% 16,895 -9% 18,580 0% 18,611 36%
Provision and Write-offs (1,183) -48% (2,287) 49% (1,534) 46% (1,054) -70% (3,559) -18% (4,330) 2%
Net mark-up / interest income after provisions 27,587 5% 26,340 30% 20,340 28% 15,841 5% 15,021 5% 14,281 52%
Non mark-up/interest Income 8,868 0% 8,862 0% 8,876 7% 8,279 14% 7,281 36% 5,368 14%
Non mark-up/interest expenses (23,432) 4% (22,598) 9% (20,702) 20% (17,313) 12% (15,519) 9% (14,215) 11%
Profit Before Taxation 13,023 3% 12,604 48% 8,514 25% 6,807 0% 6,783 25% 5,434 297%
Taxation (5,123) 1% (5,081) 77% (2,873) 35% (2,131) -4% (2,227) 15% (1,931) 383%
Profit After Taxation 7,900 5% 7,523 33% 5,641 21% 4,676 3% 4,556 30% 3,503 262%

62
REVIEW OF SIX YEARS’ PERFORMANCE
Statement of Financial Position

Total Assets
The asset base of the bank witnessed yet another year of progressive growth, with a CAGR of 14.4 percent (2011 to 2016).
The total assets of the bank were reported at Rs. 917.457 Billion at December 31, 2016 as compared to Rs. 468.294 Billion
at December 31, 2011. The growth resulted from effective management of the bank’s asset mix. Significant contributors
to this growth within the asset mix were investments and advances with a CAGR of 17.43 percent and 13.13 percent
respectively.
Deposits
Bank Alfalah’s deposit base has grown at a CAGR of 9.82 percent. Customized offerings facilitate the Bank to cater to
varying customer needs. Strategically, in the recent past, high cost deposits have been narrowed down further, which has
helped improve the NII. The Bank’s focus remains on maintaining service excellence and providing adequate returns to
our depositors together with transactional convenience through our alternate delivery channels as well as through our
widespread branch network.
Advances
Bank Alfalah continues to maintain a healthy ADR ratio. A prudent risk management framework along with an aggressive
provisioning approach has enabled the Bank to continuously review the quality of its assets. The Bank’s NPL coverage
has substantially improved from 64 percent in 2011 to 86 percent in 2016, whereas the NPL ratio has come down to 4.8
percent in 2016 from 8.94 percent in 2011. Also, the recoveries trend over the last few years indicates our focus and the
efforts that have been made in this regard.
Investments
The investment portfolio remains mainly dominated by government securities. This was witnessed mainly due to an
absence of diversified investment avenues and lack of credit appetite that prevailed in the market. Investments at cost
have registered a CAGR of 17.43 percent.
Equity and Dividend
The paid up capital of the bank has been further strengthened from 2011 to 2016. The Bank’s total equity was reported
at Rs. 49.185 Billion at December 31, 2016. In the year 2014, IFC had acquired a stake of 15 percent, which represented a
key strategic alliance in the Bank’s history. The Bank’s CAR stands at 13.18 percent at December 2016.
Going forward, the Bank intends to further strengthen its capital base in order to deliver superior results to its
stakeholders over the medium to long term.
Profit & Loss Account
Income
The composition of markup income earned has seen a shift in recent years on the back of concentration shift in the
Bank’s earning asset base. The contribution from markup income earned on advances has reduced from 60 percent in
2011 to 42 percent in 2016 while markup income from investments has increased from 38 percent in 2011 to 53 percent
in 2016. The reduction in policy rates and regulatory revisions covering minimum deposit rates over the recent past has
adversely affected the sector’s net interest margins. The Bank continues to manage its asset and liability positions to
maximize returns.
During the last six years, fee, commission income, foreign exchange income and capital gains have been the major drivers
behind non-fund income. Our fee and commission income has been supplemented by our branchless banking and G2P
initiatives, while capital gains continue to be tapped at the right times.
With key changes to our technology platform, and cross sell initiatives undertaken, the Bank remains focused on delivering
enhanced transactional convenience to customers.
Operating Expenses
The growth in administrative costs has been mainly on account of costs attributable to additional branches under the
Bank’s expansion plan, rising rentals and utility costs, and costs relating to infrastructural improvements to systems and
technology. The Bank has undertaken various initiatives such as centralization of expenses and revisits to expenditure
approval authorities in order to control costs. The management remains focused on bringing in further cost savings
through cost rationalization measures.

63
Bank’s Significant Resources
Deposits
Deposits are the core resource for any commercial banking unit to conduct its core business operations. Core Deposits
comprise of current accounts and savings accounts (CASA). Deposits, like any other source, have an attached cost, which
include competitive returns to depositors, remuneration for deposit gathering teams and additional services to facilitate
the customers.

Capital Employed
Shareholders’ Equity represents capital commitments of shareholders and investors. Such funding constitutes of
diversified sources and types, each entitling investors with unique income distribution, liquidation and voting privileges.
Several regulatory ratios and requirements such as CAR are based on the shareholders’ capital. However, equity capital is
an expensive source and is therefore raised in case of strategic decisions like expansion, acquisitions and mergers, and
in some cases to restore the capital position of an entity. Long-Term Debt instruments include Term Finance Certificates
repayable over a defined term. The Bank has had five successful Term Finance Certificate issues till date.

Human Capital
At Bank Alfalah, we place great emphasis on the quality of our leadership and employees. The Bank has always invested in
its people and will continue to do so in the future. Learning objectives at the organization are clearly defined to nurture,
reward and retain the best talent pool.

Technology
Technology has indeed revolutionized the banking industry in the past decade or so. The integration of technology into
the banking sector has witnessed significant breakthroughs like paperless operations, branchless banking through digital
channels and on the go ‘single-platform but multi-purpose solutions’. Bank Alfalah’s vision to be the premier digital bank
in Pakistan has seen us deploy cutting-edge technology to equip our customers with end to end solutions. The Alfa app,
has been a major milestone that the bank has recently achieved. The bank sees such technological advancements as vital
in terms of attaining long-term growth and sustainability.

Capital Structure & Ratios

Bank Alfalah’s planned capital structure is designed to meet regulatory and market expectations. Our targeted capital
structure enables us to invest in and grow our business, satisfy our customers' financial needs in varying environments,
access markets, and maintain flexibility to offer returns to our shareholders. The targeted capital structure also considers
levels sufficient to meet Basel III capital requirements.
Our capital targets are subject to change based on various factors, including changes to the regulatory capital framework
and expectations for large banks promulgated by bank regulatory agencies, planned capital actions, changes in our risk
profile and other factors.
The capital structure is a key driver of exposure limits available to the entity under applicable Prudential Regulations.
Furthermore, the Bank has raised Term Finance Certificates successfully in the past to supplement its Capital Base from
time to time.

64
Prospects of the Entity Including Financial and Nonfinancial Measures
Over the past five years, Bank Alfalah had demonstrated considerable growth, with an expansion of its deposits base
as well as advances. Going forward, the Bank aims to extend its performance through a broader distribution footprint,
digitized front-end channels and back-end processes. A regular review of the Bank’s significant resources, as mentioned
earlier, is conducted while considering forecast and projections.
Financial Measures
The bank incorporates various financial measures while arriving at future projections. The Bank’s management duly
ensures that all efforts are directed towards accomplishing the targets defined.
• Deposits: The bank periodically reviews the quality of its deposit mix with focus towards CASA. Apart from the
deposit mix, it is essential that the cost of deposits is kept at such a level that the Bank remains competitive within
the industry.
• Advances: Sustainable growth in advances is the key behind profitability, as advances remain the prime revenue
source for the institution. The Bank places great emphasis on credit quality and segmental diversification of its
advances portfolio. Growth in advances is managed effectively, as this has a direct impact on earnings if resources
are not adequately deployed. A robust Risk Assessment mechanism is essential to maintain quality of the advances
portfolio. The Bank focuses on maintaining a healthy gross ADR.
• Business Volume: Business volume refers to the application of a Bank’s resources to cater to customers’ demands.
This incorporates New-to-Business customer advances, trade business volumes, advisory services, over the counter
services and services channeled through digital platforms. One-shop solutions and cross sell initiatives have been
a breakthrough in terms of escalating business volumes.
• Cost to Income Ratio: The Bank is in the phase of substantially prioritizing cost efficiency across all levels of its
operations. Centralization of expenses remains a key initiative towards cost control.
• Returns on Earning Assets (ROEA): The ROEA depicts the ability of a bank’s earning assets to generate income. This
is often the result of sound management policies as well as the company’s ability to garner a larger share of the
market.
• Net Spread: Net spread is a key financial measure in evaluating the core profitability of the Bank. Interest earned
on advances and other interest bearing assets, interest paid out on deposits and borrowings is prudently managed
for all sources and uses of funds.
• Return on Equity: The ROE remains a key measure to assess returns for our shareholders.

Non-Financial Measures
For any dynamic institution, Non-financial measures are of equal significance when setting the path for the future.
Projections outlined against such measures confirm that the Bank is not only sound and transparent in terms of business
operations, but also recognizes its due role as a responsible corporate citizen. Although such standards are qualitative in
nature, their value to the business has been decisive in recent years. Non-financial measures mainly consist of:
• Compliance with the regulatory frameworks
• Corporate image
• Stakeholders’ engagement
• Relationships with customers and business partners
• Responsibility towards the society
• Environmental protection

65
STATEMENT OF VALUE ADDED

2016 2015
Rs in Mn Rs in Mn
Value Added
Net Interest Income 28,770 28,627
Non Interest Income 8,868 8,862
Operating Expenses exluding Staff costs (11,829) (10,854)
depreciation, amortization and WWF
Provision against advances, Investments & Others (1,073) (2,599)

Value added available for distribution 24,736 24,036

Distribution of Value Added % %

To Employees
Remuneration, provident fund and other benefits 9,520 38% 9,006 37%

To Government
Worker Welfare Fund 113 0.5% 287 1%
Income Tax 5,123 21% 5,081 21%
5,236 21% 5,368 22%
To providers of capital
Cash dividends to shareholders - 0% 1,590 7%
Bonus Shares - 0% - 0%
- 0% 1,590 7%
To Society
Donations 32 0.1% 58 0.24%

To Expansion and growth

Depreciation 1,691 7% 1,809 8%
Amortization 357 1% 272 1%
Retained Earnings 7,900 32% 5,933 25%
9,948 40% 8,014 33%

24,736 100% 24,036 100%

66
DUPONT ANALYSIS

Ratio Formula 2016 2015 2014 2013 2012 2011

(PAT/Total
Net Operating Margin A % 11.95 10.70 8.78 8.95 8.54 7.05
Income)

(Total Income/
Asset Turnover B % 7.44 8.88 9.68 9.27 10.77 11.49
Average Assets)

(PAT/Average
Return on Assets C=AxB % 0.89 0.95 0.85 0.83 0.92 0.81
Assets)

(Average Assets/
Leverage Ratio / Equity Multiplier D Times 19.49 20.15 22.19 21.73 21.15 20.21
Average Equity)

(PAT/Average
Return on Equity E=CxD % 17.35 19.14 18.86 18.04 19.46 16.37
Equity)

14% 20%

19.50%
12%
11.95%
19%
11.49%

10% 10.70% 10.77% 18.50%

9.68%
9.27%
18%
8.88% 8.95%
8.78%
8% 8.54%
17.50%
7.44% 7.05%
17%
6%
16.50%

4% 16%

15.50%
2%
15%

0% 14.50%
2016 2015 2014 2013 2012 2011

Net Operating Margin Asset Turnover Return on Equity

Summary
Net operating margin continued to depict signs of improvement mainly on account of growth realized via core revenue
streams. However, asset turnover for the past few years witnessed a declining trend, which was primarily attributable
to reduction in interest rates. Return on Equity was relatively on the lowerside as compared to previous years. This is
reflective of the lower percentage of dividend payout considered in 2015, as compared to prior years.

67
SHARE PRICE SENSITIVITY ANALYSIS

Below is a list of some key factors that can influence the share price of Bank Alfalah Limited. The list is not exhaus-
tive by any means and intends to cover the major areas:
• Regulatory / Policy Changes
Any regulatory or policy changes that directly impact the banking landscape and cost and / or revenue drivers are
likely to exert the biggest influence on the Bank’s stock price. For example, a change in the discount rate which di-
rectly impacts yields on government securities and advances and to a certain extent on funding costs can materially
impact profitability and hence the share price as well.
Similarly any regulatory changes such as a change in the minimum rate of deposit payable on certain types of de-
posits can have a significant impact on the cost of funds, profitability and most likely the stock price.
• Investor and Market Sentiment
While difficult to quantify in numeric terms, but a change in sentiments regarding the investment climate in general
or the stock market in particular can have an impact on the Bank’s stock price, even if there is no fundamental
development or change in the Bank’s investment or business case.
• Change in Macro Environment
Any changes in the macro environment, such as political, law and order, inflation and / or currency pressures could
see the stock price of the Bank move alongside as market preempts the developments and extrapolates the impact
of these development on policy / regulatory changes in the Bank’s share price. Hence, there could be a situation
where the stock price of the Bank moves well in advance of the regulatory / policy change actually happening.
Share Price Information (Year 2016)

High Price Rs. 38.0

Low Price Rs. 23.9
Average Volume 1,437,218
No. of trading Days 248
Days Traded 248
% of days traded 100%

Volume Price
Price (Rs)

Volume

68
STATEMENT OF COMPLIANCE WITH THE CODE OF
CORPORATE GOVERNANCE
FOR THE YEAR ENDED DECEMBER 31, 2016

This statement is being presented to comply with the Code of Corporate Governance (“CCG”) contained
in Regulation No. 19 of Chapter 5 (Listing of Companies and Securities Regulations) of the Rule Book of Pakistan
Stock Exchange Limited (“PSX”), for the purpose of establishing a framework of good governance, whereby a list-
ed company is managed in compliance with the best practices of corporate governance.

The Bank has applied the principles contained in the CCG in the following manner:
1. The Bank encourages representation of independent non-executive directors and directors representing minority
interests on its Board of Directors. At present the Board includes:

Category Names
Non-Executive Directors (5) H.H. Sheikh Nahayan Mabarak Al Nahayan*
(Coopted/appointed w.e.f. 15th January 2017)
H. H. Sheikh Hamdan Bin Mubarak Al Nahayan*
(Resigned w.e.f. 15th January 2017)
Mr. Abdulla Nasser Hawaileel Al Mansoori
Mr. Abdulla Khalil Al Mutawa
Mr. Khalid Mana Saeed Al Otaiba
Mr. Efstratios Georgios Arapoglou
Independent Directors** (2) Mr. Khalid Qurashi
Mr. Kamran Y. Mirza
Executive Director (1) Mr. Atif Bajwa (Chief Executive Officer)

* The Board of Directors of the Bank, in its meeting held on 15th January 2017 at Karachi, accepted the resignation
of H.H. Sheikh Hamdan Bin Mubarak Al Nahayan, Director/ Chairman of the Board (“the outgoing Director”), with
effect from 15th January 2017.
The Board has coopted/appointed His Highness Sheikh Nahayan Mabarak Al Nahayan, as Director of the Bank,
subject to SBP’s clearance/no objection, effective from 15th January 2017, in place and for the remainder of the
term of the outgoing Director. The No Objection / Clearance Certificate from the State Bank of Pakistan, has been
obtained by the Bank in this regard.
Furthermore, the Board of Directors has also elected His Highness Sheikh Nahayan Mabarak Al Nahayan as the
new Chairman of the Board of Directors of the Bank in place of H.H. Sheikh Hamdam Bin Mubarak Al Nahayan, with
effect from 15th January 2017.

** The independent directors meet the criteria of independence under clause 5.19.1.(b) of the CCG.

2. The Directors have confirmed that none of them is serving as a director on more than seven listed companies,
including the Bank.
3. All the resident Directors of the Bank are registered as taxpayers and none of them, in their personal capacity,
have defaulted in payment of any loan to a banking company, a DFI or an NBFI or, being a Broker of a stock ex-
change, have been declared as a defaulter by that stock exchange.
4. A casual vacancy occurring on the Board on January 15th 2017, subsequent to the year end, was filled up by the
Directors on the same day.
5. The Bank has prepared a “Code of Conduct - Ethics and Business Practices” and has ensured that appropriate
steps have been taken to disseminate it throughout the Bank along with its supporting policies and procedures.
6. The Board has developed a vision/mission statement, overall corporate strategy and significant policies of the
company. A complete record of particulars of significant policies along with the dates on which they were approved
or amended has been maintained.

69
7. All the powers of the Board have been duly exercised and decisions on material transactions, including appoint-
ment and determination of remuneration and terms and conditions of employment of the CEO, non-executive
and independent directors, have been taken by the Board/Shareholders.
8. The meetings of the Board were presided over by the Chairman and, in his absence, by a Director elected by the
Board for this purpose and the Board met at least once in every quarter. Written notices of the Board meetings,
along with agenda and working papers, were circulated at least seven days before the meetings. The minutes of
the meetings were appropriately recorded and circulated.
9. The Bank is compliant with the requirements of the Directors’ Training program under Clause 5.19.7 of the Rule
Book.
10. The board has approved the appointment of Mr. Tahir Khurshid as the Head of Internal Audit, including his
remuneration and terms and conditions of employment, whereas there was no new appointment of the CFO or
Company Secretary during the year.
11. The Directors’ Report for this year has been prepared in compliance with the requirements of the CCG and fully
describes the salient matters required to be disclosed.

12. The financial statements of the Bank were duly endorsed by CEO and CFO before approval of the Board.

13. The Directors, CEO and executives do not hold any interest in the shares of the Bank other than that disclosed
in the pattern of shareholding. The shares issued by the Bank to its eligible employees (executives) as a result
of exercise of options granted to them under the Bank’s approved Employees Stock Option Scheme (ESOS) are
included in the said pattern under the category “Executives”. During the year, the Bank has issued further option
letters to selected senior staff members including the CEO under the Bank’s ESOS, as decided by the Board
Compensation Committee. All options issued under the scheme have a defined vesting period and are exercisable
over the period specified in the scheme. This information has been disclosed as part of the annual report.

14. The Bank has complied with all the corporate and financial reporting requirements of the CCG.

15. The Board has formed an Audit Committee. It comprises of 4 members, all being non-executive Directors and the
Chairman of the Committee is an independent Director.
16. The meetings of the Audit Committee were held at least once in every quarter prior to approval of interim and
final results of the Bank and as required by the CCG. The terms of reference of the Committee have been formed
and advised to the Committee for compliance.
17. The Board has formed a Human Resources and Nomination Committee. It comprises of 4 members, of whom 3
members are non-executive Directors including the Chairman of the Committee. The Board has also constituted a
Compensation Committee comprised of 3 non-executive Directors, for the administration and superintendence of
the Bank’s Employees Stock Options Scheme (“ESOS”).
18. The Board has set up an effective internal audit function conversant with the policies and procedures of the Bank.

19. The Statutory Auditors of the Bank have confirmed that they have been given a satisfactory rating under the
quality control review program of the ICAP, that they or any of the partners of the firm, their spouses and minor
children do not hold shares of the Bank and that the firm and all its partners are in compliance with International
Federation of Accountants (IFAC) guidelines on code of ethics as adopted by the ICAP.
20. The statutory auditors or the persons associated with them have not been appointed to provide other services
except in accordance with the listing regulations and the auditors have confirmed that they have observed IFAC
guidelines in this regard.
21. The ‘closed period’, prior to the announcement of interim/final results, and business decisions, which may mate-
rially affect the market price of the Bank’s securities, was determined and intimated to Directors, employees and
stock exchange(s).
22. Material/price sensitive information has been disseminated among all market participants at once through stock
exchange(s).

70
23. The Bank has complied with the requirements relating to maintenance of register of persons having access to
inside information by designated senior management officer in a timely manner and maintained proper record
including basis for inclusion or exclusion of names of persons from the said list.
24. We confirm that all other material principles enshrined in the Code of Corporate Governance have been complied
with.

Atif Bajwa
Director and Chief Executive Officer
February 23, 2017
Abu Dhabi

71
REVIEW REPORT TO THE MEMBERS ON THE STATEMENT OF
COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE
We have reviewed the enclosed Statement of Compliance with the best practices contained in the Code of Corporate
Governance (the Code) prepared by the Board of Directors of Bank Alfalah Limited (‘‘the Bank’’) for the year ended
December 31, 2016 to comply with the requirements of Listing Regulations of Pakistan Stock Exchange (“PSX”) where the
Bank is listed.

The responsibility for compliance with the Code is that of the Board of Directors of the Bank. Our responsibility is to
review, to the extent where such compliance can be objectively verified, whether the Statement of Compliance reflects
the status of the Bank’s compliance with the provisions of the Code and report if it does not and to highlight any non-
compliance with the requirements of the Code. A review is limited primarily to inquiries of the Bank’s personnel and
review of various documents prepared by the Bank to comply with the Code.

As part of our audit of financial statements we are required to obtain an understanding of the accounting and internal
control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider
whether the Board of Directors’ statement on internal control covers all risks and controls or to form an opinion on the
effectiveness of such internal controls, the Bank’s corporate governance procedures and risks.

The Code requires the Bank to place before the Audit Committee, and upon recommendation of the Audit Committee,
place before the Board of Directors for their review and approval of related party transactions distinguishing between
transactions carried out on terms equivalent to those that prevailed in arm’s length transactions and transactions which
are not executed at arm’s length price and recording proper justification for using such alternate pricing mechanism.
We are only required and have ensured compliance of this requirement to the extent of approval of the related party
transactions by the Board of Directors upon recommendation of the Audit Committee. We have not carried out any
procedures to determine whether the related party transactions were undertaken at arm’s length price or not.

Based on our review, nothing has come to our attention, which causes us to believe that the Statement of Compliance
does not appropriately reflect the Bank’s compliance, in all material respects, with the best practices contained in the
Code as applicable to the Bank for the year ended December 31, 2016.

February 23, 2017 KPMG Taseer Hadi & Co.

Karachi Chartered Accountants
Syed Iftikhar Anjum

72
REPORT OF SHARIAH BOARD
FOR THE YEAR ENDED DECEMBER 31, 2016

By the grace of Almighty Allah, the year under review was the 13th year of Islamic commercial banking for Bank Alfalah
Limited Islamic Banking Group. While the Board of Directors and Executive Management are solely responsible to
ensure that the operations of Bank Alfalah Limited Islamic Banking Group are conducted in a manner that complies with
Shari’ah principles at all times, we the Shari’ah Board are required to submit a report on the overall Shari’ah compliance
environment of Bank Alfalah Limited - Islamic Banking Group.
During this year, the Bank mainly developed and executed liability and fee based Islamic Banking products after due
approval from Shari’ah Board. Moreover, the Shari’ah Board supervised and analyzed various products, concepts,
transactions, processes and their Shari’ah Compliance as an ongoing practice to ensure that the transactions continue
to be valid as per Shari’ah.
The main modes of financing used for the bank’s financing activities during the year consist of Murabaha, Ijarah,
Diminishing Musharakah, Istisna, Running Musharakah, Salam and Tijarah. The gradual shift towards diversification of the
modes of finance used, i.e. from Trade based modes to Participative modes, is an encouraging development beneficial
towards the growth of Islamic Banking industry at large.
Shari’ah Audit Department plays a pivotal role in achieving complete Shari’ah compliance in all matters of the bank. The
Internal Shari’ah Audit Department evaluates the adherence to Shari’ah guidelines in each and every activity undertaken
by the Bank. During the year Shari’ah Audit of almost all of the IBG branches was conducted, this allowed the Bank
to reinforce the internal Shari’ah control mechanism. Internal Shari’ah Audit department also evaluated the Shar’iah
knowledge of the staff in the branches during the audit process in order to assess the ability of the staff to correctly
carry out the transactions from Shari’ah perspective. However, audit of the Centralized Units was not conducted at the
desired level which is hopefully addressed in coming year.
To strengthen and broaden the functions of Shari’ah control, the Shari’ah Compliance Department of the bank goes
the extra mile to facilitate the customers by formulating customized process flows after assessment of the customers’
business models and determining the most suitable product.
Over the course of the year, the Shari’ah Compliance Department sought approvals from the Shari’ah Board of product
structures and process flows for its clients. Additionally, to maintain the high level of compliance the department
performed random physical inspections and verified the purchases, evidences, and invoices of financing transactions.
Physical inspections were conducted at the time of delivery of goods to ensure Shari’ah compliance in Istisna, Salam,
and Tijarah transactions. As a part of the department’s responsibilities Shari’ah Compliance also oversaw the process of
profit distribution to the depositors on monthly basis.
It is encouraging to note that IBG has aligned various staff facilities according to Shari’ah principles. However matters
pertaining to employment benefits were pending for the last few years despite repeated recommendations by the former
Shari’ah Advisor/Shari’ah Board. Now these matters have been resolved and it is being ensured that the investment of
provident fund for IBG staff is in accordance with Shari’ah. Similarly, the bank is arranging takaful coverage for staff
related matters from this year onwards.
To form our opinion as expressed in this report, we have reviewed the reports of Shari’ah Compliance Department,
Internal Shari’ah Audit and working and report of RSBM. Based on above, we are of the view that:
i) Business affairs of Bank Alfalah Islamic Banking Group, especially with reference to transactions, relevant
documentation and procedures performed and executed by the Bank during the year 2016 are, by and large, in
conformity with the principles and guidelines of Shari’ah and other guidelines issued by Shari’ah Board and State
Bank of Pakistan.
ii) Bank has a well-defined system in place in form of Internal Shari’ah Audit and Shari’ah Compliance Review to en-
sure that earnings realized from sources or means prohibited by Shari’ah will be credited to the Charity account
to warrant that the income distributed among stakeholders generally remains Halal and pure. In year 2016, an
income of Rs. 9.524 Million has been transferred to the charity account as per Shari’ah Board’s instructions due
to the violations of Shari’ah guidelines observed and highlighted during Internal Shari’ah Audit Reviews.
iii) The allocation of Profit and charging of Losses to Mudarabah based remunerative deposits, which was reviewed
and approved on monthly basis, is generally in conformity with Shari’ah Rules & Principles and Pool Management
guidelines of State Bank of Pakistan.

73
 iv) Bank has, by and large, complied with the fataawa/opinions/advices issued by Shari’ah Board from 01 Jan 2016 to
31 Dec 2016.
v) Bank is continuously focused towards enhancing the Islamic Banking skills of the staff. Learning & Development
Department of the Bank has provided Basic Islamic Banking training to almost the entire staff of the Group.
Moreover, specific Islamic Banking certification courses and Shari’ah documentation courses were also conducted.
These initiatives taken by Learning & Development of the Bank clearly distinguishes Bank Alfalah-IBG in Islamic
Banking industry.
vi) Bank has also increased its focus on Customers’ Awareness regarding Islamic Banking and conducted significant
number of programs at different cities.
vii) During the year, an amount of Rs. 40.182 Million was recovered from the customers as charity on account of delay
in payments. A substantial amount of Rs. 84.906 Million has been granted to various charitable institutions against
current collection and previous years’ balances.
viii) Management is gradually providing resources in Shari’ah Compliance Department as per Shari’ah Board require-
ments.
May Almighty Allah grant us success in this world and the next, and on the Day of Judgment, and forgive our mistakes
that we may have committed willingly or unwillingly.

Dr. Khalil Ahmad Aazami Mohib ul Haq Siddiqui Ovais Ahmed Qazi
Chairperson Shari’ah Board Member Shari’ah Board Member Shari’ah Board

February 14, 2017 / Jamadi-ul-Awal 16, 1438 A.H

74
 (Learning & Development Department)

75
 (Management Executive)

(Diminishing Musharaka)

(Shari’ah Compliance Review)

9.524
(Pool Management Guidelines)

76
MANAGEMENT STATEMENT OF COMPLIANCE WITH
EMPLOYEES STOCK OPTION SCHEME
Bank Alfalah Limited as of December 31, 2016 has implemented its Employees Stock Option Scheme as approved by the
shareholders and the Securities and Exchange Commission of Pakistan (SECP) vide its letter No. SMD/CIW/ESOS/02/2013
dated December 27, 2013.

The Bank has complied in all material respects with the requirements of the Scheme and the Public Companies (Employees
Stock Option Scheme) Rules, 2001 (the Rules) issued by the Securities and Exchange Commission of Pakistan vide SRO
300(I) 2001 dated May 11, 2001. The details of the scheme including pricing formula, options granted, lapsed, etc. have
been disclosed in note 35.2 to the financial statements. A summary of the scheme is described in the annexure attached
with this statement.

Atif Bajwa
Director and Chief Executive Officer
February 23, 2017
Abu Dhabi

77
INDEPENDENT ASSURANCE REPORT TO THE MEMBERS ON
MANAGEMENT STATEMENT OF COMPLIANCE WITH EMPLOYEES STOCK
OPTION SCHEME
We were engaged by the Board of directors of Bank Alfalah Limited (the Bank), to report on Bank’s Compliance with the
Employees Stock Option Scheme (the Scheme) approved by the shareholders in their Annual General Meeting held on
March 29, 2013 and the Public Companies (Employees Stock Option Scheme) Rules, 2001 (the Rules), as set out in the
Statement of Compliance with Employees Stock Options Scheme (the Statement) prepared by the Bank as of December
31, 2016, in the form of an independent reasonable assurance conclusion about whether the annexed statement presents
fairly the status of the Bank’s compliance with the Scheme and the Rules.
Applicable Criteria
The criteria against which the subject matter information (the Statement) is assessed comprise of the Scheme and the
Rules.
Responsibilities of the Management
The Bank’s management is responsible for preparation and presentation of the Statement in accordance with the
applicable criteria. This responsibility includes designing, implementing and maintaining internal control relevant to
compliance with the terms and conditions of the Scheme and the Rules and preparation of the Statement that is free
from material misstatement whether due to fraud or error.
Our Independence and Quality Control
We have complied with the independence and other ethical requirements of the Code of Ethics for Chartered Accountants
issued by the Institute of Chartered Accountants of Pakistan, which is founded on fundamental principles of integrity,
objectivity, professional competence and due care, confidentiality and professional behavior.
The firm applies International Standard on Quality Control 1 “Quality Control for Firms That Perform Audits and Reviews
of Historical Financial Information, and Other Assurance and Related Services Engagements” and accordingly maintains
a comprehensive system of quality control including documented policies and procedures regarding compliance with
ethical requirements, professional standards and applicable legal and regulatory requirements.
Our Responsibility
Our responsibility is to examine the annexed statement prepared by the Bank and to report thereon in the form of
an independent reasonable assurance conclusion based on the evidence obtained. We conducted our engagement in
accordance with International Standard on Assurance Engagements (ISAE 3000) ‘Assurance Engagements Other Than
Audits or Reviews of Historical Financial Information’ issued by the International Auditing and Assurance Standards
Board. That standard requires that we plan and perform our procedures to obtain reasonable assurance about whether
the annexed statement fairly, in all material respects, presents the status of the Bank’s compliance with the Scheme and
the Rules.
The procedures selected depend on our judgment, including the assessment of the risks of material non-compliance with
the Scheme and the Rules whether due to fraud or error. In making those risk assessments, we have considered internal
control relevant to the operations of the Bank in accordance with the Scheme and the Rules in order to design assurance
procedures that are appropriate in the circumstances, but not for the purposes of expressing a conclusion as to the
effectiveness of the Bank’s internal control. Reasonable assurance is less than absolute assurance.
The procedures performed included:
1. Verifying that only eligible employees have participated in the Scheme in compliance with the Rules;
2. Verifying that the share options granted, vested, lapsed or surrendered under the Scheme have been recorded in
the books of accounts in accordance with the requirements of the Rules; and
3. Ensuring that adequate disclosures have been made in respect of the Scheme in the Annual Report as required
under the Rules.
Conclusion
Our conclusion has been formed on the basis of, and is subject to, the matters outlined in this report. We believe that the
evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion.
In our opinion, the annexed statement, in all material respects, presents fairly the status of the Bank’s compliance with
the Scheme and the Rules as of December 31, 2016.

February 23, 2017 KPMG Taseer Hadi & Co.

Karachi Chartered Accountants
Syed Iftikhar Anjum

78
STATEMENT ON INTERNAL CONTROLS

This Statement of Internal Controls is based on an ongoing process designed to identify the significant risks in achieving
the bank’s policies, aims and objectives and to evaluate the nature and extent of those risks and to manage them
efficiently, effectively and economically. This process has been continuously in place for the year ended December 31,
2016.
It is the responsibility of the bank’s management to establish and maintain an adequate and effective system of
Internal Control and every endeavor is made to implement sound control procedures and to maintain a suitable control
environment.
The Board of Directors have instituted an effective Internal Audit Division which not only monitors compliance with the
bank’s policies, procedures and controls and reports significant deviations regularly to the Board Audit Committee but
also regularly reviews the adequacy of the over Internal Control system. The observations and weaknesses pointed out
by the external auditors are also addressed promptly and necessary steps are taken by the management to eliminate
such weaknesses.
The Bank has adopted the internationally accepted COSO Internal Control - Integrated Framework. The Bank follows SBP
guidelines on Internal Controls over Financial Reporting (ICFR).
To further strengthen the overall control environment, the management has constituted an Internal Control Department.
Moreover, the Bank’s Controls Committee comprising of Senior Executives of the Bank has been formulated for enhanced
governance and monitoring. As a major step forward towards processes / controls revamp, Process Improvement
Committee (PIC) was formed to evaluate and consider the recommendations of all the reviewers such as Risk, Operations
and Compliance. Regular periodic reviews of the Bank’s processes are undertaken by the said Committee.
In order to ensure consistency in the process of compliance with the relevant guidelines the Bank has followed a
structured roadmap. Accordingly, the Bank has completed a detailed documentation of the existing processes and
controls, together with a comprehensive gap analysis of the control design and development of implemented remediation
plans for the gaps.
While concerted efforts have always been made to comply with the SBP Guidelines issued, the identification, evaluation,
and management of risks within each of the Bank’s key activities, and their continued evaluation and changes to
procedures remains an ongoing process.
Furthermore, the bank has developed a comprehensive management testing and reporting framework for ensuring
ongoing operating effectiveness of majority of key controls and has significantly addressed the design improvement
opportunities identified to complete the project related initiatives.
In accordance with SBP directives, the Bank’s external auditors are engaged to provide the management with their Long
Form Report on the extent of ICFR, which is then submitted to the SBP.
Management’s Evaluation on Effectiveness of ICFR:
The system of Internal Control is designed to manage rather than eliminate the risk failure to achieve the bank’s business
strategies and policies. It can therefore only provide reasonable and not absolute assurance against material misstatement
and loss.
The management believes that the bank’s existing system of Internal Control is considered reasonable in design and is
being effectively implemented and monitored. In addition, further Internal Control improvements are expected from the
bank’s adoption of COSO framework, as described above. Based on the work performed under ICFR, the management has
identified various areas for process improvements as well as additional controls required to be put in place, and areas
requiring strengthening of existing controls. The management takes all reasonable steps to ensure that the timelines and
priorities assigned to the same are adhered to.
The Bank shall continue in its endeavor to further enhance its internal control design and assessment process in
accordance with the industry best practices.
For and behalf of the Board,

Atif Bajwa
Director and Chief Executive Officer
February 23, 2017
Abu Dhabi

79
AUDITORS’ REPORT TO THE MEMBERS

We have audited the annexed unconsolidated statement of financial position of Bank Alfalah Limited (the Bank)
as at 31 December 2016 and the related unconsolidated profit and loss account, unconsolidated statement of
comprehensive income, unconsolidated cash flow statement and unconsolidated statement of changes in equity
together with the notes forming part thereof (here-in-after referred to as the ‘financial statements’) for the year
then ended, in which are incorporated the unaudited certified returns from the branches except for fifty eight
branches which have been audited by us and two branches audited by auditors abroad and we state that we have
obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for
the purposes of our audit.
It is the responsibility of the Bank’s Board of Directors to establish and maintain a system of internal control,
and prepare and present the financial statements in conformity with approved accounting standards and the
requirements of the Banking Companies Ordinance, 1962 (LVII of 1962), and the Companies Ordinance, 1984 (XLVII
of 1984). Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the International Standards on Auditing as applicable in Pakistan.
These standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of any material misstatement. An audit includes examining, on a test basis, evidence
supporting amounts and disclosures in the financial statements. An audit also includes assessing accounting
policies and significant estimates made by management, as well as, evaluating the overall presentation of
the financial statements. We believe that our audit provides a reasonable basis for our opinion and after due
verification, which in the case of loans and advances covered more than 60% of the total loans and advances of
the Bank, we report that:
a) in our opinion, proper books of account have been kept by the Bank as required by the Companies Ordinance,
1984 (XLVII of 1984), and the returns referred to above received from the branches and the offshore banking unit
have been found adequate for the purposes of our audit;
b) in our opinion:
i) the unconsolidated statement of financial position and the unconsolidated profit and loss account together with
the notes thereon have been drawn up in conformity with the Banking Companies Ordinance, 1962 (LVII of 1962),
and the Companies Ordinance, 1984 (XLVII of 1984), and are in agreement with the books of account and are
further in accordance with accounting policies consistently applied, except for the change in accounting policies
as disclosed in note 5.1 to the accompanying financial statements, with which we concur;
ii) the expenditure incurred during the year was for the purpose of the Bank’s business; and
iii) the business conducted, investments made and the expenditure incurred during the year were in accordance with
the objects of the Bank and the transactions of the Bank which have come to our notice have been within the
powers of the Bank;
c) in our opinion and to the best of our information and according to the explanations given to us, the unconsolidated
statement of financial position, unconsolidated profit and loss account, unconsolidated statement of comprehensive
income, unconsolidated cash flow statement and unconsolidated statement of changes in equity together with
the notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and give
the information required by the Banking Companies Ordinance, 1962 (LVII of 1962), and the Companies Ordinance,
1984 (XLVII of 1984), in the manner so required and give a true and fair view of the state of the Bank’s affairs as at
31 December 2016 and its true balance of the profit, its cash flows and changes in equity for the year then ended;
and
in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted
d)
by the Bank and deposited in the Central Zakat Fund established under section 7 of that Ordinance.
February 23, 2017 KPMG Taseer Hadi & Co.
Karachi Chartered Accountants
Syed Iftikhar Anjum

80
UNCONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT DECEMBER 31, 2016

January 01,
Note 2016 2015 2015
(Restated) (Restated)
(Rupees in ‘000)
ASSETS

Cash and balances with treasury banks 6 74,071,384 62,368,790 50,515,643

Balances with other banks 7 9,373,123 16,552,207 12,331,713
Lendings to financial institutions 8 30,149,029 27,626,350 18,313,485
Investments - net 9 389,092,637 423,099,734 324,319,454
Advances - net 10 378,720,349 334,158,739 297,255,730
Operating fixed assets 11 18,133,267 17,241,968 15,740,100
Deferred tax assets 12 - - -
Other assets 13 17,917,264 21,559,733 24,652,168
917,457,053 902,607,521 743,128,293

LIABILITIES

Bills payable 14 12,886,990 9,733,929 11,758,155

Borrowings 15 178,311,035 172,393,198 55,232,916
Deposits and other accounts 16 640,944,254 640,188,735 605,963,224
Sub-ordinated loans 17 8,317,670 9,983,000 9,987,000
Liabilities against assets subject to finance lease - - -
Deferred tax liabilities 12 2,650,428 1,824,054 853,331
Other liabilities 18 14,221,914 15,131,430 14,514,599
857,332,291 849,254,346 698,309,225

NET ASSETS 60,124,762 53,353,175 44,819,068

REPRESENTED BY

Share capital 19 15,952,076 15,898,062 15,872,427

Reserves 15,895,652 14,164,120 12,338,026
Unappropriated profit 17,337,458 12,362,596 9,613,374
49,185,186 42,424,778 37,823,827
Surplus on revaluation of assets - net of tax 20 10,939,576 10,928,397 6,995,241
60,124,762 53,353,175 44,819,068

CONTINGENCIES AND COMMITMENTS 21

The annexed notes 1 to 46 and Annexures I and II form an integral part of these unconsolidated financial statements.

CHIEF EXECUTIVE OFFICER DIRECTOR DIRECTOR CHAIRMAN

81
UNCONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED DECEMBER 31, 2016

Note 2016 2015

(Rupees in ‘000)

Mark-up / return / interest earned 23 57,244,690 61,437,872

Mark-up / return / interest expensed 24 28,474,468 32,810,722
Net mark-up / interest income 28,770,222 28,627,150

Provision against non-performing loans and advances - net 10.5 1,082,506 2,150,209
Provision for diminution in the value of investments - net 9.26 100,766 136,691
Bad debts written off directly 10.6.1 - -
1,183,272 2,286,900
Net mark-up / interest income after provisions 27,586,950 26,340,250

Non mark-up / interest income

Fee, commission and brokerage income 4,667,987 4,384,496
Dividend income 584,805 514,401
Income from dealing in foreign currencies 25 1,120,736 1,379,097
Gain on sale of securities - net 26 1,681,621 1,606,751
Unrealised gain on revaluation of investments
classified as held for trading - net 9.28 109 229,063
Other income 27 812,755 747,747
Total non mark-up / interest income 8,868,013 8,861,555
36,454,963 35,201,805

Non mark-up / interest expenses

Administrative expenses 28 23,423,218 21,956,115
(Reversal) / provision against off-balance sheet obligations 18.1 (7,508) 1,066
(Reversal) / provision against other assets 13.3 (102,305) 310,765
Other charges 29 118,399 329,789
Total non mark-up / interest expenses 23,431,804 22,597,735
13,023,159 12,604,070
Extra ordinary / unusual items - -
Profit before taxation 13,023,159 12,604,070

Taxation 30
- Current 4,689,525 5,008,992
- Deferred 871,038 (495,545)
- Prior years (437,312) 567,813
5,123,251 5,081,260
Profit after taxation 7,899,908 7,522,810

(Rupees)

Basic earnings per share 31.1 4.96 4.73

Diluted earnings per share 31.2 4.93 4.73

The annexed notes 1 to 46 and Annexures I and II form an integral part of these unconsolidated financial statements.

CHIEF EXECUTIVE OFFICER DIRECTOR DIRECTOR CHAIRMAN

82
UNCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2016

Note 2016 2015

(Rupees in ‘000)

Profit after taxation 7,899,908 7,522,810

Other comprehensive income

Items that are or may be reclassified subsequently to profit and loss account

Exchange differences on translation of net investments in foreign branches 11,054 210,501

Items that will never be reclassified to profit and loss account

Remeasurement of defined benefit plan 35.1.4 309,314 (198,962)

Related tax on remeasurement of defined benefit plan (108,260) 69,637
201,054 (129,325)

Comprehensive income - transferred to statement of changes in equity 8,112,016 7,603,986

Components of comprehensive income not reflected in equity

Items that are or may be reclassified subsequently to profit and loss account

(Deficit) / surplus on revaluation of available for sale securities (88,251) 3,791,058

Related deferred tax liability 60,736 (1,346,452)
(27,515) 2,444,606

The annexed notes 1 to 46 and Annexures I and II form an integral part of these unconsolidated financial statements.

CHIEF EXECUTIVE OFFICER DIRECTOR DIRECTOR CHAIRMAN

83
UNCONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2016

Note 2016 2015

(Rupees in ‘000)
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation 13,023,159 12,604,070
Dividend income (584,805) (514,401)
12,438,354 12,089,669
Adjustments
Depreciation 28 1,691,261 1,809,454
Amortisation 28 357,473 272,179
Provision against non-performing loans and advances - net 10.5 1,082,506 2,150,209
Provision for diminution in value of investments - net 9.26 100,766 136,691
(Reversal) / provision against off-balance sheet obligations 18.1 (7,508) 1,066
(Reversal) / provision against other assets 13.3 (102,305) 310,765
Unrealised gain on revaluation of investments
classified as held for trading - net 9.28 (109) (229,063)
Gain on sale of operating fixed assets - net 27 (53,226) (11,519)
Charge for defined benefit plan 35.1.4 260,795 290,111
3,329,653 4,729,893
15,768,007 16,819,562
(Increase) / decrease in operating assets
Lendings to financial institutions (11,944,621) (23,711,516)
Held for trading securities 3,891,325 2,363,062
Advances (45,644,116) (38,850,793)
Other assets (excluding advance taxation) 4,223,462 142,188
(49,473,950) (60,057,059)
Increase / (decrease) in operating liabilities
Bills payable 3,153,061 (2,024,226)
Borrowings 5,971,645 117,197,929
Deposits and other accounts 755,519 34,225,511
Other liabilities (576,087) 410,446
9,304,138 149,809,660
(24,401,805) 106,572,163
Gratuity paid 35.1.4 (260,795) (290,111)
Income tax paid (4,692,207) (3,039,444)
Net cash (used) in / generated from operating activities (29,354,807) 103,242,608
CASH FLOWS FROM INVESTING ACTIVITIES
Net investments in available for sale securities (28,968,156) (71,390,574)
Net investments in held to maturity securities 57,927,823 984,355
Investment in subsidiaries / associated companies (8,481) (1,723,471)
Disposal of investment in subsidiaries / associated companies 890,400 928,244
Dividend income received 549,605 519,569
Investments in operating fixed assets (2,837,372) (1,951,174)
Sale proceeds of property and equipments disposed-off 11.4 111,326 22,342
Net cash generated from / (used) in investing activities 27,665,145 (72,610,709)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of share capital 84,895 41,836
Redemption of sub-ordinated loans (1,665,330) (4,000)
Dividend paid (1,585,581) (3,165,079)
Net cash used in financing activities (3,166,016) (3,127,243)
Exchange difference on translation of net investments in foreign branches 11,054 210,501
(Decrease) / increase in cash and cash equivalents (4,844,624) 27,715,157
Cash and cash equivalents at beginning of the year 93,351,641 65,536,606
Effects of exchange rate changes on cash and cash equivalents 244,080 343,958
93,595,721 65,880,564
Cash and cash equivalents at end of the year 32 88,751,097 93,595,721

The annexed notes 1 to 46 and Annexures I and II form an integral part of these unconsolidated financial statements.

CHIEF EXECUTIVE OFFICER DIRECTOR DIRECTOR CHAIRMAN

84
UNCONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2016

Capital Reserves Revenue Reserves

Exchange Employee share
Unappropriated
Share capital Share premium Statutory reserve* translation option compensa- Total
profit
reserve tion reserve
-------------------------------------------------------------------------------(Rupees in ‘000)-------------------------------------------------------------------------------

Balance as at January 1, 2015 15,872,427 4,285,556 6,636,342 1,362,465 53,663 9,613,374 37,823,827

Changes in equity for 2015

Total comprehensive income

Profit after taxation - - - - - 7,522,810 7,522,810

Other comprehensive income

Exchange difference on translation of net

investment in foreign branches - - - 210,501 - - 210,501

Remeasurement of defined benefit plan (Note 35.1.4) - - - - - (198,962) (198,962)

Related tax charge - - - - - 69,637 69,637

- - - 210,501 - 7,393,485 7,603,986

Transfer to statutory reserve - - 1,504,562 - - (1,504,562) -

Transfer from surplus on revaluation

of operating fixed assets - net of tax - - - - - 34,784 34,784

Transactions with owners recorded directly in equity

Shares issued during the year 25,635 16,201 - - - - 41,836

Final cash dividend for the year ended

December 31, 2014 @ 20% - - - - - (3,174,485) (3,174,485)

Recognition of fair value of share based payments on grant date (Note 35.2) - - - - 119,250 - 119,250

Unamortised portion of deferred employee compensation expense - - - - (24,420) - (24,420)

Transfer to Share Premium on issuance of shares under

Stock Option Scheme - 27,891 - - (27,891) - -

Balance as at December 31, 2015 15,898,062 4,329,648 8,140,904 1,572,966 120,602 12,362,596 42,424,778

Changes in equity for 2016

Total comprehensive income

Profit after taxation - - - - - 7,899,908 7,899,908

Other comprehensive income

Exchange difference on translation of net investment in

foreign branches - - - 11,054 - - 11,054

Remeasurement of defined benefit plan (Note 35.1.4) - - - - - 309,314 309,314

Related tax charge - - - - - (108,260) (108,260)

- - - 11,054 - 8,100,962 8,112,016

Transfer to statutory reserve - - 1,579,982 - - (1,579,982) -

Transfer from surplus on revaluation

of operating fixed assets - net of tax - - - - - 43,688 43,688

Transactions with owners, recorded directly in equity

Final cash dividend for the year ended

December 31, 2015 @ 10% - - - - - (1,589,806) (1,589,806)

Shares issued during the year 54,014 30,881 - - - - 84,895

Recognition of fair value of share based payments on grant date (Note 35.2) - - - - 132,026 - 132,026

Unamortised portion of deferred employee compensation expense - - - - (22,411) - (22,411)

Transfer to Share Premium on issuance of shares under

Stock Option Scheme - 56,597 - - (56,597) - -

Balance as at December 31, 2016 15,952,076 4,417,126 9,720,886 1,584,020 173,620 17,337,458 49,185,186

* This represents reserve created under section 21(i)(a) of the Banking Companies Ordinance, 1962.

The annexed notes 1 to 46 and Annexures I and II form an integral part of these unconsolidated financial statements.

CHIEF EXECUTIVE OFFICER DIRECTOR DIRECTOR CHAIRMAN

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NOTES TO AND FORMING PART OF THE UNCONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
1 STATUS AND NATURE OF BUSINESS

Bank Alfalah Limited (the Bank) is a banking company incorporated in Pakistan on June 21, 1992 as a public
limited company under the Companies Ordinance, 1984. It commenced its banking operations on November
1, 1992. The Bank’s registered office is located at B. A. Building, I. I. Chundrigar Road, Karachi and is listed on
the Pakistan Stock Exchange (formerly Karachi, Lahore and Islamabad Stock Exchanges). The Bank is engaged
in banking services as described in the Banking Companies Ordinance, 1962 and is operating through 475
conventional banking branches including 18 sub branches (2015: 484 branches including 12 sub branches),
10 overseas branches (2015: 10 branches), 153 Islamic banking branches (2015: 158 branches) and 1 offshore
banking unit (2015: 1 unit). The credit rating of the Bank is disclosed in note 33 of the unconsolidated financial
statements.

2 BASIS OF PRESENTATION

2.1 These unconsolidated financial statements represent separate financial statements of Bank Alfalah Limited in
which investments in subsidiaries and associates are accounted on the basis of direct equity interest rather
than on the basis of reported results.
2.2 In accordance with the directives of the Federal Government regarding the shifting of the banking system to
Islamic modes, the State Bank of Pakistan has issued various circulars from time to time. Permissible form of
trade-related modes of financing includes 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 unconsolidated financial statements as such, but are
restricted to the amount of facility actually utilised 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 and notified under the
provisions of the Companies Ordinance, 1984.
2.3 Key financial figures of the Islamic Banking branches are disclosed in Annexure II to the unconsolidated financial
statements.

3 STATEMENT OF COMPLIANCE

3.1 These unconsolidated financial statements have been prepared in accordance with the approved accounting
standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial
Reporting Standards (IFRSs) issued by the International Accounting Standards Board and Islamic Financial
Accounting Standards (IFASs) issued by the Institute of Chartered Accountants of Pakistan as are notified under
the Companies Ordinance, 1984, the provisions of and directives issued under the Companies Ordinance, 1984,
Banking Companies Ordinance, 1962 and the directives issued by the Securities and Exchange Commission of
Pakistan (SECP) and the State Bank of Pakistan (SBP). In case the requirements differ, the provisions of and
directives issued under the Companies Ordinance, 1984, Banking Companies Ordinance, 1962 and the directives
issued by SECP and SBP shall prevail.

3.2 The State Bank of Pakistan has deferred the applicability of International Accounting Standard (IAS) 39,
‘Financial Instruments: Recognition and Measurement’ and International Accounting Standard (IAS) 40,
‘Investment Property’ for banking companies through BSD Circular Letter No. 10 dated August 26, 2002 till
further instructions. Further, the Securities and Exchange Commission of Pakistan has deferred the applicability
of International Financial Reporting Standard (IFRS) 7, ‘Financial Instruments: Disclosures’ on banks through
its notification S.R.O 411(I)/2008 dated April 28, 2008. Accordingly, the requirements of these standards have
not been considered in the preparation of these unconsolidated financial statements. However, investments
have been classified and valued in accordance with the requirements prescribed by the State Bank of Pakistan
through various circulars.

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 3.3 The State Bank of Pakistan through BPRD Circular No. 04 of 2015 dated February 25, 2015 has deferred
applicability of Islamic Financial Accounting Standard-3 for Profit and Loss Sharing on Deposits (IFAS-3) issued
by the Institute of Chartered Accountants of Pakistan and notified by the Securities and Exchange Commission
of Pakistan (SECP), vide their S.R.O No. 571 of 2013 dated June 12, 2013 for institutions offering Islamic Financial
Services (IIFS). The standard will result in certain new disclosures in the financial statements of the Bank.

3.4 New and revised approved accounting standards not yet effective

The following standards, amendments and interpretations of approved accounting standards will be effective
for accounting periods beginning on or after January 01, 2017:

- Amendments to IAS 12 ‘Income Taxes’ are effective for annual periods beginning on or after January 01, 2017. The
amendments clarify that the existence of a deductible temporary differences depend solely on a comparison
of the carrying amount of an asset and its tax base at the end of the reporting period, and is not affected by
possible future changes in the carrying amount or expected manner of recovery of the asset. The amendments
further clarify that when calculating deferred tax asset in respect of insufficient taxable temporary differences,
the future taxable profits exclude tax deductions resulting from the reversal of those deductible temporary
differences. The amendments are not likely to have an impact on Bank’s financial statements.

- Amendments to IAS 7 ‘Statement of Cash Flows’ are part of IASB’s broader disclosure initiative and are effective
for annual periods beginning on or after January 01, 2017. The amendments require disclosures that enable
users of financial statements to evaluate changes in liabilities arising from financing activities, including both
changes arising from cash flow and non-cash changes.

- Amendments to IFRS 2 - Share-based Payment clarify the accounting for certain types of arrangements and are
effective for annual periods beginning on or after January 01, 2018. The amendments cover three accounting
areas (a) measurement of cash-settled share-based payments; (b) classification of share-based payments
settled net of tax withholdings; and (c) accounting for a modification of a share-based payment from cash-
settled to equity-settled. The new requirements could affect the classification and/or measurement of these
arrangements and potentially the timing and amount of expense recognized for new and outstanding awards.
The amendments are not likely to have an impact on Bank’s financial statements.

- Annual improvements to IFRS standards 2014-2016 cycle. The new cycle of improvements addresses
improvements to following approved accounting standards:

- Amendments to IFRS 12 ‘Disclosure of Interests in Other Entities’ (effective for annual periods beginning
on or after January 01, 2017) clarify that the requirements of IFRS 12 apply to an entity’s interests that
are classified as held for sale or discontinued operations in accordance with IFRS 5 – ‘Non-current Assets
Held for Sale and Discontinued Operations’. The amendments are not likely to have an impact on Bank’s
financial statements.

- Amendments to IAS 28 ‘Investments in Associates and Joint Ventures’ (effective for annual periods beginning
on or after January 01, 2018) clarifies that a venture capital organization and other similar entities may
elect to measure investments in associates and joint ventures at fair value through profit or loss, for each
associate or joint venture separately at the time of initial recognition of investment. Furthermore, similar
election is available to non-investment entity that has an interest in an associate or joint venture that is an
investment entity, when applying the equity method, to retain the fair value measurement applied by that
investment entity associate or joint venture to the investment entity associate’s or joint venture’s interests
in subsidiaries. This election is made separately for each investment entity associate or joint venture. The
amendments are not likely to have an impact on Bank’s financial statements.
- IFRIC 22 ‘Foreign Currency Transactions and Advance Consideration’ (effective for annual periods beginning
on or after January 01, 2018) clarifies which date should be used for translation when a foreign currency
transaction involves payment or receipt in advance of the item it relates to. The related item is translated
using the exchange rate on the date the advance foreign currency is received or paid and the prepayment
or deferred income is recognized. The date of the transaction for the purpose of determining
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 the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) would
remain the date on which receipt of payment from advance consideration was recognized. If there are
multiple payments or receipts in advance, the entity shall determine a date of the transaction for each
payment or receipt of advance consideration. The amendments are not likely to have an impact on Bank’s
financial statements.

4 BASIS OF MEASUREMENT

4.1 Accounting convention

These unconsolidated financial statements have been prepared under the historical cost convention except
that certain fixed assets and other assets are stated at revalued amounts, and held for trading and available for
sale investments and derivative financial instruments are measured at fair value.

4.2 Functional and Presentation Currency

These unconsolidated financial statements are presented in Pakistani Rupees, which is the Bank’s functional
and presentation currency. The amounts are rounded off to the nearest thousand rupees except as stated
otherwise.

4.3 Critical accounting estimates and judgements

The preparation of these unconsolidated financial statements is in conformity with approved accounting
standards as applicable in Pakistan requires management to make judgements, estimates and assumptions that
affect the reported amounts of assets and liabilities and income and expenses. It also requires management
to exercise judgement in application of its accounting policies. The estimates and associated 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 recognised in the period in which the estimate is revised, if the revision affects only that period,
or in the period of revision and in future periods if the revision affects both current and future periods.

Significant accounting estimates and areas where judgements were made by the management in the application
of accounting policies are as follows:

i) classification and provisioning against investments (notes 5.4 and 9)

ii) classification and provisioning against non-performing loans and advances (notes 5.5 and 10)
iii) income taxes (notes 5.11 and 30)
iv) accounting for defined benefit plan and compensated absences (notes 5.12 and 35)
v) depreciation / amortisation of operating fixed assets (notes 5.6 and 11)
vi) impairment of assets (notes 5.9 and 5.10)

5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these unconsolidated financial statements are
set out below. These have been consistently applied to all years presented, unless otherwise specified except for
changes mentioned in note 5.1 to these unconsolidated financial statements. In addition certain reclassification
have been made as required by SBP Circular No. 05 of 2016 (refer note 44.1).

5.1 On January 01, 2016, the State Bank of Pakistan (SBP) wide BPRD Circular No. 01 of 2016 issued ‘Regulations
for Debt Property Swaps’. In line with these regulations, the Bank, effective January 1, 2016 has changed its
accounting policy for recording of non-banking assets acquired in satisfaction of claims. Prior to this change in
accounting policy, non-banking assets acquired in satisfaction of claims were carried at cost less impairment,
if any. Had the accounting policy not been changed, Non-banking assets (included in Other Assets in the
statement of financial position) would have been lower by Rs. 36.94 million, surplus on revaluation of assets and
deferred tax liabilities would have been lower by Rs. 23.95 million and Rs. 12.99 million respectively, and profit
after tax would have been higher by Rs. 1.34 million.

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 5.2 Cash and cash equivalents

Cash and cash equivalents comprise of cash in hand, balances with treasury banks, balances with other banks
in current and deposit accounts, national prize bonds, any overdrawn nostro accounts and call lendings having
maturity of three months or less.

5.3 Lendings to / borrowings from financial institutions

The Bank enters into transactions of repo and reverse repo at contracted rates for a specified period of time.
These are recorded as under:

Sale of securities under repurchase agreements

Securities sold subject to a repurchase agreement (repo) are retained in these unconsolidated financial
statements as investments and the counter party liability is included in borrowings. The difference between the
sale and contracted repurchase price is accrued on a time proportion basis over the period of the contract and
recorded as an expense.

Purchase of securities under resale agreements

Securities purchased under agreement to resell (reverse repo) are not recognised in these unconsolidated
financial statements as investments and the amount extended to the counter party is included in lendings. The
difference between the purchase and contracted resale price is accrued on a time proportion basis over the
period of the contract and recorded as income.

5.4 Investments

5.4.1 Classification

The Bank classifies its investments as follows:

Held for trading

These are investments, which are either acquired for generating profits from short-term fluctuations in market
prices, interest rate movements, dealers’ margin or are securities included in a portfolio in which a pattern of
short-term profit taking exists.

Held to maturity

These are investments with fixed or determinable payments and fixed maturities and the Bank has the positive
intent and ability to hold them till maturity.

Available for sale

These are investments, other than those in subsidiaries and associates, which do not fall under the ‘held for
trading’ and ‘held to maturity’ categories.

Associates

Associates are all entities over which the Bank has significant influence but not control. Investment in associates
is carried at cost less accumulated impairment losses, if any.

Subsidiaries

Subsidiary is an entity over which the Bank has control. Investment in subsidiary is carried at cost less
accumulated impairment losses, if any.

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5.4.2 Regular way contracts

All purchases and sales of investments that require delivery within the time frame established by regulation or
market convention are recognised at trade date, which is the date at which the Bank commits to purchase or sell
the investments except for money market and foreign exchange contracts which are recognised at settlement
date.

5.4.3 Initial recognition and measurement

Investments other than those classified as ‘held for trading’ are initially recognised at cost. Transaction costs
associated with these investment are included in cost of investments. Investments classified as ‘held for trading’
are initially recognised at fair value and transaction costs are expensed in the profit and loss account.

5.4.4 Subsequent measurement

In accordance with the requirements of State Bank of Pakistan, quoted securities other than those classified
as ‘held to maturity’, investment in associates and investment in subsidiaries are subsequently remeasured to
market value. Surplus / (deficit) arising on revaluation of securities classified as ‘available for sale’ is included in
the statement of comprehensive income but is taken to a separate account shown in the statement of financial
position below equity. Surplus / (deficit) arising on revaluation of investments classified as ‘held for trading’ is
taken to the profit and loss account. Investments classified as ‘held to maturity’ are carried at amortised cost.

Unquoted equity securities, excluding investment in subsidiaries and associates are valued at lower of cost
and the break-up value. Break-up value of equity securities is calculated with reference to the net assets of
the investee company as per the latest available audited financial statements. Investment in subsidiaries and
associates are carried at cost, less accumulated impairment losses, if any.

5.4.5 Impairment

Impairment loss in respect of equity securities classified as available for sale, subsidiaries and associates and
held to maturity is recognised based on management’s assessment of objective evidence of impairment as a
result of one or more events that may have an impact on the estimated future cash flows of the investments.
A significant or prolonged decline in fair value of an equity investment below its cost is also considered an
objective evidence of impairment. Provision for diminution in the value of debt securities is made as per
the Prudential Regulations issued by the State Bank of Pakistan. In case of impairment of available for sale
securities, the cumulative loss that has been recognised directly in surplus / (deficit) on revaluation of securities
on the statement of financial position below equity is removed there from and recognised in the profit and
loss account. For investments classified as held to maturity and investment in subsidiaries and associates, the
impairment loss is recognised in the profit and loss account.

Gains or losses on disposal of investments during the year are taken to the profit and loss account.

5.5 Advances

Loans and advances

Loans and advances including net investment in finance lease are stated net of provision against non-
performing advances. Specific and general provisions against Pakistan operations are made in accordance with
the requirements of the Prudential Regulations issued by the State Bank of Pakistan from time to time. The
net provision made / reversed during the year is charged to profit and loss account and accumulated provision
is netted-off against advances. Provisions pertaining to overseas advances are made in accordance with the
requirements of regulatory authorities of the respective countries. Advances are written off when there are no
realistic prospects of recovery.

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 Islamic Financing and Related Assets

The Bank provides Islamic financing and related assets mainly through Murabaha, Ijarah, Diminishing Musharakah,
Musharakah, Running Musharakah, Salam, Istisna, and Export Refinance under SBP Islamic Export Refinance
Scheme. The purchases and sales arising under these arrangements are not reflected in these financial
statements as such but are restricted to the amount of facility actually utilised and the appropriate portion
of profit thereon. The income on such financings is recognised in accordance with the principles of Islamic
Shariah. The Bank determines specific and general provisions against Islamic financing and related assets on
a prudent basis in accordance with the requirements of the Prudential Regulations issued by the SBP. The net
provision made / reversed during the year is charged to profit and loss account and accumulated provision is
netted off against Islamic financing and related assets. Islamic financing and related assets are written off when
there are no realistic prospects of recovery.

Net investment in Finance Lease

Leases where the Bank transfers substantially all the risks and rewards incidental to the ownership of an asset
are classified as finance leases. A receivable is recognised on commencement of lease term at an amount equal
to the present value of the minimum lease payments, including guaranteed residual value, if any. Unearned
finance income is recognised over the term of the lease, so as to produce a constant periodic return on the
outstanding net investment in lease.

5.6 Operating Fixed assets

Tangible assets

Operating fixed assets except office premises are shown at historical cost less accumulated depreciation and
accumulated impairment losses, if any. Historical cost includes expenditures that are directly attributable to
the acquisition of the items. Office premises (which includes land and buildings) are stated at revalued amount
less accumulated depreciation.
Depreciation is charged to income by applying the straight-line method using the rates specified in note 11.2
to these unconsolidated financial statements. The depreciation charge for the year is calculated after taking
into account residual value, if any. The residual values, useful lives and depreciation method are reviewed and
adjusted, if appropriate, at each reporting date. Depreciation on additions is charged from the date on which
the assets are available for use and ceases on the date on which they are disposed off.
Maintenance and normal repairs are charged to income as and when incurred. Subsequent costs are included
in the asset’s carrying amount or are recognised as a separate asset, as appropriate, only when it is probable
that future economic benefits associated with the item will flow to the Bank and the cost of the item can be
measured reliably.

Office premises are revalued by professionally qualified valuers with sufficient regularity to ensure that the net
carrying amount does not differ materially from their fair value.

Surplus arising on revaluation is credited to the surplus on revaluation of operating fixed assets account.
Deficit arising on subsequent revaluation of operating fixed assets is adjusted against the balance in the above
mentioned surplus account as allowed under the provisions of the Companies Ordinance, 1984. The surplus on
revaluation of operating fixed assets to the extent of incremental depreciation charged on the related assets
is transferred to unappropriated profit.
Gains and losses on disposal of operating fixed assets are taken to the profit and loss account except that
the related surplus / deficit on revaluation of operating fixed assets (net of deferred taxation) is transferred
directly to unappropriated profit.

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 Intangible assets

Intangible assets having a finite useful life are stated at cost less accumulated amortisation and accumulated
impairment losses, if any. Such intangible assets are amortised using the straight-line method over their
estimated useful lives. The useful lives and amortisation method are reviewed and adjusted, if appropriate
at each reporting date. Intangible assets having an indefinite useful life are stated at acquisition cost, less
impairment loss, if any.

5.7 Capital work in progress

Capital work-in-progress is stated at cost less accumulated impairment losses, if any. All expenditure connected
with specific assets incurred during installation and construction period are carried under this head. These are
transferred to specific assets as and when assets become available for use.

5.8 Non-current assets held for sale

The Bank classifies a non-current asset (or disposal group) as held for sale if its carrying amount will be
recovered principally through a sale transaction rather than through continuing use.

A non-current asset (or disposal group) held for sale is carried at the lower of its carrying amount and the fair
value less costs to sell. Impairment losses are recognised through the profit and loss account for any initial or
subsequent write down of the non-current asset (or disposal group) to fair value less costs to sell. Subsequent
gains in fair value less costs to sell are recognised to the extent they do not exceed the cumulative impairment
losses previously recorded. A non-current asset is not depreciated while classified as held for sale or while part
of a disposal group classified as held for sale.

5.9 Impairment

The carrying amount of assets is reviewed at each reporting date to determine whether there is any indication of
impairment of any asset or group of assets. If any such indication exists, the recoverable amount of such assets
is estimated and impairment losses are recognised immediately in the unconsolidated financial statements. The
resulting impairment loss is taken to the profit and loss account except for impairment loss on revalued assets,
which is adjusted against related revaluation surplus to the extent that the impairment loss does not exceed
the surplus on revaluation of that asset.

5.10 Ijarah Assets (IFAS 2)

Ijarah assets are stated at cost less depreciation and are disclosed as part of ‘Islamic financing and related
assets’. The rental received/ receivable on Ijarah under IFAS 2 are recorded as income / revenue.

Depreciation

The Bank charges depreciation from the date of recognition of Ijarah of respective assets to Mustajir. Ijarah
assets are depreciated over the period of Ijarah using the straight line method.

Ijarah Rentals

Ijarah rentals outstanding are disclosed in ‘Islamic financing and related assets’ on the Statement of Financial
Position at amortized cost.

Impairment

Impairment of Ijarah assets is determined on the same basis as that of operating fixed assets. Impairment of
Ijarah rentals are determined in accordance with the Prudential Regulations of SBP. The provision for impairment
of Ijarah Rentals is shown as part of ‘Islamic financing and related assets’.

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 5.11 Taxation

Income tax expense comprises current and deferred tax. Income tax expense is recognised in the profit and
loss account except to the extent that it relates to items recognised directly in other comprehensive income in
which case it is recognised in statement of comprehensive income.

Current

Provision for current taxation is based on taxable income at the current rates of taxation after taking into
consideration available tax credit and rebate, if any. The charge for current tax also includes adjustments,
where considered necessary relating to prior years, which arises from assessments / developments made during
the year.

Deferred

Deferred tax is recognised using the balance sheet liability method on all temporary differences arising
between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for
the taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or
settlement of the carrying amounts of assets and liabilities using the tax rates enacted or substantively enacted
at the reporting date. A deferred tax asset is recognised only to the extent that it is probable that future
taxable profits will be available and the credits can be utilised. Deferred tax asset is reduced to the extent that
it is no longer probable that the related tax benefits will be realised.
Deferred tax liability is not recognised in respect of taxable temporary differences associated with exchange
translation reserves of foreign branches, where the timing of the reversal of the temporary differences can be
controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

5.12 Employee benefits

a) Defined benefit plan

The Bank operates an approved funded gratuity scheme covering eligible employees whose period of
employment with Bank is five years or more. Contributions to the fund are made on the basis of actuarial
recommendations. Projected Unit Credit Method is used for the actuarial valuation. Actuarial gains and losses
are recognised immediately in other comprehensive income. Gratuity is payable to staff on completion of the
prescribed qualifying period of service under the scheme.

b) Defined contribution plan

The Bank operates an approved provident fund scheme for all its regular permanent employees, administered
by the Trustees. Equal monthly contributions are made both by the Bank and its employees to the fund at the
rate of 8.33% of the basic salary in accordance with the terms of the scheme.

c) Compensated absences
The Bank recognises the liability for compensated absences in respect of employees in the period in which
these are earned up to the balance sheet date. The provision has been recognised on the basis of actuarial
recommendations.

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 d) Employees Stock Option Scheme
The grant date fair value of equity settled share based payments to employees, determined as option discount
as allowed by Public Companies (Employee Stock Option Scheme) Rules 2001, is recognized as employee
compensation expense on a straight line basis over the vesting period with a consequent credit to equity
as employee stock option compensation reserve. The deferred employee stock option cost is shown as a
deduction from employee stock option compensation reserve. Option discount means the excess of market
price of the share at the date of grant of an option under a Scheme over exercise price of the option.

When an unvested option lapses by virtue of an employee not conforming to the vesting conditions after
recognition of an employee compensation expense in the profit and loss account, such employee compensation
expense is reversed in the profit and loss account equal to the amortized portion with a corresponding effect
to employee stock option compensation reserve equal to the un amortized portion.
When a vested option lapses on expiry of the exercise period, employee compensation expense already
recognized in the profit or loss is reversed with a corresponding reduction to employee stock option
compensation reserve.
When the options are exercised, employee stock option compensation reserve relating to these options is
transferred to share capital and share premium. An amount equivalent to the face value of related shares is
transferred to share capital. Any amount over and above the share capital is transferred to share premium.

5.13 Non-banking assets acquired in satisfaction of claim

Non-banking assets acquired in satisfaction of claims are stated at revalued amounts less accumulated
depreciation thereon. The valuation of properties acquired under this head is conducted regularly, so as to
ensure that their net carrying value does not materially differ from their fair value. Any surplus arising on
revaluation of such properties is transferred to the ‘surplus on revaluation of fixed assets’ account, while any
deficit arising on revaluation is charged to profit and loss account directly. In addition, all direct costs, including
legal fees and transfer costs linked with transferring the title of the property to bank is accounted as an
expense in the profit and loss account. Furthermore, revaluation surplus on such assets shall not be admissible
for calculating bank’s Capital Adequacy Ratio (CAR) and exposure limits under the Prudential Regulations.
However, the surplus can be adjusted upon realization of sale proceeds.

5.14 Borrowings / deposits and their cost

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

b) Borrowing costs are recognised as an expense in the period in which these are incurred using effective
mark-up / interest rate method to the extent that they are not directly attributable to the acquisition
of or construction of qualifying assets. Borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset (one that takes a substantial period of time to get ready
for use or sale) are capitalised as part of the cost of that asset.

5.15 Deposits - Islamic Banking

Deposits are generated on the basis of two modes i.e. Qard and Modaraba.

Deposits taken on Qard basis are classified as ‘Current Account’ and Deposits generated on Modaraba basis are
classified as ‘Savings Account’ and ‘Fixed Deposit Accounts’.

No profit or loss is passed on to current account depositors.

Profits realised in investment pools are distributed in pre-agreed profit sharing ratio.

94
 Rab-ul-Maal (Usually Customer) share is distributed among depositors according to weightages assigned at the
inception of profit calculation period.

Mudarib (Bank) can distribute its share of profit to Rab-ul-Maal upto a specified percentage of its profit.

Profits are distributed from the pool so the depositors (remunerative) only bear the risk of assets in the pool
during the profit calculation period.

Asset pools are created at the Bank’s discretion and the Bank can add, amend, transfer an asset to any other
pool in the interests of the deposit holders.

In case of loss in a pool during the profit calculation period, the loss is distributed among the depositors
(remunerative) according to their ratio of Investments.

5.16 Provisions

Provision for guarantee claims and other off balance sheet obligations is recognised when intimated and
reasonable certainty exists for the Bank to settle the obligation. Expected recoveries are recognised by debiting
the customer’s account. Charge to the profit and loss account is stated net-of expected recoveries.
Other provisions are recognised when the Bank has a present, legal or constructive, obligation as a result of
past events, it is probable that an outflow of resources will be required to settle the obligation and a reliable
estimate of the amount can be made. Provisions are reviewed at each reporting date and are adjusted to reflect
the current best estimate.

5.17 Acceptances

Acceptances comprise undertakings by the Bank to pay bills of exchange drawn on customers. The Bank expects
most acceptances to be simultaneously settled with the reimbursement from the customers. Acceptances are
accounted for as off balance sheet transactions and are disclosed as contingent liabilities and commitments.

5.18 Revenue recognition

Advances and investments

Mark-up income on loans and advances, debt securities investments and profit on murabaha and musharika
financing are recognised on a time proportion basis. Where debt securities are purchased at a premium or
discount, those premiums / discounts are amortised through the profit and loss account over the remaining
maturity, using the effective yield method.

Dividend income is recognised at the time when the Bank’s right to receive the dividend has been established.

Lease financing

Financing method is used in accounting for income from lease financing. Under this method, the unrealised
lease income (excess of the sum of total lease rentals and estimated residual value over the cost of leased
assets) is deferred and taken to income over the term of the lease period so as to produce a constant periodic
rate of return on the outstanding net investment in the lease. Gains / losses on termination of leased contracts,
documentation charges, front end fee and other lease income are recognised as income when they are realised.
Unrealised lease income and mark-up / return on non-performing advances are suspended, where necessary, in
accordance with the requirements of the Prudential Regulations of the State Bank of Pakistan and recognised
on receipt basis.

95
 Ijarah income is recognised on an accrual basis as and when the rental becomes due.

Murabaha income is recognised on deferred income basis.

Fee, commission and brokerage

Fee, commission and brokerage income except income from guarantees and bancaassurance business are
accounted for on receipt basis.

Other income is recognised on accrual basis.

5.19 Foreign currency translation

Functional and presentation currency

Items included in the unconsolidated financial statements are measured using the currency of the primary
economic environment in which the Bank operates.

Transactions and balances

Transactions in foreign currencies are translated into Pakistani rupees at the exchange rates prevailing on
the transaction date. Foreign exchange gains and losses resulting from the settlement of such transactions
and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognised in the profit and loss account.

Forward contracts other than contracts with the State Bank of Pakistan relating to foreign currency deposits
are valued at forward rates applicable to the respective maturities of the relevant foreign exchange contract.

Forward purchase contracts with the State Bank of Pakistan relating to foreign currency deposits are valued at
the spot rate prevailing on the reporting date. The forward cover fee payable on such contracts is amortised
over the term of the contracts.

Commitments

Commitments for outstanding forward foreign exchange contracts are disclosed at contracted rates. Contingent
liabilities / commitments for letters of credit and letters of guarantee denominated in foreign currencies are
expressed in rupee terms at the exchange rates ruling on the reporting date.

Foreign operations

Assets and liabilities of foreign operations are translated into rupees at the exchange rate prevailing at the
reporting date. The results of foreign operations are translated at average rate of exchange for the year.
Translation gains and losses arising on revaluations of net investment in foreign operations are taken to
Exchange Translation Reserve in the statement of comprehensive income. These are recognised in the profit
and loss account on disposal.

5.20 Derivative financial instruments

Derivative financial instruments are initially recognised at fair value on the date at which the derivative contract
is entered into and subsequently remeasured at fair value using appropriate valuation techniques. All derivative
financial instruments are carried as assets where fair value is positive and as liabilities where fair value is
negative. Any changes in the fair value of derivative financial instruments are taken to the profit and loss
account.

96
 5.21 Off-setting

Financial assets and financial liabilities are off-set and the net amount reported in the unconsolidated financial
statements only when there is a legally enforceable right to set-off the recognised amount and the Bank intends
either to settle on a net basis, or to realise the assets and to settle the liabilities simultaneously. Income and
expense items of such assets and liabilities are also off-set and the net amount is reported in the financial
statements.

5.22 Dividend and appropriation to reserves

Dividend and appropriation to reserves, except appropriations which are required under the law, after the
reporting date, are recognised in the Bank’s unconsolidated financial statements in the year in which these are
approved.

5.23 Earnings per share

The Bank presents basic and diluted earnings per share (EPS) for its shareholders. Basic EPS is calculated by
dividing the profit or loss attributable to ordinary shareholders of the Bank by the weighted average number
of ordinary shares outstanding during the year. Diluted EPS is determined by adjusting the profit or loss
attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the
effects of all dilutive potential ordinary shares, if any.

5.24 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting structure of the Bank.
Segmented performance is reported to the senior management of the Bank on monthly basis for the purpose
of strategic decision making and performance management.

a) Business segments

Retail banking
This includes loans, deposits, trading activity, wealth management and other banking transactions with
retail and middle market customers of the Bank.

Corporate banking
This comprises of loans, deposits, project financing, trade financing, investment banking and other banking
activities with Bank’s corporate and public sector customers.

Treasury
This segment includes liquidity management activites carried out through borrowing, lending and money
market operations. The investments of the Bank primarily towards government securities and risk
management activities via use of forward contracts & derivatives are reported here.

Consumer banking
This segment primarily constitutes consumer financing activities with individual customers of the Bank.
Product suite offered to these customers include credit cards, auto loans, housing finance and personal
loans.

Islamic banking
This segment pertains to full scale Islamic Banking operations of the Bank.

International operations
This segment includes amounts related to Bank’s overseas operations, namely, commercial banking activities
in Bangladesh and Afghanistan, and wholesale banking activies in the Kingdom of Bahrain.

Others
This includes the Bank’s merchant banking and head office related activities, and all other activities not
readily tagged to the segments above.
97
 b) Geographical segments

The Bank operates in three geographical regions being:

- Pakistan
- Asia Pacific (including South Asia)
- Middle East
Note 2016 2015
(Rupees in ‘000)
6 CASH AND BALANCES WITH TREASURY BANKS

In hand

Local currency
(Including in transit 2016: Rs. 12.122 million, 2015: Rs. 6 million) 10,187,393 8,971,966

Foreign currencies
(Including in transit 2016: Rs. 4.189 million, 2015: Rs. 7 million) 2,579,051 2,377,778

With State Bank of Pakistan in

Local currency current accounts 6.1 28,662,461 20,593,524

Foreign currency current accounts 6.2 2,553,016 3,232,623
Foreign currency deposit accounts 6.3 5,972,553 7,224,768

With other central banks in

Foreign currency current accounts 6.4 4,117,412 5,933,513

Foreign currency deposit accounts 6.4 678,906 656,196

With National Bank of Pakistan in

Local currency current account 19,292,758 13,305,048

National Prize Bonds 27,834 73,374

74,071,384 62,368,790
6.1 This includes statutory liquidity reserves maintained with the SBP under Section 22 of the Banking Companies
Ordinance, 1962.
6.2 As per BSD Circular No. 9 dated December 3, 2007, cash reserve of 5% is required to be maintained with the
State Bank of Pakistan on deposits held under the New Foreign Currency Accounts Scheme (FE-25 deposits).
6.3 Special cash reserve of 15% is required to be maintained with the State Bank of Pakistan on FE-25 deposits
as specified in BSD Circular No. 14 dated June 21, 2008. Profit rates on these deposits are fixed by SBP on a
monthly basis. The State Bank of Pakistan has not remunerated these deposit accounts during the year.
6.4 Deposits with other central banks are maintained to meet their minimum cash reserves and capital requirements
pertaining to the foreign branches of the Bank.
Note 2016 2015
(Rupees in ‘000)
7 BALANCES WITH OTHER BANKS

In Pakistan
On current accounts 306,450 616,187
On deposit accounts 7.1 1,000,555 540

Outside Pakistan
On current accounts 7.2 4,375,099 10,956,696
On deposit accounts 7.3 3,691,019 4,978,784
9,373,123 16,552,207

98
 7.1 This represents funds deposited with various banks at profit rates ranging from 3.00% to 6.00% per annum
(2015: 3.00% to 4.50% per annum).

7.2 This includes amount held in Automated Investment Plans. The balance is current in nature and on increase in
the balance above a specified amount, the Bank is entitled to earn interest from the correspondent banks at
agreed upon rates.

7.3 This includes placement of funds generated through foreign currency deposits scheme (FE-25), at interest rates
ranging from 1.00% to 5.50% per annum (2015: 1.00% to 6.00% per annum) having maturities upto March 2017
(2015: March 2016).

Note 2016 2015

(Restated)
(Rupees in ‘000)
8 LENDINGS TO FINANCIAL INSTITUTIONS

Call money lendings 8.1 5,306,590 15,265,899

Bai Muajjal 8.2 24,497,227 12,360,451
Repurchase agreement lendings 8.3 345,212 -
30,149,029 27,626,350

8.1 These represent lendings to financial institutions at interest rates ranging from 0.25% to 9.00% per annum
(2015: 0.40% to 12.00% per annum) having maturities upto March 2017 (2015: November 2016).

8.2 This represents Bai Muajjal agreements entered into with State Bank of Pakistan (SBP) / other commercial
banks, whereby the Bank sold Sukuks having carrying value of Rs. 24,497 million on deferred payment basis. The
rates of return range from 5.62% to 5.97% per annum (December 2015: 6.94% to 8.26%), and these are due to
mature by June 2017 (2015: March 2016).

8.3 These represent short term lending to financial institutions against investement securities. These carry markup
rates upto 6.15% per annum (2015: Nil) with maturities upto January 2017 (2015: Nil).

8.3.1 Securities held as collateral against lending to financial institutions

2016 2015
Held by Further Total Held by Further Total
bank given as bank given as
collateral collateral
-------------------------------(Rupees in ‘000)-------------------------------

Market Treasury Bills 345,212 - 345,212 - - -

2016 2015
(Rupees in ‘000)
8.4 Particulars of lendings to financial institutions

In local currency 28,842,439 12,610,451

In foreign currencies 1,306,590 15,015,899
30,149,029 27,626,350

99
 9 INVESTMENTS - NET
9.1 Investments by types
2016 2015 (Restated)
Note Held by Given as Held by Given as
Total Total
Bank collateral Bank collateral
-----------------------------------(Rupees in ‘000)-----------------------------------
Held for trading securities
Market Treasury Bills 14,120,130 - 14,120,130 13,480,197 - 13,480,197
Pakistan Investment Bonds 20,207 - 20,207 2,423,862 - 2,423,862
Overseas Bonds 549,615 - 549,615 2,990,933 - 2,990,933
Fully paid up ordinary shares / units - Listed 740,776 - 740,776 197,998 - 197,998
15,430,728 - 15,430,728 19,092,990 - 19,092,990

Available for sale securities

Market Treasury Bills 38,584,821 - 38,584,821 78,391,879 494,563 78,886,442
Pakistan Investment Bonds 78,936,759 128,150,711 207,087,470 28,914,704 128,577,363 157,492,067
Fully paid up ordinary shares / units - Listed 6,223,937 - 6,223,937 5,000,753 - 5,000,753
Fully paid up ordinary shares / units - Unlisted 82,056 - 82,056 4,426,617 - 4,426,617
Term Finance Certificates 514,483 - 514,483 829,594 - 829,594
Preference Shares - Listed 108,835 - 108,835 108,835 - 108,835
Preference Shares - Unlisted 25,000 - 25,000 325,000 - 325,000
Redeemable Participating Certificates 501,938 - 501,938 - - -
Pakistan Euro Bonds 2,688,770 - 2,688,770 2,409,043 - 2,409,043
Overseas Bonds 7,819,677 4,839,993 12,659,670 4,804,159 - 4,804,159
Sukuk Bonds 38,663,395 5,023,937 43,687,332 33,280,442 - 33,280,442
174,149,671 138,014,641 312,164,312 158,491,026 129,071,926 287,562,952

Held to maturity securities

Market Treasury Bills 1,995,857 - 1,995,857 - - -
Pakistan Investment Bonds 31,793,773 - 31,793,773 66,180,991 - 66,180,991
Other Federal Government Securities - Bai Muajjal - - - 26,002,520 - 26,002,520
Term Finance Certificates 524,266 - 524,266 524,266 - 524,266
Pakistan Euro Bonds 706,255 - 706,255 3,347,785 - 3,347,785
Commercial Papers 661,557 - 661,557 266,822 - 266,822
Overseas Bonds 9,714,052 1,036,079 10,750,131 7,653,735 - 7,653,735
Sukuk Bonds 3,847,273 - 3,847,273 4,230,816 - 4,230,816
49,243,033 1,036,079 50,279,112 108,206,935 - 108,206,935

Subsidiaries
Alfalah Securities (Private) Limited 1,126,000 - 1,126,000 1,126,000 - 1,126,000
Alfalah GHP Investment Management Limited 130,493 - 130,493 130,493 - 130,493
Alfalah GHP Value Fund - - - 100,000 - 100,000
Alfalah GHP Cash Fund 525,474 - 525,474 525,474 - 525,474
1,781,967 - 1,781,967 1,881,967 - 1,881,967

Associates
Alfalah Insurance Limited 68,990 - 68,990 68,990 - 68,990
Sapphire Wind Power Company Limited 978,123 - 978,123 978,123 - 978,123
Alfalah GHP Money Market Fund 55,153 - 55,153 46,672 - 46,672
Alfalah GHP Income Multiplier Fund 250,000 - 250,000 250,000 - 250,000
Alfalah GHP Sovereign Fund 200,000 - 200,000 200,000 - 200,000
Alfalah GHP Islamic Stock Fund 250,000 - 250,000 250,000 - 250,000
Appollo Pharma Limited - - - 790,400 - 790,400
1,802,266 - 1,802,266 2,584,185 - 2,584,185

Investments at cost 242,407,665 139,050,720 381,458,385 290,257,103 129,071,926 419,329,029

Provision for diminution in the value of investments 9.26 (2,079,781) - (2,079,781) (6,345,811) - (6,345,811)

Investments (net of provisions) 240,327,884 139,050,720 379,378,604 283,911,292 129,071,926 412,983,218

Surplus on revaluation of held for

trading securities - net 9.28 109 - 109 229,063 - 229,063

Surplus on revaluation of available

for sale securities - net 20.2 7,636,113 2,077,811 9,713,924 9,365,358 522,095 9,887,453

Total investments 247,964,106 141,128,531 389,092,637 293,505,713 129,594,021 423,099,734

9.1.1 Market value of held to maturity securities is Rs. 48,528 million (2015: Rs. 83,866 million) excluding non-government overseas
bonds.

100
 Note 2016 2015
9.2 Strategic Investments (Rupees in ‘000)

Available for sale

Fully paid up ordinary shares - Unlisted

Al Hamra Avenue (Private) Limited 9.13 50,000 50,000

(Percentage of holding: 3.12% (2015: 3.12%))

Warid Telecom (Private) Limited (Related Party) 9.13 - 4,366,796

Subsidiaries

Alfalah Securities (Private) Limited 9.22 1,126,000 1,126,000

(Percentage of holding: 97.91% (2015: 97.91%))

Alfalah GHP Investment Management Limited 9.22 130,493 130,493

(Percentage of holding: 40.22% (2015: 40.22%))

Alfalah GHP Value Fund 9.22 - 100,000

(Percentage of holding: Nil (2015: 27%))

Associates

Alfalah Insurance Limited 9.23 68,990 68,990

(Percentage of holding: 30% (2015: 30%))

Alfalah GHP Income Multiplier Fund 9.23 250,000 250,000

(Percentage of holding: 13.17% (2015: 10.68%))

Sapphire Wind Power Company Limited 9.23 978,123 978,123

(Percentage of holding: 30% (2015: 30%))

Alfalah GHP Islamic Stock Fund 9.23 250,000 250,000

(Percentage of holding: 6.45% (2015: 52.92%))
2,853,606 7,320,402

Provision for diminution in the value of investments (876,000) (5,242,796)

1,977,606 2,077,606

9.2.1 Strategic investments are those which the Bank makes with the intention of holding them for a long term
duration and are marked as such at the time of investment. Disposals of such investments can only be made
subject to the fulfilment of the requirements prescribed by the SBP. Further, as per the SBP instructions in
BPRD Circular Letter No. 16 of 2006 dated August 01, 2006, investments marked as strategic have a minimum
retention period of 5 years from the original purchase date. However, these can be sold before the stipulated
period with the prior permission of the SBP.

101
 Note 2016 2015
9.3 Investments by segments (Restated)
(Rupees in ‘000)
Federal Government Securities
- Market Treasury Bills 9.5 54,700,808 92,366,639
- Pakistan Investment Bonds 9.6 238,901,450 226,096,920
- Overseas Government Bonds 9.7 18,042,785 11,799,149
- Sukuk Bonds 9.8 41,567,768 31,096,239
- Pakistan Euro Bonds 9.9 3,395,025 5,756,828
- Commercial Papers 9.10 132,277 -
- Other Federal Government Securities - Bai Muajjal 9.11 - 26,002,520
356,740,113 393,118,295

Fully Paid up Ordinary Shares / Preference Shares /

Units / Certificates
- Listed companies / mutual funds 9.12 6,964,713 5,198,751
- Un-listed companies 9.13 82,056 4,426,617
- Preference Shares - Listed 9.14 108,835 108,835
- Preference Shares - Unlisted 9.15 25,000 325,000
7,180,604 10,059,203

Term Finance Certificates, Debentures, Bonds,

Notes and Participation Term Certificates
- Listed TFCs 9.16 99,900 99,940
- Un-listed TFCs 9.17 938,849 1,253,920
- Sukuk Bonds 9.18 5,966,837 6,415,019
- Commercial Papers 9.19 529,280 266,822
- Overseas Bonds 9.20 5,916,631 3,649,678
- Redeemable Participating Certificates 9.21 501,938 -
13,953,435 11,685,379

Investment in Subsidiaries 9.22 1,781,967 1,881,967

Investment in Associates 9.23 1,802,266 2,584,185

Total investments at cost 381,458,385 419,329,029

Provision for diminution in the value of investments 9.26 (2,079,781) (6,345,811)

Investments (net of provisions) 379,378,604 412,983,218

Surplus on revaluation of held for trading securities - net 9.28 109 229,063
Surplus on revaluation of available for sale securities - net 20.2 9,713,924 9,887,453

Total investments 389,092,637 423,099,734

9.4 Investments include certain approved / government securities which are held by the Bank to comply with the
Statutory Liquidity Requirement determined on the basis of the Bank’s demand and time liabilities as set out
under section 29 of the Banking Companies Ordinance, 1962.

9.5 Market Treasury Bills are for the periods of three months, six months and one year. The effective rates of profit
on Market Treasury Bills range between 5.85% to 6.21% per annum (2015: 6.26% to 7.99% per annum) with
maturities upto September 2017 (2015: October 2016).

102
9.6 Pakistan Investment Bonds (PIBs) are for the periods of three, five, seven, ten years and fifteen years. The rates
of profit range from 6.21% to 12.73% per annum (2015: 8.75% to 12% per annum) with maturities from July 2017
to July 2022 (2015: May 2016 to July 2022). These also include PIBs having face value of Nil (2015: Rs. 35 million)
pledged with the National Bank of Pakistan as security to facilitate Telegraphic Transfer discounting facility.

9.7 These represent Overseas Government Bonds issued by the Government of Bahrain, the Government of Kazakhistan,
the Government of Afghanistan, the Government of Bangladesh, the Government of Mexico, the Government of
Indonesia, the Government of Sri Lanka, the Government of Qatar, the Government of Saudi Arabia and the
Government of Oman amounting to USD 5 million (2015: USD 5 million), USD 3 million (2015: USD 3 million), AFN
2,338 million (2015: AFN 1,214 million), BDT 4,208 million (2015: BDT 6,605 million), EUR 0.5 million (2015: EUR 0.5
million), USD 2 million (2015: USD 2 million) and EUR 2.5 million (2015: Nil), USD 1.5 million (2015: Nil), USD 22 million
(2015: Nil), USD 19 million (2015: Nil) and USD 22 million (2015: Nil) respectively. The rate of profit on Government
of Bahrain bond is 5.50% (2015: 5.50%), Government of Kazakhistan bond is 3.88% (2015: 3.88%) and Government
of Afghanistan bond ranging from 1.80% to 6.67% per annum (2015: 1.80% to 6.70% per annum), Government
of Bangladesh bonds carry profit rate ranging from 6.62% to 12.55% per annum (2015: 8.50% to 12.48% per
annum), Government of Mexico bonds is 1.63% (2015: 1.63%), Government of Indonesia bonds ranging from 2.63%
to 4.35% (2015: 3.38%), Government of Sri Lanka bond is 5.75% (2015: Nil), Government of Qatar bond ranging
from 2.38% to 3.28% (2015: Nil), Government of Saudi Arabia bonds ranging from 2.38% to 3.25% (2015: Nil) and
Government of Oman bond is 4.75% (2015: Nil). The bonds are due to mature by March 2020 (2015: March 2020),
October 2024 (2015: October 2024), December 2017 (2015: December 2016), November 2034 (2015: November
2034), March 2024 (2015: March 2024), January 2027 (2015: July 2025), January 2022 (2015: Nil), June 2026 (2015:
Nil), October 2026 (2015: Nil), and June 2026 (2015: Nil) respectively.

9.8 These represent sukuk bonds of Rs. 1,381 million (2015: Rs. 1,790 million) issued by Water and Power Development
Authority (WAPDA) for a period of eight and ten years, ijarah sukuk of Rs. 30,126 million (2015: Rs. 27,451 million)
issued by the State Bank of Pakistan for a period of three years, sukuk bond issued of Rs. 2,600 million by Neelum
Jhelum Power Project and ijarah sukuk of USD 71.33 million (2015: USD 17.70 million) issued by the Government
of Indonesia, the Government of South Africa, the Government of Pakistan, Government of Turkey and Bahrain.
The rates of profit on these bonds range between 5.81% to 7.06% per annum (2015: 6.78% to 7.59% per annum),
between 5.45% to 6.10% per annum (2015: 5.89% to 6.15% per annum) and between 7.19% to 7.28% per annum
(2015: Nil) and 3.90% to 6.75% per annum respectively. These sukuk bonds are due to mature by October 2021,
March 2019, October 2026, and September 2024 respectively.

9.9 These represent Pakistan Euro Bonds of US Dollar 33.14 million (2015: US Dollar 55.05 million) issued by the
Government of Pakistan. These bonds carry interest between 7.25% to 8.25% per annum (2015: 7.13% to 8.25%
per annum) with maturities upto September 2025 (2015: September 2025).

9.10 These represent Commercial papers amounting to BDT 99.94 million (2015: Nil ), Interest rate on these commercial
papers is 2.97% per annum (2015: Nil) and are due for maturity on January 2017 (2015: Nil ).

9.11 This represents Bai Muajjal agreements entered into with Ministry of Finance (MoF), whereby the Bank sold Sukuks
having carrying value of Rs. 26,002 million were sold on deferred payment basis.

103
9.12 Particulars of investments in listed companies / mutual funds include the following:
2016 2015 2016 2015
(Number of shares / (Rupees in ‘000)
certificates / units)
OIL AND GAS
2,275,000 800,000 Oil and Gas Development Corporation Limited 324,333 110,368
475,000 655,200 Pakistan Oilfields Limited 147,629 203,635
591,800 1,125,000 Pakistan Petroleum Limited 75,012 142,597
560,100 955,000 Pakistan State Oil Company Limited 209,845 350,923
140,000 213,000 Attock Petroleum Limited 74,552 113,732
200,000 - Hi-Tech Lubricants Limited 22,898 -

AGRIBUSINESS
592,200 - Agriauto Industries Limited 139,293 -

CHEMICALS AND PHARMACEUTICAL

1,773,800 1,144,600 Engro Corporation Limited 497,166 296,555
3,745,500 - Engro Fertilizer Limited 277,450 -
1,200,000 540,500 Fatima Fertilizer Company Limited 37,184 14,290
1,875,000 1,250,000 Fauji Fertilizer Company Limited 232,121 162,897
4,429,500 2,000,000 Fauji Bin Qasim Limited 232,669 111,594
300,000 - Abbot Laboratories (Pakistan) Limited 255,055 -
2,273,531 1,948,333 Agritech Limited 17,909 15,100

CONSTRUCTION AND MATERIALS

- 750,000 Attock Cement Company Limited - 138,493
1,200,000 - Fauji Cement Company Limited 44,363 -
2,191,400 2,250,000 D G Khan Cement Limited 322,308 285,827
997,700 828,500 Lucky Cement Limited 532,555 356,351
1,300,000 1,750,000 Amreli Steels Limited 69,969 89,250
550,000 - Avanceon Limited 19,416 -
851,300 - Cherat Cement Company Limited 128,283 -
128,900 - Cherat Packaging Limited 48,034 -
124,000 - Mughal Iron and Steel Industries Limited 11,810 -
2,722,000 - Pioneer Cement Limited 330,591 -
200,000 - Thal Limited 83,906 -

Real Estate
41,622,117 71,003,617 Dolmen City Real Estate Investment Trust (REIT) 457,843 781,040

PERSONAL GOODS
- 1,090,100 Nishat Mills Limited - 119,233
100,250 153,750 Al Shaheer Corporation Limited 5,432 9,593
624,500 - Gul Ahmed Textile Mills Limited 34,007 -
250,000 - Nishat (Chunian) Limited 14,434 -
250,000 - Pak Elektron Limited 17,480 -

ELECTRICITY
6,116,700 5,391,000 The Hub Power Company Limited 553,530 424,458
1,942,500 2,325,000 Kot Addu Power Company Limited 148,452 175,968
4,000,000 4,475,000 Nishat (Chunian) Power Company Limited 132,117 147,806
2,500,000 2,650,000 Nishat Power Company Limited 106,994 111,650
- 3,703,706 Engro Powergen Qadirpur Limited - 126,735
5,540,000 - K-Electric Limited 51,055 -
221,000 - Altern Energy Limited 7,949 -

TELECOMMUNICATION
- 250,000 Pakistan Telecommunication Company Limited - 4,008

BANKS
891,700 841,700 Allied Bank Limited 88,485 83,782
5,500,000 5,449,000 Bank Al Habib Limited 226,069 220,770
1,227,200 925,000 MCB Bank Limited 301,077 230,466
1,800,000 1,300,000 United Bank Limited 299,826 210,949
1,775,000 700,000 Habib Bank Limited 331,519 145,681
1,800,720 1,800,720 First Dawood Investment Bank Limited 15,000 15,000
525,000 - National Bank of Pakistan Limited 39,093 -

Financial Services
47,460 47,460 Visa Inc. - -
6,964,713 5,198,751

104
9.13 Investments in unlisted companies

2016 2015 2016 2015

(Number of shares) (Rupees in ‘000)

572,531 572,531 Pakistan Export Finance Guarantee Agency Limited 5,725 5,725
Chief Executive: Mr. S.M. Zaeem
Break-up value per share: Rs. 0.5
Date of financial statements: June 30, 2010 (Audited)

Society for Worldwide Interbank Financial

24 24 Telecommunication 4,096 4,096
Chief Executive: Mr. Gottfried Leibbrandt
Break-up value per share: Rs. 425,866 (2012: Rs. 330,035)
Date of financial statements: December 31, 2013 (Audited)

5,000,000 5,000,000 Al-Hamra Avenue (Private) Limited 50,000 50,000

Chief Executive: Mr. Habib Ahmed
Break-up value per share: Rs. 9.52
Date of financial statements: June 30, 2010 (Un-audited)

- 319,054,124 Warid Telecom (Private) Limited (Related party) note 9.13.1 - 4,366,796

2,223,452 - Pakistan Mobile Communication Limited (Related party) note 9.13.1 22,235 -
Chief Executive: Mr. Aamir Ibrahim
Break-up value per share: Rs. 15.52 (2015: Rs. 8.23)
Date of financial statements: September 30, 2016 (unaudited)
82,056 4,426,617

9.13.1 During the year, the existing shareholders of Warid Telecom (Private) Limited including the Bank transferred their
holding in Warid Telecom (Private) Limited to Pakistan Mobile Communications Limited (PMCL), in lieu of acquiring
an overall stake of 15 percent in PMCL. This development was in furtherance of the Acquisition Agreement dated
November 26, 2015.
Pursuant to the said transfer, the Bank has received 2,223,452 shares of Rs. 10 each in PMCL in lieu of its holding
in Warid Telecom (Private) Limited (pre-acquisition). As a result of this share exchange, the Bank has recorded the
shares acquired in PMCL while its investment in Warid Telecom (Private) Limited and the related provision held
thereagainst stands de-recognised.

The merger of PMCL and Warid Telecom (Private) Limited was approved by Islamabad High Court in December 2016.

9.14 Investments in preference shares - Listed

2016 2015 2016 2015

(Number of shares) (Rupees in ‘000)

10,883,486 10,883,486 Agritech Limited 108,835 108,835

Chief Executive: Mr. Faisal Muzammil
Redemption: Any time after the issuance of preference shares
Break-up value per share: Rs. 12.51 (2014: Rs. 17.96)
Date of financial statements: December 31, 2015 (Audited)
108,835 108,835

105
9.15 Investments in preference shares - Unlisted

2016 2015 2016 2015

(Number of shares) (Rupees in ‘000)

- 120,000,000 Silk Bank Preference Shares - 300,000

2,500,000 2,500,000 Trust Investment Bank Limited 25,000 25,000

Chief Executive: Mr. Ahsan Rafique
Redemption: Any time after the issuance of preference shares
Break-up value per share: Rs. (17.60) (2015: Rs. (17.96))
Date of financial statements: June 30, 2016 (Audited)
25,000 325,000

9.16 Particulars of Term Finance Certificates - Listed 2016 2015

(Rupees in ‘000)

NIB Bank Limited - (2nd Issue) 99,900 99,940

20,000 (2015: 20,000) certificates of Rs. 5,000 each

Mark up: Average six months KIBOR + 115 basis points per annum with no floor and cap

Redemption: The TFC is structured to redeem 0.3 percent of principal semi-annually in the
first ninety months followed by remaining 99.70% on maturity at the end of the
ninety sixth month. The repayment obligations of the issuer pursuant to the TFCs
unsecured and sub-ordinated to all other financial obligations of the issuer.

Maturity: June 2022

Rating: AA- (PACRA)
Chief Executive: Mr. Yameen Karai
99,900 99,940

9.17 Particulars of Term Finance Certificates - Unlisted

Askari Bank Limited 99,920 99,960

20,000 (2015: 20,000) certificates of Rs. 5,000 each

Mark up: Average six months KIBOR plus 120 basis points per annum

Redemption: TFC is structured to redeem 0.36% of the issue amount during the tenor of
the issue with 99.64% of the issue amount in year ten in 2 equal semi annual
instalments of 49.82% each. The TFCs shall be sub-ordinated to the payment of
the principal and profit to all other indebtness of the issuer including deposits,
and are not redeemable before maturity without the prior approval of the State
Bank of Pakistan.
Maturity: September 2024
Rating: AA+ (PACRA)
Chief Executive: Mr. Syed Majeedullah Hussaini

Faysal Bank Limited 74,850 149,700

30,000 (2015: 30,000) certificates of Rs. 5,000 each

Mark up: Average 6 month KIBOR plus 225 basis points per annum

Redemption: The instrument is structured to redeem 0.20 percent of principal semi-annually in

the first 60 months and remaining amount in 4 equal semi-annual instalments of
24.95% each starting from 66th month. The TFCs are sub-ordinated to all other
indebtness of the issuer including deposits.
Maturity: December 2017
Rating: AA (PACRA)
Chief Executive: Mr. Nauman Ansari

Bank AL Habib Limited - 299,520

106
 2016 2015
(Rupees in ‘000)

Agritech Limited 499,586 499,586

100,000 (2015: 100,000) certificates of Rs. 5,000 each
Mark up: Average six months KIBOR (Ask Side) + 175 basis point per annum (no floor & no cap)
Redemption: Repayment will be made in stepped up instalments where 35 percent of principal
amount will be paid in the years 3 to 5 and remaining 65 percent will be paid in
years 6 to 8.
Maturity: July 2017
Rating: Unrated
Chief Executive: Mr. Muhammad Faisal Muzammil

Zulekha Textile Mills Limited 24,680 24,680

300 (2015: 300) certificates of Rs. 100,000 each

Mark-up: Average Six Months KIBOR + 300 basis points per annum
Redemption: 10 equal semi-annual instalments commencing from the 24th months from first
draw down.
Maturity: October 2019
Rating: Unrated
Chief Executive: Shanzae Amjad

Azgard Nine Limited - Note 9.17.1 43,350 43,350

20,000 (2015: 20,000) certificates of Rs.5,000 each

Mark-up: Average Six months KIBOR (Ask Side) + 100 basis points per annum
Redemption: Principal will be repaid in 12 semi annual instalments with stepped up repayment
plan whereby 47 percent of principal amount will be repaid in the years 3 to 6 and
remaining 53 percent will be repaid in the years 7 and 8.
Maturity: December 2017
Rating: Unrated
Chief Executive: Mr. Ahmed H. Shaikh

Azgard Nine Limited - Note 9.17.2 32,870 32,870

6,574 (2015: 6,574) certificates of Rs.5,000 each

Mark-up: Zero Rated
Redemption: Principal to be repaid in 7 semi annual instalments starting from March 2014
Maturity: March 2017
Rating: Unrated
Chief Executive: Mr. Ahmed H. Shaikh

New Allied Electronics - Note 9.17.3 2,185 2,185

437 (2015: 437) certificates of Rs. 5,000 each

Mark up: Average three months KIBOR plus 275 basis points
Redemption: 17 equal quarterly instalments
Maturity: May 2011
Rating: Unrated
Chief Executive: Mr. Zeeshan Pervaiz Akhtar

Fauji Akber Portia Marine Terminals Limited (FAP) - Note 9.17.4 161,408 102,069

6 certificates of various PKR denominations (2015: 4 certificates of various PKR denominations)

Mark up: Zero rated
Redemption: Repayment will commence after the repayment of entire principal of reduced
STF facility of FAP and will be made in 3 un-equal semi-annual instalments
commencing from 2021.
Maturity: May 2022
Rating: Unrated
Chief Executive: Commodore (Retd) Pervaiz Ahmed Khan
938,849 1,253,920

107
9.17.1 In the year 2012, the Bank’s exposure in the TFCs of Azgard Nine Limited (ANL) amounting to Rs. 99.920 million
was restructured under a Debt / Asset Swap arrangement. As per the terms of the restructuring, the Bank
received 1,616,036 shares of Agritech Limited (AGL) (valued at Rs. 35 per share) as partial settlement of the
ANL’s TFC exposure. In addition, the Bank also injected additional equity amounting to Rs. 11.631 million for
acquisition of additional 332,297 shares in AGL. Subsequent to this settlement, Bank’s exposure in the TFC of
ANL has reduced to Rs. 43.350 million (as reflected in note 9.17). This exposure in TFC is fully provided while
investment in shares has been held at fair value.
As per the terms of agreement, AGL shares shall be held by the respective trustees for the TFC issue in their
name and on behalf of the TFC Holders who shall be the beneficial owners of the subject shares in proportion
to their holdings. The Trustees of the TFC issue are authorised pursuant to shareholders investors agreement
to hold the said ordinary shares for and on behalf of TFC holders for a period of five years from the date of
transfer. Hence, 1,616,036 shares received by the Bank are held by the trustees of the TFCs.
Further, under the terms of Investor’s Buy-Back Agreement entered into by the Bank in 2012, the strategic
investor issued a put option notice to the Bank in January 2016. The Bank being one of the financing investors
has purchase 325,198 shares of AGL at a price of Rs. 35 per share.
9.17.2 This represents Zero Rated Term Finance Certificates of Azgard Nine Limited (ANL) received in settlement of
overdue mark-up outstanding on the actual TFC exposure of the Bank, amounting to Rs. 99.920 million. The
settlement was made as per the Investor Agreement entered into between ANL and the Bank. As at December
31, 2016, this investment is fully provided.
9.17.3 These represent TFCs of New Allied Electronics amounting to Rs. 2.185 million, received partially in lieu of the
fully impaired unlisted TFCs of First Dawood Investment Bank previously held by the Bank. As at December 31,
2016, this investment is fully provided.
9.17.4 During the year 2016, the Bank received zero rated TFCs of Fauji Akbar Portia Marine Terminal Limited (FAP)
amounting to Rs. 59.339 million (2015: Rs. 51.034 million). These TFCs were received in settlement of overdue
mark-up instalments on reduced STF facility of FAP. The Bank will continue to receive TFCs in settlement of
mark-up to be accrued on semi-annual basis till May 2021. As at December 31, 2016, the exposure in the TFCs
amounts to Rs. 161.408 million which stands fully provided.
9.18 Investments in sukuk bonds
Number of 2016 2015
Investee company Date of maturity Profit rate per annum
Certificates (Rupees in ‘000)

Security Leasing Corporation Limited - II September 2022 6 months KIBOR plus 1.95% 35,000 52,350 52,350

BRR Guardian Modaraba December 2016 1 months KIBOR 20,000 36,177 58,750

Sitara Peroxide (Private) Limited August 2016 3 months KIBOR plus 1.00% 60,000 118,052 157,813

Liberty Power Tech Limited March 2021 3 months KIBOR plus 3.00% 100,000 297,132 356,674

Amreli Steel (Private) Limited December 2016 3 months KIBOR plus 2.5 % - - 95,000

Security Leasing Corporation Limited - I January 2022 3% Cash + 3% accrual 5,000 6,418 6,418

Quetta Textile Mills Limited September 2019 6 months KIBOR plus 1.50% 30,000 72,619 74,483

Pakistan Mobile Communication Limited December 2019 3 months KIBOR plus 0.88 % 340,000 1,700,000 1,700,000

Sui Southern Gas Company Limited October 2019 3 months KIBOR plus 0.4% 300,000 1,500,000 1,500,000

TF Varlik Kiralama AS April 2019 5.38% 317,005 317,005 318,711

Kuveyt Turk Katilim Bankasi June 2019 5.16% 522,993 522,993 523,705

Albaraka Turk Katilim Bankasi June 2019 6.25% 925,697 925,697 -

Sharjah International Bank May 2021 3.08% 418,394 418,394 1,571,115

5,966,837 6,415,019

108
 9.19 These represent Commercial papers amounting to BDT 400 million (2015: BDT 200 million), Interest rates on
these commercial papers range between 7.75% to 9.50% per annum (2015: 10.25% per annum), and are due for
maturity upto April 2017 (2015: March 2016).
9.20 These represent overseas bonds amounting to US Dollar 52 million (2015: USD 30 million) and EUR 5 million
(2015: EUR 5 million) issued by TC ZIRRAT Bankasi A.S, Qatar National Bank, Turkey Halk Bankasi, RAK Funding
Cayman Limited, Turkey IS Bankasi A.S, African Finance Corporation, Abu Dhabi Commercial Bank, Turkiye Sinai
Kalkinma Bankasi AS, Burgan Senior SPC Limited, Union National Bank African Import Export, Turkiye Garanti
Bankasi A.S and Deutsche Bank respectively. Interest rates on these bonds range between, 2.18% to 5.00% per
annum (2015: 1.57% to 5.00% per annum) and 1.13% to 3.38% per annum (2015: 1.13% to 3.38% per annum) and
are due for maturity upto, December 2021 (2015: June 2021), and March 2025 (2015: March 2025) respectively.
9.21 These represents redeemable participating certificates amounting to USD 4.8 million (2015: Nil) issued by
Baltoro Growth Fund, registered in Mauritius. The fund has a life of ten years and distributions would be made
at the end of the life.

9.22 Particulars of investment in subsidiaries

The paid up value of these shares / units is Rs. 10 unless otherwise stated.

2016 2015 2016 2015

(Number of shares / units) (Rupees in ‘000)

112,600,000 112,600,000 Alfalah Securities (Private) Limited 1,126,000 1,126,000

Percentage of holding: 97.91% (2015: 97.91%)
Break-up value per share: Rs. 1.98 (2015: Rs. 2.10)
Date of audited financial statements: December 31, 2016
Chief Executive: Atif Mohammed Khan

13,049,070 13,049,070 Alfalah GHP Investment Management Limited 130,493 130,493

Percentage of holding: 40.22% (2015: 40.22%)
Break-up value per share: Rs. 16.24 (2015: Rs. 13.87)
Date of audited financial statements: December 31, 2016
Chief Executive: Ms. Maheen Rehman

- 2,889,739 Alfalah GHP Value Fund - 100,000

1,050,926 1,050,926 Alfalah GHP Cash Fund 525,474 525,474

Percentage of holding: 38.85 % (2015: 70.09%)
NAV per unit: Rs. 508.37 (2015: Rs. 514.71)
Date of reviewed financial statements: December 31, 2016
Management Company - Alfalah GHP Investment Management
Limited
(Paid-up value of each unit is Rs. 500)
1,781,967 1,881,967

109
9.23 Particulars of investments in associates

The paid up value of these shares / units is Rs. 10 unless otherwise stated.

2016 2015 2016 2015

(Number of shares / units) (Rupees in ‘000)

14,997,825 14,997,825 Alfalah Insurance Limited 68,990 68,990

Percentage of holding: 30% (2015: 30%)
Break-up value per share: Rs. 18.61 (2015: Rs. 16.07)
Date of un-audited financial statements: December 31, 2016
Chief Executive: Mr. Nasar us Samad Qureshi

97,812,317 97,812,317 Sapphire Wind Power Company Limited 978,123 978,123

Percentage of holding: 30% (2015: 30%)
Break-up value per share: Rs. 12.19 (2015: Rs. 11.14)
Date of un-audited financial statements: December 31, 2016
Chief Executive: Mr. Nadeem Abdullah

567,660 524,771 Alfalah GHP Money Market Fund 55,153 46,672

Percentage of holding: 4.16% (2015: 2.71%)
NAV per unit: Rs. 100.92 (2015: 103.69)
Date of reviewed financial statements: December 31, 2016
Management Company - Alfalah GHP Investment Management Limited
(Paid-up value of each unit is Rs. 100)

5,481,236 5,481,236 Alfalah GHP Income Multiplier Fund 250,000 250,000

Percentage of holding: 13.17% (2015: 10.68%)
NAV per unit: Rs. 54.45 (2015: Rs. 52.58)
Date of reviewed financial statements: December 31, 2016
Management Company - Alfalah GHP Investment Management Limited
(Paid-up value of each unit is Rs. 50)

1,978,187 1,978,187 Alfalah GHP Sovereign Fund 200,000 200,000

Percentage of holding: 9.01 % (2015:2.59%)
NAV per unit: Rs.108.29 ( 2015: Rs. 106.48)
Date of reviewed financial statements: December 31, 2016
Management Company - Alfalah GHP Investment Management Limited
(Paid-up value of each unit is Rs. 100)

5,590,077 5,590,077 Alfalah GHP Islamic Stock Fund 250,000 250,000

Percentage of holding: 6.45% (2015: 52.92%)
NAV per unit: Rs. 78.62 (2015: Rs. 64.39)
Date of reviewed financial statements: December 31, 2016
Management Company - Alfalah GHP Investment Management
Limited
(Paid-up value of each unit is Rs. 50)

- 20,800,000 Appollo Pharma Limited - 790,400

1,802,266 2,584,185

110
 2016 2015
9.24 Particulars of Assets and Liabilities of Subsidiaries and Associates (Rupees in ‘000)

Subsidiaries

Alfalah Securities (Private) Limited

Date of audited financial statements: December 31, 2016

Assets 1,150,647 274,978
Liabilities 922,533 32,413
Revenue 92,430 12,030
Loss for the year 36,811 29,577

Alfalah GHP Investment Management Limited

Date of audited financial statements: December 31, 2016

Assets 760,053 602,972
Liabilities 225,661 158,764
Revenue 394,273 278,278
Profit for the year 90,184 20,554

Alfalah GHP Cash Fund

Date of reviewed financial statements: December 31, 2016

Assets 1,406,671 801,763
Liabilities 31,510 30,004
Revenue 28,077 33,271
Profit for the six months period 34,543 20,604

Associates

Alfalah Insurance Limited

Date of un-audited financial statements: December 31, 2016

Assets 2,781,815 2,358,908
Liabilities 1,851,276 1,553,592
Revenue 173,803 180,158
Profit for the year 126,723 115,214

Sapphire Wind Power Company Limited

Date of un-audited financial statements: December 31 , 2016

Assets 13,634,295 13,041,994
Liabilities 9,658,325 9,408,801
Revenue 873,864 285,310
Profit for the year 155,593 116,553

Alfalah GHP Money Market Fund

Date of reviewed financial statements: December 31, 2016

Assets 1,399,008 2,028,461
Liabilities 20,981 18,783
Revenue 48,073 66,801
Profit for the six months period 36,852 55,933

111
 2016 2015
Alfalah GHP Income Multiplier Fund (Rupees in ‘000)

Date of reviewed financial statements: December 31, 2016

Assets 2,306,511 2,731,883
Liabilities 39,851 32,415
Revenue 83,746 120,263
Profit for the six months period 60,141 95,698

Alfalah GHP Sovereign Fund

Date of reviewed financial statements: December 31, 2016

Assets 2,440,650 8,181,233
Liabilities 64,362 63,938
Revenue 133,688 332,892
Profit for the six months period 54,916 280,920

Alfalah GHP Islamic Stock Fund

Date of reviewed financial statements: December 31, 2016

Assets 7,032,923 699,117
Liabilities 217,862 18,867
Revenue 1,190,543 56,222
Profit for the six months period 1,280,850 46,241

9.25 Quality of available for sale securities

Market value Cost

Long / Medium
2016 2015 2016 2015 Term Credit Rated by
Rating
----------------------------(Rupees in ‘000)----------------------------

Market Treasury Bills 38,574,968 78,961,247 38,584,821 78,886,442 (Unrated - Government Securities)

Pakistan Investment Bonds 213,763,528 166,465,955 207,087,470 157,492,067 (Unrated - Government Securities)

Term Finance Certificates

Askari Bank Limited 101,769 99,741 99,920 99,960 AA+ PACRA
NIB Bank Limited (2nd Issue) 101,034 98,941 99,900 99,940 AA- PACRA
Faysal Bank Limited 75,457 153,068 74,850 149,700 AA PACRA
Bank Al-Habib Limited - 330,930 - 299,520 AA+ PACRA
New Allied Electronics * Not Applicable Not Applicable 2,185 2,185 ------(Unrated)------
Fauji Akbar Portia Marine Terminals Limited * Not Applicable Not Applicable 161,408 102,069 ------(Unrated)------
Azgard Nine Limited * Not Applicable Not Applicable 43,350 43,350 ------(Unrated)------
Azgard Nine Limited (Zero rated) * Not Applicable Not Applicable 32,870 32,870 ------(Unrated)------
278,260 682,680 514,483 829,594

* These Term Finance Certificates are quoted, however due to absence of trading their market value is not available. Adequate provision
has been made against these certificates.

112
 Market value Cost
Long / Medium
2016 2015 2016 2015 Term Credit Rated by
Rating
--------------------------(Rupees in ‘000)------------------------
Shares in Listed Companies / Certificates / Units
Agritech Limited 28,828 18,217 17,909 15,100 ------(Unrated)------
Allied Bank Limited 106,300 79,339 88,485 83,782 AA+ PACRA
Amreli Steels Limited 86,567 105,123 69,969 89,250 A PACRA
Attock Cement Pakistan Limited - 125,813 - 138,493 A+ JCR-VIS
Altern Energy Limited 9,116 - 7,949 - ------(Unrated)------
Abbot Laboratories (Pakistan) Limited 287,127 - 255,055 - ------(Unrated)------
Agriauto Industries Limited 212,002 - 139,293 - ------(Unrated)------
Attock Petroleum Limited 95,847 107,591 74,552 113,732 ------(Unrated)------
Bank Al Habib Limited 324,445 226,678 226,069 220,770 AA+ PACRA
Cherat Cement Company Limited 121,828 - 103,254 - A PACRA
Cherat Packaging Limited 43,566 - 48,034 - ------(Unrated)------
Dolmen City Real Estate Investment Trust (REIT) 452,432 761,869 457,843 781,040 RR1 JCR-VIS
Engro Fertilizer Limited 254,619 - 277,450 - AA- PACRA
Engro Corporation Limited 458,330 279,390 397,140 256,728 AA PACRA
Engro Powergen Qadirpur Limited - 126,593 - 126,735 ------(Unrated)------
Fatima Fertilizer Limited 44,268 22,365 37,184 12,613 AA- PACRA
Fauji Bin Qasim Limited 226,835 86,922 232,669 93,215 ------(Unrated)------
Fauji Cement Company Limited 49,588 - 40,218 - ------(Unrated)------
Fauji Fertilizer Company Limited 195,694 147,475 232,121 162,897 AA PACRA
First Dawood Investment Bank Limited 6,501 2,394 15,000 15,000 ------(Unrated)------
Kot Addu Power Company Limited 153,069 188,325 148,452 175,968 AA+ JCR-VIS
Lucky Cement Limited 779,634 358,904 452,197 306,277 ------(Unrated)------
DG Khan Cement Limited 443,460 332,078 281,352 285,827 ------(Unrated)------
Habib Bank Limited 485,019 140,084 331,519 145,681 AAA JCR-VIS
MCB Bank Limited 219,984 200,586 230,466 230,466 AAA PACRA
Nishat (Chunian) Power Company Limited 221,920 246,349 132,117 147,806 ------(Unrated)------
Nishat Mills Limited - 103,418 - 119,233 AA PACRA
Nishat Power Company Limited 160,225 142,252 106,994 111,650 A+ PACRA
Oil and Gas Development Corporation Limited 330,700 93,872 279,433 110,368 AAA PACRA
Pakistan Oilfields Limited 253,945 175,607 147,629 203,635 ------(Unrated)------
Pioneer Cement Limited 351,673 - 300,277 - A PACRA
Pakistan Petroleum Limited 111,365 137,036 75,012 142,597 ------(Unrated)------
Thal Limited 101,706 - 83,906 - ------(Unrated)------
Pakistan State Oil Company Limited 217,105 311,110 185,526 350,923 AA PACRA
The Hub Power Company Limited 648,269 478,732 449,037 350,018 AA+ PACRA
United Bank Limited 430,020 201,435 299,826 210,949 AAA JCR-VIS
Visa Shares 387,310 385,502 - - ------(Unrated)------
8,299,297 5,585,059 6,223,937 5,000,753

113
 Market value Cost
Long / Medium
2016 2015 2016 2015 Term Credit Rated by
Rating
--------------------------(Rupees in ‘000)------------------------
Shares in Un-listed Companies
Pakistan Export Finance Guarantee Agency Limited Not Applicable 5,725 5,725 ------(Unrated)------
Society for Worldwide Interbank Financial
Telecommunication Not Applicable 4,096 4,096 ------(Unrated)------
Al-Hamra Avenue (Private) Limited Not Applicable 50,000 50,000 ------(Unrated)------
Warid Telecom (Private) Limited Not Applicable - 4,366,796 ------(Unrated)------
Pakistan Mobile Communication Limited Not Applicable 22,235 - AA- PACRA
82,056 4,426,617
Preference Shares in Listed Companies
Agritech Limited Not Applicable 108,835 108,835 ------(Unrated)------

Preference Shares in Un-listed Companies

Silk Bank Preference Shares Not Applicable - 300,000 ------(Unrated)------
Trust Investment Bank Limited Not Applicable 25,000 25,000 ------(Unrated)------
25,000 325,000
Overseas Bonds
Kingdom of Bahrain Bond 545,314 533,639 553,251 563,025 BB+ Fitch
Kazakistan Sovereign Bond 315,076 296,774 309,038 308,943 BBB Fitch
Qatar National Bank Finance Limited - 524,634 - 524,114 A+ S&P
State of Qatar 2026 1,010,354 - 1,035,677 - AA Fitch
Oman International Bond 2021 1,045,906 - 1,044,923 - BBB- S&P
Oman International Bond 2026 504,363 - 521,073 - BBB- S&P
Republic of Sri lanka 152,043 - 156,898 - B+ Fitch
Republic of Indonesia (2027) 156,959 - 156,261 - BBB- Fitch
Republic of Indonesia (2022) 52,536 - 52,179 - BBB- Fitch
Saudi International Bond 1,028,153 - 1,032,378 - AA- Fitch
Abu Dhabi Commercial Bank Cayman Limited 1,047,062 1,049,268 1,045,995 1,048,228 A+ Fitch
United Mexican State 53,781 44,572 55,069 53,922 BBB+ Fitch
Indonesia Government Bond 226,902 226,503 218,302 228,590 BBB- Fitch
Republic of Indonesia 2023 (Euro) 55,712 - 54,825 - BB+ S&P
Kingdom of Saudi Arabia 913,644 - 932,332 - AA- Fitch
Oman International Bond 2026 706,087 - 724,341 - BBB- S&P
Qatar 21 512,815 - 517,972 - AA Fitch
Qatar 26 202,221 - 207,291 - AA Fitch
TC Zirrat Bankasi A.S 257,677 258,114 260,908 261,087 BBB- Fitch
Turkiye Halk Bankasi 51,493 51,865 52,281 52,346 BBB- Fitch
Syndicate Bank - 53,557 - 52,371 - -
RAK Funding Cayman Limited 209,189 206,566 208,412 208,398 BBB+ Fitch
Turkiye IS Bankasi A.S 298,865 306,129 310,991 310,874 BBB- Fitch
Turkiye Garanti Bankasi A.S 330,617 344,622 326,014 342,365 BBB Fitch
Africa Finance Corporation 644,304 630,010 623,370 623,004 A3 Moody’s
Deutsche Bank 207,408 213,449 216,011 226,892 BBB+ S&P
Turkiey Sanai 48,965 - 51,945 - BBB- Fitch
Halk Bank 21 514,499 - 521,933 - BBB- Fitch
Burgan Senior SPC Limited 412,850 - 415,625 - A+ Fitch
Qatar National Bank 497,486 - 502,176 - A+ S&P
Union National Bank 540,718 - 552,199 - A+ Fitch
Pakistan Euro Bonds 2,790,198 2,482,952 2,688,770 2,409,043 B Fitch
15,333,197 7,222,654 15,348,440 7,213,202

114
 Market value Cost

Long / Medium
2016 2015 2016 2015 Term Credit Rated by
Rating
--------------------------(Rupees in ‘000)------------------------

Redeemable Participating Certificates

Baltoro Growth Fund 501,938 - 501,938 - ------(Unrated)------

Sukuk Bonds

Pakistan Sukuk Bond 19 964,535 927,157 909,084 910,044 B Fitch

Pakistan Sukuk Bond 21 4,273,644 - 4,183,940 - B Fitch

Ijarah Sukuk Bonds - 905,742 - 944,663 ------(Unrated)------

TF Varlik Kiralama AS 321,644 322,437 317,005 318,711 BBB Fitch

Kuveyt Turk Katilim Bankasi 534,917 539,254 522,992 523,705 BBB Fitch

Albaraka Turk Katilim Bankasi 923,623 1,562,521 925,697 1,571,115 BB- S&P

Sharjah International Bank 414,984 - 418,394 - A3 Moody’s

Pakistan International Sukuk 534,173 - 535,094 - B Fitch

Indonesia Sovereign 524,687 - 524,754 - BBB- Fitch

South Africa Sovereign 424,448 - 418,394 - BBB- Fitch

Turkey Sukuk 355,372 - 366,095 - BBB- Fitch

Kingdom of Bahrain 536,643 - 522,993 - BB+ Fitch

GoP - Ijara Sukuk XIV - 7,462,130 - 7,432,655 ------(Unrated)------

GoP - Ijara Sukuk XVI 21,021,100 20,244,608 20,519,468 20,018,400 ------(Unrated)------

GoP - Ijara Sukuk XVII 5,782,560 - 5,606,994 - ------(Unrated)------

GoP - Ijara Sukuk XVIII 4,080,400 - 4,000,000 - ------(Unrated)------

Neelam Jehlum Hydel Power Company 2,600,000 - 2,600,000 - AAA JCR-VIS

Wapda Sukuk III 1,267,973 1,411,426 1,214,286 1,457,143 ------(Unrated)------

Security Leasing Corporation Limited I Not Applicable Not Applicable 6,418 6,418 ------(Unrated)------

Security Leasing Corporation Limited II Not Applicable Not Applicable 23,105 23,105 ------(Unrated)------

Quetta Textile Mills limited Not Applicable Not Applicable 72,619 74,483 ------(Unrated)------

44,560,703 33,375,275 43,687,332 33,280,442

115
 2016 2015
9.26 Particulars of provision for diminution in value of investments - net (Rupees in ‘000)

Opening balance 6,345,811 6,216,757

Charge for the year 100,766 136,691
Reversals during the year - -
100,766 136,691
Provision adjusted / written off during the year (4,366,796) (7,637)
Closing balance 2,079,781 6,345,811

9.27 Particulars of provision for diminution in value of investments

by type and segment

Available for sale securities

Listed companies / mutual funds
- Fully paid up ordinary shares / units
- First Dawood Investment Bank Limited 15,000 15,000

- Preference shares
- Agritech Limited 108,835 108,835

Unlisted companies
- Fully paid up ordinary shares of Rs. 10 each
- Pakistan Export Finance Guarantee Agency Limited 5,725 5,725
- Al-Hamra Avenue (Private) Limited 50,000 50,000
- Warid Telecom (Private) Limited (Related party) - 4,366,796
- Pakistan Mobile Communications Limited (Related party) 3,936 -

Unlisted securities
- Term finance certificates / sukuks
- Azgard Nine Limited 76,220 76,220
- Security Leasing Corporation Limited I 6,418 6,418
- Security Leasing Corporation Limited II 23,105 23,105
- New Allied Electronics 2,185 2,185
- Fauji Akbar Portia Marine Terminals Limited 161,407 102,069
- Quetta Textile Mills Limited 72,619 37,242

- Preference shares
- Trust Investment Bank Limited 25,000 25,000

Held to maturity securities

Unlisted securities
- Term finance certificates / sukuk bonds
- Agritech Limited 499,586 499,586
- BRR Guardian Modaraba 36,177 34,062
- Security Leasing Corporation Limited 29,245 29,245
- Sitara Peroxide (Private) Limited 113,643 113,643
- Zulekha Textile Mills 24,680 24,680

Investment in subsidiaries

Unlisted company
- Fully paid up ordinary shares of Rs. 10 each
- Alfalah Securities (Private) Limited 826,000 826,000

2,079,781 6,345,811

116
 9.28 Unrealised gain / (loss) on revaluation of investments classified as held for trading - net

Unrealised gain / (loss) Cost

2016 2015 2016 2015
---------------------- (Rupees in ‘000) ----------------------

Market Treasury Bills (3,790) (6,414) 14,120,130 13,480,197

Pakistan Investment Bonds (441) 4,060 20,207 2,423,862
Overseas Bonds (16,137) 229,460 549,615 2,990,933
Fully paid up ordinary shares / units - Listed 20,477 1,957 740,776 197,998
109 229,063 15,430,728 19,092,990

Note 2016 2015

(Restated)
(Rupees in ‘000)
10 ADVANCES - NET

Loans, cash credits, running finances, etc.

In Pakistan 309,121,955 278,764,277
Outside Pakistan 13,181,132 11,007,287
322,303,087 289,771,564
Net investment in finance lease
In Pakistan 10.2 4,181,047 3,638,627
Outside Pakistan - -
4,181,047 3,638,627

Islamic financing and related assets (gross) 10.3 57,908,118 43,062,240

Bills discounted and purchased (excluding market treasury bills)

Payable in Pakistan 5,033,339 6,186,509
Payable outside Pakistan 6,437,718 7,692,258
11,471,057 13,878,767
10.1 395,863,309 350,351,198
Provision against advances
Specific provision against non-performing loans and
10.5 (16,366,993) (15,452,555)
advances
General provision against advances 10.5 (775,967) (739,904)
(17,142,960) (16,192,459)

378,720,349 334,158,739

10.1 Particulars of advances - gross of provisions

In local currency 362,259,686 307,318,819

In foreign currencies 33,603,623 43,032,379
395,863,309 350,351,198

Short term (upto one year) 249,579,074 240,473,933

Long term (over one year) 146,284,235 109,877,265
395,863,309 350,351,198

117
10.2 Net investment in finance lease

2016 2015
Later than Later than
Not later Not later
one and less Over five one and less Over five
than one Total than one Total
than five years than five years
year year
years years
------------------------------------------------ (Rupees in ‘000) ------------------------------------------------

Lease rentals receivable 501,660 2,568,669 55,185 3,125,514 361,008 2,399,850 - 2,760,858
Residual value 146,820 1,237,330 - 1,384,150 63,767 1,109,316 - 1,173,083
Minimum lease payments 648,480 3,805,999 55,185 4,509,664 424,775 3,509,166 - 3,933,941
Financial charges for
future periods (48,731) (276,485) (3,401) (328,617) (90,913) (204,401) - (295,314)
Present value of minimum
lease payments 599,749 3,529,514 51,784 4,181,047 333,862 3,304,765 - 3,638,627

10.3 These represents financing and related assets placed under shariah permisible modes and presented in note A-II.1 and A-II.2

10.4 Advances include Rs. 19,019 million (2015: Rs. 18,455 million) which have been placed under non-performing status as detailed below:
2016
Classified advances Provision required Provision held
Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total
Category of Classification ---------------------------------------------------------- (Rupees in ‘000) ----------------------------------------------------------
Other Assets Especially
Mentioned (Agri Financing) 149,224 - 149,224 4,318 - 4,318 4,318 - 4,318
Substandard 2,336,995 - 2,336,995 577,634 - 577,634 577,634 - 577,634
Doubtful 1,990,208 - 1,990,208 1,483,906 - 1,483,906 1,483,906 - 1,483,906
Loss 14,223,167 318,921 14,542,088 14,061,997 239,138 14,301,135 14,061,997 239,138 14,301,135
18,699,594 318,921 19,018,515 16,127,855 239,138 16,366,993 16,127,855 239,138 16,366,993

2015
Classified advances Provision required Provision held
Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total
Category of Classification ----------------------------------------------------------- (Rupees in ‘000) -----------------------------------------------------------
Other Assets Especially
Mentioned (Agri Financing) 115,219 - 115,219 2,547 - 2,547 2,547 - 2,547
Substandard 2,052,587 54,595 2,107,182 524,432 70,795 595,227 524,432 70,795 595,227
Doubtful 2,554,443 5,506 2,559,949 1,502,617 1,587 1,504,204 1,502,617 1,587 1,504,204
Loss 13,110,724 562,325 13,673,049 12,936,185 414,392 13,350,577 12,936,185 414,392 13,350,577
17,832,973 622,426 18,455,399 14,965,781 486,774 15,452,555 14,965,781 486,774 15,452,555

10.5 Particulars of provisions against non-performing loans and advances

Note 2016 2015

Specific General Total Specific General Total
------------------------------ (Rupees in ‘000) ------------------------------

Opening balance 15,452,555 739,904 16,192,459 13,601,307 649,503 14,250,810

Exchange adjustment and other movements 347 (1,135) (788) 31,406 3,300 34,706

Charge for the year 3,408,125 157,643 3,565,768 3,921,493 146,652 4,068,145
Reversals / recoveries during the year (2,362,817) (120,445) (2,483,262) (1,858,385) (59,551) (1,917,936)
1,045,308 37,198 1,082,506 2,063,108 87,101 2,150,209

Amounts written off 10.6.1 (131,217) - (131,217) (243,266) - (243,266)

Closing balance 16,366,993 775,967 17,142,960 15,452,555 739,904 16,192,459

118
10.5.1 The additional profit arising from availing the forced sales value (FSV) benefit - net of tax at December 31, 2016
which is not available for distribution as either cash or stock dividend to shareholders/ bonus to employees
amounted to Rs. 95.817 million (2015: Rs. 110.774 million).

10.5.2 General provision against consumer loans represents provision maintained at an amount equal to 1.5% of the
fully secured performing portfolio and 5% of the unsecured performing portfolio as required by the Prudential
Regulations issued by the State Bank of Pakistan. General reserve of at least equivalent to 1% of the secured
and performing SE portfolio and 2% of the unsecured and performing SE portfolio is also maintained as
required under Prudential Regulations for Small and Medium Enterprise Financing.

10.5.3 Particulars of provisions against advances

2016 2015
Specific General Total Specific General Total
-----------------------------------(Rupees in ‘000)--------------------------------------------

In local currency 16,127,855 655,224 16,783,079 14,965,781 639,433 15,605,214

In foreign currencies 239,138 120,743 359,881 486,774 100,471 587,245
16,366,993 775,967 17,142,960 15,452,555 739,904 16,192,459

10.5.4 Although the Bank has made provision against its non-performing portfolio as per the category of classification
of the loan, the Bank holds enforceable collateral in the event of recovery through litigation. These securities
comprise of charge against various tangible assets of the borrower including land, building and machinery,
stock in trade etc.
2016 2015
10.6 Particulars of write-offs (Rupees in ‘000)

10.6.1 Against provisions 131,217 243,266

Directly charged to profit and loss account - -

131,217 243,266

10.6.2 Write offs of Rs. 500,000 and above 75,143 172,501

Write offs of below Rs. 500,000 56,074 70,765

131,217 243,266
10.7 Details of loans written-off of Rs. 500,000/- and above
In terms of sub-section (3) of Section 33A of the Banking Companies Ordinance, 1962 the statement in respect of
loans written-off or any other financial relief of five hundred thousand rupees or above allowed to a person(s)
during the year ended December 31, 2016 is given in Annexure-I.

119
 Note 2016 2015
10.8 Particulars of loans and advances to directors, executives, (Rupees in ‘000)
associated companies, etc.

Debts due by directors, executives or officers of the Bank or any

of them either severally or jointly with any other persons

- Balance at beginning of the year 5,735,039 5,139,055

- Loans granted during the year 2,722,298 1,867,232
- Repayments during the year (2,183,888) (1,271,248)
- Balance at end of the year 6,273,449 5,735,039

Debts due by companies or firms in which the directors of the Bank

are interested as directors, partners or in the case of private
companies as members

- Balance at beginning of the year 1,499,410 901,426

- Loans granted during the year 5,374,930 3,099,590
- Repayments during the year (3,565,509) (2,501,606)
- Balance at end of the year 3,308,831 1,499,410

Debts due by subsidiary company, controlled firms, managed

modarabas and other related parties

- Balance at beginning of the year 4,840,040 2,957,096

- Loans granted during the year 16,687,444 19,070,202
- Repayments during the year (16,796,079) (17,187,258)
- Balance at end of the year 4,731,405 4,840,040

Total 14,313,685 12,074,489

11 OPERATING FIXED ASSETS

Capital work-in-progress 11.1 775,408 704,981

Property and equipment 11.2 16,098,712 15,497,616
Intangible assets 11.3 1,259,147 1,039,371
18,133,267 17,241,968

11.1 Capital work-in-progress

Civil works 292,809 286,041

Equipment / intangibles 432,288 412,113
Advances to suppliers and contractors 54,015 18,239
Others 1,496 3,913
Provision against capital work-in-progress (5,200) (15,325)
775,408 704,981

120
 11.2 Property and equipment

2016

Surplus on
Cost / Depreciation/ Accumulated
revaluation / Cost / Accumulated Net book
revaluation Additions / Impairment Write Off depreciation Rate of
(adjustment Write Off Revaluation as depreciation Depreciation value as at
Description as at (disposals) / for the year / Accumulated as at depreciation
against Cost at December as at January on Revaluation December 31,
January 1, *adjustments (on disposal) / Depreciation December 31, %
accumulated 31, 2016 1, 2016 2016
2016 *adjustments 2016
depreciation)

---------------------------------------------------------------------- (Rupees in ‘000) ---------------------------------------------------------------------- per annum

Office premises 4,893,362 751,091 - - 5,732,324 - 75,982 - - 82,593 5,649,731 2.5%

(36,519) - - - -
*124,390 - *6,611 - -

Revaluation 5,399,467 - - 5,435,838 - 49,995 - 49,995 5,385,843 2.5%

(11,191) - - - -
*47,562 - - - - -
10,292,829 751,091 - 11,168,162 - 75,982 49,995 - 132,588 11,035,574
(47,710) - - -
*171,952 - *6,611 -

Lease hold 4,777,757 160,912 - - 4,802,297 2,909,432 336,691 - - 3,200,899 1,601,398 10% - 20%
improvements (1,516) (128,096) (1,471) (37,390)
*(6,760) *(6,363)

Furniture and 1,944,494 62,931 - - 1,975,248 1,291,442 158,338 - - 1,423,640 551,608 10% - 25%
fixtures (32,408) (26,332)
*231 *192

Office equipment 9,422,103 1,155,990 - - 10,364,540 6,834,037 1,006,830 - - 7,630,817 2,733,723 20% - 25%
(207,925) (203,656)
*(5,628) *(6,394)

Vehicles 347,956 144,518 - - 413,895 252,612 63,425 - - 237,486 176,409 25%

(78,646) (78,646)
*67 *95

26,785,139 2,275,442 - - 28,724,142 11,287,523 1,641,266 49,995 - 12,625,430 16,098,712

(368,205) - (128,096) (310,105) (37,390)
*159,862 *(5,859)

* This includes cost and surplus of two properties transferred from non-banking assets acquired in satisfaction of claims

121
 2015
Surplus on
Depreciation/ Accumulated
Cost / revaluation / Cost / Accumulated Accumulated Net book
Additions / Impairment Write Off depreciation Rate of
revaluation as (adjustment Write Off Revaluation as depreciation Depreciation value as at
Description (disposals) / for the year / Accumulated as at depreciation
at January 1, against Cost at December as at January Reversed on December 31,
*adjustments (on disposal) / Depreciation December 31, %
2015 accumulated 31, 2015 1, 2015 Revaluation 2015
*adjustments 2015
depreciation)
---------------------------------------------------------------------- (Rupees in ‘000) ---------------------------------------------------------------------- per annum

Office premises 5,158,963 11,157 - - 4,893,362 187,629 86,278 (272,715) - - 4,893,362 2.5%
- (272,715) - - - -
*(4,043) - - *(1,192) - -

Revaluation 3,917,799 - 1,643,150 - 5,399,467 107,966 53,516 (161,482) - - 5,399,467 2.5%

- (161,482) - - - -
- - - - - -
9,076,762 11,157 1,643,150 10,292,829 295,595 139,794 (434,197) - - 10,292,829
- (434,197) - -
*(4,043) - *(1,192) -

Lease hold 4,214,355 591,081 - (16,922) 4,777,757 2,573,351 360,878 - (16,922) 2,909,432 1,868,325 10% - 20%
improvements - -
*(10,757) *(7,875)

Furniture and 2,077,740 62,894 - (176,145) 1,944,494 1,274,163 204,332 - (176,145) 1,291,442 653,052 10% - 25%
fixtures (1,490) (1,268)
*(18,505) *(9,640)

Office equipment 9,319,066 1,145,482 - (1,011,440) 9,422,103 6,873,578 1,017,359 - (1,011,440) 6,834,037 2,588,066 20% - 25%
(57,013) (53,049)
*26,008 *7,589

Vehicles 382,747 31,710 - (28,939) 347,956 225,980 87,091 - (28,939) 252,612 95,344 25%
(34,521) (27,884)
*(3,041) *(3,636)

25,070,670 1,842,324 1,643,150 (1,233,446) 26,785,139 11,242,667 1,809,454 (434,197) (1,233,446) 11,287,523 15,497,616
(93,024) (434,197) (82,201)
*(10,338) *(14,754)

11.2.1 Included in cost of property and equipment are fully depreciated items still in use have cost of Rs. 7,611.24
million (2015: Rs. 6,365.40 million).
11.2.2 Office premises were last revalued on December 31, 2015 on the basis of market values determined by
independent valuer M/s. Akbani & Javed Associates, M/s. Harvester Services (Private) Limited and M/s. Asif
Associates (Private) Limited. Had there been no revaluation, the net book value of the office premises would
have been Rs. 5,649.731 million (2015: Rs. 4,893.362 million).

122
 11.3 Intangible assets

2016
Cost Accumulated Amortisation
Book
Rate of
As at Additions/ As at As at Amortisation Write Off As at value as at
Description Write Off amortisation
January (deletions)/ December January (deletions) / accumulated December December
Cost %
1, 2016 *adjustment 31, 2016 1, 2016 *adjustment depreciation 31, 2016 31, 2016

--------------------------------------------------------- (Rupees in ‘000) --------------------------------------------------------- per annum

Computer
software 2,341,848 578,813 2,918,660 1,302,477 357,473 1,659,513 1,259,147 20%
- -
*(2,001) *(437)

Goodwill 56,031 - - 56,031 56,031 - 56,031 - -

2,397,879 578,813 - 2,974,691 1,358,508 357,473 - 1,715,544 1,259,147

- -
*(2,001) *(437)

2015
Cost Accumulated Amortisation
Book
Rate of
As at Additions/ As at As at Amortisation Write Off As at value as at
Description Write Off amortisation
January (deletions)/ December January (deletions) / accumulated December December
Cost %
1, 2015 *adjustment 31, 2015 1, 2015 *adjustment depreciation 31, 2015 31, 2015

--------------------------------------------------------- (Rupees in ‘000) --------------------------------------------------------- per annum

Computer
software 1,959,342 533,042 (151,690) 2,341,848 1,181,330 272,179 (151,690) 1,302,477 1,039,371 20%
- -
*1,154 *658

Goodwill 56,031 - - 56,031 56,031 - - 56,031 - -

2,015,373 533,042 (151,690) 2,397,879 1,237,361 272,179 (151,690) 1,358,508 1,039,371

- -
*1,154 *658

11.3.1 Included in cost of intangible assets are fully amortized items still in use having cost of Rs. 836.84 million (2015: Rs. 772.44 million)

123
11.4 Details of disposals of operating fixed assets
Details of disposals of operating fixed assets having cost of more than Rs. 1,000,000 or net book value of Rs. 250,000 or above are given
below:

Accumulated Net book Sale Mode of

Description Cost Particulars of purchaser
depreciation value proceeds disposal
------------------- (Rupees in ‘000) -------------------
Land & Building
Freehold Land 4,710 - 4,710 18,906 Negotiation Government of Punjab
Freehold Land 43,000 - 43,000 50,000 Negotiation Mr. Afzaal
47,710 - 47,710 68,906

Leasehold Improvements
Civil & Electrical Works 1,174 1,155 19 38 Bid M/s Shahbaz Haider
Items having book value of less
than Rs. 250,000 or cost of
less than Rs. 1,000,000 342 316 26 17 Various Various
1,516 1,471 45 55
Furniture and fixtures
Items having book value of less
than Rs. 250,000 or cost of
less than Rs. 1,000,000 32,408 26,332 6,076 4,521 Various Various
32,408 26,332 6,076 4,521
Computers
Server Machine 1,885 1,885 - - Insurance Claim M/s Alfalah Insurance
Server Machine 1,482 1,482 - 121 Bid M/s Ahsan & Brothers
Items having book value of less
than Rs. 250,000 or cost of
less than Rs. 1,000,000 24,834 23,926 908 2,225 Various Various
28,201 27,293 908 2,346
Office equipment
ATM 1,625 1,625 - 3 Bid M/s Star Network
ATM 3,637 3,637 - 6 Bid M/s Star Network
ATM 1,270 1,270 - 2 Bid M/s Star Network
ATM 1,138 1,136 2 447 Insurance Claim M/s Alfalah Insurance
Generator 2,050 2,050 - 659 Bid M/s Arsalan Brothers
Generator 1,243 696 547 290 Bid M/s Abdul Rasheed
Generator 2,455 2,455 - 740 Bid M/s F.F Trading Company
Generator 2,150 2,150 - 440 Bid M/s Pak Power Moves
Generator 1,192 1,192 - 153 Bid M/s Bismillah Insaf Scrap
Generator 1,145 1,145 - 282 Bid M/s Arsalan Brothers
Generator 1,013 1,013 - 273 Bid M/s Arsalan Brothers
Generator 1,013 1,013 - 273 Bid M/s Arsalan Brothers
Generator 1,200 1,200 - 631 Bid M/s Mars Engineering
Generator 1,200 1,200 - 631 Bid M/s Mars Engineering
Generator 1,180 1,180 - 309 Bid M/s Mars Engineering
Generator 1,200 1,200 - 631 Bid M/s Mars Engineering
Generator 1,070 1,070 - 309 Bid M/s Mars Engineering
Generator 1,112 1,022 90 690 Insurance Claim M/s Alfalah Insurance
Generator 1,195 1,195 - 257 Bid M/s Haji Muhammad Azam & Sons
Generator 2,713 2,713 - 794 Bid M/s MTS Garments Limited
POS Terminals 28,901 28,901 - - Trade In M/s Marshal Engg. & Electronics
Card Printer 1,800 1,800 - - Trade In M/s Crest Technologies
DVR 1,034 1,034 - 33 Bid M/s Shahbaz Haider
Electrical Panel 9,902 9,902 - 321 Bid M/s Shahbaz Haider
HVAC 63,980 63,980 - 2,037 Bid M/s Shahbaz Haider
Items having book value of less
than Rs. 250,000 or cost of
less than Rs. 1,000,000 43,306 40,584 2,722 6,304 Various Various
179,724 176,363 3,361 16,515

124
 Accumulated Net book
Description Cost Sale proceeds Mode of disposal Particulars of purchaser
depreciation value
------------------- (Rupees in ‘000) -------------------
Vehicles
Honda Civic 1,178 1,178 - 698 Bid Mr. M. Kamran Khan
Honda Civic 1,382 1,382 - 906 Bid Mr. Usman Shahid
Honda Civic 1,506 1,506 - 917 Bid Mr. Muhammad Ansar Khan
Honda Civic 1,422 1,422 - 677 Bid Mr. Muhammad Ansar Khan
Honda Civic 1,523 1,523 - 1,081 Bid Mr. Sajid Hussain
Honda Accord 5,866 5,866 - 587 As per Policy Mr. Yasir Rashid
Honda Accord 6,617 6,617 - 662 As per Policy Mr. Faisal Farooq Khan
Honda Accord 7,017 7,017 - 702 As per Policy Mr. Ali Sultan
Honda City 1,376 1,376 - 1,001 Bid Mr. Muhammad Hanif
Honda City 1,376 1,376 - 906 Bid Mr. Usman Shahid
Honda City 1,490 1,490 - 149 As per Policy Mr. Riaz Hamdani
Mercedes-Benz 8,427 8,427 - 843 As per Policy Mr. Saad Ur Rehman
Mercedes-Benz 8,427 8,427 - 843 As per Policy Mr. Mirza Zafar Baig
Mercedes-Benz 8,462 8,462 - 846 As per Policy Mr. Khurram Hussain
Mercedes-Benz 8,500 8,500 - 850 As per Policy Ms. Mehreen Ahmed
Toyota Yaris 2,138 2,138 - 787 As per Policy Mr. Zeeshan Khan
Toyota Yaris 2,138 2,138 - 808 As per Policy Mr. Md. Nurul Islam Dewan
Toyota Corolla 1,691 1,691 - 169 As per Policy Mr. Sharif Khawar
Toyota Corolla 1,608 1,608 - 161 As per Policy Mr. Mian Ejaz
Items having book value of less
than Rs. 250,000 or cost of
less than Rs. 1,000,000 6,502 6,502 - 5,390 Various Various
78,646 78,646 - 18,983

Total - December 31, 2016 (Note 11.2) 368,205 310,105 58,100 111,326

Total - December 31, 2015 93,024 82,201 10,823 22,342

*Disposal as per Bank’s policy represents vehicles sold to employees as per the terms of their employment.

2016 2015
12 DEFERRED TAX LIABILITIES - NET (Rupees in ‘000)

Deferred debits arising due to

Provision for doubtful debts 392,066 1,434,609
Provision against off-balance sheet obligations 13,078 15,706
Impairment in the value of investments 2,264,329 2,247,184
Provision against other assets 309,218 334,501
2,978,691 4,032,000
Deferred credits arising due to
Accelerated tax depreciation (1,388,669) (1,473,306)
Gain on remeasurement of held for trading investments (38) (80,172)
Surplus on revaluation of available for sale investments (3,399,873) (3,460,609)
Surplus on revaluation of operating fixed assets (840,539) (841,967)
(5,629,119) (5,856,054)
(2,650,428) (1,824,054)

125
12.1 Reconciliation of deferred tax assets/ liabilities

Recognized Recognized
in Other in Other
Recognized in Comprehensive Recognized in Comprehensive
January 01, December 31, December 31,
Profit and Loss Income / Profit and Loss Income /
2015 2015 2016
Account Surplus on Account Surplus on
revaluation of revaluation of
assets assets
----------------------------------------------------- (Rupees in ‘000) -----------------------------------------------------
Deferred debits arising due to
Provision for doubtful debts 1,106,413 328,196 - 1,434,609 (1,042,543) - 392,066
Provision against off-balance sheet
obligations 15,333 373 - 15,706 (2,628) - 13,078
Impairment in the value of investments 2,202,709 44,475 - 2,247,184 17,145 - 2,264,329
Provision against other assets 215,401 119,100 - 334,501 (25,283) - 309,218
3,539,856 492,144 - 4,032,000 (1,053,309) - 2,978,691

Deferred credits arising due to

Accelerated tax depreciation 1,482,114 (8,808) - 1,473,306 (84,637) - 1,388,669
Gain on remeasurement of held -
for trading investments 56,034 24,138 - 80,172 (80,134) - 38
Surplus on revaluation of available -
for sale investments 2,114,157 - 1,346,452 3,460,609 - (60,736) 3,399,873
Surplus on revaluation of operating -
fixed assets 740,882 (18,731) 119,816 841,967 (17,500) 16,072 840,539
4,393,187 (3,401) 1,466,268 5,856,054 (182,271) (44,664) 5,629,119

Net deferred tax liabilities (853,331) 495,545 (1,466,268) (1,824,054) (871,038) 44,664 (2,650,428)

Note 2016 2015

(Restated)
(Rupees in ‘000)
13 OTHER ASSETS

Income / mark-up accrued in local currency 13,797,059 16,770,774

Income / mark-up accrued in foreign currencies 661,808 754,640
Advances, deposits, advance rent and other prepayments 2,116,356 2,663,543
Non-banking assets acquired in satisfaction of claims 13.1 471,365 675,325
Dividend receivable 42,303 7,103
Unrealised gain on forward foreign exchange contracts 320,749 739,757
Unrealised gain on interest rate swaps 55,336 1,888
Receivable from brokers - 6,143
Stationery and stamps on hand 95,569 82,833
Defined benefit plan 35.1.3 349,317 40,003
Balance held with bank 13.2 413,074 413,657
Others 13.4 218,206 178,223
18,541,142 22,333,889
Provision held against other assets 13.3 (623,878) (774,156)
17,917,264 21,559,733

13.1 Market value of non-banking assets acquired in satisfaction of claims 519,570 761,755

126
 13.2 This represents an amount of USD 3.949 million held in the Bank’s Nostro Account in New York, United States
of America, which has been put on hold by a commercial bank pursuant to receipt of notice of seizure based on
the order passed by the District Court, District of Columbia, USA.
Based on the fact that the said amount is not readily available for use of the Bank, the amount has been
reclassified from Balances with Other banks to Other Assets. Although the management is confident that the
matter will be decided in the Bank’s favour, as at December 31, 2016, the Bank has maintained full provision
against the same (December 31, 2015: USD 3.949 million).
2016 2015
13.3 Provision held against other assets (Rupees in ‘000)

Opening balance 774,156 530,472

(Reversal) / charge for the year (102,305) 310,765
Payment out of provisions - (22,097)
Amount written off (35,304) (22,322)
Exchange and other adjustments (12,669) (22,662)
Closing balance 623,878 774,156
13.4 This includes an amount of Rs. 112.350 million given as advance against issuance of shares to an associated
company Sapphire Wind Power Company Limited.
Note 2016 2015
(Rupees in ‘000)
14 BILLS PAYABLE

In Pakistan 12,743,285 9,592,804

Outside Pakistan 143,705 141,125
12,886,990 9,733,929
15 BORROWINGS

In Pakistan 161,138,463 164,187,489

Outside Pakistan 17,172,572 8,205,709
178,311,035 172,393,198
15.1 Particulars of borrowings with respect to currencies

In local currency 161,138,463 164,187,489

In foreign currencies 17,172,572 8,205,709
178,311,035 172,393,198

15.2 Details of borrowings secured / unsecured

Secured
Borrowings from State Bank of Pakistan under:
Export refinance scheme 15.3 18,725,467 16,889,852
Long-Term Finance for Export Oriented Projects
Scheme (LTF-EOP) - -
Long-Term Finance Facility 15.4 2,851,400 394,024
Modernisation of SMEs - -
Financing Facility for Storage of Agriculture Produce (FFSAP) 15.5 92,049 146,235
Repurchase agreement borrowings 15.6 136,763,030 129,071,926
Borrowings from other central banks 198,418 -
158,630,364 146,502,037
Unsecured
Call borrowings 15.7 13,461,835 17,901,900
Bai Muajjal 15.8 6,218,836 7,935,453
Overdrawn nostro accounts - 53,808
19,680,671 25,891,161

178,311,035 172,393,198

127
15.3 This facility is secured against a demand promissory note executed in favour of the State Bank of Pakistan.
The mark-up rate on this facility ranges from 1.00% to 2.00% per annum (2015: 2.50% to 4.50% per annum)
payable on a quarterly basis.
15.4 This facility is secured against a demand promissory note executed in favour of the State Bank of Pakistan.
The mark-up rate on this facility ranges from 2.00% to 5.00% per annum (2015: 3.00% to 4.50% per annum)
payable on a quarterly basis.
15.5 This facility is secured against a demand promissory note executed in favour of the State Bank of Pakistan.
The mark-up rate on this facility ranges from 3.25% to 6.50% per annum (2015: 6.25% per annum) payable on
a quarterly basis.
15.6 This represents repurchase agreement borrowing from SBP and other banks at the rate of 1.10% and 5.95% per
annum respectively (2015: 6.04% and 6.50% per annum) having maturities upto February 2017 (2015: January
2016).
15.7 This represents borrowings from financial institutions at mark-up rates ranging from 0.55% to 5.80% per
annum (2015: 0.50% to 6.08% per annum) having maturities upto March 2017 (2015: March 2016).

15.8 This represents borrowings from financial institutions at mark-up rates ranging from 5.60% to 5.70% per
annum (2015: 6.35% to 7.45%) having maturities upto May 2017 (2015: April 2016).

2016 2015
16 DEPOSITS AND OTHER ACCOUNTS (Restated)
(Rupees in ‘000)
Customers
Fixed deposits 94,268,250 137,604,333
Savings deposits 229,010,684 210,368,288
Current accounts - non-remunerative * 283,711,087 238,121,421
Others * 4,721,828 3,522,762
611,711,849 589,616,804
Financial institutions
Remunerative deposits 27,435,848 48,877,152
Non-remunerative deposits 1,796,557 1,694,779
29,232,405 50,571,931
640,944,254 640,188,735
16.1 Particulars of deposits

In local currency 557,824,338 539,929,934

In foreign currencies 83,119,916 100,258,801
640,944,254 640,188,735

*Call deposits amounting to Rs. 6,205 million (2015: Rs. 3,326 million) have been reclassified from Others to
Current accounts - non-remunerative for better presentation.

128
 2016 2015
(Rupees in ‘000)
17 SUB-ORDINATED LOANS

Term Finance Certificates IV - Private, Unsecured 3,324,670 4,988,000

Mark up Either of the following options with the holder:

- Floating coupon of Base Rate + 2.50 percent

(Base Rate is defined as the simple average of the ask rate of the six
months KIBOR prevailing on the first day of the start of each half yearly
period for mark up due at the end of that period).

- Fixed coupon of 15 percent per annum payable semi-annually in arrears

Subordination The TFCs are subordinated as to the payment of principal and profit to
all other indebtness of the Bank.

Issue date December 2009

Rating AA-

Tenor Eight years

Redemption The instrument is structured to redeem 0.26% of principal, semi-

annually, in the first 78 months and remaining principal of 33.247% each
of the issue amount respectively, starting from the 84th month.

Maturity December 2017

Term Finance Certificates V - Quoted, Unsecured 4,993,000 4,995,000

Mark up Base Rate + 1.25 percent

(Base Rate is defined as the simple average of the ask rate of the six
months KIBOR prevailing on one business day prior to each redemption
date for the redemption amount payable on the beginning of each semi-
annual period for the markup due at the end of that period).
Subordination The TFCs are subordinated as to the payment of principal and profit to
all other indebtness of the bank.

Issue date February 2013

Rating AA-

Tenor Eight years

Redemption The instrument will be structured to redeem semi-annually in such a way

that 0.30% of the principal will be redeemed in the first 90 months and
remaining principal of 99.70% at maturity in the 96th month.

Maturity February 2021

8,317,670 9,983,000

129
 Note 2016 2015
(Rupees in ‘000)
18 OTHER LIABILITIES

Mark-up / return / interest payable in local currency 1,549,223 1,969,052

Mark-up / return / interest payable in foreign currencies 175,609 280,118
Unearned commission and income on bills discounted 238,539 437,666
Accrued expenses 3,393,977 3,831,161
Branch adjustment account 816,333 947,438
Payable against redemption of credit card reward points 142,453 122,804
Taxation payable 257,212 463,980
Security deposits 5,225,935 4,790,001
Unclaimed dividend 62,660 58,435
Unrealised loss on forward foreign exchange contracts 555,131 729,875
Unrealised loss on interest rate swaps 37,078 88,804
Provision against off-balance sheet obligations 18.1 69,708 77,590
Workers’ Welfare Fund 29.1 588,278 475,569
Compensated absences 18.2 401,644 313,930
Others 708,134 545,007
14,221,914 15,131,430

18.1 Provision against off-balance sheet obligations

Opening balance 77,590 85,953

(Reversal) / charge for the year (7,508) 1,066
Exchange and other adjustments (374) (9,429)
Closing balance 69,708 77,590

18.2 During the year, a valuation for compensated absences has been carried out by an actuary appointed for the
purpose. Major assumptions considered for the purposes of valuation are as follows:

Mortality Rate SLIC 2001-2005

Withdrawal Rate Age dependant withdrawal table; the average turnover rate over next one year is
around 20.37%.
Salary Increase rate 8.0% p.a.

19 SHARE CAPITAL

19.1 Authorised capital

2016 2015 2016 2015

(Number of shares) (Rupees in ‘000)
2,300,000,000 2,300,000,000 Ordinary shares of Rs. 10 each 23,000,000 23,000,000

19.2 Issued, subscribed and paid up capital

2016 2015 Ordinary shares of Rs. 10 each 2016 2015

(Number of shares) (Rupees in ‘000)

870,801,304 865,399,937 Fully paid in cash 8,708,013 8,653,999

724,406,250 724,406,250 Issued as bonus shares 7,244,063 7,244,063

1,595,207,554 1,589,806,187 15,952,076 15,898,062

130
 During the year the Bank has issued 5,401,367 ordinary shares having face value of Rs. 10/- each to its employees
on excercise of options vested under the Employees Stock Option Scheme (ESOS) (note 35.2). The paid-up
capital of the Bank before issuance of shares to employees was Rs. 15,898,061,870 (divided into 1,589,806,187
shares of Rs. 10 each) and after issuance of shares to the employees has increased to Rs. 15,952,075,540 (divided
into 1,595,207,554 shares of Rs. 10 each).

Note 2016 2015

(Rupees in ‘000)
20 SURPLUS ON REVALUATION OF ASSETS - NET OF TAX

Surplus arising on revaluation of:

- Operating fixed assets 20.1 4,559,251 4,557,499
- Non-banking assets acquired in satisfaction of claims 20.1 36,942 -
4,596,193 4,557,499
- Available for sale securities 20.2 6,343,383 6,370,898
10,939,576 10,928,397
20.1 Surplus on revaluation of fixed assets

Surplus on revaluation of operating fixed assets at January 01 11.2 5,399,467 3,809,833

Transferred to retained earnings in respect of incremental depreciation

charged during the year - net of tax (32,497) (34,784)
Revaluation of fixed assets / non-banking assets during the year 50,890 -
Surplus on revaluation of fixed assets recognized during the year 47,562 1,643,150
Related deferred tax liability in respect of incremental depreciation
charged during the year (17,498) (18,732)
Reversal of surplus on account of disposal of property 11.2 (11,191) -
37,266 1,589,634
5,436,733 5,399,467

Related deferred tax liability on surplus as at January 01 841,968 740,884

Deferred tax liability charge / (reversal) 16,070 119,816

Deferred tax liability in respect of incremental depreciation
charged during the year (17,498) (18,732)
(1,428) 101,084
840,540 841,968

4,596,193 4,557,499
20.2 Surplus on revaluation of available for sale securities

Government securities 7,642,123 9,257,769

Quoted shares / units / certificates / sukuks / bonds 2,068,211 596,124
Term finance certificates 3,590 33,560
Interest rate swaps 29,332 (55,946)
9,743,256 9,831,507
Related deferred tax liability (3,399,873) (3,460,609)
6,343,383 6,370,898

131
 2016 2015
(Rupees in ‘000)
21 CONTINGENCIES AND COMMITMENTS

21.1 Direct credit substitutes

i) Government 1,632,063 743,580

ii) Banking companies & other financial institutions - 311,835
iii) Others 53,167 2,094,645
1,685,230 3,150,060
21.2 Transaction-related contingent liabilities

i) Government 32,243,564 27,412,625

ii) Banking companies & other financial institutions 544,762 163,826
iii) Others 11,725,088 12,719,286
44,513,414 40,295,737
21.3 Trade-related contingent liabilities

Letters of credit 73,061,529 52,107,916

Acceptances 12,188,691 15,797,161

21.4 Other contingencies

21.4.1 Claims against the Bank not acknowledged as debts 13,847,649 14,861,738

These mainly represents counter claims filed by the borrowers for restricting the Bank from disposal of assets
(such as hypothecated / mortgaged / pledged assets kept as security), damage to reputation and cases filed
by Ex. employees of the Bank for damages sustained by them consequent to the termination from the Bank’s
employment. Based on legal advice and / or internal assessment, management is confident that the matters will
be decided in Bank’s favour and the possibility of any outcome against the Bank is remote and accordingly no
provision has been made in these financial statements.
2016 2015
(Rupees in ‘000)
21.5 Commitments in respect of forward lendings

Commitments to extend credit 28,450,269 5,222,555

Commitments in respect of investments 3,596,186 -

21.6 Commitments in respect of forward exchange contracts

Purchase 53,992,848 98,261,212

Sale 41,084,440 106,520,120

21.7 Commitments for the acquisition of fixed assets 336,774 291,237

21.8 Commitments in respect of repo transactions

Repurchase 136,912,078 129,226,010

Resale 349,222 -

21.9 Other commitments

Interest rate swaps 7,622,307 6,962,920

Donations 22,000 22,000

21.10 Contingency for tax payable (note 30.1)

132
 22 DERIVATIVE INSTRUMENTS
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 characteristics of
forwards, futures, swaps and options.
At present the bank deals in the following instruments:
- Forward Exchange Contracts
- Interest Rate Swaps
- Share Options (note 9.17.1)

22.1 Product analysis

Interest Rate Swaps Forward Rate Agreements
2016 2015 2016 2015
Counter Parties No. of Notional No. of Notional No. of Notional No. of Notional
Contracts Principal * Contracts Principal * Contracts Principal * Contracts Principal *
(Rupees in ‘000) (Rupees in ‘000)
With Banks for
Hedging 20 7,622,307 18 6,962,920 - - - -
Market Making - - - - 179 80,299,452 215 191,003,452
With FIs other than banks
Hedging - - - - - - - -
Market Making - - - - - - - -
With other entities for
Hedging - - - - - - - -
Market Making - - - - 620 14,777,835 730 13,777,880
Total
Hedging 20 7,622,307 18 6,962,920 - - - -
Market Making - - - - 799 95,077,287 945 204,781,332

* At the exchange rate prevailing at the year end

22.2 Unrealised gain / (loss) on derivatives financial instruments.

Contractual / notional amount Unrealised gain / (loss)

2016 2015 2016 2015
---------------------- (Rupees in ‘000) ----------------------

Interest Rate Swaps 7,622,307 6,962,920 18,258 (17,668)

Forward Exchange Contract Purchase 53,992,848 98,261,212 (513,325) (523,544)
Forward Exchange Contract Sale 41,084,440 106,520,120 278,942 533,426

22.3 Maturity Analysis - Forward Exchange Contract Purchase

Forward Exchange Contract Sale and Interest Rate Swap (Fixed Rate)
Mark to Market
Remaining Maturity Number of Notional Negative Positive Net
Contracts Principal
---------------------- (Rupees in ‘000) ----------------------
Upto 1 month 226 47,296,545 (195,790) 143,932 (51,858)
1 to 3 months 225 30,873,282 (169,046) 82,595 (86,451)
3 to 6 months 219 12,695,144 (153,658) 65,939 (87,719)
6 months to 1 year 129 4,212,317 (36,637) 28,282 (8,355)
1 to 2 years - - - - -
2 to 3 years 11 4,222,856 (15,058) 942 (14,116)
3 to 5 years 5 2,039,671 (9,118) 9,715 597
5 to 10 years 4 1,359,780 (12,902) 44,679 31,777
Above 10 years - - - - -
819 102,699,595 (592,209) 376,084 (216,125)

133
 2016 2015
23 MARK-UP / RETURN / INTEREST EARNED (Rupees in ‘000)

a) On loans and advances to:

i) customers 23,828,088 25,474,230
ii) financial institutions 106,941 272,510

b) On investments in:
i) held for trading securities 969,854 1,140,627
ii) available for sale securities 22,420,671 22,521,676
iii) held to maturity securities 6,962,638 9,105,351

c) On deposits with financial institutions 2,703,457 2,634,590

d) On securities purchased under resale agreements 253,041 288,888
57,244,690 61,437,872

24 MARK-UP / RETURN / INTEREST EXPENSED

Deposits 18,553,408 22,653,547

Securities sold under repurchase agreements 7,189,657 6,755,279
Other short term borrowings 1,557,026 2,039,750
Term finance certificates 953,301 1,102,752
Brokerage and commission 221,076 259,394
28,474,468 32,810,722

25 INCOME FROM DEALING IN FOREIGN CURRENCIES

This includes Rs. 405.4 million (2015: Rs. 783.6 million) being income on account of interest on cross currency
swap transactions, which corresponds to the cost included under ‘Mark-up / return / interest expensed’ in this
regard.

2016 2015
26 GAIN ON SALE OF SECURITIES - NET (Rupees in ‘000)

Federal Government Securities

- Market Treasury Bills 41,607 350,718
- Pakistan Investment Bonds 748,725 774,197
Overseas Bonds 65,553 170,371
Shares / Mutual Funds 772,690 257,113
Sukuk Bonds 53,046 54,352
1,681,621 1,606,751

134
 Note 2016 2015
(Rupees in ‘000)

27 OTHER INCOME

Gain on sale of operating fixed assets 11.4 53,226 11,519

Gain on exchange of assets 22,235 -
Postage, telex service charges etc. 737,294 736,228
812,755 747,747
28 ADMINISTRATIVE EXPENSES

Non executive directors fee & allowances 110,609 91,967

Salaries, allowances, etc. 28.1 8,734,492 8,236,493
Charge for defined benefit plan 35.1.4 260,795 290,111
Contribution to defined contribution plan 36 326,341 295,929
Charge for employee stock option scheme 35.2 109,615 94,830
Charge for staff compensated absences 87,714 88,210
Staff training expenses 226,702 172,315
Rent, taxes, insurance, electricity, etc. 3,526,417 3,378,650
Legal and professional charges 664,892 415,550
Communications 883,922 734,923
Repairs and maintenance 1,564,255 1,526,509
Stationery and printing 420,001 404,747
Advertisement and publicity 801,164 831,635
Donations 28.2 31,960 57,638
Auditors’ remuneration 28.3 30,704 21,874
Depreciation 11.2 1,691,261 1,809,454
Amortisation of intangible assets 11.3 357,473 272,179
Travelling, conveyance and fuel expenses 473,354 490,067
Entertainment 185,592 200,281
Subscription 32,499 31,120
Charge for outsourced services 1,198,399 1,164,174
Security service charges 984,093 837,761
Others 720,964 509,698
23,423,218 21,956,115

28.1 The Bank operates a short term employee benefit scheme which includes cash awards/ performance bonus for
all eligible employees. Under this scheme, the bonus for all executives, including the CEO is determined on the
basis of employees’ evaluation and Bank’s performance during the year. The aggregate amount determined for
the eligible employees in respect of the above scheme relating to the Key Management Personnel of the Bank and
for Other Executives amounted to Rs. 423.464 million (2015: Rs. 396.718 million) and Rs. 549.710 million (2015: Rs.
476.717 million) respectively.

135
 Note 2016 2015
28.2 Donations (Rupees in ‘000)

Alif Noon Parents Foundation 20,000 -

Network of Organizations Working for People with Disabilities - Pakistan 3,000 -
Karachi Vocational Training Centre 2,460 -
Family Education Services Foundation 6,500 -
Institute of Business Administration - 22,000
Jaipur Foot - 5,638
Karachi Education Initiative (KEI) - 25,000
The Aga Khan University - 5,000
31,960 57,638

28.3 Auditors’ remuneration

Audit fee 9,010 7,900

Half yearly review 2,268 1,900
Special certifications and sundry advisory services 10,360 5,328
Out-of-pocket expenses 1,947 1,051
23,585 16,179
Fee for audit of foreign branches 7,119 5,695
30,704 21,874

29 OTHER CHARGES

Penalties imposed by the State Bank of Pakistan 5,690 42,892

Workers’ Welfare Fund 29.1 112,709 286,897
118,399 329,789

29.1 Through Finance Act 2008, the Federal Government introduced amendments to the Workers’ Welfare Fund
(WWF) Ordinance, 1971 whereby the definition of industrial establishment was extended. The amendments were
challenged and conflicting judgments were rendered by various courts. Appeals against these orders were filed
in the Supreme Court.
During the current year, 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 the above judgment. These petitions
are currently pending with the Supreme Court of Pakistan.
A legal advice has been obtained by the Pakistan Banks Association which highlights that consequent to filing of
these review petitions, a risk has arisen and the judgment is not conclusive until the review petition is decided.
Accordingly, the amount charged for Workers Welfare Fund since 2008 has not been reversed.

136
 2016 2015
30 TAXATION (Rupees in ‘000)

For the year

Current 4,689,525 5,008,992
Deferred (157,060) (495,545)

For prior years

Current (437,312) 567,813
Deferred 1,028,098 -
590,786 567,813
5,123,251 5,081,260

30.1 The income tax assessments of the Bank have been finalized upto and including tax year 2016. Matters of
disagreement exist between the Bank and tax authorities for various assessment years and are pending with the
Commissioner of Inland Revenue (Appeals), Appellate Tribunal Inland Revenue (ATIR), High Court of Sindh and
Supreme Court of Pakistan. These issues mainly relate to addition of mark up in suspense to income, taxability
of profit on government securities, bad debts written off and disallowances relating to profit and loss expenses.
In respect of tax years 2008, 2011, 2012, 2013, 2015 and 2016, the tax authorities have raised certain issues
including disallowance of expenditure on account of non-deduction of withholding tax, default in payment of
WWF, allocation of expenses to dividend and capital gains and dividend income from mutual funds not being
taken under income from business, resulting in additional demand of Rs. 1,467.175 million. As a result of appeal
filed before Commissioner Appeals against these issues, relief has been provided for tax amount of Rs. 1,023.719
million whereas appeal effect orders are pending. The management’s appeals on certain issues are pending before
Commissioner Appeals. The management is confident that these matters will be decided in favour of the Bank and
consequently has not made any provision in respect of these amounts.
The Bank has received amended assessment orders for Tax Years from 2010 to 2013 wherein Tax Authorities have
disallowed depreciation on Ijara Assets considering it Finance Lease and raised a tax demand of Rs. 990.423
million. As a result of appeal filed before Commissioner Appeal, relief is provided to the Bank. Accordingly tax
amount is reduced to Rs. 96.160 million. The Bank has filed appeal before Appellate Tribunal. The Bank has not
made any provision against these orders and the management is of the view that the matter will be settled in
Bank’s favour through appellate process.
In respect of monitoring of withholding taxes, the Bank has received various orders from tax authorities. The
Bank has not made provision amounting to Rs. 433.377 million against tax demand for tax years 2009, 2011, 2015
and 2016. The Bank intends to obtain relief through rectification orders. The management is of the view that the
matter will be settled in Bank’s favour.
The Bank has received an order from a provincial tax authority wherein tax authority has disallowed certain
exemptions of sales tax on banking services and demanded sales tax and penalty amounting to Rs. 97.560 million
(excluding default surcharge) for the period from July 2011 to June 2014. Bank’s appeal against this order is
currently pending before Commissioner Appeals. The Bank has not made any provision against this order and the
management is of the view that the matter will be settled in Bank’s favour through appellate process.

137
 2016 2015
30.2 Relationship between tax expense and accounting profit (Rupees in ‘000)

Profit before taxation 13,023,159 12,604,070

Tax at the applicable rate of 35% (2015: 35%) 4,558,106 4,411,425

Effect of:
- permanent differences 1,992 15,012
- tax charge pertaining to overseas branches 60,628 88,715
- adjustment of prior years 590,786 567,813
- others (88,261) (1,705)
Tax expense for the year 5,123,251 5,081,260

31 EARNINGS PER SHARE

31.1 BASIC EARNINGS PER SHARE (Rupees in ‘000)

Profit after taxation for the year 7,899,908 7,522,810

(Number of shares in
thousand)

Weighted average number of ordinary shares 1,593,898 1,590,888

(Rupees)

Basic earnings per share 4.96 4.73

31.2 DILUTED EARNINGS PER SHARE

(Rupees in ‘000)

Profit after taxation for the year 7,899,908 7,522,810

(Number of shares in
thousand)

Weighted average number of ordinary shares 1,602,937 1,590,888

(Rupees)

Diluted earnings per share 4.93 4.73

31.3 Reconciliation of basic and diluted earning per share

(Number of shares in
thousand)

Weighted average number of ordinary shares 1,593,898 1,590,888

Plus: Employee stock option scheme 9,039 -
Dilutive potential ordinary shares 1,602,937 1,590,888

138
 2016 2015
32 CASH AND CASH EQUIVALENTS (Rupees in ‘000)

Cash and balances with treasury banks 6 74,071,384 62,368,790

Balances with other banks 7 9,373,123 16,552,207
Call money lendings 5,306,590 14,728,532
Overdrawn nostro accounts 15.2 - (53,808)
88,751,097 93,595,721

33 CREDIT RATING
PACRA has assigned a long term credit rating of AA [Double A] and a short term credit rating of A1+ [A one plus] to
the Bank as at June 2016 with a positive outlook (2015: AA [Double A] for long term and A1+ [A one plus] for short
term with a stable outlook).
Subsequent to the year end JCR-VIS has assigned a long term credit rating of AA+ [Double A plus] and a short term
credit rating of A1+ [A one plus] with a stable outlook to the Bank.
2016 2015
34 STAFF STRENGTH (Number of employees)
Permanent 7,615 7,565
Temporary / on contractual basis 193 233
Total staff strength 7,808 7,798

35 EMPLOYEE BENEFITS
35.1 DEFINED BENEFIT PLAN
35.1.1 Principal actuarial assumptions
The projected unit credit method, as required by the International Accounting Standard 19 - ‘Employee Benefits’,
was used for actuarial valuation based on the following significant assumptions:
2016 2015
Valuation discount rate (p.a) 9.50% 10.00%
Salary increase rate (p.a) - Short term (3 years) 7.50% 10.00%
Salary increase rate (p.a) - Long term 9.50% 10.00%
Expected rate of return on plan assets 9.50% 10.00%
Normal retirement age 60 Years 60 Years
Duration 10.46 Years 13.63 Years
The disclosures made in notes 35.1 to 35.1.13 are based on the information included in the actuarial valuation
report of the Bank as of December 31, 2016.
Note 2016 2015
35.1.2 Reconciliation of receivable from defined benefit plan (Rupees in ‘000)
Present value of defined benefit obligation 35.1.6 1,920,065 1,743,133
Fair value of plan assets 35.1.7 (2,269,382) (1,783,136)
(349,317) (40,003)
35.1.3 Movement in (receivable) / payable from defined benefit plan
Opening balance (40,003) (238,523)
Charge for the year - in profit and loss account 35.1.4 260,795 290,111
Other comprehensive Income 35.1.4 (309,314) 198,962
Adjustments - (442)
Bank’s contribution to fund made during the year (260,795) (290,111)
Closing balance (349,317) (40,003)

139
35.1.4 Charge for defined benefit plan
2016 2015
(Rupees in ‘000)
Recognised in profit and loss account
Current service cost 277,835 332,822
Net interest (17,040) (42,711)
260,795 290,111
Recognised in other comprehensive income
Actuarial gain on obligations 55,216 252,372
Actuarial (loss) / gain on Assets 254,098 (451,334)
309,314 (198,962)
Total (48,519) 489,073

35.1.5 Actual return on plan assets 434,975 225,357

35.1.6 Reconciliation of present value of obligation

Present value of obligation as at January 1 1,743,133 1,770,352
Current service cost 277,835 332,822
Interest cost 163,837 182,824
Benefits paid (209,524) (290,493)
Remeasurement gain on obligation (55,216) (252,372)
Present value of obligation as at December 31 1,920,065 1,743,133

Note 2016 2015

35.1.7 Changes in the fair value of plan assets are as follows: (Rupees in ‘000)

Opening fair value of plan assets 1,783,136 2,008,875

Expected return 180,877 225,977
Contributions by the Bank 260,795 290,111
Benefits paid (209,524) (290,493)
Remeasurement (loss) / gain 254,098 (451,334)
Fair value at end of the year 35.1.8 2,269,382 1,783,136

35.1.8 Plan assets consist of the following:

2016 2015
(Rupees in ‘000) % (Rupees in ‘000) %

Ordinary shares 1,047,132 46% 366,896 21%

Term Finance Certificates - 0% 27,572 1%
Pakistan Investment Bonds 536,864 24% 562,446 32%
Units of mutual funds 283,810 12% 301,916 17%
Cash and bank balances 401,576 18% 524,306 29%
2,269,382 100% 1,783,136 100%

140
35.1.9 Amount for the current year and the previous four years of the present value of the defined benefit obligation,
the fair value of plan assets, surplus / deficit and experience adjustments arising thereon are as follows:

2016 2015 2014 2013 2012

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

Defined benefit obligation 1,920,065 1,743,133 1,770,352 1,547,856 1,372,290

Fair value of plan assets 2,269,382 1,783,136 2,008,875 1,429,334 1,182,931
Surplus / (deficit) 349,317 40,003 238,523 (118,522) (189,359)

Experience adjustments on
plan liabilities 55,216 252,372 267 (56,337) 56,038

Experience adjustments on plan assets 254,098 (451,334) 356,778 127,174 (16,931)

35.1.10 Expected gratuity expense for the next year

Expected gratuity expense for the year ending December 31, 2017, works out to Rs. 250.153 million.

35.1.11 Sensitivity Analysis

Present Value of Defined

Particulars Benefit Obligation Percentage Change
(Rupees in ‘000)
Current Liability 1,864,585
+1% Discount Rate 1,683,534 -9.71%
-1% Discount Rate 2,077,893 11.44%
+1% Salary Increase Rate 2,086,284 11.89%
-1% Salary Increase Rate 1,673,465 -10.25%
+10% Withdrawal Rates 1,864,585 0.00%
-10% Withdrawal Rates 1,864,585 0.00%
1 Year Mortality age set back 1,864,585 0.00%
1 Year Mortality age set forward 1,864,585 0.00%

35.1.12 Maturity Profile

Undiscounted Payments
Particulars
(Rupees in ‘000)
Year 1 137,138
Year 2 156,103
Year 3 119,610
Year 4 132,377
Year 5 124,023
Year 6 to Year 10 687,012
Year 11 and above 5,484,788

35.1.13 Risks Associated with Defined Benefit Plans

(a) Investment Risks:

The risk arises when the actual performance of the investments is lower than expectation and thus creating a
shortfall in the funding objectives.

141
(b) Longevity Risks:

The risk arises when the actual lifetime of retirees is longer than expectation. This risk is measured at the plan
level over the entire retiree population.

(c) Salary Increase Risk:

The most common type of retirement benefit is one where the benefit is linked with final salary. The risk arises
when the actual increases are higher than expectation and impacts the liability accordingly.

(d) Withdrawal Risk:

The risk of actual withdrawals varying with the actuarial assumptions can impose a risk to the benefit obligation.
The movement of the liability can go either way.

35.2 EMPLOYEES STOCK OPTION SCHEME

The Bank grants share options to its employees under the Bank’s Employee Stock Options Scheme (ESOS), as
approved by the shareholders and SECP vide its letter No. SMD/CIW/ESOS/02/2013 dated 27 December 2013.

Under the Scheme, the Bank has granted options to certain critical employees selected by the Board Compensation
Committee to subscribe to new ordinary shares over a period from 2014 to 2016 as detailed below. As per the
Scheme, the entitlement and exercise price are subject to adjustments because of issue of right shares and bonus
shares. The options carry neither right to dividends nor voting rights till shares are issued to employees on
exercise of options.

The grant dates and the vesting period for the options are laid down under the scheme. The options vest over a
three year period with one third of the options vesting on completion of each year of service from the date of
grant. The options not exercised on completion of first and second year of vesting may be carried forward to be
exercised on completion of three year period. After the expiry of the third exercise period, the option holder will
lose all the rights of exercise for any remaining options not exercised.
The details of the options under the scheme as at December 31, 2016 were as follows:
Granted in the Granted in the Granted in the
year 2016 year 2015 year 2014
(Rupees in ‘000)
Options issued 13,737 12,614 11,331
Options no longer in issue 492 1,010 1,594
Options vested N/A 4,063 6,837
Options exercised N/A 2,782 5,183
Vested Options cumulatively carried forward N/A 1,191 1,470
Shares issued under ESOS grants N/A 2,782 5,183
Exercise price per share Rs. 14.95 Rs. 15.15 Rs. 16.32
Option discount per share Rs. 9.96 Rs. 10.10 Rs. 10.88

36 DEFINED CONTRIBUTION PLAN

The Bank operates an approved provident fund scheme for all its permanent employees to which both the Bank
and employees contribute @ 8.33% of basic salary in equal monthly contributions.

During the year, the Bank contributed Rs. 326.341 million (2015: Rs. 295.929 million) in respect of this fund.

142
 37 COMPENSATION OF DIRECTORS AND EXECUTIVES

Chief Executive Directors Executives

2016 2015 2016 2015 2016 2015
------------------------------- (Rupees in ‘000) -------------------------------

Fee - - 110,609 91,967 - -

Managerial remuneration - note 37.2 82,669 77,707 - - 3,293,386 2,894,032
Post employment benefits 9,481 8,989 - - 384,712 326,605
Rent and house maintenance 3,840 5,024 - - 974,851 838,145
Utilities 5,691 5,394 - - 244,947 214,084
101,681 97,114 110,609 91,967 4,897,896 4,272,866

Number of persons* 1 1 6 8 2,128 1,836

*As a result of Election of Directors held during the year 2015, three new non-executive directors were appointed
on the Board who replaced two of the outgoing non-executive directors.

37.1 The Chief Executive and certain Executives have been provided with the free use of cars and household equipment
as per Bank’s policy.

37.2 All executives, including the CEO are entitled to certain short term employee benefits which are disclosed in note
28.1 to these financial statements. In addition, the Bank has also granted share options to certain key employees
- refer note 35.2.

38 FAIR VALUE OF FINANCIAL INSTRUMENTS

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 and subsidiaries, 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.

38.1 The Bank measures fair values using the following fair value hierarchy that reflects the significance of the inputs
used in making the measurements:

Level 1: Fair value measurements using quoted prices (unadjusted) in active markets for identical assets or liabilities.

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).

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:

143
 2016
Carrying Amount Fair value
Derivative
Loans and Subsidiaries & Instrument Other financial
HFT AFS HTM Total Level 1 Level 2 Level 3 Total
Receivables Associates Held for Risk liabilities
Management
----------------------------------------------------------(Rupees in ‘000)------------------------------------------------------------------------
On balance sheet financial instruments
Financial assets measured at fair value
- Other assets 320,749 - - - - - - 320,749 320,749 320,749
Forward foreign exchange contracts 55,336 - - - - - - 55,336 55,336 55,336
Interest rate swaps
- Investments
Government Securities (Tbills, PIBs, GoP Sukuks,
Overseas Govt. Sukkuk, Overseas and Euro bonds) 14,371,242 304,976,096 - - - - - 319,347,338 319,347,338 319,347,338
Overseas Bonds - others 298,341 5,061,134 - - - - - 5,359,475 5,359,475 5,359,475
Ordinary shares of listed companies 761,255 8,292,796 - - - - - 9,054,051 9,054,051 9,054,051
Debt securities (TFCs) - 278,260 - - - - - 278,260 278,260 278,260
Sukuk-Other than Govt - 2,195,167 - - - - - 2,195,167 2,195,167 2,195,167

Financial assets not measured at fair value

- Cash and bank balances with treasury banks - - - 74,071,384 - - - 74,071,384
- Balances with other banks - - - 9,373,123 - - - 9,373,123
- Lending to financial institutions - - - 30,149,029 - - - 30,149,029
- Advances - - - 378,720,349 - - - 378,720,349
- Other assets - - - 16,974,249 - - - 16,974,249
- Investments
Government Securities (PIBs, WAPDA Sukuks,
Overseas, Euro bonds and Commercial Paper) - - 45,026,708 - - - - 45,026,708 45,937,908 45,937,908
Overseas Bonds - Others - - 518,251 - - - - 518,251
Unlisted shares (Ordinary & Preference) - 22,395 - - - - - 22,395
Redeemable Participating Certificate - 501,938 - - - - - 501,938
Commercial Paper - - 529,280 - - - - 529,280
Sukuk-Other than Govt - - 3,501,541 - - - - 3,501,541
Associates
- Mutual Funds - - - - 755,153 - - 755,153 1,009,483 1,009,483
- Ordinary shares of unlisted companies - - - - 1,047,113 - - 1,047,113
Subsidiaries
- Mutual Funds - - - - 525,474 - - 525,474 534,264 534,264
- Ordinary shares of unlisted companies - - - - 430,493 - - 430,493
15,806,923 321,327,786 49,575,780 509,288,134 2,758,233 - - 898,756,856

Financial liabilities measured at fair value

- Other liabilities
Forward foreign exchange contracts 555,131 - - - - - - 555,131 555,131 555,131
Interest rate swaps 37,078 - - - - - - 37,078 37,078 37,078

Financial liabilities not measured at fair value

- Bills Payable - - - - - - 12,886,990 12,886,990
- Borrowings - - - - - - 178,311,035 178,311,035
- Deposits and other accounts - - - - - - 640,944,254 640,944,254
- Subordinated loans - - - - - - 8,317,670 8,317,670
- Other liabilities - - - - - - 12,475,968 12,475,968

592,209 - - - - - 852,935,917 853,528,126

Off balance sheet financial instruments

- Forward Exchange Contracts Purchase - - - - - 53,992,848 - 53,992,848 53,479,523 53,479,523
- Forward Exchange Contracts Sale - - - - - 41,084,440 - 41,084,440 40,805,498 40,805,498
- Interest Rate Swaps - - - - - 7,622,307 - 7,622,307 7,640,565 7,640,565

144
 2015
Carrying Amount Fair value
Derivative
Other
Loans and Subsidiaries & Instrument
HFT AFS HTM financial Total Level 1 Level 2 Level 3 Total
Receivables Associates Held for Risk
liabilities
Management
----------------------------------------------------------(Rupees in ‘000)------------------------------------------------------------------------
On balance sheet financial instruments
Financial assets measured at fair value
- Other assets
Forward foreign exchange contracts 739,757 - - - - - - 739,757 739,757 739,757
Interest rate swaps 1,888 - - - - - - 1,888 1,888 1,888
- Investments
Government Securities (Tbills, PIBs, GoP Sukuks,
Overseas Govt. Sukkuk, Overseas and Euro bonds) 19,122,097 279,962,706 - - - - - 299,084,803 299,084,803 299,084,803
Overseas Bonds - others - 3,638,213 - - - - - 3,638,213 3,638,213 3,638,213
Ordinary shares of listed companies 199,954 5,582,663 - - - - - 5,782,617 5,782,617 5,782,617
Debt securities (TFCs) - 682,680 - - - - - 682,680 682,680 682,680
Sukuk-Other than Govt - 2,424,212 - - - - - 2,424,212 2,424,212 2,424,212

Financial assets not measured at fair value

- Cash and bank balances with treasury banks - - - 62,368,790 - - - 62,368,790
- Balances with other banks - - - 16,552,207 - - - 16,552,207
- Lending to financial institutions - - - 27,626,350 - - - 27,626,350
- Advances - - - 334,158,739 - - - 334,158,739
- Other assets - - - 20,059,942 - - - 20,059,942
- Investments
Government Securities (PIBs, WAPDA Sukuks,
Overseas and Euro bonds) - - 77,515,845 - - - - 77,515,845 80,144,714 80,144,714
Other Federal Government Securities - Bai Muajjal - - 26,002,520 - - - - 26,002,520 26,002,520 26,002,520
Overseas Bonds - others - - 266,822 - - - - 266,822
Unlisted shares (Ordinary & Preference) - 304,096 - - - - - 304,096
Sukuk-Other than Govt - 37,242 3,720,532 - - - - 3,757,774 3,720,532 3,720,532
Associates
- Mutual Funds - - - - 496,672 - 496,672 553,269 553,269
- Ordinary shares of unlisted companies - - - - 1,837,513 - 1,837,513
Subsidiaries
- Mutual Funds - - - - 875,474 - - 875,474 1,088,561 1,088,561
- Ordinary shares of unlisted companies - - - - 430,493 - - 430,493
20,063,696 292,631,812 107,505,719 460,766,028 3,640,152 - - 884,607,407

Financial liabilities measured at fair value

- Other liabilities
Forward foreign exchange contracts 729,875 - - - - - - 729,875 729,875 729,875
Interest rate swaps 88,804 - - - - - - 88,804 88,804 88,804

Financial liabilities not measured at fair value

- Bills Payable - - - - - - 9,733,929 9,733,929
- Borrowings - - - - - - 172,393,198 172,393,198
- Deposits and other accounts - - - - - - 640,188,735 640,188,735
- Subordinated loans - - - - - - 9,983,000 9,983,000
- Other liabilities - - - - - - 13,333,516 13,333,516

818,679 - - - - - 845,632,378 846,451,057

Off balance sheet financial instruments

- Forward Exchange Contracts Purchase
- Forward Exchange Contracts Sale - - - - - 98,261,212 - 98,261,212 97,746,522 97,746,522
- Interest Rate Swaps - - - - - 106,520,120 - 106,520,120 105,986,695 105,986,695
- - - - - 6,962,920 - 6,962,920 6,876,004 6,876,004

38.2 Fixed assets have been carried at revalued amounts determined by professional valuers (level 3 measurement)
based on their assessment of the market values as disclosed in note 11. The valuations are conducted by the
valuation experts appointed by the Bank which are also on the panel of State Bank of Pakistan. The valuation
experts used a market based approach to arrive at the fair value of the Bank’s properties. The market approach
used prices and other relevant information generated by market transactions involving identical or comparable
or similar properties. These values are adjusted to reflect the current condition of the properties. 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 financial statements.

145
39 SEGMENT DETAILS WITH RESPECT TO BUSINESS ACTIVITIES

The segment analysis with respect to business activity is as follows:

2016
Retail Corporate Consumer Islamic International
Treasury Others* Total
Banking Banking Banking Banking Operations
------------------------------------------------------------------- (Rupees in ‘000) ------------------------------------------------------------------

Segment income 7,298,058 13,531,759 28,638,451 4,112,573 8,341,049 3,574,977 615,836 66,112,703
Inter-segment income / (expense) 16,118,158 (5,651,265) (10,352,823) (953,836) - - 839,766 -
Segment expenses 19,221,682 6,209,065 8,041,695 1,847,509 6,682,172 1,919,015 9,168,406 53,089,544
Profit before tax 4,194,534 1,671,429 10,243,933 1,311,228 1,658,877 1,655,962 (7,712,804) 13,023,159
Segment assets 140,271,845 205,760,792 312,980,625 21,723,442 138,753,216 68,423,352 29,543,781 917,457,053
Segment non-performing loans 8,620,164 7,771,668 - 435,243 1,785,331 318,921 87,188 19,018,515
Segment provision required against
loans and advances 7,959,603 6,703,930 - 909,939 1,187,405 361,707 20,376 17,142,960
Segment liabilities 428,263,389 80,352,604 143,261,894 1,490,927 127,051,522 59,363,853 17,548,102 857,332,291
Segment return on assets (ROA) (%) 0.87% 0.60% 1.57% 6.17% 1.24% 2.78% -7.51% 1.49%
Segment cost of funds (%) 3.25% 5.07% 5.56% 5.46% 2.98% 2.10% 3.44% 3.63%

2015
Retail Corporate Consumer Islamic International
Treasury Others* Total
Banking Banking Banking Banking Operations
------------------------------------------------------------------- (Rupees in ‘000) ------------------------------------------------------------------

Segment income 7,280,467 15,435,240 30,913,732 3,806,283 8,447,458 4,031,911 384,336 70,299,427
Inter-segment income / (expense) 19,346,496 (6,412,101) (12,799,878) (998,213) - - 863,696 -
Segment expenses 22,719,223 6,760,000 8,079,909 1,829,767 6,632,459 2,396,077 9,277,922 57,695,357
Profit before tax 3,907,740 2,263,139 10,033,945 978,303 1,814,999 1,635,834 (8,029,890) 12,604,070
Segment assets - net 106,129,202 205,820,951 358,426,849 17,482,403 129,872,172 59,007,149 25,868,795 902,607,521
Segment non-performing loans 8,977,326 7,204,259 - 463,094 1,089,699 622,426 98,595 18,455,399
Segment provision required against
loans and advances 8,414,604 5,245,658 - 829,809 1,006,092 587,245 109,051 16,192,459
Segment liabilities 407,407,312 116,827,306 144,255,333 1,356,670 120,561,328 49,349,369 9,497,028 849,254,346
Segment return on assets (ROA) (%) 0.87% 0.82% 1.62% 5.30% 0.67% 3.26% -8.92% 1.60%
Segment cost of funds (%) 4.22% 6.49% 6.89% 6.62% 3.76% 2.60% 4.46% 4.63%

* Profit before tax of this segment includes head office related expenses

40 TRUST ACTIVITIES

The Bank is not engaged in any significant trust activities. However, it acts as security agent for various Term Finance
Certificates it arranges and distributes on behalf of its customers. In addition, the Bank is also holding investments of other
entities in its IPS account maintained with the State Bank of Pakistan.

41 RELATED PARTY TRANSACTIONS

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over
the other party in making financial or operational decisions and include major shareholders, subsidiary company, associated
companies with or without common directors, retirement benefit funds and directors and key management personnel and their
close family members.
Banking transactions with the related parties are executed substantially on the same terms, including mark-up rates and
collateral, as those prevailing at the time for comparable transactions with unrelated parties and do not involve more than a
normal risk.

Contributions to and accruals in respect of staff retirements and other benefit plans are made in accordance with the actuarial
valuations / terms of the contribution plan. Remuneration to executives is determined in accordance with the terms of their
appointment.

146
 Details of transactions with related parties and balances with them as at the year-end other than disclosed elsewhere are as follows:
2016
Group
Key
companies Subsidiaries /
Directors management Total
/ Others / Associates
personnel
Strategic
41.1 Deposits --------------------------------(Rupees in ‘000)-------------------------------
Balance at beginning of the year 14,825 120,281 6,095,049 402,093 6,632,248
Placements during the year 306,363 1,257,912 117,678,110 47,045,141 166,287,526
Withdrawals / adjustments* during the year (310,987) (1,213,687) (115,084,595) (46,325,345) (162,934,614)
Balance at end of the year 10,201 164,506 8,688,564 1,121,889 9,985,160

2015
Group
Key
companies Subsidiaries /
Directors management Total
/ Others / Associates
personnel
Strategic
--------------------------------(Rupees in ‘000)-------------------------------
Balance at beginning of the year 38,398 71,170 5,054,223 486,239 5,650,030
Placements during the year 168,409 1,271,256 81,788,021 31,744,672 114,972,358
Withdrawals / adjustments* during the year (191,982) (1,222,145) (80,747,195) (31,828,818) (113,990,140)
Balance at end of the year 14,825 120,281 6,095,049 402,093 6,632,248

2016
Group
Key
companies Subsidiaries /
Directors management Total
/ Others / Associates
personnel
Strategic
41.2 Advances --------------------------------(Rupees in ‘000)-------------------------------
Balance at beginning of the year 89,000 328,280 6,339,450 - 6,756,730
Disbursements during the year - 287,570 22,062,374 - 22,349,944
Repayments / adjustments* during the year (9,870) (264,515) (20,361,588) - (20,635,973)
Balance at end of the year 79,130 351,335 8,040,236 - 8,470,701

Provisions held against advances - - 1,543,054 - 1,543,054

2015 (Restated)
Group
Key
companies Subsidiaries /
Directors management Total
/ Others / Associates
personnel
Strategic
--------------------------------(Rupees in ‘000)-------------------------------
Balance at beginning of the year - 280,630 3,828,522 30,000 4,139,152
Disbursements during the year 90,000 324,922 22,147,792 22,000 22,584,714
Repayments / adjustments* during the year (1,000) (277,272) (19,636,864) (52,000) (19,967,136)
Balance at end of the year 89,000 328,280 6,339,450 - 6,756,730

Provisions held against advances - - 185,627 - 185,627

2016
Group
Key
companies Subsidiaries /
Directors management Total
/ Others / Associates
personnel
Strategic
41.3 Investments --------------------------------(Rupees in ‘000)-------------------------------
Balance at beginning of the year - - 4,716,796 4,466,152 9,182,948
Investments during the year - - 1,977,290 258,481 2,235,771
(Redemptions) / adjustments* during the year - - (4,666,796) (1,140,400) (5,807,196)
Balance at end of the year - - 2,027,290 3,584,233 5,611,523

Provisions held against investments - - 53,936 826,000 879,936

147
 2015
Group
Key
companies Subsidiaries /
Directors management Total
/ Others / Associates
personnel
Strategic
--------------------------------(Rupees in ‘000)-------------------------------
Balance at beginning of the year - - 4,416,796 3,670,925 8,087,721
Investments during the year - - - 1,723,471 1,723,471
(Redemptions) / adjustments* during the year - - 300,000 (928,244) (628,244)
Balance at end of the year - - 4,716,796 4,466,152 9,182,948

Provisions held against investments - - 4,416,796 826,000 5,242,796

* Adjustments include changes on account of retirement / appointment of Directors, changes in Key Management Personnel and Sponsor shareholders.
2016
Group
Key
companies Subsidiaries /
Directors management Total
/ Others / Associates
personnel
Strategic
41.4 Call borrowings / Repo --------------------------------(Rupees in ‘000)-------------------------------
Balance at beginning of the year - - - - -
Borrowings during the year - - 2,200,000 - 2,200,000
Repayments during the year - - (2,200,000) - (2,200,000)
Balance at end of the year - - - - -

2015
Group
Key
companies Subsidiaries /
Directors management Total
/ Others / Associates
personnel
Strategic
--------------------------------(Rupees in ‘000)-------------------------------
Balance at beginning of the year - - - - -
Borrowings during the year - - 1,300,000 - 1,300,000
Repayments during the year - - (1,300,000) - (1,300,000)
Balance at end of the year - - - - -

2016
Group
Key
companies Subsidiaries /
Directors management Total
/ Others / Associates
personnel
Strategic
41.5 Call lendings / Reverse Repo --------------------------------(Rupees in ‘000)-------------------------------
Balance at beginning of the year - - - - -
Placements during the year - - 17,250,000 - 17,250,000
Withdrawals during the year - - (17,250,000) - (17,250,000)
Balance at end of the year - - - - -

2015
Group
Key
companies Subsidiaries /
Directors management Total
/ Others / Associates
personnel
Strategic
--------------------------------(Rupees in ‘000)-------------------------------
Balance at beginning of the year - - - - -
Placements during the year - - 17,825,000 - 17,825,000
Withdrawals during the year - - (17,825,000) - (17,825,000)
Balance at end of the year - - - - -

148
 2016 2015
41.6 Advances (Rupees in ‘000)
Running finance 753,858 760,958
Long term loans 7,716,843 5,995,772

41.7 Contingencies and commitments

Letters of credit, acceptance & guarantees outstanding 1,724,344 3,134,931

41.8 Customer accounts

PLS accounts 5,957,992 3,304,579
Current accounts 1,212,614 1,059,518
Fixed deposit accounts 2,814,554 2,268,151

41.9 Transactions with Subsidiaries / Associates and Others

Subsidiaries / Associates
Mark-up expense on deposits 48,509 46,283
Mark-up income on advances - 36,254
Mark-up paid to Alfalah GHP Income Multiplier Fund on TFCs Issued 488 648
Mark-up paid to Alfalah GHP Income fund on TFCs issued 5,509 9,316
Brokerage Expense pertaining to Alfalah Securities (Private) Limited 943 680
Rent Income from Alfalah Insurance Limited 1,955 1,997
Rent Income from Alfalah Securities (Private) Limited 115 1,368
Insurance premium paid to Alfalah Insurance Company Limited 544,525 533,948
Insurance claims received from Alfalah insurance Company Limited against
operating fixed assets 1,137 2,614
Dividend paid to Alfalah Insurance Company Limited 500 1,000
Dividend income from Alfalah Insurance Company Limited - 5,311
Dividend income from Alfalah GHP Money Market Fund   8,481 -
Dividend income from Alfalah GHP Sovereign Fund 9,253 26,944
Dividend income from Alfalah GHP Islamic Stock Fund 45,320 40,867
Dividend income from Alfalah GHP Cash Fund 32,926 47,082
Dividend income from Alfalah GHP Income Multiplier Fund 10,270 23,284
Dividend income from Alfalah GHP Income Value Fund - 22,434
Revenue from Alfalah GHP Investment Management Limited against sale of units 111,090 68,739
Capital Gain on sale of units of Alfalah GHP Money Market Fund - 46,672
Capital Gain on sale of units of Alfalah GHP Value Fund 104,800 -
Capital Gain on sale of units of Alfalah GHP Cash Fund - 25,085
Capital Gain on sale of shares of Apollo Pharma Limited 57,486 -
Other Income from Sapphire Wind Power Company Limited 7,905 -
Reversal of provision against rent receivable from Alfalah Securities (Private) Limited - 9,147
Purchase of miscellaneous items from Alfalah GHP Investment Management Limited - 170
Others
Mark-up income 624,937 421,942
Mark-up expense on deposits 269,117 261,949
Dividend income from Pakistan Mobile Communication Limited 2,454 -
Rent income from Wateen Telecom Limited - 1,766
Rent income from Warid Telecom (Private) Limited / Pakistan Mobile
Communication Limited 17,096 16,937
Rent expense paid pertaining to Wateen Telecom Limited 3,304 11,200
Interest received on placements with Silk Bank 3,350 5,061
Mark-up paid to Taavun (Private) Limited on TFCs Issued 74,813 74,845
Mark-up paid to Key Management Personnel on TFCs Issued 29,407 26,108
Mark-up received on Sukuk from Pakistan Mobile Communication Limited 29,249 -

149
 2016 2015
(Rupees in ‘000)
Amount received on Redemtption of Silk Bank Preference Shares 439,200 -
Interest paid on Borrowings from Silk Bank 362 372
Payment to Institute of Bankers of Pakistan for calendars and diaries etc. 2,900 464
Payment to Wateen Telecom Limited and Wateen Solutions (Private) Limited for
purchase of equipment and maintenance charges 142,723 143,993
Provision against advances on Wateen Telecom (Private) Limited 1,357,594 -
Provision against advances on Wateen Wimax (Private) Limited 185,460 185,627
Provision against investment in Warid Telecom (Private) Limited - 4,366,796
Provision against investment in Pakistan Mobile Communication Limited 3,936 -
Gain on exchange of shares of Warid Telecom (Private) Limited 22,235 -
Commission received from Warid Telecom (Private) Limited 1,828 9,656
Payment to Monet (Private) Limited for Branchless banking services 166,452 197,588
Payment to Al-Qudees & Co 10,263 27,505
Payment to Intelligens Financials - 3,407
Payment to Locker Smiths (Private) Limited 10,675 -
Payment to Sundar Interiors & Architects 4,525 57,412
Payment to Timber Links 2,850 10,428
Payment to Expressive Safety & Security Solutions 10,201 7,540
Payment to Olive International (Private) Limited 1,652 6,590
Payment to Computer Marketing Co. (Private) Limited. 23,407 11,396
Payment to K-Tabs 16,112 19,345
Payment to MEC Engineer 10,885 2,894
Payment to Printeria - 40,321
Payment to Tahiri Printers 8,671 -
Payment to Bawany Traders 4,102 -
Payment to MEK Steel Furniture 100 -
Payment to S-TECH 4,215 -
Payment to The Pakistan Business Council 1,500 1,500
Charges for Security Services to Wackenhut Pakistan (Private) Limited - 136,393
Contribution to employees provident fund 326,341 295,929
Contribution to gratuity fund 260,795 290,111

41.10 Balances with Subsidiaries / Associates and Others

Subsidiaries / Associates
Advance against issuance of Shares - Sapphire Wind Power Company Limited 112,350 112,350
Advance Rent from Alfalah Insurance Company Limited - 1,955
Rent receivable from Alfalah Insurance Company Limited 416 -
Rent receivable from Alfalah Securities (Private) Limited - 577
Brokerage payable to Alfalah Securities (Private) Limited 296 46
TFCs held by Alfalah GHP Income Multiplier Fund 6,116 6,119
TFCs held by Alfalah GHP Income Fund 72,887 87,899
Others
Mark-up suspended on advances to Warid Telecom (Private) Limited 61,267 42,582
Mark-up suspended on advances to Wateen Telecom (Private) Limited 808,508 644,122
Mark-up suspended on advances to Wateen Wimax 16,808 5,587
Mark-up receivable on Sukuk from Pakistan Mobile Communication Limited 3,247 -
Advance Rent from Warid Telecom Limited 9,164 8,206
Rent payable to Wateen Telecom Limited - 750
TFCs held by Taavun (Private) Limited 332,467 498,800
TFCs held by Key Management Personnel 132,348 186,591

41.11 The key management personnel / directors compensation are as follows:

Salaries and allowances (also refer note 28.1) 1,263,958 1,152,532

Fair value charge against employee stock option scheme 109,615 94,830
In addition, the Chief Executive and certain Executives are provided with Bank maintained cars and other benefits.

150
 42 CAPITAL ASSESSMENT AND ADEQUACY

42.1 Scope of Applications

Amounts subject to Pre - Basel III treatment

The Basel-III Framework is applicable to the Bank both at the consolidated level (comprising of wholly/partially
owned subsidiaries and associates) and also on a stand alone basis. Subsidiaries are included while calculating
Consolidated Capital Adequacy for the Bank using full consolidation method whereas associates in which the Bank
has significant influence on equity method. Standardized Approach is used for calculating the Capital Adequacy
for Credit and Market risks, whereas, higher of Alternate Standardized Approach (ASA) or 70% of Basic Indicator
Approach (BIA) is used for Operational Risk Capital Adequacy purpose.

42.2 Capital Management

42.2.1 Objectives and goals of managing capital

The Bank manages its capital to attain following objectives and goals:

- an appropriately capitalized status, as defined by Banking regulations;

- acquire strong credit ratings that enable an optimized funding mix and liquidity sources at lesser costs;
- cover all risks underlying business activities; and
- retain flexibility to harness future investment opportunities, build and expand even in stressed times.

42.2.2 Statutory Minimum Capital Requirement and Capital Adequacy Ratio

The State Bank of Pakistan through its BSD Circular No.07 of 2009 dated April 15, 2009 requires the minimum paid
up capital (net of losses) for all locally incorporated Banks to be raised to Rs. 10 billion in a phased manner from
the financial year December 2013. The paid up capital of the Bank for the year ended December 31, 2016 stands at
Rs. 15.952 billion and is in compliance with the SBP requirement for the said year.

The capital adequacy ratio of the Bank is subject to the Basel III capital adequacy guidelines stipulated by the
State Bank of Pakistan through its BPRD Circular No. 06 of 2013 dated August 15, 2013. These instructions are
effective from December 31, 2013 in a phased manner with full implementation intended by December 31, 2019.
Under Basel III guidelines Banks are required to maintain the following ratios on an ongoing basis:

Phase-in arrangement and full implementation of the minimum capital requirements:

As of
Sr.
Ratio 2015 2016 2017 2018 December 31,
No
2019
1 CET 1 6.0% 6.0% 6.0% 6.0% 6.0%
2 ADT 1 1.5% 1.5% 1.5% 1.5% 1.5%
3 Tier 1 7.5% 7.5% 7.5% 7.5% 7.5%
4 Total Capital 10.0% 10.0% 10.0% 10.0% 10.0%
5 *CCB 0.25% 0.65% 1.28% 1.90% 2.50%
6 Total Capital Plus CCB 10.25% 10.65% 11.28% 11.90% 12.50%

* Capital conservation buffer

42.2.3 Bank’s regulatory capital is analysed into three tiers

Common Equity Tier 1 capital (CET1), which includes fully paid up capital (including the bonus shares), balance in
share premium account, general reserves, statutory reserves as per the financial statements and net unappropriated
profits after all regulatory adjustments applicable on CET1 (refer note 42.4).

151
 Additional Tier 1 Capital (AT1), which includes perpetual non-cumulative preference shares and share premium
resulting from the issuance of preference shares balance in share premium account after all regulatory adjustments
applicable on AT1 (refer to note 42.4).
Tier 2 capital, which includes Subordinated debt/ Instruments, share premium on issuance of Subordinated debt/
Instruments, general provisions for loan losses (up to a maximum of 1.25% of credit risk weighted assets), net
reserves on revaluation of fixed assets and equity investments up to a maximum of 45% of the balance, further
in the current year additional benefit of revaluation reserves (net of tax effect) is availed at the rate of 60% per
annum for the remaining portion of 55% of revaluation reserve and foreign exchange translation reserves after
all regulatory adjustments applicable on Tier-2 (refer to note 42.4).
The required capital adequacy ratio (10.65% of the risk-weighted assets) is achieved by the Bank through
improvement in the capital base, asset quality at the existing volume level, ensuring better recovery management
and composition of asset mix with low risk. Banking operations are categorized as either trading book or Banking
book and risk-weighted assets are determined according to specified requirements of the State Bank of Pakistan
that seek to reflect the varying levels of risk attached to assets and off-balance sheet exposures. The total risk-
weighted exposures comprise of the credit risk, market risk and operational risk.
Basel-III Framework enables a more risk-sensitive regulatory capital calculation to promote long term viability of
the Bank. As the Bank carry on the business on a wide area network basis, it is critical that it is able to continuously
monitor the exposure across entire organization and aggregate the risks so as to take an integrated approach/
view. Maximization of the return on risk-adjusted capital is the principal basis to be used in determining how
capital is allocated within the Bank to particular operations. The Bank remained compliant with all externally
imposed capital requirements through out the year. Further, there has been no material change in the Bank’s
management of capital during the year.

42.2.4 Leverage Ratio

The leverage ratio of the Bank as at December 31, 2016 is 3.45% (2015: 3.41%). The ratio has been computed as
prescribed by State Bank of Pakistan through Instructions for Basel-III Implementation in Pakistan.

As on December 31, 2016; Total Tier 1 capital of the Bank amounts to Rs. 42,549,933 thousand (2015: Rs. 36,850,340
thousand) whereas the total exposure measure amounts to Rs. 1,231,632,253 thousand (2015: Rs. 1,079,543,383
thousand).

Favourable shift in leverage ratio is mainly due to an increase in Bank’s Tier 1 capital and a decrease in unconditionally
cancellable commitment.

42.3 Capital Adequacy

Bank’s approach for assessing the adequacy of the capital to support current and future business operations
based on the following:

a. Capital Adequacy plays key consideration for not only arriving at the business projections / plans but is
religiously monitored while undertaking transactions.

b. Bank has demonstrated the capability to comfortably meet new and enhanced capital adequacy standards,
therefore it is now following controlled growth strategy. The TFC was issued to support the growth but
gradually the Bank is enriching the Tier 1 capital while ensuring regular dividend to share holders.

c. The capital base forms the very basic foundation of business plans. The capital base is sufficient to
support the envisaged business growth and this would be monitored regularly.

152
 d. Current and potential risk exposures across all the major risk types are:

Adequacy of controls
Materiality Level for
Risk Type (Adequate / Partially
Bank– High/Medium/Low
adequate/ Not adequate)
Credit High Adequate
Market High Adequate
Operational High Adequate
Model Low Adequate
Concentration Medium Adequate
Interest rate risk in Banking Book High Adequate
Liquidity High Adequate
Country Medium Adequate
Reputation Medium Adequate
Strategic / Business Medium Adequate
Legal Risk Medium Adequate

e. As per the ICAAP exercise Bank’s CAR, with all shocks incorporated stays around 12.40%. Despite of this
figure we feel that the outlook of the Bank is stable due to following mitigants:

i. The probability of all shocks materializing at the same time is remote given that fact that Banks’ risk
management is activities are more prudent.
ii. Increasing CASA deposits in line with branch network.
iii. Better recoveries of existing NPLs and more controlled lending.
iv. Increasing returns on advances.
v. With improvements in capital markets, Bank would always have the opportunity to tap fresh capital.

f. The Bank enjoys strong sponsor support from Abu Dhabi Group and IFC, leading to increased investor
confidence. Moreover, the Bank has been issuing TFCs successfully on a regular basis, demonstrating Bank’s
capacity to raise capital when required.

g. Bank follows Standardised Approach for Credit and Market Risk, and Alternative Standardized Approach for
Operational Risk. The assessment of capital adequacy is based on regulatory requirements.

42.3.1 Stress Testing

Stress testing and scenario analysis examines the sensitivity of Bank’s Capital for Regulatory capital as well as
Economic capital under a number of scenarios and ensures that emerging risks stemming into its portfolio are
appropriately accounted. The exercise is submitted to the regulator at regular intervals as per the requirements. The
scope of this exercise has been expanded to incorporate internally developed scenarios based on macroeconomic
situation and portfolio composition as well.

153
42.4 Capital Adequacy Ratio as at December 31, 2016
2016 2015
(Restated)
(Rupees in ‘000)
Common Equity Tier 1 capital (CET1): Instruments and reserves
1 Fully Paid-up Capital/ Capital deposited with SBP 15,952,076 15,898,062
2 Balance in Share Premium Account 4,417,126 4,329,648
3 Reserve for issue of Bonus Shares - -
4 Discount on Issue of shares - -
5 General/ Statutory Reserves 9,894,506 8,261,506
6 Gain/(Losses) on derivatives held as Cash Flow Hedge - -
7 Unappropriated/unremitted profits/ (losses) 17,337,458 12,362,596
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)
9 CET 1 before Regulatory Adjustments 47,601,166 40,851,812
10 Total regulatory adjustments applied to CET1 (Note 42.4.1) 5,051,233 4,001,472
11 Common Equity Tier 1 42,549,933 36,850,340

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)
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 42.4.2) 203,991 410,987
19 Additional Tier 1 capital after regulatory adjustments - -
20 Additional Tier 1 capital recognized for capital adequacy - -

21 Tier 1 Capital (CET1 + admissible AT1) (11+20) 42,549,933 36,850,340

Tier 2 Capital
22 Qualifying Tier 2 capital instruments under Basel III plus any related share premium 3,990,400 4,989,000
23 Tier 2 capital instruments subject to phaseout arrangement issued under pre-Basel III rules - 465,454
24 Tier 2 capital instruments issued to third parties by consolidated subsidiaries
- -
(amount allowed in group Tier 2)
25 of which: instruments issued by subsidiaries subject to phase out - -
26 General provisions or general reserves for loan losses-up to maximum of 1.25% of
820,775 780,744
Credit Risk Weighted Assets
27 Revaluation Reserves (net of taxes) c=a+b 8,504,055 7,322,026
28 of which: Revaluation reserves on fixed assets a 3,556,216 3,053,524
29 of which: Unrealized gains/losses on AFS b 4,947,839 4,268,502
30 Foreign Exchange Translation Reserves 1,584,020 1,572,966
31 Undisclosed/Other Reserves (if any) - -
32 T2 before regulatory adjustments 14,899,250 15,130,190
33 Total regulatory adjustment applied to T2 capital (Note 42.4.3) 546,938 1,023,572
34 Tier 2 capital (T2) after regulatory adjustments 14,352,312 14,106,618
35 Tier 2 capital recognized for capital adequacy 14,352,312 14,106,618
36 Portion of Additional Tier 1 capital recognized in Tier 2 capital - -
37 Total Tier 2 capital admissible for capital adequacy 14,352,312 14,106,618

38 TOTAL CAPITAL (T1 + admissible T2) (21+37) 56,902,245 50,956,958

39 Total Risk Weighted Assets (RWA) {for details refer Note 42.7 431,627,955 384,122,010

Capital Ratios and buffers (in percentage of risk weighted assets)

40 CET1 to total RWA 9.86% 9.59%
41 Tier 1 capital to total RWA 9.86% 9.59%
42 Total capital to total RWA 13.18% 13.27%
Bank specific buffer requirement (minimum CET1 requirement plus capital
43 6.65% 6.25%
conservation buffer plus any other buffer requirement)
44 of which: capital conservation buffer requirement 0.65% 0.25%
45 of which: countercyclical buffer requirement - -
46 of which: D-SIB or G-SIB buffer requirement - -
47 CET1 available to meet buffers (as a percentage of risk weighted assets) 3.86% 3.59%

National minimum capital requirements prescribed by SBP

48 CET1 minimum ratio 6.00% 6.00%
49 Tier 1 minimum ratio 7.50% 7.50%
50 Total capital minimum ratio (Inclusive of 0.65% CCB for 2016 (2015: 0.25%)) 10.65% 10.25%

154
 2016 2015
Amounts Amounts
subject to subject to
Regulatory Adjustments and Additional Information Amount Amount
Pre- Basel III Pre- Basel III
treatment* treatment*
(Rupees in ‘000)

42.4.1 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) 1,723,207 1,331,250
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) 1,787,215 1,191,477 1,612,800 2,419,201
5 Defined-benefit pension fund net assets 209,590 16,001
6 Reciprocal cross holdings in CET1 capital instruments of banking, financial and insurance entities 1,026,250 630,434
7 Cash flow hedge reserve - -
8 Investment in own shares/ CET1 instruments 100,980 -
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 203,991 410,987
22 Total regulatory adjustments applied to CET1 (sum of 1 to 21) 5,051,233 4,001,472

42.4.2 Additional Tier 1 & Tier 1 Capital: regulatory adjustments

23 Investment in mutual funds exceeding the prescribed limit [SBP specific adjustment] - -
24 Investment in own AT1 capital instruments - -
25 Reciprocal cross holdings in Additional Tier 1 capital instruments of banking, financial
and insurance entities - -
26 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) - -
27 Significant investments in the capital instruments of banking, financial and insurance entities
that are outside the scope of regulatory consolidation - -
28 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 capital 203,991 (203,991) 410,987 (410,987)
29 Adjustments to Additional Tier 1 due to insufficient Tier 2 to cover deductions - -
30 Total regulatory adjustment applied to AT1 capital (sum of 23 to 29) 203,991 410,987

42.4.3 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 capital 203,991 (203,991) 410,987 (410,987)
32 Reciprocal cross holdings in Tier 2 instruments of banking, financial and insurance entities 342,120 611,920
33 Investment in own Tier 2 capital instrument 827 665
34 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) - -
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) 546,938 1,023,572

*The amount represents regulatory deductions that are still subject to pre-Basel-III treatment during the transitional period.

155
 2016 2015
42.4.4 Additional Information (Restated)
(Rupees in ‘000)
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) 368,934,296 316,946,373
(i) of which: deferred tax assets 1,191,477 2,419,201
(ii) of which: Defined-benefit pension fund net assets 139,727 24,002
(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 171,571 222,688
(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 407,983 821,974

Amounts below the thresholds for deduction (before risk weighting)

38 Non-significant investments in the capital of other financial entities 171,571 222,688

39 Significant investments in the common stock of financial entities 611,974 547,983
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) 820,775 780,744
42 Cap on inclusion of provisions in Tier 2 under standardized approach 4,635,563 4,005,128
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 - -

42.5 Capital Structure Reconciliation

Balance sheet
Under regulatory
as in published
Table: 42.5.1 scope of
financial
consolidation
statements
2016
(Rupees in ‘000)
Assets
Cash and balances with treasury banks 74,071,384 74,071,384
Balances with other banks 9,373,123 9,373,123
Lending to financial institutions 30,149,029 30,149,029
Investments 389,092,637 389,092,637
Advances 378,720,349 378,720,349
Operating fixed assets 18,133,267 18,133,267
Deferred tax assets - -
Other assets 17,917,264 17,917,264
Total assets 917,457,053 917,457,053

Liabilities & Equity

Bills payable 12,886,990 12,886,990
Borrowings 178,311,035 178,311,035
Deposits and other accounts 640,944,254 640,944,254
Sub-ordinated loans 8,317,670 8,317,670
Liabilities against assets subject to finance lease - -
Deferred tax liabilities 2,650,428 2,650,428
Other liabilities 14,221,914 14,221,914
Total liabilities 857,332,291 857,332,291

Share capital/ Head office capital account 15,952,076 15,952,076

Reserves 15,895,652 15,895,652
Unappropriated/ Unremitted profit/ (losses) 17,337,458 17,337,458
Minority Interest - -
Surplus on revaluation of assets 10,939,576 10,939,576
Total equity 60,124,762 60,124,762

Total liabilities & equity 917,457,053 917,457,053

156
 Balance sheet as in Under regulatory
Table: 42.5.2 published financial scope of
statements consolidation
2016 Reference
(Rupees in ‘000)
Assets
Cash and balances with treasury banks 74,071,384 74,071,384
Balances with other banks 9,373,123 9,373,123
Lending to financial institutions 30,149,029 30,149,029
Investments 389,092,637 389,092,637
- of which: Non-significant investments in the capital instruments of banking,
- - a
financial and insurance entities exceeding 10% threshold
- of which: significant investments in the capital instruments issued by banking,
- - b
financial and insurance entities exceeding regulatory threshold
- of which: Mutual Funds exceeding regulatory threshold - - c
- of which: reciprocal crossholding of capital instrument
CET1 1,026,250 1,026,250
d
AT1 - -
T2 276,726 276,726
- of which: others (mention details) - - e
Advances 378,720,349 378,720,349
- shortfall in provisions/ excess of total EL amount over eligible provisions under IRB - - f
- general provisions reflected in Tier 2 capital 775,967 775,967 g
Fixed Assets 18,133,267 18,133,267
of which: Intangibles 1,723,207 1,723,207 h
Deferred Tax Assets - -
- of which: DTAs that rely on future profitability excluding those arising from
temporary differences 2,978,692 2,978,692 i
- of which: DTAs arising from temporary differences exceeding regulatory threshold - - j
Other assets 17,917,264 17,917,264
- of which: Goodwill - - k
- of which: Defined-benefit pension fund net assets 349,317 349,317 l
Total assets 917,457,053 917,457,053

Liabilities & Equity

Bills payable 12,886,990 12,886,990
Borrowings 178,311,035 178,311,035
Deposits and other accounts 640,944,254 640,944,254
Sub-ordinated loans 8,317,670 8,317,670
- of which: eligible for inclusion in AT1 - - m
- of which: eligible for inclusion in Tier 2 3,990,400 3,990,400 n
Liabilities against assets subject to finance lease - -
Deferred tax liabilities 2,650,428 2,650,428
- 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 - - r
Other liabilities 14,221,914 14,221,914
Total liabilities 857,332,291 857,332,291

Share capital 15,952,076 15,952,076

- of which: amount eligible for CET1 15,952,076 15,952,076 s
- of which: amount eligible for AT1 - - t
Reserves 15,895,652 15,895,652
- of which: portion eligible for inclusion in CET1 14,311,632 14,311,632
General Reserve 9,894,506 9,894,506 u
Share Premium 4,417,126 4,417,126
- of which: portion eligible for inclusion in Tier 2 1,584,020 1,584,020 v
Unappropriated profit/ (losses) 17,337,458 17,337,458 w
Minority Interest - -
- of which: portion eligible for inclusion in CET1 - - x
- of which: portion eligible for inclusion in AT1 - - y
- of which: portion eligible for inclusion in Tier 2 - - z
Surplus on revaluation of assets 10,939,576 10,939,576
- of which: Revaluation reserves on Fixed Assets 4,559,251 4,559,251
- of which: Non-banking assets acquired in satisfaction of claims 36,942 36,942 aa
- of which: Unrealized Gains/Losses on AFS 6,343,383 6,343,383
- In case of Deficit on revaluation (deduction from CET1) - - ab
Total equity 60,124,762 60,124,762

Total liabilities & equity 917,457,053 917,457,053

157
 Component of
Table: 42.5.3 regulatory capital Reference
reported by bank
2016
(Rupees in ‘000)

Common Equity Tier 1 capital (CET1): Instruments and reserves

1 Fully Paid-up Capital/ Capital deposited with SBP 15,952,076
2 Balance in Share Premium Account 4,417,126 (s)
3 Reserve for issue of Bonus Shares -
4 General/ Statutory Reserves 9,894,506
(u)
5 Gain/(Losses) on derivatives held as Cash Flow Hedge -
6 Unappropriated/unremitted profits/ (losses) 17,337,458 (w)
7 Minority Interests arising from CET1 capital instruments issued to third party by consolidated
- (x)
bank subsidiaries (amount allowed in CET1 capital of the consolidation group)
8 CET 1 before Regulatory Adjustments 47,601,166

Common Equity Tier 1 capital: Regulatory adjustments

9 Goodwill (net of related deferred tax liability) - (k) - (o)
10 All other intangibles (net of any associated deferred tax liability) 1,723,207 (h) - (p)
11 Shortfall of provisions against classified assets - (f)
12 Deferred tax assets that rely on future profitability excluding those arising from temporary
1,787,215 {(i) - (r} * 60%
differences (net of related tax liability)
13 Defined-benefit pension fund net assets 209,590 {(l) - (q)} * 60%
14 Reciprocal cross holdings in CET1 capital instruments 1,026,250 (d)
15 Cash flow hedge reserve -
16 Investment in own shares/ CET1 instruments 100,980
17 Securitization gain on sale -
18 Capital shortfall of regulated subsidiaries -
19 Deficit on account of revaluation from bank’s holdings of fixed assets/ 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% - (a) - (ac) - (ae)
of the issued share capital (amount above 10% threshold)
21 Significant investments in the capital instruments issued by banking, financial and insurance
- (b) - (ad) - (af)
entities that are outside the scope of regulatory consolidation (amount above 10% threshold)
22 Deferred Tax Assets arising from temporary differences (amount above 10% threshold,
- ( j)
net of related tax liability)
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 of which: Investment in TFCs of other banks exceeding the prescribed limit -
28 of which: Any other deduction specified by SBP (mention details) -
29 Regulatory adjustment applied to CET1 due to insufficient AT1 and Tier 2 to cover deductions 203,991
30 Total regulatory adjustments applied to CET1 (sum of 9 to 29) 5,051,233
31 Common Equity Tier 1 42,549,933

Additional Tier 1 (AT 1) Capital

32 Qualifying Additional Tier 1 instruments plus any related share premium -
33 of which: Classified as equity - (t)
34 of which: Classified as liabilities - (m)
Additional Tier 1 capital instruments issued by consolidated subsidiaries and held by third
35 - (y)
parties (amount allowed in group AT 1)
36 of which: instrument issued by subsidiaries subject to phase out -
37 AT1 before regulatory adjustments -

Additional Tier 1 Capital: regulatory adjustments

38 Investment in mutual funds exceeding the prescribed limit (SBP specific adjustment) -
39 Investment in own AT1 capital instruments -
40 Reciprocal cross holdings in Additional Tier 1 capital instruments -
41 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 - (ac)
the issued share capital (amount above 10% threshold)
42 Significant investments in the capital instruments issued by banking, financial and insurance
- (ad)
entities that are outside the scope of regulatory consolidation
43 Portion of deduction applied 50:50 to core capital and supplementary capital based onpre-Basel
203,991
III treatment which, during transitional period, remain subject to deduction from Tier 1 capital
44 Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover deductions -
45 Total of Regulatory Adjustment applied to AT1 capital (sum of 38 to 43) 203,991
46 Additional Tier 1 capital -
47 Additional Tier 1 capital recognized for capital adequacy -
48 Tier 1 Capital (CET1 + admissible AT1) (31+47) 42,549,933

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 Component of
Table: 42.5.3 regulatory capital Reference
reported by bank
2016
(Rupees in ‘000)
Tier 2 Capital
49 Qualifying Tier 2 capital instruments under Basel III plus any related share premium 3,990,400
(n)
50 Capital instruments subject to phase out arrangement from tier 2 (Pre-Basel III instruments)
51 Tier 2 capital instruments issued to third party by consolidated subsidiaries
(amount allowed in group tier 2) - (z)
52 of which: instruments issued by subsidiaries subject to phase out -
53 General Provisions or general reserves for loan losses-up to maximum of 1.25% of
Credit Risk Weighted Assets 820,775 (g)
54 Revaluation Reserves 8,504,055
55 of which: Revaluation reserves on fixed assets 3,556,216
portion of (aa)
56 of which: Unrealized Gains/Losses on AFS 4,947,839
57 Foreign Exchange Translation Reserves 1,584,020 (v)
58 Undisclosed/Other Reserves (if any) -
59 T2 before regulatory adjustments 14,899,250

Tier 2 Capital: regulatory adjustments

60 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 203,991
61 Reciprocal cross holdings in Tier 2 instruments 342,120
62 Investment in own Tier 2 capital instrument 827
63 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 - (ae)
the issued share capital (amount above 10% threshold)
64 Significant investments in the capital instruments issued by banking, financial and insurance
- (af)
entities that are outside the scope of regulatory consolidation
65 Amount of Regulatory Adjustment applied to T2 capital (sum of 60 to 64) 546,938
66 Tier 2 capital (T2) 14,352,312
67 Tier 2 capital recognized for capital adequacy 14,352,312
68 Excess Additional Tier 1 capital recognized in Tier 2 capital -
69 Total Tier 2 capital admissible for capital adequacy 14,352,312

70 TOTAL CAPITAL (T1 + admissible T2) (48+69) 56,902,245

159
42.6 Main Features Template of Regulatory Capital Instruments

Disclosure template for main features of regulatory capital instruments

S. No. Main Features Common Shares Instrument - 2 Instrument - 3
1 Issuer Bank Alfalah Limited Bank Alfalah Limited Bank Alfalah Limited
2 Unique identifier (eg KSE Symbol or Bloomberg BAFL BAFL BAFL TFC 5
identifier etc.)
3 Governing law(s) of the instrument Laws of Islamic Laws of Islamic Laws of Islamic Republic of Pakistan
Republic of Pakistan Republic of Pakistan
Regulatory treatment
4 Transitional Basel III rules Common Equity Tier 1 Tier 2 Tier 2
5 Post-transitional Basel III rules Common Equity Tier 1 Ineligible Ineligible
6 Eligible at solo/ group/ group&solo Solo and Group Solo and Group Solo and Group
7 Instrument type Ordinary shares Subordinated debt Subordinated debt
8 Amount recognized in regulatory capital Rs. 15,952,076 Nil Rs. 3,990,400
(Currency in PKR thousands, as of reporting date)
9 Par value of instrument Rs. 10 Rs. 5,000 Rs. 5,000
10 Accounting classification Share holders’ equity Liability Liability
11 Original date of issuance 21-Jun-92 Dec 2009 Feb 19 & 20, 2013
12 Perpetual or dated NA Dated Dated
13 Original maturity date NA Dec 2017 Feb 2021
14 Issuer call subject to prior supervisory approval NA NA No
15 Optional call date, contingent call dates and NA NA NA
redemption amount
16 Subsequent call dates, if applicable NA NA NA
Coupons / dividends
17 Fixed or floating dividend/ coupon NA Fixed to floating Floating
18 Coupon rate and any related index/ benchmark NA Option 1: Fixed at Floating at 6 Months KIBOR*(Base Rate) plus 125 basis points per annum without any
15.50% per annum floor or CAP
Option 2: 6 Months
KIBOR plus 250 basis
points per annum
19 Existence of a dividend stopper No No No
20 Fully discretionary, partially discretionary or NA Fully discretionary Fully discretionary
mandatory
21 Existence of step up or other incentive to redeem NA No No
22 Noncumulative or cumulative NA Cumulative Cumulative
23 Convertible or non-convertible NA Non convertible Convertible
24 If convertible, conversion trigger (s) NA NA At the option of supervisor it can be converted into common equity upon occurrence
of certain trigger events , called point of non viability(PONV). The PONV is the earlier
of;
1. A decision made by SBP that a conversion or temporary/ permanent write off is
necessary without which the bank would become non viable.
2. the decision to make a public sector injection of capital, or equivalent support,
without which the bank would have become non viable, as determined by SBP.
25 If convertible, fully or partially NA NA May convert fully or partially
26 If convertible, conversion rate NA NA To be determined in the case of trigger event
27 If convertible, mandatory or optional conversion NA NA Optional
28 If convertible, specify instrument type convertible NA NA Common Equity Tier 1
into
29 If convertible, specify issuer of instrument it NA NA Bank Alfalah Limited
converts into
30 Write-down feature No NA Yes
31 If write-down, write-down trigger(s) NA NA At the option of supervisor it can be either written off upon occurrence of a certain
trigger event , called point of non viability(PONV). The PONV is the earlier of;
1. A decision made by SBP that a conversion or temporary/ permanent
write off is necessary without which the bank would become non viable.
2. the decision to make a public sector injection of capital, or equivalent support,
without which the bank would have become non viable, as determined by SBP.
32 If write-down, full or partial NA NA Either may be written-down fully or may be written down partially.
33 If write-down, permanent or temporary NA NA Temporary
34 If temporary write-down, description of write-up NA NA As may be determined by reversal of trigger event and subject to regulator’s approval
mechanism
35 Position in subordination hierarchy in liquidation NA Deposits Deposits
(specify instrument type immediately senior to
instrument
36 Non-compliant transitioned features NA NA No
37 If yes, specify non-compliant features NA NA N/A

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42.7 Risk Weighted Assets

The capital requirements for the banking group as per the major risk categories should be indicated in the manner given below:-

Capital Requirements Risk Weighted Assets

2015 2015
2016 2016
(Restated) (Restated)
(Rupees in ‘000)
Credit Risk
On-Balance sheet
Portfolios subject to standardized approach (Comprehensive)
Cash & cash equivalents - - - -
Sovereign 3,038,749 2,969,180 28,532,859 28,967,616
Public Sector entities 485,776 986,853 4,561,275 9,627,832
Banks 1,531,628 1,124,334 14,381,486 10,969,116
Corporate 20,516,468 15,706,091 192,642,891 153,230,159
Retail 4,049,701 3,220,789 38,025,363 31,422,330
Residential Mortgages 348,457 313,969 3,271,896 3,063,114
Past Due loans 271,911 266,037 2,553,152 2,595,479
Operating Fixed Assets 1,747,671 1,630,849 16,410,061 15,910,718
Other assets 601,669 1,427,685 5,649,474 13,928,637
32,592,030 27,645,787 306,028,457 269,715,001
Portfolios subject to Internal Rating Based (IRB) Approach
e.g. Corporate, Sovereign, Corporate, Retail, Securitization etc. - - - -

Off-Balance sheet
Non-market related
Financial guarantees 2,767,404 936,061 25,985,017 9,132,300
Acceptances 120,141 1,143,764 1,128,089 11,158,670
Performance Related Contingencies 1,235,126 825,039 11,597,424 8,049,163
Trade Related Contingencies 1,197,543 830,617 11,244,536 8,103,584
5,320,214 3,735,481 49,955,066 36,443,717
Market related
Foreign Exchange contracts 52,978 57,548 497,446 561,441
Derivatives 5,225 2,770 49,064 27,026
58,203 60,318 546,510 588,467
Equity Exposure Risk in the Banking Book
Under simple risk weight method
Listed Equity Investment 774,420 516,131 7,271,546 5,035,426
Unlisted Equity Investment 750,130 886,792 7,043,475 8,651,626
1,524,550 1,402,923 14,315,021 13,687,052
Under Internal models approach - - - -
39,494,997 32,844,509 370,845,054 320,434,237

Market Risk
Capital Requirement for portfolios subject to Standardized Approach
Interest rate risk 181,139 297,976 2,264,238 3,724,700
Equity position risk 156,890 31,993 1,961,125 399,913
Foreign Exchange risk 10,455 886,466 130,688 11,080,825
348,484 1,216,435 4,356,051 15,205,438
Capital Requirement for portfolios subject to Internal Models Approach

Operational Risk [70% of BIA or ASA whichever is higher

is taken as capital charge (2015: 80%)]*

Capital Requirement for operational risks 4,514,148 3,878,587 56,426,850 48,482,335

Total Risk Weighted Exposures 44,357,629 37,939,531 431,627,955 384,122,010

* SBP has accorded approval to the bank vide SBP letter No. BPRD/ BA&CP/ 614/ 17838/2013 dated December 03, 2013 for adoption of ASA
based on the following capital floor i.e, operational risk charge under ASA should not fall below a certain percentage of operational risk capital
charge calculated under Basic Indicator Approach (BIA)

Capital Floor (for operational risk capital charge only)

December 2013 - December 2014 Year 2015 Year 2016
90% 80% 70%

2016 2015
Capital Adequacy Ratios
Required Actual Required Actual

CET1 to total RWA 6.00% 9.86% 6.00% 9.59%

Tier-1 capital to total RWA 7.50% 9.86% 7.50% 9.59%
Total capital to total RWA 10.65% 13.18% 10.25% 13.27%

161
43 RISK MANAGEMENT

The variety of business activities undertaken by the Bank requires effective identification, measurement,
monitoring, integration and management of different financial and non-financial risks that are constantly
evolving as business activities change in response to concurrent internal and external developments. The Board
Risk Management Committee (BRMC) is appointed and authorized by the Board of Directors (BOD) to assist
in design, regular evaluation and timely updating of the risk management framework of the Bank. The Board
has further authorized management committees i.e. Central Management Committee (CMC) and Central Credit
Committee (CCC). To complement CMC and to supervise risk management activities within their respective
scopes, CMC has further established sub-committees such as Assets & Liabilities Committee (ALCO), Investment
Committee, Principal Investment Committee, Information Technology Steering Committee (ITSC), Internal Control
& Compliance Committee (ICCC) and Process Improvement Committee.

The risk management framework endeavours to be a comprehensive and evolving guideline to cater to changing
business dynamics. The framework includes:

- Clearly defined risk management policies and procedures.

- Well constituted organizational structure, in the form of a separate risk management department, which
ensures that individuals responsible for risk approval are independent from risk taking units i.e. Business
Units.

- Mechanism for ongoing review of policies and procedures and risk exposures.

The primary objective of this architecture is to inculcate risk management into the organization flows to ensure
that risks are accurately identified & assessed, properly documented, approved, and adequately monitored &
managed in order to enhance long term earnings and to protect the interests of the Bank’s depositors and
shareholders.

The Bank’s risk management framework has a well-defined organizational structure for effective management of
credit risk, market risk, liquidity risk, operational risk, IT security risk and environment and social risk.

43.1 Credit risk

Credit risk is the identification of probability that counterparty will cause a financial loss to the Bank due to
its inability or unwillingness to meet its contractual obligation. This credit risk arises mainly from both direct
lending activities as well as contingent liabilities. Credit risk management processes encompass identification,
assessment, measurement, monitoring and control of Bank’s exposure to credit risk. The Bank’s credit risk
management philosophy is based on Bank’s overall business strategy / direction as established by the Board.
The Bank is committed to the appropriate level of due diligence to ensure that credit risks have been properly
analysed, fully disclosed to the approving authorities and appropriately rated, also ensuring that the credit
commitment is appropriately structured, priced (in line with market practices) and documented.
The Bank has built and maintained a sound loan portfolio in terms of well-defined credit policy approved by
BOD. Its credit evaluation system comprises of well-designed credit appraisal, sanctioning and review procedures
for the purpose of emphasizing prudence in lending activities and ensuring the high quality of asset portfolio.
In order to have an effective and efficient risk assessment, and to closely align its functions with Business,
Credit Division has separate units for corporate banking, Islamic banking, commercial & SME banking, agricultural
financing, and overseas operations.
The Bank manages its portfolio of loan assets with a view to limit concentrations in terms of risk quality, industry,
maturity and large exposure. Internal rating based portfolio analysis is also conducted on regular basis. This
portfolio level oversight is maintained by Risk Management Division.

162
 A sophisticated internal credit rating system is in place, which is capable of quantifying counter-party &
transaction risk in accordance with the best practices. The risk rating system takes into consideration qualitative
and quantitative factors of the counter-party, transaction structure & security and generates internal ratings
at Obligor and Facility levels. The facility rating system, developed in line with SBP’s guidelines, also provides
estimated LGD (Loss Given Default). This has been implemented in Corporate Banking and Retail & Middle Market
segments with other business units to follow. Furthermore, this system has an integrated loan origination module,
which is currently being used in Corporate Banking, Islamic Banking and Retail & Middle Market segments.
The system is regularly reviewed for improvements as per SBP’s guidelines for Internal Credit Rating and Risk
Management. Furthermore, Bank has also automated Internal Rating validation process based on statistical tests
for Corporate, Commercial, ME, SE & Agri rating models. It covers both discrimination & calibration statistical
tests as per best international practices. The system is backed by secured database with backup support and
is capable of generating MIS reports providing snapshot of the entire portfolio for strategizing and decision
making. The system has been enhanced to generate the risk weighted assets required for supporting the credit
facilities at the time of credit origination and computation of Risk Weighted Assets for the quarterly credit risk
related Basel submissions.
A centralized Credit Administration Division (CAD) under Operations Group is working towards ensuring that
terms of approval of credit sanctions and regulatory stipulations are complied, all documentation including
security documentation is regular & fully enforceable and all disbursements of approved facilities are made only
after necessary authorization by CAD. Credit Monitoring, under CAD, keeps a watch on the quality of the credit
portfolio in terms of borrowers’ behaviour, identifies weakening accounts relationships and reports it to the
appropriate authority with a view to arrest deterioration.
To handle the specialized requirements of managing delinquent and problem accounts, the Bank has a separate
client facing unit to negotiate repayment/ settlement of the Bank’s non-performing exposure and protect the
interests of the bank’s depositors and stakeholders. Unlike other banking groups, where the priority is the
maximization of Bank’s revenue, the priority of the Special Asset Management Group (SAMG) is recovery of funds
and/or to structure an arrangement (such as rescheduling, restructuring, settlement or a combination of these)
by which the interests of the Bank are protected. Where no other recourse is possible, SAMG may proceed with
legal recourse so as to maximize the recovery of the Bank’s assets. The Risk Management Division also monitors
the NPL portfolio of the Bank and reports the same to CCC/ BRMC.

43.1.1 Credit Risk - General Disclosures Basel Specific

Bank Alfalah Limited is using Standardized Approach (SA) of SBP Basel accord for the purpose of estimating
Credit Risk Weighted Assets. Under SA, banks are allowed to take into consideration external rating(s) of counter-
party(s) for the purpose of calculating Risk Weighted Assets. A detailed procedural manual specifying return-
based formats, methodologies and processes for deriving Credit Risk Weighted Assets in accordance with the
SBP Basel Standardized Approach is in place and firmly adhered to.

43.1.2 Disclosures for portfolio subject to the Standardised Approach & Supervisory risk weights

43.1.2.1 External ratings

SBP Basel III guidelines require banks to use ratings assigned by specified External Credit Assessment Agencies
(ECAIs) namely PACRA, JCR-VIS, Moodys, Fitch and Standard & Poors.

The State Bank of Pakistan through its letter number BSD/BAI-2/201/1200/2009 dated December 21, 2009 has
accorded approval to the Bank for use of ratings assigned by CRAB and CRISL. The Bank uses these ECAIs to rate its
exposures denominated in Bangladeshi currency on certain corporate and banks incorporated in Bangladesh.

The Bank uses external ratings for the purposes of computing the risk weights as per the Basel III framework. For
exposures with a contractual maturity of less than or equal to one year, short-term rating given by approved Rating
Agencies is used, whereas for long-term exposure with maturity of greater than one year, long-term rating is used.

163
 Where there are two ratings available, the lower rating is considered and where there are three or more ratings
the second - lowest rating is considered.

43.1.3 Disclosures with respect to Credit Risk Mitigation for Standardised Approach

43.1.3.1 Credit risk mitigation policy

The Bank defines collateral as the assets or rights provided to the Bank by the borrower or a third party in order
to secure a credit facility. The Bank would have the rights of secured creditor in respect of the assets / contracts
offered as security for the obligations of the borrower / obligor.

43.1.3.2 Collateral valuation and management

As stipulated in the SBP Basel II / III guidelines, the Bank uses the comprehensive approach for collateral valuation.
Under this approach, the Bank reduces its credit exposure to a counterparty when calculating its capital
requirements to the extent of risk mitigation provided by the eligible financial collateral as specified in the Basel
III guidelines. In line with Basel II / III guidelines, the Bank makes adjustments in eligible collaterals received
for possible future fluctuations in the value of the collateral in line with the requirements specified by SBP
guidelines. These adjustments, also referred to as ‘haircuts’, to produce volatility-adjusted amounts for collateral,
are reduced from the exposure to compute the capital charge based on the applicable risk weights.

43.1.3.3 Types of collateral taken by the Bank

Bank Alfalah Limited determines the appropriate collateral for each facility based on the type of product and
counterparty. In case of corporate and SME financing, fixed assets are generally taken as security for long
tenor loans and current assets for working capital finance usually backed by mortgage or hypothecation.
For project finance, security of the assets of the borrower and assignment of the underlying project contracts
is generally obtained. Additional security such as pledge of shares, cash collateral, TDRs, SSC/DSCs, charge on
receivables may also be taken. Moreover, in order to cover the entire exposure Personal Guarantees of Directors
/ Borrowers are also obtained generally by the Bank. For retail products, the security to be taken is defined in
the product policy for the respective products. Housing loans and automobile loans are secured by the security
of the property/automobile being financed respectively. The valuation of the properties is carried out by an
approved valuation agency.
The Bank also offers products which are primarily based on collateral such as shares, specified securities and
pledged commodities. These products are offered in line with the SBP prudential regulations and approved
product policies which also deal with types of collateral, valuation and margining.
The decision on the type and quantum of collateral for each transaction is taken by the credit approving authority
as per the credit approval authorization approved by the Central Credit Committee (CCC) under its delegation
powers. For facilities provided as per approved product policies (retail products, loan against shares etc.),
collateral is taken in line with the policy.

43.1.3.4 Types of eligible financial collateral

For credit risk mitigation purposes (capital adequacy purposes), the Bank considers all types of financial
collaterals that are eligible under SBP Basel III accord. This includes Cash / TDRs, Gold, securities issued by
Government of Pakistan such as T-Bills and PIBs, National Savings Certificates, certain debt securities rated by a
recognised credit rating agency, mutual fund units where daily Net Asset Value (NAV) is available in public domain
and guarantees from certain specified entities (Government of Pakistan, Banks etc.) under substitution effect of
Basel in general, for capital calculation purposes, in line with the SBP Basel III requirements, the Bank
recognises only eligible collaterals as mentioned in the SBP Basel III accord.

164
43.1.3.5 Credit concentration risk

Credit concentration risk arises mainly due to concentration of exposures under various categories viz. industry,
geography, and single/group borrower exposures. Within credit portfolio, as a prudential measure aimed at
better risk management and avoidance of concentration of risks, the SBP has prescribed regulatory limits on
banks’ maximum exposure to single borrower and group borrowers. Moreover, in order to restrict the industry
concentration risk, Bank’s annual credit plan spells out the maximum allowable exposure that it can take on
specific industries. Additionally, the Internal Rating System allows the Bank to monitor risk rating concentration
of borrowers against different grades / scores ranging from 1 - 12 (1 being the best and 12 being loss category).

43.1.4 Segmental information

43.1.4.1 Segments by class of business

2016
Advances (Gross) Deposits Contingent liabilities*
(Note 10) (Note 16)
(Rupees Percent (Rupees Percent (Rupees Percent
in ‘000) in ‘000) in ‘000)

Agribusiness 25,146,203 6.35% 4,512,814 0.70% 676,226 0.51%

Automobile & Transportation Equipment 6,716,530 1.70% 6,896,102 1.08% 4,942,532 3.76%
Chemical and Pharmaceuticals 4,074,952 1.03% 4,367,174 0.68% 4,036,635 3.07%
Cement 6,310,583 1.59% 998,229 0.16% 4,105,149 3.12%
Communication 6,316,495 1.60% 5,688,168 0.89% 2,894,449 2.20%
Electronics and Electrical Appliances 4,299,732 1.09% 2,686,895 0.42% 4,467,410 3.40%
Educational Institutes 1,915,871 0.48% 7,980,970 1.25% 267,878 0.20%
Financial 8,621,617 2.18% 26,319,240 4.11% 16,187,989 12.32%
Fertilizers 10,855,791 2.74% 418,538 0.07% 130,998 0.10%
Food & Allied Products 16,426,146 4.15% 8,758,225 1.37% 2,755,962 2.10%
Glass & Ceramics 361,281 0.09% 401,428 0.06% 349,719 0.27%
Ghee & Edible Oil 9,421,674 2.38% 3,419,859 0.53% 5,259,148 4.00%
Housing Societies / Trusts 2,535,735 0.64% 23,360,992 3.64% 54,801 0.04%
Insurance - 0.00% 3,497,192 0.55% - 0.00%
Import & Export 6,645,776 1.68% 3,618,472 0.56% 8,483 0.01%
Iron / Steel 9,725,608 2.46% 4,467,572 0.70% 6,357,746 4.84%
Oil & Gas 18,578,938 4.69% 20,598,300 3.21% 17,873,323 13.60%
Paper & Board 3,652,792 0.92% 495,440 0.08% 1,361,049 1.04%
Production and Transmission of Energy 58,281,948 14.72% 19,430,454 3.03% 5,256,974 4.00%
Real Estate / Construction 10,281,339 2.60% 31,372,965 4.89% 5,653,556 4.30%
Retail / Wholesale Trade 14,605,147 3.69% 28,724,702 4.48% 12,486,802 9.50%
Rice Processing and Trading/ Wheat 9,470,043 2.39% 2,189,755 0.34% 67,897 0.05%
Sugar 8,501,559 2.15% 1,635,158 0.26% 733,111 0.56%
Shoes and Leather garments 2,373,883 0.60% 2,173,422 0.34% 342,355 0.26%
Sports Goods 402,310 0.10% 443,678 0.07% 126,329 0.10%
Surgical Goods 490,108 0.12% 521,150 0.08% 25,256 0.02%
Textile Spinning 31,099,133 7.86% 2,747,373 0.43% 6,469,700 4.92%
Textile Weaving 14,184,418 3.58% 3,147,400 0.49% 2,783,776 2.12%
Textile Composite 21,445,047 5.42% 4,963,715 0.77% 5,202,455 3.96%
Welfare Institutions 1,000,000 0.25% 17,551,301 2.74% - 0.00%
Individuals 36,637,139 9.25% 241,987,139 37.75% 684,330 0.52%
Others 45,485,511 11.50% 155,570,432 24.27% 19,886,826 15.11%
395,863,309 100.00% 640,944,254 100.00% 131,448,864 100.00%

*Contingent liabilities for the purpose of this note are presented at cost and includes direct credit substitutes, transaction related contingent
liabilities and trade related contingent liabilities.

165
 2015
Advances (Gross) Deposits Contingent liabilities*
(Note 10) (Note 16)
(Rupees Percent (Rupees Percent (Rupees Percent
in ‘000) in ‘000) in ‘000)

Agribusiness 25,426,115 7.26% 9,268,099 1.45% 403,097 0.36%

Automobile & Transportation Equipment 3,621,759 1.03% 12,494,496 1.95% 2,310,736 2.08%
Chemical and Pharmaceuticals 6,569,859 1.88% 6,943,315 1.08% 4,826,490 4.33%
Cement 5,050,929 1.44% 3,012,779 0.47% 1,679,342 1.51%
Communication 6,795,506 1.94% 7,408,672 1.16% 2,033,797 1.83%
Electronics and Electrical Appliances 5,450,802 1.56% 3,981,446 0.62% 1,463,169 1.31%
Educational Institutes 1,579,472 0.45% 10,393,163 1.62% 166,705 0.15%
Financial 6,012,279 1.72% 43,479,479 6.79% 16,388,180 14.72%
Fertilizers 10,761,359 3.07% 13,237,190 2.07% 2,243,982 2.02%
Food & Allied Products 10,422,249 2.97% 9,009,487 1.41% 2,366,516 2.13%
Glass & Ceramics 400,958 0.11% 1,858,994 0.29% 136,529 0.12%
Ghee & Edible Oil 7,625,148 2.18% 4,018,647 0.63% 3,314,775 2.98%
Housing Societies / Trusts 1,011,819 0.29% 10,340,871 1.62% 62,421 0.06%
Insurance 1,247 0.00% 1,774,999 0.28% - 0.00%
Import & Export 3,679,806 1.05% 14,074,053 2.20% 448,922 0.40%
Iron / Steel 10,082,093 2.88% 7,888,480 1.23% 5,970,084 5.36%
Oil & Gas 32,560,786 9.29% 41,076,943 6.42% 13,674,007 12.28%
Paper & Board 3,107,556 0.89% 2,399,688 0.37% 669,425 0.60%
Production and Transmission of Energy 55,783,228 15.92% 12,261,946 1.92% 10,895,232 9.78%
Real Estate / Construction 9,589,567 2.74% 20,256,601 3.16% 6,593,492 5.92%
Retail / Wholesale Trade 8,153,916 2.33% 28,219,596 4.41% 5,239,175 4.71%
Rice Processing and Trading/ Wheat 9,290,979 2.65% 6,134,412 0.96% 8,572 0.01%
Sugar 6,787,255 1.94% 3,522,207 0.55% 143,569 0.13%
Shoes and Leather garments 2,301,645 0.66% 5,307,073 0.83% 448,764 0.40%
Sports Goods 104,205 0.03% 964,705 0.15% 37,579 0.03%
Surgical Goods 404,717 0.12% 928,481 0.15% 71,983 0.06%
Textile Spinning 25,064,417 7.15% 2,963,234 0.46% 4,204,188 3.78%
Textile Weaving 10,375,119 2.96% 3,086,072 0.48% 876,232 0.79%
Textile Composite 16,144,130 4.61% 4,578,195 0.72% 5,493,318 4.93%
Welfare Institutions 73,341 0.02% 8,209,978 1.28% 3,050 0.00%
Individuals 32,871,599 9.38% 194,754,585 30.42% 1,547,964 1.39%
Others 33,247,338 9.48% 146,340,849 22.85% 17,629,579 15.83%
350,351,198 100.00% 640,188,735 100.00% 111,350,874 100.00%

43.1.4.2 Segment by sector 2016

Advances (Gross) Deposits Contingent liabilities*
(Note 10) (Note 16)
(Rupees Percent (Rupees Percent (Rupees Percent
in ‘000) in ‘000) in ‘000)

Public / Government 86,223,360 21.78% 18,982,770 2.96% 22,410,079 17.05%

Private 309,639,949 78.22% 621,961,484 97.04% 109,038,785 82.95%
395,863,309 100.00% 640,944,254 100.00% 131,448,864 100.00%

2015
Advances (Gross) Deposits Contingent liabilities*
(Note 10) (Note 16)
(Rupees Percent (Rupees Percent (Rupees Percent
in ‘000) in ‘000) in ‘000)

Public / Government 94,312,609 26.92% 36,469,841 5.70% 16,132,091 14.49%

Private 256,038,589 73.08% 603,718,894 94.30% 95,218,783 85.51%
350,351,198 100.00% 640,188,735 100.00% 111,350,874 100.00%
*Contingent liabilities for the purpose of this note are presented at cost and includes direct credit substitutes, transaction related contingent
liabilities and trade related contingent liabilities.

166
43.1.4.3 Details of non-performing advances and specific provisions by class of business segment

2016 2015
Classified Specific Classified Specific
advances provision held advances provision held
----------------------------(Note 10.4)----------------------------
-------------------------(Rupees in ‘000)-------------------------

Agribusiness 378,541 216,924 293,088 150,383

Automobile & Transportation equipment 1,131,004 417,619 141,121 87,666
Chemical & Pharmaceuticals 225,513 225,513 110,231 98,165
Communication 1,870,813 1,870,813 519,376 519,376
Educational Institutes 52,322 45,972 - -
Electronic & Electrical Appliances - - 413,838 411,590
Financial 1,302,880 1,288,470 78,970 78,970
Fertilizers 765,136 765,136 790,636 794,048
Food and allied products 257,302 175,802 273,119 202,843
Glass / Ceramics 17,133 17,133 26,559 26,559
Ghee & Edible Oil 457,638 457,638 392,526 454,547
Import & Export 885,121 829,730 626,525 603,525
Iron and steel 227,394 187,622 246,643 213,770
Oil and gas 1,701,406 1,356,224 2,271,267 1,368,285
Paper & Board 90,892 90,892 133,651 133,551
Production and transmission of energy 148,839 148,839 1,948 1,948
Real Estate / Construction 557,536 534,411 655,948 348,688
Retail Trade & Wholesale 2,002,294 1,400,352 895,584 824,676
Rice processing and trading / wheat 1,092,534 1,048,501 521,589 501,232
Sugar 7,322 6,737 - -
Shoes & Leather garments 94,654 94,654 95,251 94,301
Sports 30,990 30,990 3,900 3,900
Surgical goods 32,153 32,153 15,047 15,047
Textile Spinning 1,398,435 1,391,135 628,397 644,892
Textile Weaving 1,104,051 1,024,229 316,201 309,064
Textile Composite 1,051,420 937,481 3,090,643 2,899,945
Individuals 982,412 790,055 1,119,034 918,437
Others 1,152,780 981,968 4,794,307 3,747,147
19,018,515 16,366,993 18,455,399 15,452,555

43.1.4.4 Details of non-performing advances and specific provisions by sector

2016 2015
Classified Specific Classified Specific
advances provision held advances provision held
-------------------------(Rupees in ‘000)-------------------------

Public / Government - - - -
Private 19,018,515 16,366,993 18,455,399 15,452,555
19,018,515 16,366,993 18,455,399 15,452,555

167
43.1.4.5 Geographical segment analysis 2016
Profit before Total assets Net assets Contingent
taxation employed employed liabilities*
-------------------------(Rupees in ‘000)-------------------------

Pakistan 11,367,197 849,033,701 51,065,263 125,163,263

Asia Pacific (including South Asia) 1,107,779 48,111,705 8,201,003 4,665,616
Middle East 548,183 20,311,647 858,496 1,619,985
13,023,159 917,457,053 60,124,762 131,448,864

2015
Profit before Total assets Net assets Contingent
taxation employed employed liabilities*
-------------------------(Rupees in ‘000)-------------------------

Pakistan 10,968,236 843,600,372 43,695,395 97,080,642

Asia Pacific (including South Asia) 1,355,228 46,078,322 8,741,448 5,081,365
Middle East 280,606 12,928,827 916,332 9,188,867
12,604,070 902,607,521 53,353,175 111,350,874

*Contingent liabilities for the purpose of this note are presented at cost and includes direct credit substitutes,
transaction related contingent liabilities and trade related contingent liabilities.

43.2 Market risk

Market risk exposes the Bank to the risk of financial losses resulting from movements in market prices. It is the
risk associated with changes in the interest rates, foreign exchange rates, equity prices and commodity prices.
To manage and control market risk, a well-defined risk management structure, under Board approved Market &
Liquidity Risk Management Policy, is in place. The policy outlines methods to measure and control market risk
which are carried out at a portfolio level. Moreover, it also includes controls which are applied, where necessary,
to individual risk types, to particular books and to specific exposures. These controls include limits on exposure to
individual market risk variables as well as limits on concentrations of tenors and issuers. This structure is reviewed,
adjusted and approved periodically.
The Bank’s Asset and Liability Committee (ALCO) and Investment Committee (IC) are primarily responsible for the
oversight of the market risk, supported by Market Risk Management Unit of Risk Management Division (RMD). The
Bank uses the Standardized Approach to calculate capital charge for market risk as per the current regulatory
framework under Basel II / III. Currently, the Bank calculates ‘Value at Risk (VaR)’ on a regular basis. Moreover, the
Bank also carries out stress testing on regular intervals by applying shocks on fixed income, equity and foreign
exchange positions.

43.2.1 Foreign exchange risk

Foreign exchange (FX) risk arises from the fluctuation in the value of financial instruments due to the changes in
foreign exchange rates. The Bank manages this risk by setting and monitoring dealer and currency-wise limits.

FX risk is mainly managed through matched positions. Unmatched positions are covered substantially through
derivative instruments such as forwards and swaps. VaR analysis are conducted on regular basis to measure and
monitor the FX risk.

The currency risk is regulated and monitored against the regulatory/statutory limits enforced by the State Bank of
Pakistan. The foreign exchange exposure limits in respective currencies are managed against the prescribed limits.

The analysis below represents the concentration of the Bank’s foreign currency risk for on and off balance sheet
financial instruments:

168
 2016
Off-balance Net foreign
Assets Liabilities
sheet items currency
exposure
-------------------------(Rupees in ‘000)---------------------

Pakistan Rupee 904,257,255 833,137,544 (10,905,418) 60,214,293

United States Dollar 11,742,423 16,364,610 4,491,512 (130,675)
Great Britain Pound 1,344,791 4,904,811 3,574,955 14,935
Arab Emirates Dirham 16,408 1,343 - 15,065
Euro 72,409 2,917,512 2,850,232 5,129
Other currencies 23,767 6,471 (11,281) 6,015
Total foreign currency exposure 13,199,798 24,194,747 10,905,418 (89,531)
Total currency exposure 917,457,053 857,332,291 - 60,124,762

2015
Off-balance Net foreign
Assets Liabilities
sheet items currency
exposure
-------------------------(Rupees in ‘000)---------------------

Pakistan Rupee 867,586,751 811,623,017 8,236,601 64,200,335

United States Dollar 33,991,224 29,601,732 (15,445,404) (11,055,912)
Great Britain Pound 293,051 4,988,182 4,706,822 11,691
Japanese Yen 151,675 2,998 (152,303) (3,626)
Euro 216,986 2,984,674 2,774,062 6,374
Other currencies 367,834 53,743 (119,778) 194,313
Total foreign currency exposure 35,020,770 37,631,329 (8,236,601) (10,847,160)
Total currency exposure 902,607,521 849,254,346 - 53,353,175

43.2.2 Equity investment risk

Equity investment risk arises due to the risk of changes in the prices of individual stocks held by the bank. The
Bank’s equity investments are classified as Available for Sale (AFS) and Held for Trading (HFT) investments. The
objective of investments classified as HFT portfolio is to take advantage of short term capital gains, while the
AFS portfolio is maintained with a medium term view of capital gains and dividend income. The Bank’s Investment
Committee is primarily responsible for the oversight of the equity investment risk. Market Risk Management Unit
of RMD monitors and reports portfolio and scrip level internal and external limits.

43.3 Interest rate risk

Interest Rate Risk is the adverse impact on the bank’s shareholder’s equity due to changes in the interest rates.
It may be further elaborated as changes in the present value of the asset, liabilities and commitments due to
changes in the term structure of the interest rates. The Bank is exposed to interest rate risk primarily as a
result of mismatches in the amounts of assets and liabilities and off-balance sheet instruments within a certain
range of maturity due to re-pricing (whichever is earlier). The Bank has formulated a separate Interest Rate Risk
Management (IRRM) framework which establishes aggregate and tenor-wise balance sheet level PV01 (Price Value
of 1bps) limits to manage interest rate risk within the Board approved risk appetite. Treasury and FI Group is
primarily responsible for management of interest rate risk on a daily basis, and the Asset and Liability Committee
(ALCO) oversees the interest rate risk at Bank level. Market Risk Management Unit of Risk Management Division
independently monitors, analyses and reports various limits including management action point limits and re-
pricing of the assets and liabilities on a regular basis.

169
43.3.1 Mismatch of interest rate sensitive assets and liabilities
2016
Exposed to yield / interest rate risk
Non-interest
Effective yield/ Over 1 to 3 Over 3 to 6 Over 6 months Over 1 to 2 Over 2 to 3 Over 3 to 5 Over 5 to 10 bearing
Total Upto 1 month Above 10 years
interest rate months months to 1 year years years years years financial
instruments
------------------------------------------------------------------------------------------- (Rupees in '000) -------------------------------------------------------------------------------------------
On-balance sheet financial instruments

Financial Assets

Cash and balances with treasury banks - 74,071,384 6,651,459 - - - - - - - - 67,419,925

Balances with other banks 0.78% 9,373,123 3,256,176 1,435,399 - - - - - - - 4,681,548
Lendings to financial institutions 4.90% 30,149,029 3,857,883 11,892,500 14,398,646 - - - - - - -
Investments 7.61% 389,092,637 29,919,376 27,023,435 1,542,424 58,458,677 88,541,189 97,689,618 46,175,864 27,259,389 647,989 11,834,676
Advances 7.27% 378,720,349 29,811,582 128,342,849 186,754,816 28,899,125 63,943 154,176 266,316 195,322 4,232,220 -
Other assets 17,350,334 - - - - - - - - - 17,350,334
898,756,856 73,496,476 168,694,183 202,695,886 87,357,802 88,605,132 97,843,794 46,442,180 27,454,711 4,880,209 101,286,483

Financial Liabilities

Bills payable 12,886,990 - - - - - - - - - 12,886,990

Borrowings 5.12% 178,311,035 147,557,104 8,014,324 19,796,157 - - - - 2,943,450 - -
Deposits and other accounts 3.04% 640,944,254 290,491,729 20,059,108 23,733,050 15,172,690 753,186 477,159 27,860 - - 290,229,472
Sub-ordinated loans 9.68% 8,317,670 - 4,993,000 2,524,154 800,516 - - - - - -
Other liabilities 13,068,177 - - - - - - - - - 13,068,177
853,528,126 438,048,833 33,066,432 46,053,361 15,973,206 753,186 477,159 27,860 2,943,450 - 316,184,639

On-balance sheet gap 45,228,730 (364,552,357) 135,627,751 156,642,525 71,384,596 87,851,946 97,366,635 46,414,320 24,511,261 4,880,209 (214,898,156)

Off-balance sheet financial instruments

Forward exchange contracts - purchase 53,992,848 26,259,608 15,818,226 8,080,646 3,834,368 - - - - - -

Forward exchange contracts - sale 41,084,440 21,036,937 15,055,056 4,614,498 377,949 - - - - - -
Repo transaction - resale 349,222 349,222 - - - - - - - - -
Repo transaction - repurchase 136,912,078 135,683,547 1,228,531 - - - - - - - -
Interest Rate Swaps - receipts 7,622,307 1,586,974 6,035,333 - - - - - - - -
Interest Rate Swaps - payments 7,622,307 - - - - - 4,222,855 2,039,671 1,359,781 - -
Off-balance sheet gap (123,654,448) (128,524,680) 5,569,972 3,466,148 3,456,419 - (4,222,855) (2,039,671) (1,359,781) - -

Total yield / interest rate risk sensitivity gap (493,077,037) 141,197,723 160,108,673 74,841,015 87,851,946 93,143,780 44,374,649 23,151,480 4,880,209

Cumulative yield / interest rate risk sensitivity gap (493,077,037) (351,879,314) (191,770,641) (116,929,626) (29,077,680) 64,066,100 108,440,749 131,592,229 136,472,438

2015
Exposed to yield / interest rate risk
Non-interest
Effective yield/ Over 1 to 3 Over 3 to 6 Over 6 months Over 1 to 2 Over 2 to 3 Over 3 to 5 Over 5 to 10 bearing
Total Upto 1 month Above 10 years
interest rate months months to 1 year years years years years financial
instruments
------------------------------------------------------------------------------------------- (Rupees in '000) -------------------------------------------------------------------------------------------
On-balance sheet financial instruments

Financial Assets

Cash and balances with treasury banks - 62,368,790 7,880,964 - - - - - - - - 54,487,826

Balances with other banks 0.82% 16,552,207 2,904,940 2,074,384 - - - - - - - 11,572,883
Lendings to financial institutions 8.03% 27,626,350 13,895,000 13,193,983 533,644 3,723 - - - - - -
Investments 9.14% 423,099,734 2,592,749 52,449,451 38,355,780 146,346,231 56,712,435 64,174,242 27,040,219 25,706,276 295,487 9,426,864
Advances 8.66% 334,158,739 46,954,706 94,165,043 139,457,496 49,457,007 95,146 123,260 287,372 434,434 3,184,275 -
Other assets 20,801,587 - - - - - - - - - 20,801,587
884,607,407 74,228,359 161,882,861 178,346,920 195,806,961 56,807,581 64,297,502 27,327,591 26,140,710 3,479,762 96,289,160

Financial Liabilities

Bills payable 9,733,929 - - - - - - - - - 9,733,929

Borrowings 6.22% 172,393,198 143,210,497 4,381,324 24,580,883 - - - - 166,686 - 53,808
Deposits and other accounts 4.00% 640,188,735 289,527,760 47,840,572 33,572,157 22,311,911 1,874,012 966,744 199,291 - - 243,896,288
Sub-ordinated loans 11.04% 9,983,000 - 4,995,000 2,588,455 799,847 1,599,698 - - - - -
Other liabilities 14,152,195 - - - - - - - - - 14,152,195
846,451,057 432,738,257 57,216,896 60,741,495 23,111,758 3,473,710 966,744 199,291 166,686 - 267,836,220

On-balance sheet gap 38,156,350 (358,509,898) 104,665,965 117,605,425 172,695,203 53,333,871 63,330,758 27,128,300 25,974,024 3,479,762 (171,547,060)

Off-balance sheet financial instruments

Forward exchange contracts - purchase 98,261,212 48,466,074 38,285,002 10,163,560 1,346,576 - - - - -

Forward exchange contracts - sale 106,520,120 29,830,025 72,780,665 3,850,461 58,969 - - - - -
Repo transactions - repurchase 129,226,010 129,226,010 - - - - - - - -
Interest Rate Swaps - receipts 6,962,920 1,600,180 5,100,887 261,853 - - - - - -
Interest Rate Swaps - payments 6,962,920 - - - - - - 5,287,064 1,675,856 -
Off-balance sheet gap (137,484,918) (108,989,781) (29,394,776) 6,574,952 1,287,607 - - (5,287,064) (1,675,856) -

Total yield / interest rate risk sensitivity gap (467,499,679) 75,271,189 124,180,377 173,982,810 53,333,871 63,330,758 21,841,236 24,298,168 3,479,762
Cumulative yield / interest rate risk sensitivity gap (467,499,679) (392,228,490) (268,048,113) (94,065,303) (40,731,432) 22,599,326 44,440,562 68,738,730 72,218,492

170
 2016 2015
43.3.2 Reconciliation of Assets and Liabilities exposed to yield / interest rate risk with
(Rupees in ‘000)
Total Assets and Liabilities

Total financial assets as per note 43.3.1 898,756,856 884,607,407

Add: Non financial assets
Operating fixed assets 18,133,267 17,241,968
Other assets 566,930 758,146
Total assets as per statement of financial position 917,457,053 902,607,521

Total liabilities as per note 43.3.1 853,528,126 846,451,057

Add: Non financial liabilities
Deferred tax liabilities 2,650,428 1,824,054
Other liabilities 1,153,737 979,235
Total liabilities as per statement of financial position 857,332,291 849,254,346

43.4 Country risk

Country risk, refers to the possibility that economic and political conditions in a foreign country could adversely
impact the Bank’s exposure in that country. For the Bank, country risk arises as a result of the Bank’s foreign currency
lending, trade and treasury business with counterparties domiciled in other countries as well as investments and
capital transactions. In order to monitor and mitigate the risk, Bank has in place a comprehensive country risk
management framework. Under this framework, the transfer risk is measured using financial market and economic
factors. Political risk is measured using a variety of indicia indicative of relative certainty of payment of foreign
obligations. Based on this framework, risk limits are assigned to countries within the Board approved limits.
The limits and their utilization are monitored and controlled at head office level and country risk exposures are
reported to Central Credit Committee at a defined frequency.

43.5 Liquidity risk

Liquidity risk is the potential for loss to the Bank arising from either its inability to meet its obligations or to fund
increases in assets as they fall due without incurring an unacceptable cost.
The Bank’s Asset and Liability Committee (ALCO) is primarily responsible for the formulation of the overall
strategy and oversight of the asset liability function including liquidity management. The BOD has approved a
comprehensive Market & Liquidity Risk Management Policy which stipulates the various parameters to monitor
and control liquidity risk including maintenance of various liquidity ratios. Liquidity Risk Management Unit of
RMD is responsible for independent monitoring of the overall liquidity risk in line with regulatory requirements
and BoD approved Risk Framework. It also monitors & reports the maintenance of liquidity buffer in form of
excess Government securities over regulatory requirement, liquidity ratios and depositors’ concentration both
in terms of the overall funding mix and avoidance of undue reliance on large volume deposits. As core retail
deposits form a considerable part of the Bank’s overall funding mix, significant importance is being given to the
stability and growth of these deposits. Maturity gaps and sources of funding are also reviewed in order to ensure
diversification in terms of tenor, currency and geography. Moreover, Bank also prepares a ‘Contingency Funding
Plan’ (CFP) to address liquidity issues in times of stress / crisis situations containing early warning indicators
to pre-empt unforeseen liquidity crisis. In addition to this, the Bank has designed different scenarios of cash
outflows to stress test adequacy of its liquid assets.

171
43.5.1 Maturities of assets and liabilities - based on working prepared by the Asset and Liability Management Committee
(ALCO) of the Bank
2016

Over 1 to 3 Over 3 to 6 Over 6 months Over 1 to 2 Over 2 to 3 Over 3 to 5 Over 5 to 10

Total Upto 1 month Above 10 years
months months to 1 year years years years years
--------------------------------------------------------------- (Rupees in ‘000) ----------------------------------------------------------------------------------
Assets
Cash and balances with treasury banks 74,071,384 36,846,823 1,772,930 2,425,381 3,867,441 6,757,184 1,307,969 2,639,200 6,211,747 12,242,709
Balances with other banks 9,373,123 7,937,724 1,435,399 - - - - - - -
Lendings to financial institutions 30,149,029 3,857,883 11,892,500 14,398,646 - - - - - -
Investments 389,092,637 29,567,940 26,624,534 1,365,933 66,439,619 88,541,189 97,689,618 47,972,996 27,484,586 3,406,222
Advances 378,720,349 60,429,570 74,260,351 74,376,411 40,512,742 10,088,682 19,127,442 55,801,997 28,726,245 15,396,909
Operating fixed assets 18,133,267 122,842 245,687 368,530 737,060 1,474,120 1,474,120 2,708,214 2,509,407 8,493,287
Other assets 17,917,264 15,453,573 227,564 341,346 365,238 683,001 211,636 317,453 317,453 -
917,457,053 154,216,355 116,458,965 93,276,247 111,922,100 107,544,176 119,810,785 109,439,860 65,249,438 39,539,127
Liabilities
Bills payable 12,886,990 12,886,990 - - - - - - - -
Borrowings 178,311,035 147,557,104 8,014,324 19,796,157 - - - - 2,943,450 -
Deposits and other accounts 640,944,254 43,065,961 42,459,849 50,339,554 77,053,235 119,366,260 23,555,005 47,285,340 108,170,442 129,648,608
Sub-ordinated loans 8,317,670 - 1,000 1,662,330 1,663,340 2,000 2,000 4,987,000 - -
Deferred tax liabilities 2,650,428 - - - 2,650,428 - - - - -
Other liabilities 14,221,914 7,323,211 572,313 918,104 2,586,282 705,501 705,501 1,411,002 - -
857,332,291 210,833,266 51,047,486 72,716,145 83,953,285 120,073,761 24,262,506 53,683,342 111,113,892 129,648,608

Net assets 60,124,762 (56,616,911) 65,411,479 20,560,102 27,968,815 (12,529,585) 95,548,279 55,756,518 (45,864,454) (90,109,481)

Share capital 15,952,076

Reserves 15,895,652
Unappropriated profit 17,337,458
Surplus on revaluation of assets - net of tax 10,939,576
60,124,762
2015
Over 1 to 3 Over 3 to 6 Over 6 months Over 1 to 2 Over 2 to 3 Over 3 to 5 Over 5 to 10
Total Upto 1 month Above 10 years
months months to 1 year years years years years
--------------------------------------------------------------- (Rupees in ‘000) ----------------------------------------------------------------------------------

Assets
Cash and balances with treasury banks 62,368,790 24,957,532 4,141,354 4,768,934 6,095,093 188,315 1,156,125 2,286,746 5,538,959 13,235,732
Balances with other banks 16,552,207 14,477,823 2,074,384 - - - - - - -
Lendings to financial institutions 27,626,350 13,895,000 13,193,983 533,644 3,723 - - - - -
Investments 423,099,734 2,520,871 48,493,577 15,046,677 152,167,038 58,248,104 84,418,850 30,240,219 28,028,759 3,935,639
Advances 334,158,739 50,086,876 95,441,109 62,922,984 27,554,695 12,149,602 18,789,835 45,449,363 10,238,566 11,525,709
Operating fixed assets 17,241,968 115,298 230,595 345,892 691,785 1,383,570 1,383,570 2,587,670 2,577,930 7,925,658
Other assets 21,559,733 18,411,290 280,160 420,240 440,948 941,679 266,354 399,531 399,531 -
902,607,521 124,464,690 163,855,162 84,038,371 186,953,282 72,911,270 106,014,734 80,963,529 46,783,745 36,622,738

Liabilities
Bills payable 9,733,929 9,733,929 - - - - - - - -
Borrowings 172,393,198 143,264,305 4,381,324 24,580,883 - - - - 166,686 -
Deposits and other accounts 640,188,735 92,791,698 89,134,029 95,309,296 104,357,745 3,455,393 19,121,615 36,484,643 90,701,673 108,832,643
Sub-ordinated loans 9,983,000 - 1,000 1,000 1,663,330 3,326,670 2,000 4,000 4,985,000 -
Deferred tax liabilities 1,824,054 - - - 1,824,054 - - - - -
Other liabilities 15,131,430 8,974,374 536,962 914,860 2,118,634 646,650 646,650 1,293,300 - -
849,254,346 254,764,306 94,053,315 120,806,039 109,963,763 7,428,713 19,770,265 37,781,943 95,853,359 108,832,643

Net assets 53,353,175 (130,299,616) 69,801,847 (36,767,668) 76,989,519 65,482,557 86,244,469 43,181,586 (49,069,614) (72,209,905)

Share capital 15,898,062

Reserves 14,164,120
Unappropriated profit 12,362,596
Surplus on revaluation of assets - net of tax 10,928,397
53,353,175

In line with SBP BSD Circular Letter No. 03 of 2011 on “Maturity and Interest Rate Sensitivity Gap Reporting” the Bank conducted a behavioural study of non-maturity deposits (non-contractual deposits)
and performed regression analysis to determine deposit withdrawal pattern on Current and Savings Accounts (CASA). Regression analysis is used to investigate the relationship between time, the amount of
deposits and deposits withdrawals in order to arrive at an estimated deposits withdrawals pattern. This methodology is in line with the industry best practices and regulatory guidance.

172
43.5.2 Maturities of assets and liabilities based on contractual maturities
2016
Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5
Total Upto 1 to 3 to 6 Months to 1 to 2 to 3 to 5 to 10 Above
Month Months Months Year Years Years Years Years 10 Years
--------------------------------------------------------------------(Rupees in ‘000)--------------------------------------------------------------------
Assets
Cash and balances with treasury banks 74,071,384 66,265,750 564,904 804,133 919,594 1,515,407 284,447 584,019 1,426,447 1,706,683
Balances with other banks 9,373,123 7,937,724 1,435,399 - - - - - - -
Lendings to financial institutions 30,149,029 3,857,883 11,892,500 14,398,646 - - - - - -
Investments 389,092,637 37,473,425 26,624,534 1,365,933 58,534,134 88,541,189 97,689,618 47,972,996 27,484,586 3,406,222
Advances 378,720,349 60,366,612 74,274,799 74,391,313 40,520,383 10,090,379 19,131,335 55,813,309 28,732,123 15,400,096
Operating fixed assets 18,133,267 122,842 245,687 368,530 737,060 1,474,120 1,474,120 2,708,214 2,509,407 8,493,287
Other assets 17,917,264 15,453,573 227,564 341,346 365,238 683,001 211,636 317,453 317,453 -
917,457,053 191,477,809 115,265,387 91,669,901 101,076,409 102,304,096 118,791,156 107,395,991 60,470,016 29,006,288
Liabilities
Bills payable 12,886,990 12,886,990 - - - - - - - -
Borrowings 178,311,035 147,557,104 8,014,324 19,796,157 - - - - 2,943,450 -
Deposits and other accounts 640,944,254 570,522,872 22,893,797 20,990,475 18,355,077 1,969,944 1,951,626 4,078,582 153,547 28,334
Sub-ordinated loans 8,317,670 - 1,000 1,662,330 1,663,340 2,000 2,000 4,987,000 - -
Deferred tax liabilities 2,650,428 - - - 2,650,428 - - - - -
Other liabilities 14,221,914 7,323,211 572,313 918,104 2,586,282 705,501 705,501 1,411,002 - -
857,332,291 738,290,177 31,481,434 43,367,066 25,255,127 2,677,445 2,659,127 10,476,584 3,096,997 28,334
Net assets 60,124,762 (546,812,368) 83,783,953 48,302,835 75,821,282 99,626,651 116,132,029 96,919,407 57,373,019 28,977,954

Share capital 15,952,076

Reserves 15,895,652
Unappropriated profit 17,337,458
Surplus on revaluation of investments 10,939,576
60,124,762

2015
Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5
Total Upto 1 to 3 to 6 Months to 1 to 2 to 3 to 5 to 10 Above
Month Months Months Year Years Years Years Years 10 Years
--------------------------------------------------------------------(Rupees in ‘000)--------------------------------------------------------------------
Assets
Cash and balances with treasury banks 62,368,790 52,140,763 2,212,246 1,375,203 1,931,132 48,645 333,150 665,974 1,664,542 1,997,135
Balances with other banks 16,552,207 14,477,823 2,074,384 - - - - - - -
Lendings to financial institutions 27,626,350 13,895,000 13,193,983 533,644 3,723 - - - - -
Investments 423,099,734 7,718,031 48,493,577 15,046,677 146,969,878 58,248,104 84,418,850 30,240,219 28,028,759 3,935,639
Advances 334,158,739 50,086,876 95,441,109 62,922,984 27,554,695 12,149,602 18,789,835 45,449,363 10,238,566 11,525,709
Operating fixed assets 17,241,968 115,298 230,595 345,892 691,785 1,383,570 1,383,570 2,587,670 2,577,930 7,925,658
Other assets 21,559,733 18,411,290 280,160 420,240 440,948 941,679 266,354 399,531 399,531 -
902,607,521 156,845,081 161,926,054 80,644,640 177,592,161 72,771,600 105,191,759 79,342,757 42,909,328 25,384,141
Liabilities
Bills payable 9,733,929 9,733,929 - - - - - - - -
Borrowings 172,393,198 143,264,305 4,381,324 24,580,883 - - - - 166,686 -
Deposits and other accounts 640,188,735 538,262,834 47,840,572 28,733,371 22,311,911 1,874,012 966,744 199,291 - -
Sub-ordinated loans 9,983,000 - 1,000 1,000 1,663,330 3,326,670 2,000 4,000 4,985,000 -
Deferred tax liabilities 1,824,054 - - - 1,824,054 - - - - -
Other liabilities 15,131,430 8,974,374 536,962 914,860 2,118,634 646,650 646,650 1,293,300 - -
849,254,346 700,235,442 52,759,858 54,230,114 27,917,929 5,847,332 1,615,394 1,496,591 5,151,686 -
Net assets 53,353,175 (543,390,361) 109,166,196 26,414,526 149,674,232 66,924,268 103,576,365 77,846,166 37,757,642 25,384,141

Share capital 15,898,062

Reserves 14,164,120
Unappropriated profit 12,362,596
Surplus on revaluation of investments 10,928,397
53,353,175

Current and Saving deposits have been classified under maturity upto one month as these do not have any contractual maturity. Further, the
Bank estimates that these deposits are a core part of its liquid resources and will not fall below the current year’s level.

173
43.6 Operational risk

Basel II defines Operational risk as, “the risk of loss resulting from inadequate or failed internal processes, people
and systems or from external events.” In compliance with the Risk Management Guidelines, issued by SBP, an
Operational Risk Management (ORM) Unit is established within RMD.
The Operational risk management policy of the Bank is duly approved by the Board and Operational Risk
Management Manual covers the processes, structure and functions of Operational risk management and provides
guidelines to identify, assess, monitor, control and report operational risk in a consistent and transparent manner
across the Bank.

43.6.1 Operational Risk Disclosures - Basel II Specific

Bank was given approval for adoption of Alternative Standardized Approach (ASA) under Basel II for determining
capital charge on Operational Risk in December 2013 and Bank started calculating its capital charge for operational
risk on ASA in its financials from December 31, 2013. The SBP Approval stipulated a capital floor i.e. operational
risk charge under ASA should not fall below as a certain percentage of operational risk capital charge calculated
under Basic Indicator Approach for initial 3 years. These floors are 90% for 2013 and 2014, 80% for 2015 and 70%
for 2016. Bank Alfalah is one of the first few banks in Pakistan to achieve this milestone. As per SBP requirements,
Bank’s operational risk assessment systems have also been reviewed by the external auditors during 2014.
The Bank’s ORM framework and practices address all the significant areas of ORM within the Bank including Risk
Control Self Assessment (RCSA), Key Risk Indicators (KRIs), Operational Loss Data Management, and Operational Risk
Reporting. The ORM Unit engages with Bank’s business / support units and regularly collaborates in determining
and reviewing the risks, and suggests controls on need basis. Additionally, all the policies and procedures of
the Bank are reviewed from the operational risk perspective, and the recommendations of RMD are taken into
consideration before their approval. A Process Improvement Committee (PIC) in this regard has been formed
to evaluate and consider the recommendations of all the reviewers. Further, the unit also reviews functional
specification documents (FSDs) and reviews / test the functionalities and systems prepared on premise of the FSD.
The Operational Loss Database and KRIs systems introduced in 2010 have been further enhanced and the reports
are submitted to Central Management Committee and Board Risk Management Committee. From April 2017 loss
data base reports shall also be shared with the regulator on its prescribed format.
As required by Basel, Bank has categorized all its operational loss/near miss incidents into following loss event
categories:

- Internal Fraud
- External Fraud
- Employment Practice & Workplace Safety
- Client, Product & Business Practice
- Damage to Physical Assets
- Business Disruption & System Failure
- Execution, Delivery & Process Management

43.6.2 IT Security Risk

The Bank has in place an IT Security Risk Management Policy and an IT Management Policy, duly approved by the
Board of Directors, which derive from the regulatory mandates and the ISO 27001:2013 international standards
framework. A dedicated IT Security Risk Management unit, functioning within RMD manages IT and information
security risks to bank’s technology assets by developing IT security baselines for IT solutions that support products
and services, monitoring of threats and vulnerabilities, investigation of reported information security incidents,
reinforcement of IT security risk awareness to employees via periodic communications, following up on due dates
with stakeholders responsible for remediation of open issues, and reporting the status of IT security risk to the
management and BRMC/Board.

174
43.7 Environmental & Social Risk Management Unit

Initiative to integrate sustainable finance approach in credit evaluation and approval process.

Being a responsible corporate citizen wherever BAFL operates, the Bank has integrated sustainable finance
approach in its lending activities. In this regard, an Environmental & Social Management System (ESMS), duly
approved by the Board of Directors, has been put in place in close coordination with IFC. The ESMS Framework
essentially requires that any relevant lending opportunity is to be reviewed and evaluated against;

- IFC Exclusion List

- Applicable national laws on environment, health, safety and social issues
- IFC Performance Standards.

This Framework is an integral part of the credit approval process and all relevant credit proposals require clearance
of E&S Officer prior to approval of the competent authority. The Environmental & Social Risk Management Unit,
part of RMD and headed by a senior risk officer with environmental and social risk management qualifications,
is responsible for identifying, vetting and approving projects from an ESRM perspective. This role also entails
coordination with provincial Environmental Protection Agencies (EPA) to remove ambiguities related to the
EPA approval requirements and to educate the clients. BAFL is also in assisting SBP to promote ESRM practices
across the banking industry. The Bank firmly believes that the integration of financial, social and environmental
considerations into its decision making would enable higher & sustainable gains for all stakeholders.

44 GENERAL

Comparative information has been re-classified, re-arranged or additionally incorporated in these financial
statements, wherever necessary to facilitate comparison.

44.1 During the year, the State Bank of Pakistan (SBP), vide BPRD Circular Letter No. 05 of 2016 dated February 29,
2016 has issued instructions on revised forms of annual financial statements, which further supplements the
requirements laid down earlier, vide SBP’s BSD Circular No. 4 of 2006 and BSD Circular Letter No. 03 of 2013 on
the matter.
In order to standardize the financial statements and to bring comparability, banks having IBBs have been advised
to show Islamic Financing and Related Assets under the head of “Advances” in their financial statements. In
addition, banks have also been advised to show Bai Muajjal of Government of Pakistan Ijara Sukuk with State
Bank of Pakistan and other Financial Institutions under the head “Lendings to Financial Institutions” , whereas Bai
Muajjal transactions with Government of Pakistan are required to be reported under investment category as other
Federal Government securities.

The effect of re-classification on comparative information presented for the year ended December 31, 2015 as part
of the Statement of Financial Position is as follows:

As at December 31, 2015

(Rupees in ‘000)
As previously Effect of Re-
As restated
reported classification

Lending to Financial Institutions 53,628,870 (26,002,520) 27,626,350

Investments - net 397,097,214 26,002,520 423,099,734
Advances - net 327,297,821 6,860,918 334,158,739
Other assets 28,420,651 (6,860,918) 21,559,733

175
44.2 In addition to the aforementioned, no significant reclassification has been made except as follows:

Reclassified
Description Rupees in ‘000 From To

Insurance expenses on Ijarah assets (294,962) Other Income Mark-up / return / interest earned

Registration expenses on Ijarah assets (68,243) Other Income Mark-up / return / interest earned

Rental income on Ijarah assets 342,671 Other Income Mark-up / return / interest earned

45 NON-ADJUSTING EVENT AFTER THE YEAR END REPORTING DATE

There were no appropriation or distribution made after the reporting date.

46 DATE OF AUTHORISATION

These unconsolidated financial statements were authorised for issue on February 23, 2017 by the Board of
Directors of the Bank.

CHIEF EXECUTIVE OFFICER DIRECTOR DIRECTOR CHAIRMAN

176
ANNEXURE - I
STATEMENT SHOWING WRTTEN-OFF LOANS OR ANY OTHER FINANCIAL RELIEF OF
RUPEES 500,000 OR ABOVE DURING THE YEAR ENDED DECEMBER 31, 2016

(Rupees in ‘000)
Outstanding liabilities at January 1, 2016
Other
Name of individuals / partners / directors Principal Mark-up Total
S. No. Name and address of the borrower Father’s / Husband’s Name Total financial relief Product Name
(with CNIC No.) Principal Mark-up Others written-off written-off (9+10+11)
provided
(5+6+7)
1 2 3 4 5 6 7 8 9 10 11 12 13
Adnan Moid, CNIC # 35201-5370418-1 & Sameera Junaid, CNIC # Abdul Moid & W/O Cash Finance
1 SCI-TEK Pakistan, Address: Suite # 14th Floor Imtiaz Plaza, Lahore. 5,680 2,000 4,493 12,173 - - 3,241 3,241
42201-9669251-2 Mohammad Junaid Hypo
2 Syed Abdul Wahid Jan Japan Motors, Address: Plot # 42/43, Scheme Syed Muhammad
Syed Abdul Wahid, CNIC # 54400-0439115-3 1,127 553 - 1,680 - 759 - 759 TOD
33, Quetta Town, Super Highway, Karachi. Ibrahim Agha
3 Sitara Corporation, Address: Suite # 07, Contonment Shopping
M.Akram Butt Proprietor, CNIC # 42501-5408558-5 Meharuddin 7,490 1,408 - 8,898 - 1,118 2,399 3,516 Cash Finance
Center, Korangi Creek, 75190, Karachi.
4 Imari Courts, Address: House # 282, Block B-II, MA Johar Town,
Imrana Ijaz, CNIC # 35202-4579084-8 Ijaz Ahmed 500 1,099 - 1,599 - 399 1,513 1,912 Term Finance
Lahore.
5 Click trade Pvt Ltd, CEO: Hanif Peerani, Address: Business Address: Muhammad Imran, CNIC # 42301-2480772-3
Muhammad Hanif
Suit # 102, 1st floor, The Plaza, Khayaban-E-Iqbal Kehkashan, Block Umair, CNIC # 42301-2674318-9 12,787 16,583 - 29,370 - 14,404 9,138 23,542 Current Finance
Peerani Of 1 & 2
9, Clifton, Karachi. Hanif Peerani, CEO, CNIC # 509-56-136717
Current Finance
6 Ghazanfar Traders, Address: New Ghalla Mandi, Kamoke. Ghazanfar Ali Rana, CNIC # 35202-2757045-7 Rehmat Ali Rana - 3,989 708 4,697 - 498 985 1,483
- Hypo
Cash Finance
7 Saleem Paint, Address: House Vehari Bazar Burewala. Sajid Saleem, CNIC # 36601-0778142-1 Muhammad Saleem 1,494 325 - 1,819 - 185 319 504
Hypo
8 Faheem Nisar Traders, Address: Faheem Nisar Traders Grain Market Current Finance
Faheem Nisar, CNIC # 33301-0231042-7 Nisar Ahmad - 2,326 342 2,668 - - 617 617
Gojra, Toba Tek Singh. - Hypo
9 The Habib Enterprises, Address: SD 39, Falcon Complex, Gulberg Current Finance
Habib Ullah Rana, CNIC # 35202-2168800-1 Fazal Din Rana - 2,092 167 2,259 - 167 1,018 1,185
III, Lahore. - Hypo
10 Chaudhary CNG Station Address: Khokhar KI, Sialkot Road, Attiq Ur Rehman, CNIC # 34101-4771522-3 Ch Muhammad Saeed / Current Finance
- 2,388 814 3,202 - 790 - 790
Gujranwala. Ch Muhammad Saeed, CNIC # 34101-7800989-1 Noor Hussain - Hypo
Ch Muhammad Saleem
11 Shaheen CNG Filling Station, Address: 106, District Courts, Sahiwal. Ch.Mazhar Saleem, CNIC # 36502-1316702-5 - 3,975 1,055 5,030 - 511 328 839 TOD
Akhtar
12 Universal Tobacco Company (Pvt) Ltd, Address: Zamindara
Abdul Aziz, CNIC # 16101-4706638-7 Ghulam Sarwar Khan 1,712 957 844 3,513 - 442 71 513 Lease Finance
Chambers, Par Hoti Mardan.
13 Kamran Agro Services, Address: Mauza Faizpur, Bahawalpur Cash Finance
Maratab Ali Sheikh, CNIC # 36302-0406060-7 Muhammad Ikram Sheikh 8,500 4,117 - 12,617 - - 3,017 3,017
Road, Multan. Hypo
14 Feroze Enterprises, Address: Chak # 54, K.L.P. Road, Chani Goth, Cash Finance
Imran Feroze, CNIC # 31301-4725771-1 Ikram Ur Rehman 8,375 6,401 - 14,776 - 433 5,185 5,619
Ahmed Pur East. Hypo & Pledge
15 Salman Zia, Address: 41-R, DHA Lahore. Salman Zia, CNIC # 35201-0976436-7 Muhammad Zia-Ul-Haq 14,499 3,196 - 17,695 - 1,402 - 1,402 Cash Finance
16 Insaf Timber & Iron Supply, Address: Kutchehry Road Near Daska CURRENT
Mirza Waheed Ahmad, CNIC # 34602-6507285-9 Mirza Bashir Ahmed 1,040 857 - 1,898 - 857 - 857
Chowk, Pasrur. FINANCE
17 Ali Raza Embroidery Address: Property # NE-XVI -139-S-4, Near CURRENT
Muhammad Shahzad, CNIC # 35201-2120538-3 Tufail Bhatti 2,237 833 75 3,145 - 780 - 780
Talab Wali Masjid, Bano Bazar, Baghbanpura, Lahore. FINANCE
18 Eehab Latif, Address: Eehabs Engineering Company Pvt Ltd.2-Km
Defence Road, Off 24th KM Multan Road, Mohalanwal, Chung, Eehab Latif, CNIC # 35202-2639210-5 Muhammad Latif 1,592 156 1,466 3,214 - 156 1,466 1,622 LEASE FINANCE
Lahore.
19 Rana Muhammad Ijaz Khan Rice Mills, Address: 3.5 Km Saharan Ke
Rana Muhammad Idress Khan, CNIC # 35103-1360739-7 Munshi Khan 64,691 3,467 - 68,158 - 3,467 - 3,467 Cash Finance
Phoolngagar, Tehsil Patoki, District Kasur.
20 Rasool Traders, Address: 413-D, Satellite Town, Rahim Yar Khan. Current Finance
Ghulam Rasool, CNIC # 31303-2451997-3 Chaudhry Ameer Uddin 2,407 1,692 59 4,157 - 1,655 2 1,657
- Hypo
21 Ashrafi Electric Store, Address: 302, Rafi Mention, Arambagh, Alfalah Kamyab
Adeel Ahmed Khan, CNIC # 42301-7470197-9 Ikhtar Uddin Khan 4,786 1,512 - 6,298 - 1,492 - 1,492
Shahrah-e-Liaquat, Karachi. Karobar
22 Arshad Plastic, Address: Chak # 203 Rb, Near Muhammadi
Muhammad Arshad, CNIC # 33100-5779938-1 Fazal Muhammad 2,493 1,627 55 4,176 - 1,376 - 1,376 SME / R&MM
Dawkhana 204, Chak Road, Manawala, Faisalabad.
M Zulaid Khan, CNIC # 36302-9638836-7
Muhammad Sharif Khan Cash Finance
23 Variety Builders, Address: Saeed Centre, Kutchery Road, Multan. Khawar, CNIC # 36302-1638426-1 4,374 261 1,653 6,287 - - 1,887 1,887
Khakwani Hypo
Kulsoom, CNIC # 36302-2635584-0
24 Zanwa Pvt Ltd, Address: Office # 2, 2nd Floor, Arshad Sharif Plaza, Zahid Waheed Butt, CNIC # 61101-1881391-5 Abdul Waheed Butt
G-11 Markaz Islamabad. Waseem Zafar, CNIC # 61101-1874082-9 Zafar Mohammad 1,966 1,199 - 3,165 - - 1,022 1,022 Current Finance
Naveed Kausar Khan, CNIC # 35201-1352290-5 Abdul Qayyum Khan
25 Hafiz Saleem Allahwalla Jewllers, Address: Al Bina Mohalla
Hassan, CNIC # 34104-2350410-3 Ch Abdul Wahid 1,399 845 - 2,244 - 844 - 844 SME / R&MM
Kharadian, House No 14-S-188, Koocha Kashmirian, Wazirabad.
26 Dostsons Cotton Mills Pvt Ltd, Address: Plot # 222, Sector 39,
Jamal Iftikhar, CNIC # 42301-0932772-3 Iftikhar Ahmed 35,606 - 23,157 58,763 - 11,157 - 11,157 Cash Finance
Korangi Kreek Industrial Area, Karachi.
27 Mudassar Motors, Address: House # 2-B, Cycle Market Colony, Cash Finance
Mudassar Latif , CNIC # 31104-3567826-3 Muhammad Latif 5,000 1,262 1,414 7,676 - 1,212 1,414 2,626
Haroonabad. Hypo
Muhammad Younas
28 Gulshan Traders, Address: Gulshan Traders, Ferozewattoan. Muhammad Nawaz, CNIC # 35404-1675914-7 1,025 904 125 2,055 - 900 125 1,025 Term Finance
Bajwa
29 Kashmir Plastic, Address: Khasra No. 198, Abu Bakar Siddique Cash Finance
Muhammad Nazir, CNIC # 35202-9088476-7 Khushi Muhammad 2,999 608 - 3,607 - 507 - 507
Colony, St # 5, Ghulshan-e- Ravi Stop, Bund Road Lahore. Hypo
30 Green Crop Pvt Ltd, Address: 1st Floor, 105-GCL Centre, Main Cash Finance
Hafiz Mahmood Ahmad Shad, CNIC # 36603-4386596-3 Muhammad Ahmad Shad 7,975 2,564 209 10,748 - - 2,402 2,402
Liaquat Pura Road, Vehari. Hypo
31 Dewan Syed Muhammad Abbas Bukhari, Address: Shop # 4-5 Shuja Dewan Syed Muhammad Abbas Bukhari, Dewan Ashiq Hussain BAL Musalsal Zarie
3,886 2,052 38 5,976 - 1,245 38 1,283
Shopping Centre, Old Multan Road Near Taxi Stand, Shujabad. CNIC # 35201-1065247-3 Bukhari Sahulat
32 Sikandar Hayat Goraya, Address: Mouzza Bhartaan Wala Tehsil BAL Musalsal Zarie
Sikandar Hayat Gotaya, CNIC # 34601-8341286-1 Ch. Muraad Ali 3,235 2,569 69 5,873 - - 1,023 1,023
Daska, Disst. Sialkot. Sahulat
33 Abdul Majeed Khan Pathan, Address: Mohalla Babur Sultan Kot Abdul Hameed Khan BAL Musalsal
Abdul Majeed Khan Pathan, CNIC # 43304-7300585-7 2,000 1,638 - 3,638 - 1,091 - 1,091
Taluka & Distt. Shikarpur. Patthan Zarie Sahulat
34 Allah Bux Khan Pathan, Address: Mohalla Babur Sultan Kot Taluka Abdul Hameed Khan BAL Musalsal
Allah Bux Khan Pathan, CNIC # 43304-3818440-9 - 1,130 - 1,130 - 673 - 673
& Distt. Shikarpur. Patthan Zarie Sahulat
35 Muhammad Aslam Dahir, Address: Mouza Bhutta Wahin, Post Office Ghualm Muhammad BAL Musalsal
Muhammad Aslam Dahir, CNIC # 35202-8964255-5 1,488 1,916 37 3,441 - 1,422 20 1,441
Same, Tehsil Sadiqabad, Distt. Rahim Yar Khan. Dahir Zarie Sahulat
36 Sheikh Abdul Jalil, Address: House # 30/333, Mohalla Shah Syedan, Sialkot. Sheikh Abdul Jalil, CNIC # 34603-0450222-9 Sheikh Abdul Rasheed 1,298 869 108 2,275 - 517 108 625 AGRI

177
 (Rupees in ‘000)
Outstanding liabilities at January 1, 2016
Other
Name of individuals / partners / directors Principal Mark-up Total
S. No. Name and address of the borrower Father’s / Husband’s Name Total financial relief Product Name
(with CNIC No.) Principal Mark-up Others written-off written-off (9+10+11)
provided
(5+6+7)
1 2 3 4 5 6 7 8 9 10 11 12 13
37 Iltaf Hussain & Najam Iltaf, Address: Bucha Road Rawana, Tehsil, Iltaf Hussain, CNIC # 38401-5272055-3 Muhammad Roshan/Altaf
3,499 5,874 219 9,592 - 4,992 - 4,992 AGRI
Kotmomen, Distt. Sargodha. Najam Iltaf, CNIC # 38403-2248127-3 Hussain
38 Muhammad Sharif, Address: Chak # 147/Rb , Chorri P.O Same, Tehsil BAL Musalsal
Muhammad Sharif, CNIC # 33101-1207933-1 Shah Muhammad 1,480 865 55 2,400 - 850 - 850
Chak Jumra Distt, Faisalabad. Zarie Sahulat
39 Ghulam Nabi Mouza Tabkra, Address: PO, Mandi Sadiq Ganj, Tehsil BAL Musalsal
Ghulam Nabi, CNIC # 31105-0303894-9 Manzoor Ahmad 1,048 871 - 1,919 - 564 - 564
Minchanabad, Distt Bahawalnagar. Zarie Sahulat
40 Muhammad Ali Raza Khan Khakwani, Address: Chak # 307 Eb Ghulam Akbar Khan BAL Musalsal
Muhammad Ali Raza Khan, CNIC # 36302-5729110-3 2,926 914 38 3,878 - 840 - 840
Dakhana Khas, Burewala Distt, Vehari. Khakwani Zarie Sahulat
41 Shamas Ali Shah, Address: House # P-30, Sq # 42, Khasra # 25/12,
Shamas Ali Shah, CNIC # 33100-8657818-9 Muratab Ali Shah 1,500 939 3,387 5,825 - 811 3,387 4,197 MURABAHA
Chak # 207/Rb Mohallah, Nazar Niaz Jhumara Road, Faisalabad.
42 Shafique Hussain, Address: House # 239-A, Ghulam Muhammad
Shafique Hussain, CNIC # 33100-6290955-5 Muhammad Bashir 7,425 6,198 7,888 21,511 2,403 2,378 8,630 13,411 Home Musharaka
Abad, Faisalabad.
43 Riffat Tariq, Address: P-387/A-3, St-16, Mahmoodabbad, Faisalabad. Riffat Tariq, CNIC # 33100-0877999-2 Tariq Mehmood 1,051 550 552 2,153 - 768 485 1,253 Home Musharaka
44 Abdur Rauf, Address: House # 663 Nizam Block, Allama Iqbal
Abdur Rauf, CNIC # 35202-0619041-1 Malik Rehmat Ali 1,814 - 85 1,899 929 - 85 1,014 Car Ijarah
Town, Lahore.
45 Khalid Ameer, Address: House # 362 Jahanzaib Block, Allama Iqbal
Khalid Ameer, CNIC # 38402-1580613-3 Muhammad Hayyat 1,636 - 65 1,700 741 - 65 806 Car Ijarah
Town, Lahore.
46 Muhammad Asghar, Address: House # 25-C, Sardar Street College
Muhammad Asghar, CNIC # 35201-1315329-3 Muhammad Ismaeel 1,540 - 76 1,615 726 - 76 801 Car Ijarah
Road, Samanabad Lahore.
47 Shabbir Ahmad, Address: House # 12/A, Street # 2, Captain Jamal
Shabbir Ahmad, CNIC # 36302-7970532-3 Faqeer Muhammad 1,529 - 68 1,597 768 - 68 836 Car Ijarah
Road, Sanda, Lahore.
48 Muhammad Naveed, Address: House-20, Street-1, Haji Younus Pura,
Muhammad Naveed, CNIC # 35201-7246123-5 Muhammad Saeed 1,692 - 65 1,757 763 - 65 828 Car Ijarah
Baghban Pura Lahore.
49 Rehan Sohail, Address: House # 121-A, Nishtar Block, Allama Iqbal
Rehan Sohail, CNIC # 35200-4377808-1 Muhamma Tufail 1,417 - 99 1,515 567 - 99 666 Car Ijarah
Town, Lahore.
50 Muhammad Shahzad, Address: House # 10, Block-C, St # 7, Mohni
Muhammad Shahzad, CNIC # 35102-0688191-9 Muhammad Sarwar 1,711 - 66 1,777 874 - 66 940 Car Ijarah
Road, Lahore.
51 Rao Muhammad Javaid Iqbal, Address: House # 401, St. No. 09,
Rao Muhammad Javaid Iqbal, CNIC # 35202-9248672-7 Rao Ronaq Ali 1,815 - 77 1,892 1,009 - 77 1,086 Car Ijarah
outfall Road, Sanat Nagar, Lahore.
52 Tayyaba, Address: House # D-5, Street # 10-A, Muslim Colony,
Tayyaba, CNIC # 35202-9259954-0 Khlid Hussain 1,151 - 59 1,209 487 - 59 546 Car Ijarah
Sohwari, Lahore.
53 Faisal Ali, Address: House # 24, College Street, Marzi Pura, Ravi
Faisal Ali, CNIC # 35202-9642785-7 Khlid Hussain 1,713 - 77 1,789 807 - 77 883 Car Ijarah
Road, Lahore.
54 Farah Amin, Address: House # 3, St # 11, Main Bazar, Dhoop Sari,
Farah Amin, CNIC # 35202-0932781-6 Muhammad Amin 1,604 - 67 1,671 794 - 67 861 Car Ijarah
Sanda, Lahore.
55 Azeem, Address: Mohallah Band Road, Khokar Road, Badami
Azeem, CNIC # 35202-2446902-5 Malik Muhammad Latif 2,261 - 120 2,381 1,047 - 120 1,166 Car Ijarah
Bagh, Lahore.
56 Shahid Ali, Address: House # 486-B, Kocha Kakim Deen Androon,
Shahid Ali, CNIC # 35202-2534815-1 Khushi Muhammad 1,668 - 83 1,750 809 - 83 891 Car Ijarah
Moori Gate, Lahore.
57 Muhammad Saleem, Address: House # 09 Mohallah Tibbah Baba
Shahid Ali, CNIC # 35202-0859231-1 Muhammad Hanif 1,688 - 68 1,756 788 - 68 856 Car Ijarah
Farid, Lahore.
58 Khurram Sharif, Address: House # 14, Street # 174, Collage Park,
Khurram Sharif, CNIC # 352010-467485-3 Muhammad Sharif Khalio 1,644 - 64 1,708 749 - 64 813 Car Ijarah
Baghbanpura, Lahore.
59 Khalid Latif, Address: House # 1, Larex Scheme, Canal Bank,
Khalid Latif, CNIC # 31102-0596296-1 Abdul Latif Javed 1,566 - 64 1,630 687 - 64 751 Car Ijarah
Mughalpura, Lahore.
60 Muhammad Yasin, Address: House # 13, Block-C Ahmad Housing
Muhammad Yasin, CNIC # 36401-3277759-3 Mehmood Ahmed 1,482 - 64 1,546 651 - 64 715 Car Ijarah
Scheme, Near Taqwa Masjid, Lahore.
61 Liaqat Ali, Address: House # 14, Muslim Park Allama Iqbal Road,
Liaqat Ali, CNIC # 36601-2117091-7 Habib Ahmad 2,229 - 90 2,320 1,026 - 90 1,117 Car Ijarah
Ghari Shahu, Lahore.
62 Farrukh Bashir, Address: Abu Bakar Block, House # 1, St-5, Meraj
Farrukh Bashir, CNIC # 17201-7842413-9 Bashir Ullah Khan 1,485 - 78 1,562 703 - 78 781 Car Ijarah
Park Begum Kot, Shahdra, Lahore.
63 Faisal Altaf, Address: House # 55-H, Al-Hafiz Town, Near Margzar
Faisal Altaf, CNIC # 36302-0172000-3 Altaf Hussain 2,503 - 190 2,692 552 - 190 742 Car Ijarah
Colony, Lahore.
64 Muhammad Kashif Siddique, Address: House # 04, Khalid Street, Sheikh Muhammad
Muhammad Kashif Siddique, CNIC # 35202-2787579-3 1,767 - 122 1,889 619 - 122 741 Car Ijarah
Near MCB Bank, Sanda Road, Lahore. Siddique
65 Ali Ahmed Siddiqui, Address: House # 5-5, St No. 11, Muslim Colony,
Ali Ahmed Siddiqui, CNIC # 35201-2719072-3 Zahoor Ahmad Siddiqui 2,820 - 135 2,955 1,176 - 135 1,311 Car Ijarah
Baghbanpura, Lahore.
66 Adil Maqsood, Address: H # 1, St # 5, Ram Garh, Mughalpura,
Adil Maqsood, CNIC # 35201-7930812-7 Maqsood Ahmad 2,244 - 85 2,329 1,060 - 85 1,146 Car Ijarah
Lahore.
67 Muhammad Zaman, Address: House # 13-C, Mohallah Taj Road,
Muhammad Zaman, CNIC # 35202-6504261-7 Muhammad Aslam 1,566 - 71 1,637 707 - 71 778 Car Ijarah
Usman Gunjh Badami Bagh, Lahore.
68 Muhammad Saeed Gull, Address: House # 698, Neelam Block, Allam
Muhammad Saeed Gull, CNIC # 35202-2571955-1 Gull Muhammad 2,264 - 142 2,406 843 - 142 985 Car Ijarah
Iqbal Town, Lahore .
69 Qaiser Abbas, Address: House # 04, Street # 15, Chaudry Park, Muhammad Anwar
Qaiser Abbas, CNIC # 35202-7446465-3 3,016 - 168 3,184 1,209 - 168 1,377 Car Ijarah
Rashid Road, Lohore. Jaffery
70 Ammad Mehmood ul Hassan Butt, Address: House # 118, Block-H,
Ammad Mehmood Ul Hassan Butt, CNIC # 35202-2036781-3 Mehmood Ul Hassan Butt 3,045 - 191 3,236 1,278 - 191 1,469 Car Ijarah
Sabzazar, Lahore.
71 Muhammad Arshad, Address: House # 74, St # 1, New Shadbagh,
Muhammad Arshad, CNIC # 35200-1569928-5 Muhammad Bashir 2,272 - 100 2,372 1,362 - 100 1,462 Car Ijarah
Jahangir Park, Lahore.
72 Muhammad Usman, Address: House # 192-2C2, Irfan Chowk Near
Muhammad Usman, CNIC # 35202-9588157-5 Tariq Mehmood 3,018 - 172 3,189 1,098 - 172 1,270 Car Ijarah
Butt Chowk, Township, Lahore.
73 Muhammad Raza, Address: House # 4/7A, St #14, Dilshad Street
Muhammad Raza, CNIC # 35201-8464103-1 Hafeez Nazeer 2,953 - 111 3,064 1,182 - 111 1,294 Car Ijarah
Shalamar Town, Lahore.

178
 (Rupees in ‘000)
Outstanding liabilities at January 1, 2016
Other
Name of individuals / partners / directors Principal Mark-up Total
S. No. Name and address of the borrower Father’s / Husband’s Name Total financial relief Product Name
(with CNIC No.) Principal Mark-up Others written-off written-off (9+10+11)
provided
(5+6+7)
1 2 3 4 5 6 7 8 9 10 11 12 13
74 Muhammad Mukhtar, Address: 392-F, Gulshan-e-Ravi, Lahore. Muhammad Mukhtar, CNIC # 35102-9099151-5 Hakim Ali 1,431 - 84 1,515 634 - 84 719 Car Ijarah
75 Syed Tashkeel Haider Rizvi, Address: House -303 Zenat Block, Syed Zaheer Mustafa
Syed Tashkeel Haider Rizvi, CNIC # 17301-2498932-5 1,579 - 58 1,637 701 - 58 759 Car Ijarah
Allama Iqbal Town, Lahore. Rizvi
76 Shafakat Ali, Address: H # 14-F, St No.174, College Park,
Shafakat Ali, CNIC # 35201-1556622-7 Muhammad Rafi 2,053 - 129 2,182 795 - 129 924 Car Ijarah
Baghbanpura, Lahore.
77 Abdul Razzaq, Address: House # 373 Block-B Sabzazar Scheme
Abdul Razzaq, CNIC # 35202-4236731-7 Muhammad Idrees 1,980 - 93 2,073 849 - 93 943 Car Ijarah
Multan Road, Lahore.
78 Sufyan Ali, Address: House # 12, Street # 32, Muslim Abad Noori
Sufyan Ali, CNIC # 35201-0384999-5 Malik Muhammad Bukhsh 1,476 - 76 1,552 687 - 76 763 Car Ijarah
Darbar Road, Fathe Garh, Lahore.
79 Tahir Naveed, Address: House # 8-B Ghousia Street # 48, Muhalla
Tahir Naveed, CNIC # 35201-9288576-3 Muhammad Shafi 4,588 - 393 4,981 1,292 - 393 1,685 Car Ijarah
Amratsari, Shalimar Town, Lahore.
80 Muhammad Farooq, Address: House # 202 Haydayat Ullah Block
Muhammad Farooq, CNIC # 36502-4638062-7 Muhammad Sadiq 2,972 - 178 3,150 1,168 - 178 1,346
Mustafa Town, Lahore.
82 Mahjuba Corporation, Address: House # 40. S.M. Maleh Road, (2nd Hafez Abu Syed Khan,
Al-Haj Md. Nazimuddin Khan NIC # N/A 24,690 973 - 25,663 24,690 17,162 - 41,852 MLPO
Floor), Tanbazar, Narayangang, Bangladesh. Amena Begum
83 Galaxy Enterprise, Address: 27, Bijoy Nagar, Suite C1 (1St Floor), Abul Qasem Sikder,
Al-Mamun Sikder, CNIC # 26916-4942010-5 3,688 - - 3,688 - 1,150 2,055 3,205 MLPO
Dhaka, Bangladesh. Rowshan Ara Begum
84 TuaHa Textile Limited, Address: Kabirpur Savar, Dhaka, Bangladesh. Md. Sorwar Hossain, CNIC # 26916-4945828-3 Late Sultan Hossain
Reheha Sorwar, CNIC # 26916-4945863-7 Md. Sorwar Hossain
Afroza Alam, CNIC # 26926-2066940-3 (Father)
Shahidul Alam, CNIC # 26926-2066940-2 Mr. Shahidul Alam
Abu Bakar Siddique, CNIC # 47985-2028715-2 (Husband) MLPO Long
304,350 52,652 - 357,002 - 43,394 96,017 139,411
Negar Sultana, CNIC # 26916-4946103-8 Late Abdul Bari Term
Late Sultan Hossain
Akon
Ehsanul Haq Mazumder
(Husband)
85 Valentine Sweaters Ltd, Address: House # 315 (Ground Floor), Road Kalilur Rahman Bhuiyan, CNIC # 19227-0602879-2 Ali Miah Bhuiyan
# 04 (East Side) DOHS Baridhara, Dhaka-1206, Bangladesh. Sultana Akhter, CNIC # 19227-0685597-2 and Abul Basher 3,515 533 - 4,048 - 1,184 2,292 3,476 MLPO Short Term
resepctively
86 Abdul Matin Sarker, Address: House # 07, Flat-C-1, Road # 51, Md. Abdul Matin Sarker, CNIC # 19523323019469309
Gulshan, Dhaka, Bangladesh.
Late Abdul Majid Sarker 3,705 217 - 3,922 - 688 - 688 MLPO Short Term
Address II: VIII-Markun, P.O-Monnonagar, Tongi, Station Road,
Tongi, Gazipur, Bangladesh.
87 Raja Safdar Mehmood, Address: House # 1-A, St # 38, I-8/2, Raja Safdar Mehmood, CNIC # 37405-0636197-3
Haji Muhammad Arif 469 197 - 666 78 583 - 661 Credit Card
Islamabad.
88 Natasha Sami, Address: House # 4-B, Old Firing Range Road, Main Natasha Sami, CNIC # 17301-4946784-2
Abdus Sami Khan 285 169 - 454 347 174 - 521 Credit Card
Bani Galla Road, Bani Galla, Islamabad.
89 Sarfraz Ahmed Malik, Address: House # 19-C, New Muslim Town, Sarfraz Ahmed Malik, CNIC # 35202-7416717-1
Malik Shah Din 383 194 - 577 386 253 - 639 Credit Card
Lahore.
90 Adnan Haider Zaidi, Address: House # 4-A, Street # 05, 17-Mile, Adnan Haider Zaidi, CNIC # 91509-0153735-7
Riaz Hussain Zaidi 517 362 - 879 517 362 - 879 Credit Card
Bara Kahu, Al-Wadi Society, Islamabad.
91 Saqib Rafay, Address: House # B-69, KDA Scheme-1, Near Saqib Rafay, CNIC # 42201-5529933-9
Abdur Rafay 460 563 - 1,023 148 563 - 711 Credit Card
Intelligence Office, Karachi.
92 Sheikh Mohammad Shafi, Address: House # 5-Canal Park, Gulberg Sheikh Mohammad Shafi, CNIC # 35202-1783443-5
Abdul Ghani 510 299 - 809 510 317 - 826 Credit Card
II, Lahore.
93 Mudassar Attique, Address: House # B-III/218, Street Mai Malangi, Mudassar Attique, CNIC # 34202-0238023-1
Muzafar Hussain 513 179 - 692 521 321 - 842 Credit Card
Mohallah Charaghpura, Lalamusa.
94 Karim Hassan Ali Chatoor, Address: House # 132, Block-A, Phase-I, Karim Hassan Ali Chatoor, CNIC # 35200-6742103-9
Hassan Ali Chatoor 457 115 - 572 457 285 - 742 Credit Card
DHA, Lahore.
95 Cornelius, Address: House # 150, Near The Little Delisht Montessori Cornelius, CNIC # 33301-4150156-5
Yousaf Masih 318 44 - 362 318 227 - 544 Credit Card
School, New Iqbal Town, Islamabad.
96 Pervez Shamsuddin Daredia, Address: House # Grand Residency-II, Pervez Shamsuddin Daredia, CNIC # 91509-0127060-9
3rd Floor, B-7, Suite 303, Street # 2, Bath Island, Near French Shamsuddin Haji Daredia 417 29 - 446 417 271 - 688 Credit Card
Embassy, Karachi.
97 Ehsan Ali, Address: House # 653, Block-G-4, Johar Town, Lahore. Ehsan Ali, CNIC # 35404-1782920-7 Nasr Ullah Khan 260 32 - 292 437 367 - 804 Credit Card
98 Muhammad Rashad Latif, Address: House # 68-A, Askari Housing Muhammad Rashad Latif, CNIC # 35202-8617884-3
Abdul Latif Piracha 355 212 - 567 463 224 - 687 Credit Card
Complex, Gulberg-III, Lahore.
99 Syed Muhammad Zain Zaidi, Address: House # D-T-95, Block-12, F.B. Syed Muhammad Zain Zaidi, CNIC # 42101-9791513-3 Syed Muhammad
207 14 - 221 260 404 - 664 Credit Card
Area. Near Noorani Masjid, Karachi. Salim Zaidi
100 Muhammad Akbar, Address: House # 282, St # 1, Gobindpura, Muhammad Akbar, CNIC # 33100-0815803-7
M.Salamat Ali 349 0 - 349 384 251 - 635 Credit Card
National Children School, Faisalabad.
101 Rafiq Hussain Khokhar, Address: House # L-3, Street # 5, Block -2, Rafiq Hussain Khokhar, CNIC # 42401-1053236-9
Muhammed Nazir 278 10 - 287 396 373 - 770 Credit Card
Gulistan-e-Johar, Near Saddin Gramar School, Karachi.
102 Liaqat Ali, Address: Bhatti Manzil, Nathay Khan general Store, Liaqat Ali, CNIC # 34601-0721520-7
Nastey Khan 337 0 - 337 399 242 - 640 Credit Card
Mohalla Haji Nurpura, College Road Daska.
103 Atif Mustafa, Address: House # 5-E-8/21, Nazimabad # 5, Near Atif Mustafa, CNIC # 42101-7774573-5
Ghulam Mustafa 230 - - 230 402 233 - 635 Credit Card
Abbasi Shaheed Hospital, Karachi.
104 Mahmood Ahmed, Address: House # 2, St. # 10, New Mozang, Opp Mahmood Ahmed, CNIC # 35202-1196217-9
Mian Zahoor 394 2 - 396 443 195 - 638 Credit Card
Oxford School, Lahore.
105 Naveed Ahmad Khokhar, Address: House # B-1-8-S-47, Allama Naveed Ahmad Khokhar, CNIC # 34102-0459039-5
Iqbal Road, Ghalla Mandi, Kamonke, Near Science Foundation Manzoor Ahmad Khokhar 545 12 - 557 530 308 - 838 Credit Card
School, Gujranwala.

179
 (Rupees in ‘000)
Outstanding liabilities at January 1, 2016
Other
Name of individuals / partners / directors Principal Mark-up Total
S. No. Name and address of the borrower Father’s / Husband’s Name Total financial relief Product Name
(with CNIC No.) Principal Mark-up Others written-off written-off (9+10+11)
provided
(5+6+7)
1 2 3 4 5 6 7 8 9 10 11 12 13
106 Asmat Ullah Address: Flat # 02,Opposite Muhammad Masjid, Near Asmat Ullah, CNIC # 54303-3288966-7
Firdost Khan 406 90 - 497 982 109 - 1,092 Auto Finance
Liaqat Bazar, Quetta.
107 Asia Begum, Address: House # 1-S.P Wasa Way Wala, P/O Haveli Asia Begum, CNIC # 35301-2586690-4
Zulifqar 239 159 - 398 1,252 194 - 1,446 Auto Finance
Lakha, Tehsil Depalpur Distt Okara.
108 Adnan Arshad, Address: House # 12/264 Bhatti Streetmohallah Adnan Arshad, CNIC # 34202-0925884-3
Arshad Ali 314 76 - 390 1,073 97 - 1,170 Auto Finance
Charghpura, Lalamusa
109 Muhammad Asghar Shaheen Address: Ward # 4, Bahawal Nagar Muhammad Asghar Shaheen, CNIC # 31101-7465406-3
Muhammad Idrees 597 31 - 629 598 75 - 674 Credit Card
Road, Dunga Bunga, Bahawal Nagar.
110 Sheikh Muhammad Tariq Ali, Address: House # Main Road, Madina Sheikh Muhammad Tariq Ali, CNIC # 31101-1656899-9
Sheikh Muhammad Aslam 24 13 - 37 619 - - 619 Credit Card
Town, Near Mobile Tower, Near Mobile Tower.
111 Muhammad Aleem, Address: House # 105, Street # 31 Bank Colony, Muhammad Aleem, CNIC # 35202-5366145-9
Muhamamd Ibrahim 57 38 - 95 1,119 139 - 1,258 Credit Card
Samanabad bank Colony, Samanabad.
112 Shafaqat Ali Address: House # 14-F, Street # 174, College Park,Near Shafaqat Ali, CNIC # 35201-1556622-7
Muhammad Rafi 62 63 - 125 1,399 191 - 1,591 Credit Card
Shalimar College, Baghbanpuranear Shalimar College, Baghbanpura.
113 Muhammad Qasim, Address: House # 269-E/2, Johar Town. Muhammad Qasim, CNIC # 54400-0524761-5 Ghulam Sarwar 113 87 - 200 1,459 282 - 1,742 Credit Card
Total 656,821 152,949 52,957 862,727 75,143 132,283 154,135 361,561

180
ANNEXURE - II
ISLAMIC BANKING BUSINESS

The bank is operating through 153 Islamic banking branches as at December 31, 2016 (December 31, 2015: 158 branches).

STATEMENT OF FINANCIAL POSITION Note 2016 2015

(Rupees in ‘000)
ASSETS

Cash and balances with treasury banks 10,191,942 9,516,305

Balances with and due from financial institutions 1,672,323 2,938,812
Lendings to financial institutions 27,997,227 12,610,451
Investments - net 38,670,241 59,424,549
Islamic financing and related assets A-II.1 & A-II.2 56,720,714 42,056,149
Operating fixed assets 2,128,031 2,285,906
Other assets 2,317,048 2,664,563
139,697,526 131,496,735
LIABILITIES

Bills payable 1,862,656 1,428,720

Borrowings 3,833,240 9,984,637
Deposits and other accounts
- Current Accounts 43,990,411 38,196,882
- Saving Accounts 53,988,674 51,824,143
- Term Deposits 18,038,671 14,714,498
- Others 428,262 429,421
Deposits from financial institutions - remunerative deposits 1,113,125 240,392
Deposits from financial institutions - non-remunerative deposits 1,867 1,946
Other liabilities 6,302,957 5,303,877
129,559,863 122,124,516
NET ASSETS 10,137,663 9,372,219

REPRESENTED BY

Islamic banking fund 1,800,000 1,800,000

Exchange equalisation reserve 878 (56)
Unappropriated / Unremitted profit (Head Office Current Account) 6,626,936 6,463,950
8,427,814 8,263,894
Surplus on revaluation of assets - net of tax 1,709,849 1,108,325
10,137,663 9,372,219

Remuneration to Shariah Advisor / Board 6,720 4,605

CHARITY FUND

Opening balance 176,557 131,543

Additions during the year
Received from customers on delayed payments & others 40,182 80,933
Non-shariah compliant income 9,524 1,295
Profit on charity saving account 6,958 8,527
56,664 90,755
Distribution of charity
Welfare Works (38,357) (16,397)
Health (38,850) (24,163)
Education (7,700) (5,181)
Payments / Utilization during the year (84,907) (45,741)
Closing balance 148,314 176,557

181
ANNEXURE - II
ISLAMIC BANKING BUSINESS

PROFIT & LOSS ACCOUNT 2016 2015

(Rupees in ‘000)

Income / return earned 7,332,961 7,808,779

Income / return expensed 3,476,563 3,725,082
Net income / return earned after depreciation 3,856,398 4,083,697

Provisions against non-performing loans and advances - net 216,554 109,353

Provision for diminution in the value of investments - net 2,114 13,828
Bad debts written off directly - -
218,668 123,181
Net income / return earned after provisions 3,637,730 3,960,516

Other income
Fee, commission and brokerage income 313,488 253,125
Dividend income 45,320 40,867
Income from dealing in foreign currencies 139,742 133,190
Gain on sale of securities - net 2,054 83,649
Unrealised gain on revaluation of investment classified as held for trading - -
Other income 87,370 91,983
Total other income 587,974 602,814
4,225,704 4,563,330
Other expenses
Administrative expenses 3,061,824 2,764,172
Provision against off-balance sheet obligations 304 -
Other charges 1,088 1,088
Total other expenses 3,063,216 2,765,260

Profit before taxation 1,162,488 1,798,070

182
ANNEXURE - II
ISLAMIC BANKING BUSINESS
Notes to the Annexure II For the year ended December 31, 2016

Note 2016 2015

(Rupees in ‘000)
A-II.1 Islamic Financing and Related Assets

Murabaha A-II.1.1 10,002,211 10,173,925

Ijarah A-II.1.2 7,912,045 7,220,136
Diminishing Musharakah A-II.1.3 709,981 506,584
Musharakah A-II.1.4 9,893,714 9,902,071
Running Musharakah A-II.1.5 10,424,504 3,153,938
Salam A-II.1.6 11,888,467 5,016,961
Istisna A-II.1.7 1,934,468 1,833,420
Falah Tijarah A-II.1.8 100,000 -
SBP Islamic Export Refinance Scheme A-II.1.9 2,889,840 3,410,839
Others A-II.1.10 965,484 838,275
56,720,714 42,056,149

A-II.1.1 Murabaha

Financing / Investments / Receivables 6,793,602 6,374,831

Advances 2,869,333 3,652,705
Inventory 867,834 716,596
Others (Provisions) (528,558) (570,207)
10,002,211 10,173,925

A-II.1.2 Ijarah

Financing / Investments / Receivables 152,401 176,280

Advances 614,708 408,452
Assets 7,414,547 6,875,617
Others (Provisions) (269,611) (240,213)
7,912,045 7,220,136

A-II.1.3 Diminishing Musharakah

Financing / Investments / Receivables 747,673 614,441

Advances 100,077 45,053
Others (Provisions) (137,769) (152,910)
709,981 506,584

A-II.1.4 Musharakah

Financing / Investments / Receivables 8,978,617 8,258,035

Advances 1,096,318 1,653,089
Others (Provisions) (181,221) (9,053)
9,893,714 9,902,071

A-II.1.5 Runnig Musharakah

Financing / Investments / Receivables 10,424,504 3,153,938

Advances - -
Others (Provisions) - -
10,424,504 3,153,938

183
 2016 2015
(Rupees in ‘000)
A-II.1.6 Salam

Financing / Investments / Receivables 11,927,367 4,989,061

Advances - 30,000
Inventory 8,000 -
Others (Provisions) (46,900) (2,100)
11,888,467 5,016,961

A-II.1.7 Istisna

Financing / Investments / Receivables 221,340 810,830

Advances 1,469,378 1,022,590
Inventory 243,750 -
1,934,468 1,833,420

A-II.1.8 Falah Tijarah

Financing / Investments / Receivables 50,000 -

Inventory 50,000 -
100,000 -

A-II.1.9 SBP Islamic Export Refinance Scheme

Financing / Investments / Receivables 2,889,840 3,410,839

Advances - -
Others (Provisions) - -
2,889,840 3,410,839

A-II.1.10 Others

Staff Loans 915,094 808,194

Staff Loans Inventory 48 208
Advance Against Musharakah Staff 63,415 46,320
Advance Against Ijarah Staff 8,472 2,709
Overdue Acceptances and FBP 1,802 12,452
Others (Provisions) (23,347) (31,608)
965,484 838,275

184
ANNEXURE - II
ISLAMIC BANKING BUSINESS
Notes to the Annexure II For the year ended December 31, 2016

A-II.2 Assets under Ijarah (IFAS-2 )

a) Brief description of the Ijarah arrangements

Ijarah contracts entered into by the Bank essentially represent arrangements whereby the Bank (being the owner
of assets) transfers its usufruct to its customers for an agreed period at an agreed consideration. The significant
ijarah contracts entered into by the Bank are with respect to vehicles, plant and machinery and equipment and
are for periods ranging from 3 to 5 years.

b) Movement in net book value of ijarah assets

2016
Asset categories
Vehicles - Vehicles - Plant &
Equipment Total
Consumer Corporate Machinery
----------------------------- (Rupees in ‘000) -----------------------------

At January 1, 2016
Cost 8,557,297 977,866 321,746 4,185 9,861,094
Accumulated depreciation (2,510,200) (314,461) (157,529) (3,287) (2,985,477)
Net book value 6,047,097 663,405 164,217 898 6,875,617

Year ended December 31, 2016

Opening net book value 6,047,097 663,405 164,217 898 6,875,617
Additions 1,130,853 491,971 373,043 - 1,995,867
Disposals
Cost (1,033,177) (23,238) (21,642) - (1,078,057)
Accumulated depreciation 967,859 93,294 43,752 - 1,104,905
(65,318) 70,056 22,110 - 26,848
Depreciation (1,201,642) (207,184) (74,959) - (1,483,785)
Closing net book value 5,910,990 1,018,248 484,411 898 7,414,547

At December 31, 2016

Cost 8,654,973 1,446,599 673,147 4,185 10,778,904
Accumulated depreciation (2,743,983) (428,351) (188,736) (3,287) (3,364,357)
Net book value 5,910,990 1,018,248 484,411 898 7,414,547

185
 2015
Asset categories
Vehicles - Vehicles - Plant &
Equipment Total
Consumer Corporate Machinery
----------------------------- (Rupees in ‘000) -----------------------------

At January 1, 2015
Cost 6,908,417 678,140 517,928 13,634 8,118,119
Accumulated depreciation (1,958,688) (372,301) (300,668) (11,859) (2,643,516)
Net book value 4,949,729 305,839 217,260 1,775 5,474,603

Year ended December 31, 2015

Opening net book value 4,949,729 305,839 217,260 1,775 5,474,603
Additions 3,043,051 593,396 78,256 - 3,714,703
Disposals
Cost (1,394,171) (293,670) (274,438) (9,449) (1,971,728)
Accumulated depreciation 735,275 166,450 188,863 8,437 1,099,025
(658,896) (127,220) (85,575) (1,012) (872,703)
Depreciation (1,286,787) (108,610) (45,724) 135 (1,440,986)
Closing net book value 6,047,097 663,405 164,217 898 6,875,617

At December 31, 2015

Cost 8,557,297 977,866 321,746 4,185 9,861,094
Accumulated depreciation (2,510,200) (314,461) (157,529) (3,287) (2,985,477)
Net book value 6,047,097 663,405 164,217 898 6,875,617

2016 2015
c) Future Ijarah payments receivable (Rupees in ‘000)

Not later than one year 1,485,310 1,377,350

Later than one year and not later than five years 5,929,237 5,498,267
7,414,547 6,875,617

186
ANNEXURE - II
ISLAMIC BANKING BUSINESS
PLS POOL MANAGEMENT

A-II.3 1. The pools, their key features and risk and reward characteristics.
The profit and loss sharing between the Rabbul Maal (depositor) and Mudarib (Bank - Islamic Banking Group) is
based upon the underlying principles of Mudaraba, where Bank also contributes its equity to general pool of
funds, and becomes the capital provider.
Currently Islamic Banking Group is managing following pools:
a) General Pool for Local Currency Depositors
b) FCY Pool for Foreign Currency (USD, GBP and EURO) depositors
c) FIs Pool for Treasury Purposes
d) IERS Pool for Islamic Export Refinance Scheme facilities
e) Islamic Banking Afghanistan Operations Pool

All the Mudaraba based Remunerative deposits shall be considered as an investment from Rabbul Maal in the pool,
along with IBG’s own share of equity, which is also commingled in the pool. The applications of these funds are
on Advances, Investments, and Placements for generating profits to be shared among the depositors as per the
Weightage system.
The IERS pool is maintained as per the guideline under SBP IERS Scheme.
The assets, liabilities, equities, income and expenses are segregated for each of the pool. No pool investment is
intermingled with each other. The risk associated with each pool is thus equally distributed among the pools.
2. Avenues / sectors where Mudaraba based deposits have been deployed.

2016 2015
(Rupees in ‘000)
Agribusiness 700,000 4,012,938
Automobile and transportation equipment 736,167 519,761
Chemical and pharmaceuticals 808,926 1,233,566
Cement 3,088,934 3,097,895
Communication 1,158,982 1,100,176
Electronics and electrical appliances 594,871 1,097,774
Educational institutes 94,826 24,102
Financial 657,104 -
Food and allied products 1,813,881 1,128,938
Glass and Ceramics 6,378 716
Ghee and Edible Oil 496,405 -
Iron / Steel 2,278,980 4,085,334
Paper and Board 40,152 -
Production and transmission of energy 6,920,701 6,409,509
Real Estate / Construction 24,053 116,311
Retail / wholesale trade 2,805,726 -
Rice processing and trading / wheat 1,073,060 1,982,075
Sugar 823,867 1,211,792
Shoes and leather garments 674,948 717,954
Sports goods 8,696 4,900
Surgical goods 8,877 9,755
Textile spinning 4,922,689 2,721,054
Textile weaving 1,356,453 1,406,655
Textile composite 4,250,640 3,156,685
Individuals 8,357,982 3,873,804
Others 14,204,821 5,150,546
Total Gross Islamic Financing and Related Assets 57,908,119 43,062,240
Total Gross Investments* 38,038,021 59,391,533
Total Islamic Placements 29,669,550 15,549,263
Total Invested Funds 125,615,690 118,003,036
* Mainly invested in GOP Ijarah Sukuks.

187
3. The major components of Profit distribution and charging of the expenses.

Profit is distributed among the Mudaraba deposits on the basis of underlying principles of weightage mechanism
which are announced before the beginning of the concerned period. Only direct attributable expenses such
as depreciation on ijarah assets, brokerage, CIB Charges, bad debts write off on advances and loss on sale of
investments etc are charged to the pool. Expenses of pool(s) do not include general and specific provisioning
created against non-performing financings and diminution in the value of investments.

4. The Bank managed the following general and specific pools during the year:

Profit rate
return
Percentage Amount of
Profit rate distributed
General Profit rate of Mudarib Mudarib
and weightage Mudarib to
Remunerative return Profit sharing ratio share Share
announcement share remunerative
Depositor’s Pools earned transferred transferred
period deposits
through Hiba through Hiba
(Savings and
fixed)
Mudarib Rabbul Maal (Rupees in (Rupees in
Share/Fee Share ‘000) ‘000)

PKR Pool Monthly 6.20% 38.33% 61.67% 1,638,065 2.97% 28.07% 441,994
USD Pool Monthly 0.73% 80.00% 20.00% 16,189 0.15% 4.32% 699
GBP Pool Monthly - 80.00% 20.00% 339 0.02% 15.66% 53
EUR Pool Monthly 0.25% 80.00% 20.00% 1,493 0.08% 0.04% 1
Foreign Operation
Pool (Afghanistan Bi-Annually - 50.00% 50.00% - - - -
branch - USD)

Profit rate
return
Percentage Amount of
Profit rate distributed
Profit rate of Mudarib Mudarib
and weightage Mudarib to
Specific pools return Profit sharing ratio share Share
announcement share remunerative
earned transferred transferred
period deposits
through Hiba through Hiba
(Savings and
fixed)

(Rupees in (Rupees in
Bank Share SBP Share
‘000) ‘000)
Islamic Export
Refinance (IERS) Pool Monthly 2.93% 76.84% 23.16% 229,289 Nil 1.52% 3,485

188
AUDITORS’ REPORT TO THE MEMBERS

We have audited the annexed consolidated financial statements comprising consolidated statement of financial position
of Bank Alfalah Limited and its subsidiary companies (the Group) as at 31 December 2016 and the related consolidated
profit and loss account, consolidated statement of comprehensive income, consolidated cash flow statement and
consolidated statement of changes in equity together with the notes forming part thereof, for the year then ended. We
have also expressed separate opinions on the financial statements of Bank Alfalah Limited and its subsidiary companies
namely Alfalah Securities (Private) Limited and Alfalah GHP Investment Management Limited. These financial statements
are responsibility of the Holding Company’s management. Our responsibility is to express an opinion on these financial
statements based on our audit.

Our audit was conducted in accordance with the International Standards on Auditing and accordingly included such tests
of accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the consolidated financial statements present fairly the financial position of Bank Alfalah Limited and its
subsidiary companies as at 31 December 2016 and the results of their operations for the year then ended.

February 23, 2017 KPMG Taseer Hadi & Co.

Karachi Chartered Accountants
Syed Iftikhar Anjum

189
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT DECEMBER 31, 2016

January 01,
Note 2016 2015 2015
(Restated) (Restated)
(Rupees in ‘000)

ASSETS

Cash and balances with treasury banks 6 74,071,394 62,368,827 50,515,645

Balances with other banks 7 9,498,787 16,583,138 12,334,368
Lendings to financial institutions 8 30,149,029 27,626,350 18,313,485
Investments - net 9 389,666,922 423,518,968 324,960,872
Advances - net 10 378,724,300 334,160,478 297,226,872
Operating fixed assets 11 18,216,937 17,317,691 15,796,592
Deferred tax assets 12 - - -
Other assets 13 19,115,471 21,840,305 24,810,965
919,442,840 903,415,757 743,958,799

LIABILITIES

Bills payable 14 12,886,990 9,733,929 11,758,155

Borrowings 15 178,710,629 172,393,198 55,232,916
Deposits and other accounts 16 640,854,225 640,137,161 605,956,904
Sub-ordinated loans 17 8,317,670 9,983,000 9,987,000
Liabilities against assets subject to finance lease - - -
Deferred tax liabilities 12 2,911,531 1,826,270 821,038
Other liabilities 18 14,836,925 15,249,463 14,635,222
858,517,970 849,323,021 698,391,235

NET ASSETS 60,924,870 54,092,736 45,567,564

REPRESENTED BY

Share capital 19 15,952,076 15,898,062 15,872,427

Reserves 15,895,652 14,164,120 12,338,026
Unappropriated profit 17,777,737 12,813,488 10,091,872
Total equity attributable to the equity holders of the Bank 49,625,465 42,875,670 38,302,325
Non-controlling interest 323,466 274,134 255,999
Surplus on revaluation of assets - net of tax 20 10,975,939 10,942,932 7,009,240
60,924,870 54,092,736 45,567,564

CONTINGENCIES AND COMMITMENTS 21

The annexed notes 1 to 46 form an integral part of these consolidated financial statements.

CHIEF EXECUTIVE OFFICER DIRECTOR DIRECTOR CHAIRMAN

190
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED DECEMBER 31, 2016

Note 2016 2015

(Rupees in ‘000)

Mark-up / return / interest earned 23 57,245,259 61,404,178

Mark-up / return / interest expensed 24 28,474,583 32,810,469
Net mark-up / interest income 28,770,676 28,593,709

Provision against non-performing loans and advances - net 10.5 1,082,506 2,150,209
Provision for diminution in the value of investments - net 9.25 100,766 136,691
Bad debts written off directly 10.6.1 - -
1,183,272 2,286,900
Net mark-up / interest income after provisions 27,587,404 26,306,809

Non mark-up / interest income

Fee, commission and brokerage income 5,121,885 4,570,382
Dividend income 479,251 349,963
Income from dealing in foreign currencies 25 1,120,736 1,379,097
Gain on sale of securities - net 26 1,519,335 1,534,994
Unrealised gain on revaluation of investments
classified as held for trading - net 9.27 109 229,063
Share of profit from associates 9.23.1 531,852 309,017
Other income 27 706,680 750,833
Total non mark-up / interest income 9,479,848 9,123,349
37,067,252 35,430,158

Non mark-up / interest expenses

Administrative expenses 28 23,708,444 22,119,740
(Reversal) / provision against off-balance sheet obligations 18.1 (7,508) 1,066
(Reversal) / provision against other assets 13.3 (106,138) 322,391
Other charges 29 118,399 329,789
Total non mark-up / interest expenses 23,713,197 22,772,986
13,354,055 12,657,172
Extra ordinary / unusual items - -
Profit before taxation 13,354,055 12,657,172

Taxation 30
- Current 4,729,131 5,036,065
- Deferred 1,123,431 (461,035)
- Prior years (437,633) 567,813
5,414,929 5,142,843
Profit after taxation 7,939,126 7,514,329

Profit attributable to:

Equity holders of the Bank 7,889,794 7,502,660
Non-controlling interest 49,332 11,669
7,939,126 7,514,329

(Rupees)

Basic earnings per share 31.1 4.95 4.72

Diluted earnings per share 31.2 4.92 4.72

The annexed notes 1 to 46 form an integral part of these consolidated financial statements.

CHIEF EXECUTIVE OFFICER DIRECTOR DIRECTOR CHAIRMAN

191
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2016

Note 2016 2015

(Rupees in ‘000)

Profit after taxation 7,939,126 7,514,329

Other comprehensive income

Items that are or may be reclassified subsequently to profit and loss account

Exchange differences on translation of net investments in foreign branches 11,054 210,501

Items that will never be reclassified to profit and loss account

Remeasurement of defined benefit plans 35.1.4 309,314 (199,200)

Related tax on remeasurement of defined benefit plans (108,260) 69,637
201,054 (129,563)
Share of Remeasurement of defined benefit plans of associate (499) (752)

Comprehensive income - transferred to statement of changes in equity 8,150,735 7,594,515

Attributable to:

Equity holders of the Bank 8,101,403 7,576,380

Non-controlling interest 49,332 18,135
Comprehensive income - transferred to statement of changes in equity 8,150,735 7,594,515

Components of comprehensive income not reflected in equity

Items that are or may be reclassified subsequently to profit and loss account

Surplus on revaluation of available for sale securities (59,396) 3,791,058

Related deferred tax liability 54,245 (1,346,452)
(5,151) 2,444,606
Share of surplus on revaluation on associates’ available for sale securities - 536
(5,151) 2,445,142

The annexed notes 1 to 46 form an integral part of these consolidated financial statements.

CHIEF EXECUTIVE OFFICER DIRECTOR DIRECTOR CHAIRMAN

192
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2016

Note 2016 2015

(Rupees in ‘000)
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation 13,354,055 12,657,172
Dividend income (479,251) (349,963)
Share of profit from associates - net of tax 9.23.1 (531,852) (309,017)
12,342,952 11,998,192
Adjustments
Depreciation 28 1,701,175 1,816,229
Amortisation 28 361,118 275,439
Provision against non-performing loans and advances - net 10.5 1,082,506 2,150,209
Provision for diminution in value of investments - net 9.25 100,766 136,691
(Reversal) / provision against off-balance sheet obligations 18.1 (7,508) 1,066
(Reversal) / provision against other assets 13.3 (106,138) 322,391
Unrealised gain on revaluation of investments
classified as held for trading - net 9.27 (109) (229,063)
Bad debts written-off directly 10.6.1 - -
Gain on sale of operating fixed assets - net 27 (55,294) (13,975)
Charge for defined benefit plan 35.1.4 260,795 290,282
3,337,311 4,749,269
15,680,263 16,747,461
(Increase) / decrease in operating assets
Lendings to financial institutions (11,944,621) (23,711,516)
Held for trading securities 3,891,325 2,363,062
Advances (45,646,328) (38,881,390)
Other assets (excluding advance taxation) 3,527,232 (56,111)
(50,172,392) (60,285,955)
Increase / (decrease) in operating liabilities
Bills payable 3,153,061 (2,024,226)
Borrowings 6,371,239 117,197,929
Deposits and other accounts 717,064 34,180,257
Other liabilities (146,734) 565,200
10,094,630 149,919,160
(24,397,499) 106,380,666
Gratuity paid 35.1.4 (260,795) (290,282)
Income tax paid (4,738,347) (3,066,039)
Net cash (used in) / generated from operating activities (29,396,641) 103,024,345

CASH FLOWS FROM INVESTING ACTIVITIES

Net investments in available for sale securities (28,968,156) (71,390,574)
Net investments in held to maturity securities 57,927,823 984,355
Investment in associated companies (8,481) (1,960,874)
Disposal of investment in associated companies 1,052,685 1,434,580
Proceed from disposal of investment in associated companies 106,249 168,887
Dividend income received 443,356 355,131
Investments in operating fixed assets (2,865,184) (1,981,066)
Sale proceeds of property and equipment disposed-off 11.4 113,393 25,424
Net cash generated from / (used in) investing activities 27,801,685 (72,364,137)

CASH FLOWS FROM FINANCING ACTIVITIES

Issuance of share capital 84,895 41,836
Redemption of sub-ordinated loans (1,665,330) (4,000)
Dividend paid (1,585,581) (3,165,079)
Net cash used in financing activities (3,166,016) (3,127,243)
Exchange difference on translation of the net investments in foreign branches 11,054 210,501

(Decrease) / increase in cash and cash equivalents (4,749,918) 27,743,466

Cash and cash equivalents at beginning of the year 93,382,609 65,539,265
Effects of exchange rate changes on cash and cash equivalents 244,080 343,958
93,626,689 65,883,223
Cash and cash equivalents at end of the year 32 88,876,771 93,626,689

The annexed notes 1 to 46 form an integral part of these consolidated financial statements.

CHIEF EXECUTIVE OFFICER DIRECTOR DIRECTOR CHAIRMAN

193
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2016

Capital Reserves Revenue Reserves

Exchange Employee Non

Share capital Share Statutory translation share option Unappro- Sub-total Controlling Total
premium reserve* reserve compensation priated profit Interest
reserve
---------------------------------------------------------------------(Rupees in ‘000)---------------------------------------------------------------------

Balance as at January 1, 2015 15,872,427 4,285,556 6,636,342 1,362,465 53,663 10,091,872 38,302,325 255,999 38,558,324
Changes in equity for 2015
Total comprehensive income

Profit after taxation - - - - - 7,502,660 7,502,660 11,669 7,514,329

Effect of change in minority interest - - - - - (6,466) (6,466) 6,466 -

Other comprehensive income

Exchange difference on translation of net - - - 210,501 - - 210,501 - 210,501
investment in foreign branches
Remeasurement of defined benefit plans - - - - - (199,200) (199,200) - (199,200)

Related tax charge - - - - - 69,637 69,637 - 69,637

Share of Remeasurement of defined - - - - - (752) (752) - (752)
benefit plans of associate
- - - 210,501 - 7,365,879 7,576,380 18,135 7,594,515
Transfer to statutory reserve - - 1,504,562 - - (1,504,562) - - -

Transfer from surplus on revaluation

of operating fixed assets - net of tax - - - - - 34,784 34,784 - 34,784

Transactions with owners recorded directly in equity

Shares issued during the year 25,635 16,201 - - - - 41,836 - 41,836

Final cash dividend for the year ended

December 31, 2014 @ 20% - - - - - (3,174,485) (3,174,485) - (3,174,485)
Recognition of fair value of share based payments on - - - - 119,250 - 119,250 - 119,250
grant date (note 35.2)
Unamortised portion of deferred employee - - - - (24,420) - (24,420) - (24,420)
compensation expense
Transfer to Share Premium on issuance of - 27,891 - - (27,891) - - - -
shares under Stock Option Scheme
Balance as at December 31, 2015 15,898,062 4,329,648 8,140,904 1,572,966 120,602 12,813,488 42,875,670 274,134 43,149,804

Changes in equity for 2016

Total comprehensive income

Profit after taxation - - - - - 7,889,794 7,889,794 49,332 7,939,126

Effect of change in minority interest - - - - - - - - -

Other comprehensive income

Exchange difference on translation of net - - - 11,054 - - 11,054 - 11,054
investment in foreign branches
Remeasurement of defined benefit plans (note 35.1.4) - - - - - 309,314 309,314 - 309,314

Related tax charge - - - - - (108,260) (108,260) - (108,260)

Share of Remeasurement of defined - - - - - (499) (499) - (499)
benefit plans of associate
- - - 11,054 - 8,090,349 8,101,403 49,332 8,150,735

Transfer to statutory reserve - - 1,579,982 - - (1,579,982) - - -

Transfer from surplus on revaluation

of operating fixed assets - net of tax - - - - - 43,688 43,688 - 43,688

Transactions with owners, recorded directly in equity

Final cash dividend for the year ended

December 31, 2015 @ 10% - - - - - (1,589,806) (1,589,806) - (1,589,806)

Shares issued during the year 54,014 30,881 - - - - 84,895 - 84,895

Recognition of fair value of share based - - - - 132,026 - 132,026 - 132,026
payments on grant date (note 35.2)
Unamortised portion of deferred employee - - - - (22,411) - (22,411) - (22,411)
compensation expense
Transfer to Share Premium on issuance of - 56,597 - - (56,597) - - - -
shares under Stock Option Scheme

Balance as at December 31, 2016 15,952,076 4,417,126 9,720,886 1,584,020 173,620 17,777,737 49,625,465 323,466 49,948,931

* This represents reserve created under section 21(i)(a) of the Banking Companies Ordinance, 1962.

CHIEF EXECUTIVE OFFICER DIRECTOR DIRECTOR CHAIRMAN

194
NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
1 STATUS AND NATURE OF BUSINESS

1.1 The “Group” consists of:

Holding Company
Bank Alfalah Limited, Pakistan

Bank Alfalah Limited (the Bank) is a banking company incorporated in Pakistan on June 21, 1992 as a public limited
company under the Companies Ordinance, 1984. It commenced its banking operations on November 1, 1992. The
Bank’s registered office is located at B. A. Building, I. I. Chundrigar Road, Karachi and is listed on the Pakistan Stock
Exchange (formerly Karachi, Lahore and Islamabad Stock Exchanges). The Bank is engaged in banking services
as described in the Banking Companies Ordinance, 1962 and is operating through 475 conventional banking
branches including 18 sub branches (2015: 484 branches including 12 sub branches), 10 overseas branches (2015: 10
branches), 153 Islamic banking branches (2015: 158 branches) and 1 offshore banking unit (2015: 1 unit). The credit
rating of the Bank is disclosed in note 33 of the consolidated financial statements.

Percentage of Holding
2016 2015
Subsidiaries
Alfalah Securities (Private) Limited, Pakistan 97.91 percent 97.91 percent
Alfalah GHP Investment Management Limited, Pakistan 40.22 percent 40.22 percent

1.2 In addition the Group maintains investments in the following:

Investment in mutual funds established under trust structure not consolidated as

subsidiaries - Note 1.2.1

Alfalah GHP Value Fund Nil 27 percent

Alfalah GHP Cash Fund 38.85 percent 70.09 percent
Alfalah GHP Islamic Income Fund 0.14 percent 84.1 percent

Associates
Alfalah Insurance Limited 30 percent 30 percent
Sapphire Wind Power Company Limited 30 percent 30 percent
Alfalah GHP Money Market Fund 4.16 percent 2.71 percent
Alfalah GHP Income Multiplier Fund 13.17 percent 10.68 percent
Alfalah GHP Sovereign Fund 9.01 percent 5.22 percent
Alfalah GHP Income Fund Nil 0.43 percent
Alfalah GHP Islamic Stock Fund 6.45 percent 52.92 percent
Appollo Pharma Limited Nil 7.4 percent

1.2.1 These represent the Bank’s investment in mutual funds established under Trust structure, which are subsidiaries
of the Group under IFRS 10, but have not been considered for the purposes of consolidation in accordance with
the directives issued by the Securities and Exchange Commission of Pakistan (SECP) through S.R.O 56(I) /2016
dated January 28, 2016. The said SRO states that the requirements of consolidation under section 237 of the
Companies Ordinance 1984 and IFRS 10 ‘Consolidated Financial Statements’ is not applicable in case of investment
by companies in mutual funds established under Trust structure. Accordingly, for the purposes of Consolidated
Financial Statements of the Group, the investments in these funds have been accounted for as associates as
explained in note 2.4 to these consolidated financial statements.

195
 2 BASIS OF PRESENTATION

2.1 These consolidated financial statements represent financial statements of holding company - Bank Alfalah Limited
and its subsidiaries. The assets and liabilities of subsidiaries have been consolidated on a line-by-line basis and
the investment held by the holding company is eliminated against the corresponding share capital of subsidiaries
in these consolidated financial statements.

2.2 In accordance with the directives of the Federal Government regarding the shifting of the banking system to
Islamic modes, the State Bank of Pakistan has issued various circulars from time to time. Permissible form of
trade-related modes of financing includes 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 utilised 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 and notified under the provisions of the Companies Ordinance,
1984.

2.3 Key financial figures of the Islamic Banking branches are disclosed in Annexure II to the unconsolidated financial
statements.

2.4 Basis of consolidation

Subsidiaries are entities controlled by the Group. Control exists when the Group is exposed, or has rights, to
variable returns from its involvement with investee and has the ability to affect those returns through its power
over the investee.

These consolidated financial statements incorporate the financial statements of subsidiaries from the date that
control commences until the date that control ceases.

Associates are those entites in which the Group has significant influence, but not control, over the financial
and operating polices. Associates as well as investment in mutual funds established under trust structure (not
consolidated as subsidiaries) are accounted for using the equity method.

Non-controlling interests are that part of the net results of operations and of net assets of subsidiaries attributable
to interest which are not owned by the holding company. Material intra-group balances and transactions are
eliminated.

3 STATEMENT OF COMPLIANCE

3.1 These consolidated financial statements have been prepared in accordance with the approved accounting
standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial
Reporting Standards (IFRSs) issued by the International Accounting Standards Board and Islamic Financial
Accounting Standards (IFASs) issued by the Institute of Chartered Accountants of Pakistan as are notified under
the Companies Ordinance, 1984, the provisions of and directives issued under the Companies Ordinance, 1984,
Banking Companies Ordinance, 1962 and the directives issued by the Securities and Exchange Commission of
Pakistan (SECP) and the State Bank of Pakistan (SBP). In case the requirements differ, the provisions of and
directives issued under the Companies Ordinance, 1984, Banking Companies Ordinance, 1962 and the directives
issued by SECP and SBP shall prevail.

3.2 The State Bank of Pakistan has deferred the applicability of International Accounting Standard (IAS) 39, ‘Financial
Instruments: Recognition and Measurement’ and International Accounting Standard (IAS) 40, ‘Investment Property’
for banking companies through BSD Circular Letter No. 10 dated August 26, 2002 till further instructions.
Further, the Securities and Exchange Commission of Pakistan has deferred the applicability of International

196
 Financial Reporting Standard (IFRS) 7, ‘Financial Instruments: Disclosures’ on banks through its notification S.R.O
411(I)/2008 dated April 28, 2008. 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 prescribed by the State Bank of Pakistan through various circulars.

3.3 The State Bank of Pakistan through BPRD Circular No. 04 of 2015 dated February 25, 2015 has deferred applicability
of Islamic Financial Accounting Standard-3 for Profit & Loss Sharing on Deposits (IFAS-3) issued by the Institute
of Chartered Accountants of Pakistan and notified by the Securities & Exchange Commission of Pakistan (SECP),
vide their S.R.O. No. 571 of 2013 dated June 12, 2013 for Institutions offering Islamic Financial Services (IIFS). The
standard will result in certain new disclosures in these consolidated financial statements of the Group.

3.4 New and revised approved accounting standards not yet effective

The following standards, amendments and interpretations of approved accounting standards will be effective for
accounting periods beginning on or after January 01, 2017:

- Amendments to IAS 12 ‘Income Taxes’ are effective for annual periods beginning on or after January 01, 2017. The
amendments clarify that the existence of a deductible temporary difference depends solely on a comparison
of the carrying amount of an asset and its tax base at the end of the reporting period, and is not affected by
possible future changes in the carrying amount or expected manner of recovery of the asset. The amendments
further clarify that when calculating deferred tax asset in respect of insufficient taxable temporary differences,
the future taxable profit excludes tax deductions resulting from the reversal of those deductible temporary
differences. The amendments are not likely to have an impact on Group’s financial statements.

- Amendments to IAS 7 ‘Statement of Cash Flows’ are part of IASB’s broader disclosure initiative and are effective
for annual periods beginning on or after January 01, 2017. The amendments require disclosures that enable
users of financial statements to evaluate changes in liabilities arising from financing activities, including both
changes arising from cash flow and non-cash changes.

- Amendments to IFRS 2 - Share-based Payment clarify the accounting for certain types of arrangements and are
effective for annual periods beginning on or after January 01, 2018. The amendments cover three accounting
areas (a) measurement of cash-settled share-based payments; (b) classification of share-based payments
settled net of tax withholdings; and (c) accounting for a modification of a share-based payment from cash-
settled to equity-settled. The new requirements could affect the classification and/or measurement of these
arrangements and potentially the timing and amount of expense recognized for new and outstanding awards.
The amendments are not likely to have an impact on Group’s financial statements.

- Annual improvements to IFRS standards 2014-2016 cycle. The new cycle of improvements addresses
improvements to following approved accounting standards:

- Amendments to IFRS 12 ‘Disclosure of Interests in Other Entities’ (effective for annual periods beginning on or
after January 01, 2017) clarify that the requirements of IFRS 12 apply to an entity’s interests that are classified
as held for sale or discontinued operations in accordance with IFRS 5 – ‘Non-current Assets Held for Sale and
Discontinued Operations’. The amendments are not likely to have an impact on Group’s financial statements.

- Amendments to IAS 28 ‘Investments in Associates and Joint Ventures’ (effective for annual periods beginning
on or after January 01, 2018) clarifies that a venture capital organization and other similar entities may elect
to measure investments in associates and joint ventures at fair value through profit or loss, for each associate
or joint venture separately at the time of initial recognition of investment. Furthermore, similar election is
available to non-investment entity that has an interest in an associate or joint venture that is an investment
entity, when applying the equity method, to retain the fair value measurement applied by that investment entity
associate or joint venture to the investment entity associate’s or joint venture’s interests in subsidiaries. This
election is made separately for each investment entity associate or joint venture. The amendments are not likely
to have an impact on Group’s financial statements.

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 - IFRIC 22 ‘Foreign Currency Transactions and Advance Consideration’ (effective for annual periods beginning
on or after January 01, 2018) clarifies which date should be used for translation when a foreign currency
transaction involves payment or receipt in advance of the item it relates to. The related item is translated using
the exchange rate on the date the advance foreign currency is received or paid and the prepayment or deferred
income is recognized. The date of the transaction for the purpose of determining the exchange rate to use on
initial recognition of the related asset, expense or income (or part of it) would remain the date on which receipt
of payment from advance consideration was recognized. If there are multiple payments or receipts in advance,
the entity shall determine a date of the transaction for each payment or receipt of advance consideration. The
amendments are not likely to have an impact on Bank’s financial statements.

4 BASIS OF MEASUREMENT

4.1 Accounting convention

These consolidated financial statements have been prepared under the historical cost convention except that
certain fixed assets and other assets are stated at revalued amounts, and held for trading and available for sale
investments and derivative financial instruments are measured at fair value.

4.2 Functional and Presentation Currency

These consolidated financial statements are presented in Pakistani Rupees, which is the Group’s functional
and presentation currency. The amounts are rounded off to the nearest thousand rupees except as stated
otherwise.

4.3 Critical accounting estimates and judgements

The preparation of these consolidated financial statements is in conformity with approved accounting standards
as applicable in Pakistan requires management to make judgements, estimates and assumptions that affect the
reported amounts of assets and liabilities and income and expenses. It also requires management to exercise
judgement in application of its accounting policies. The estimates and associated 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 recognised
in the period in which the estimate is revised, if the revision affects only that period, or in the period of revision
and in future periods if the revision affects both current and future periods.

Significant accounting estimates and areas where judgements were made by the management in the application
of accounting policies are as follows:

i) classification and provisioning against investments (notes 5.4 and 9)

ii) classification and provisioning against non-performing loans and advances (notes 5.5 and 10)
iii) income taxes (notes 5.11 and 30)
iv) accounting for defined benefit plan and compensated absences (notes 5.12 and 35)
v) depreciation / amortisation of operating fixed assets (notes 5.6 and 11)
vi) impairment of assets (notes 5.9 and 5.10)

5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out
below. These have been consistently applied to all years presented, unless otherwise specified except for changes
mentioned in note 5.1 to these consolidated financial statements. In addition certain reclassification have been
made as required by SBP Circular No. 05 of 2016 (refer note 44.1).

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 5.1 On January 01, 2016, the State Bank of Pakistan (SBP) wide BPRD Circular No. 01 of 2016 issued ‘Regulations
for Debt Property Swaps’. In line with these regulations, the Bank, effective January 01, 2016 has changed its
accounting policy for recording of non-banking assets acquired in satisfaction of claims. Prior to this change in
accounting policy, non-banking assets acquired in satisfaction of claims were carried at cost less impairment, if
any. Had the accounting policy not been changed, Non-banking assets (included in Other Assets in the statement
of financial position) would have been lower by Rs. 36.94 million, surplus on revaluation of assets and deferred tax
liabilities would have been lower by Rs. 23.95 million and Rs. 12.99 million respectively, and profit after tax would
have been higher by Rs. 1.34 million.

5.2 Cash and cash equivalents

Cash and cash equivalents comprise of cash in hand, balances with treasury banks, balances with other banks
in current and deposit accounts, national prize bonds, any overdrawn nostro accounts and call lendings having
maturity of three months or less.

5.3 Lendings to / borrowings from financial institutions

The holding company enters into transactions of repo and reverse repo at contracted rates for a specified period
of time. These are recorded as under:

Sale of securities under repurchase agreements

Securities sold subject to a repurchase agreement (repo) are retained in these consolidated financial statements
as investments and the counter party liability is included in borrowings. The difference between the sale and
contracted repurchase price is accrued on a time proportion basis over the period of the contract and recorded
as an expense.

Purchase of securities under resale agreements

Securities purchased under agreement to resell (reverse repo) are not recognised in these consolidated financial
statements as investments and the amount extended to the counter party is included in lendings. The difference
between the purchase and contracted resale price is accrued on a time proportion basis over the period of the
contract and recorded as income.

5.4 Investments

5.4.1
Classification

The Group classifies its investments as follows:

Held for trading

These are investments, which are either acquired for generating a profit from short-term fluctuations in market
prices, interest rate movements, dealers’ margin or are securities included in a portfolio in which a pattern of
short-term profit taking exists.

Held to maturity

These are investments with fixed or determinable payments and fixed maturities and the Bank has the positive
intent and ability to hold them till maturity.

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 Available for sale

These are investments, other than those in subsidiaries and associates, which do not fall under the ‘held for
trading’ and ‘held to maturity’ categories.

Associates

Associates are all entities over which the Group has significant influence but not control. These are accounted
for using the equity method of accounting. The investment in associates are initially recognised at cost and the
carrying amount of investment is increased or decreased to recognise the investor’s share of the post acquisition
profits or losses in income and its share of the post acquisition movement in reserves.

Investments in mutual funds established under trust structure not consolidated as subsidiaries - Note 1.2.1

For the purposes of presentation, such investments have been disclosed as part of associates, and accounted for
at par with associates using the equity method of accounting.

5.4.2 Regular way contracts

All purchases and sales of investments that require delivery within the time frame established by regulation or
market convention are recognised at trade date, which is the date at which the Bank commits to purchase or sell
the investments except for money market and foreign exchange contracts which are recognised at settlement
date.

5.4.3 Initial recognition and measurement

Investments other than those categorised as ‘held for trading’ are initially recognised at cost. Transaction costs
associated with the investment are included in cost of investments. Investments classified as ‘held for trading’ are
initially recognised at fair value and transaction costs are expensed in the profit and loss account.

5.4.4 Subsequent measurement

In accordance with the requirements of State Bank of Pakistan, quoted securities other than those classified as
‘held to maturity’, investment in associates are subsequently remeasured to market value. Surplus / (deficit) arising
on revaluation of securities classified as ‘available for sale’ is included in the statement of comprehensive income
but is taken to a separate account shown in the statement of financial position below equity. Surplus / (deficit)
arising on revaluation of quoted securities which are ‘held for trading’ is taken to the profit and loss account.
Investments classified as ‘held to maturity’ are carried at amortised cost.

Unquoted equity securities, excluding investment in associates are valued at lower of cost and the break-up value.
Break-up value of equity securities is calculated with reference to the net assets of the investee company as per
the latest available audited financial statements.

5.4.5 Impairment

Impairment loss in respect of equity securities classified as available for sale, associates and held to maturity is
recognised based on management’s assessment of objective evidence of impairment as a result of one or more
events that may have an impact on the estimated future cash flows of the investments. A significant or prolonged
decline in fair value of an equity investment below its cost is also considered an objective evidence of impairment.
Provision for diminution in the value of debt securities is made as per the Prudential Regulations issued by the
State Bank of Pakistan. In case of impairment of available for sale securities, the cumulative loss that has been
recognised directly in surplus / (deficit) on revaluation of securities on the statement of financial position below

200
 equity is removed there from and recognised in the profit and loss account. For investments classified as held to
maturity and investment in associates, the impairment loss is recognised in the profit and loss account.

Gains or losses on disposal of investments during the year are taken to the profit and loss account.

5.5 Advances

Loans and advances

Loans and advances including net investment in finance lease are stated net of provision against non-performing
advances. Specific and general provisions against Pakistan operations are made in accordance with the requirements
of the Prudential Regulations issued by the State Bank of Pakistan from time to time. The net provision made /
reversed during the year is charged to profit and loss account and accumulated provision is netted-off against
advances. Provisions pertaining to overseas advances are made in accordance with the requirements of regulatory
authorities of the respective countries. Advances are written off when there are no realistic prospects of recovery.

Islamic Financing and Related Assets

The Group provides Islamic financing and related assets mainly through Murabaha, Ijarah, Diminishing Musharakah,
Musharakah, Running Musharakah, Salam, Istisna, and Export Refinance under SBP Islamic Export Refinance
Scheme. The purchases and sales arising under these arrangements are not reflected in these financial statements
as such but are restricted to the amount of facility actually utilised and the appropriate portion of profit thereon.
The income on such financings is recognised in accordance with the principles of Islamic Shariah. The Group
determines specific and general provisions against Islamic financing and related assets on a prudent basis in
accordance with the requirements of the Prudential Regulations issued by the SBP. The net provision made /
reversed during the year is charged to profit and loss account and accumulated provision is netted off against
Islamic financing and related assets. Islamic financing and related assets are written off when there are no realistic
prospects of recovery.

Net investment in Finance Lease

Leases where the Group transfers substantially all the risks and rewards incidental to the ownership of an asset
are classified as finance leases. A receivable is recognised on commencement of lease term at an amount equal to
the present value of the minimum lease payments, including guaranteed residual value, if any. Unearned finance
income is recognised over the term of the lease, so as to produce a constant periodic return on the outstanding
net investment in lease.

5.6 Operating Fixed assets

Tangible assets

Operating fixed assets except office premises are shown at historical cost less accumulated depreciation and
accumulated impairment losses, if any. Historical cost includes expenditures that are directly attributable to the
acquisition of the items. Office premises (which includes land and buildings) are stated at revalued amount less
accumulated depreciation.

Depreciation is charged to income by applying the straight-line method using the rates specified in note 11.2
to these consolidated financial statements. The depreciation charge for the year is calculated after taking into
account residual value, if any. The residual values, useful lives and depreciation method are reviewed and adjusted,
if appropriate, at each reporting date. Depreciation on additions is charged from the date on which the assets are
available for use and ceases on the date on which they are disposed off.

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 Maintenance and normal repairs are charged to income as and when incurred. Subsequent costs are included in
the asset’s carrying amount or are recognised as a separate asset, as appropriate, only when it is probable that
future economic benefits associated with the item will flow to the Bank and the cost of the item can be measured
reliably.

Office premises are revalued by professionally qualified valuers with sufficient regularity to ensure that the net
carrying amount does not differ materially from their fair value.

Surplus arising on revaluation is credited to the surplus on revaluation of operating fixed assets account. Deficit
arising on subsequent revaluation of operating fixed assets is adjusted against the balance in the above mentioned
surplus account as allowed under the provisions of the Companies Ordinance, 1984. The surplus on revaluation of
operating fixed assets to the extent of incremental depreciation charged on the related assets is transferred to
unappropriated profit.

Gains and losses on disposal of operating fixed assets are taken to the profit and loss account except that the
related surplus / deficit on revaluation of operating fixed assets (net of deferred taxation) is transferred directly
to unappropriated profit.

Intangible assets

Intangible assets having a finite useful life are stated at cost less accumulated amortisation and accumulated
impairment losses, if any. Such intangible assets are amortised using the straight-line method over their estimated
useful lives. The useful lives and amortisation method are reviewed and adjusted, if appropriate at each reporting
date. Intangible assets having an indefinite useful life are stated at acquisition cost, less impairment loss, if any.

Goodwill

Goodwill arising on the acquisition represents the excess of the consideration transferred over interest in net
fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree. For the purpose of
impairment testing , goodwill acquired in a business combination is allocated to each of the CGUs, or groups
of CGU, that is expected to benefit from the synergies of the combination. Goodwill impairment reviews are
undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment.
The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the
fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently
reversed.

5.7 Capital work in progress

Capital work-in-progress is stated at cost less accumulated impairment losses, if any. All expenditure connected
with specific assets incurred during installation and construction period are carried under this head. These are
transferred to specific assets as and when assets become available for use.

5.8 Non-current assets held for sale

The Group classifies a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered
principally through a sale transaction rather than through continuing use.

A non-current asset (or disposal group) held for sale is carried at the lower of its carrying amount and the fair
value less costs to sell. Impairment losses are recognised through the profit and loss account for any initial or
subsequent write down of the non-current asset (or disposal group) to fair value less costs to sell. Subsequent
gains in fair value less costs to sell are recognised to the extent they do not exceed the cumulative impairment
losses previously recorded. A non-current asset is not depreciated while classified as held for sale or while part of
a disposal group classified as held for sale.

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 5.9 Impairment

The carrying amount of assets is reviewed at each reporting date to determine whether there is any indication of
impairment of any asset or group of assets. If any such indication exists, the recoverable amount of such assets
is estimated and impairment losses are recognised immediately in the consolidated financial statements. The
resulting impairment loss is taken to the profit and loss account except for impairment loss on revalued assets,
which is adjusted against related revaluation surplus to the extent that the impairment loss does not exceed the
surplus on revaluation of that asset.

5.10
Ijarah Assets (IFAS 2)

Ijarah assets are stated at cost less depreciation and are disclosed as part of ‘Islamic financing and related assets’.
The rental received / receivable on Ijarah under IFAS 2 are recorded as income / revenue.

Depreciation

The group charges depreciation from the date of recognition of Ijarah of respective assets to Mustajir. Ijarah
assets are depreciated over the period of Ijarah using the straight line method.

Ijarah Rentals

Ijarah rentals outstanding are disclosed in ‘Islamic financing and related assets’ on the Statement of Financial
Position at amortized cost.

Impairment

Impairment of Ijarah assets is determined on the same basis as that of operating fixed assets. Impairment of Ijarah
rentals are determined in accordance with the Prudential Regulations of SBP. The provision for impairment of
Ijarah Rentals is shown as part of ‘Islamic financing and related assets’.

5.11 Taxation

Income tax expense comprises current and deferred tax. Income tax expense is recognised in the profit and loss
account except to the extent that it relates to items recognised directly in other comprehensive income in which
case it is recognised in statement of comprehensive income.

Current

Provision for current taxation is based on taxable income at the current rates of taxation after taking into
consideration available tax credit and rebates, if any. The charge for current tax also includes adjustments, where
considered necessary relating to prior years, which arises from assessments / developments made during the year.

Deferred

Deferred tax is recognised using the balance sheet liability method on all temporary differences arising between
the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for the taxation
purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of
the carrying amounts of assets and liabilities using the tax rates enacted or substantively enacted at the reporting
date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be
available and the credits can be utilised. Deferred tax asset is reduced to the extent that it is no longer probable
that the related tax benefits will be realised.

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 Deferred tax liability is not recognised in respect of taxable temporary differences associated with exchange
translation reserves of foreign branches, where the timing of the reversal of the temporary difference can be
controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

5.12 Employee benefits

a)
Defined benefit plan

The holding company operates an approved funded gratuity scheme covering eligible employees whose period
of employment with the holding company is five years or more. Contributions to the fund are made on the
basis of actuarial recommendations. Projected Unit Credit Method is used for the actuarial valuation. Actuarial
gains and losses are recognised immediately in other comprehensive income. Gratuity is payable to staff on
completion of the prescribed qualifying period of service under the scheme.

The subsidiary - Alfalah Securities operates an unfunded gratuity scheme for all its employees who have
completed the qualifying period as defined in the scheme. The cost of providing benefits under the defined
benefit scheme is determined using the “Projected Unit Credit Method”. Actuarial (remeasurement) gains and
losses are recognised as income or expense in full in the year in which they occur in other comprehensive
income.

b) Defined contribution plan

The Holding Company operates an approved provident fund scheme for all its regular permanent employees,
administered by the Trustees. Equal monthly contributions are made both by the holding company and its
employees to the fund at the rate of 8.33% of the basic salary in accordance with the terms of the scheme.

The subsidiary - Alfalah GHP Investment Management Limited operates an approved funded contributory
provident fund for all its permanent employees to which equal monthly contributions are made both by the
Company and the employees at the rate of 10% of basic salary.

c) Compensated absences

The Holding Company recognises the liability for compensated absences in respect of employees in the period
in which these are earned up to the balance sheet date. The provision has been recognised on the basis of
actuarial recommendations.

d) Employees Stock Option Scheme

The grant date fair value of equity settled share based payments to employees, determined as option discount
as allowed by Public Companies (Employee Stock Option Scheme) Rules 2001, is recognized as employee
compensation expense on a straight line basis over the vesting period with a consequent credit to equity
as employee stock option compensation reserve. The deferred employee stock option cost is shown as a
deduction from employee stock option compensation reserve. Option discount means the excess of market
price of the share at the date of grant of an option under a Scheme over exercise price of the option.

When an unvested option lapses by virtue of an employee not conforming to the vesting conditions after
recognition of an employee compensation expense in the profit and loss account, such employee compensation
expense is reversed in the profit and loss account equal to the amortized portion with a corresponding effect
to employee stock option compensation reserve equal to the un amortized portion.

When a vested option lapses on expiry of the exercise period, employee compensation expense already
recognized in the profit or loss is reversed with a corresponding reduction to employee stock option
compensation reserve.

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 When the options are exercised, employee stock option compensation reserve relating to these options is
transferred to share capital and share premium. An amount equivalent to the face value of related shares is
transferred to share capital. Any amount over and above the share capital is transferred to share premium.

5.13 Non-banking assets acquired in satisfaction of claim

Non-banking assets acquired in satisfaction of claims are stated at revalued amounts less accumulated depreciation
thereon. The valuation of properties acquired under this head is conducted regularly, so as to ensure that their net
carrying value does not materially differ from their fair value. Any surplus arising on revaluation of such properties
is transferred to the ‘surplus on revaluation of fixed assets’ account, while any deficit arising on revaluation is
charged to profit and loss account directly. In addition, all direct costs, including legal fees and transfer costs
linked with transferring the title of the property to bank is accounted as an expense in the profit and loss account.
Furthermore, revaluation surplus on such assets shall not be admissible for calculating bank’s Capital Adequacy
Ratio (CAR) and exposure limits under the Prudential Regulations. However, the surplus can be adjusted upon
realization of sale proceeds.

5.14 Borrowings / deposits and their cost

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

b) Borrowing costs are recognised as an expense in the period in which these are incurred using effective
mark-up / interest rate method to the extent that they are not directly attributable to the acquisition of or
construction of qualifying assets. Borrowing costs that are directly attributable to the acquisition, construction
or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) are
capitalised as part of the cost of that asset.

5.15 Deposits - Islamic Banking

Deposits are generated on the basis of two modes i.e. Qard and Modaraba.

Deposits taken on Qard basis are classified as ‘Current Account’ and Deposits generated on Modaraba basis are
classified as ‘Savings Account’ and ‘Fixed Deposit Accounts’.

No profit or loss is passed on to current account depositors.

Profits realised in investment pools are distributed in pre-agreed profit sharing ratio.

Rab-ul-Maal (Usually Customer) share is distributed among depositors according to weightages assigned at the
inception of profit calculation period.

Mudarib (Bank) can distribute its share of profit to Rab-ul-Maal upto a specified percentage of its profit.

Profits are distributed from the pool so the depositors (remunerative) only bear the risk of assets in the pool
during the profit calculation period.

Asset pools are created at the Bank’s discretion and the Bank can add, amend, transfer an asset to any other pool
in the interests of the deposit holders.

In case of loss in a pool during the profit calculation period, the loss is distributed among the depositors
(remunerative) according to their ratio of Investments.

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 5.16
Provisions

Provision for guarantee claims and other off balance sheet obligations is recognised when intimated and
reasonable certainty exists for the Bank to settle the obligation. Expected recoveries are recognised by debiting
the customer’s account. Charge to the profit and loss account is stated net-of expected recoveries.

Other provisions are recognised when the Bank has a present, legal or constructive, obligation as a result of past
events, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate
of the amount can be made. Provisions are reviewed at each reporting date and are adjusted to reflect the current
best estimate.

5.17 Acceptances

Acceptances comprise undertakings by the Bank to pay bills of exchange drawn on customers. The Bank expects
most acceptances to be simultaneously settled with the reimbursement from the customers. Acceptances are
accounted for as off balance sheet transactions and are disclosed as contingent liabilities and commitments.

5.18 Revenue recognition

Advances and investments

Mark-up income on loans and advances, debt securities investments and profit on murabaha and musharika
financing are recognised on a time proportion basis. Where debt securities are purchased at a premium or discount,
those premiums / discounts are amortised through the profit and loss account over the remaining maturity, using
the effective yield method.

Dividend income is recognised at the time when the Group’s right to receive the dividend has been established.

Lease financing

Financing method is used in accounting for income from lease financing. Under this method, the unrealised lease
income (excess of the sum of total lease rentals and estimated residual value over the cost of leased assets) is
deferred and taken to income over the term of the lease period so as to produce a constant periodic rate of return
on the outstanding net investment in the lease. Gains / losses on termination of leased contracts, documentation
charges, front end fee and other lease income are recognised as income when they are realised.

Unrealised lease income and mark-up / return on non-performing advances are suspended, where necessary, in
accordance with the requirements of the Prudential Regulations of the State Bank of Pakistan and recognised on
receipt basis.

Ijarah income is recognised on an accrual basis as and when the rental becomes due.

Morabaha income is recognised on deferred income basis.

Fee, commission and brokerage

Fee, commission and brokerage income except income from guarantees and bancaassurance business are
accounted for on receipt basis. Other income is recognised on accrual basis.

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 5.19 Foreign currency translation

Functional and presentation currency

Items included in these consolidated financial statements are measured using the currency of the primary economic
environment in which the Bank operates.

Transactions and balances

Transactions in foreign currencies are translated into Pakistani rupees at the exchange rates prevailing on the
transaction date. Foreign exchange gains and losses resulting from the settlement of such transactions and from
the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies
are recognised in the profit and loss account.

Forward contracts other than contracts with the State Bank of Pakistan relating to foreign currency deposits are
valued at forward rates applicable to the respective maturities of the relevant foreign exchange contract.

Forward purchase contracts with the State Bank of Pakistan relating to foreign currency deposits are valued at
the spot rate prevailing on the reporting date. The forward cover fee payable on such contracts is amortised over
the term of the contracts.

Commitments

Commitments for outstanding forward foreign exchange contracts are disclosed at contracted rates. Contingent
liabilities / commitments for letters of credit and letters of guarantee denominated in foreign currencies are
expressed in rupee terms at the exchange rates ruling on the reporting date.

Foreign operations

Assets and liabilities of foreign operations are translated into rupees at the exchange rate prevailing at the
reporting date. The results of foreign operations are translated at average rate of exchange for the year. Translation
gains and losses arising on revaluations of net investment in foreign operations are taken to Exchange Translation
Reserve in the statement of comprehensive income. These are recognised in the profit and loss account on
disposal.

5.20 Derivative financial instruments

Derivative financial instruments are initially recognised at fair value on the date at which the derivative contract
is entered into and subsequently remeasured at fair value using appropriate valuation techniques. All derivative
financial instruments are carried as assets where fair value is positive and as liabilities where fair value is negative.
Any changes in the fair value of derivative financial instruments are taken to the profit and loss account.

5.21 Off-setting

Financial assets and financial liabilities are off-set and the net amount reported in these consolidated financial
statements only when there is a legally enforceable right to set-off the recognised amount and the Bank intends
either to settle on a net basis, or to realise the assets and to settle the liabilities simultaneously. Income and
expense items of such assets and liabilities are also off-set and the net amount is reported in the financial
statements.

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 5.22
Dividend and appropriation to reserves

Dividend and appropriation to reserves, except appropriations which are required under the law, after the
reporting date, are recognised in the Bank’s unconsolidated financial statements in the year in which these are
approved.

5.23
Earnings per share

The Group presents basic and diluted earnings per share (EPS) for its shareholders. 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. Diluted EPS is determined by adjusting the profit or loss attributable
to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all
dilutive potential ordinary shares, if any.

5.24
Segment reporting

Operating segments are reported in a manner consistent with the internal reporting structure of the Bank.
Segmented performance is reported to the senior management of the Bank on monthly basis for the purpose of
strategic decision making and performance management.

a) Business segments

Retail banking

This includes loans, deposits, trading activity, wealth management and other banking transactions with retail
and middle market customers of the Bank.

Corporate banking

This comprises of loans, deposits, project financing, trade financing, investment banking and other banking
activities with Bank’s corporate and public sector customers.

Treasury

This segment includes liquidity management activites carried out through borrowing, lending and money
market operations. The investments of the Bank primarily towards government securities and risk management
activities via use of forward contracts & derivatives are reported here.

Consumer banking

This segment primarily constitutes consumer financing activities with individual customers of the Bank. Product
suite offered to these customers include credit cards, auto loans, housing finance and personal loans.

Islamic banking

This segment pertains to full scale Islamic Banking operations of the Bank.

International operations

This segment includes amounts related to Bank’s overseas operations, namely, commercial banking activities in
Bangladesh and Afghanistan, and wholesale banking activies in the Kingdom of Bahrain.

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 Retail Brokerage

It includes asset management activities mainly through the subsidiary Alfalah Securities (Private) Limited.

Asset Management

It includes asset management activities mainly through the subsidiary Alfalah GHP Investment Management
Limited.

Others

This includes the Bank’s merchant banking and head office related activities, and all other activities not readily
tagged to the segments above.

b)
Geographical segments

The group operates in three geographical regions being:

- Pakistan
- Asia Pacific (including South Asia)
- Middle East

Note 2016 2015

(Rupees in ‘000)
6 CASH AND BALANCES WITH TREASURY BANKS

In hand

Local currency
(including in transit 2016: Rs. 12.122 million, 2015: Rs. 6 million) 10,187,403 8,972,003

Foreign currencies
(including in transit 2016: Rs. 4.189 million, 2015: Rs. 7 million) 2,579,051 2,377,778

With State Bank of Pakistan in

Local currency current accounts 6.1 28,662,461 20,593,524

Foreign currency current accounts 6.2 2,553,016 3,232,623
Foreign currency deposit accounts 6.3 5,972,553 7,224,768

With other central banks in

Foreign currency current accounts 6.4 4,117,412 5,933,513

Foreign currency deposit accounts 6.4 678,906 656,196

With National Bank of Pakistan in

Local currency current account 19,292,758 13,305,048

National Prize Bonds 27,834 73,374

74,071,394 62,368,827

209
6.1 This includes statutory liquidity reserves maintained with the SBP under Section 22 of the Banking Companies
Ordinance, 1962.

6.2 As per BSD Circular No. 9 dated December 3, 2007, cash reserve of 5% is required to be maintained with the State
Bank of Pakistan on deposits held under the New Foreign Currency Accounts Scheme (FE-25 deposits).

6.3 Special cash reserve of 15% is required to be maintained with the State Bank of Pakistan on FE-25 deposits as
specified in BSD Circular No. 14 dated June 21, 2008. Profit rates on these deposits are fixed by SBP on a monthly
basis. The State Bank of Pakistan has not remunerated these deposit accounts during the year.

6.4 Deposits with other central banks are maintained to meet their minimum cash reserves and capital requirements
pertaining to the foreign branches of the Holding Company.

Note 2016 2015
(Rupees in ‘000)
7 BALANCES WITH OTHER BANKS

In Pakistan
On current accounts 352,952 618,033
On deposit accounts 7.1 1,079,717 29,625

Outside Pakistan
On current accounts 7.2 4,375,099 10,956,696
On deposit accounts 7.3 3,691,019 4,978,784
9,498,787 16,583,138

7.1 This represents funds deposited with various banks at profit rates ranging from 3.00% to 6.00% per annum (2015:
3.00% to 5.75% per annum).

7.2 This includes amount held in Automated Investment Plans. The balance is current in nature and on increase in the
balance above a specified amount, the Bank is entitled to earn interest from the correspondent banks at agreed
upon rates.

7.3 This includes placement of funds generated through foreign currency deposits scheme (FE-25), at interest rates
ranging from 1.00% to 5.50% per annum (2015: 1.00% to 6.00% per annum) having maturities upto March 2017
(2015: March 2016).

Note 2016 2015

(Restated)
(Rupees in ‘000)
8 LENDINGS TO FINANCIAL INSTITUTIONS

Call money lendings 8.1 5,306,590 15,265,899

Bai Muajjal 8.2 24,497,227 12,360,451
Repurchase agreement lendings 8.3 345,212 -
30,149,029 27,626,350

8.1 These represent lendings to financial institutions at interest rates ranging from 0.25% to 9.00% per annum (2015:
0.40% to 12.00% per annum) having maturities upto March 2017 (2015: November 2016).

210
8.2 This represents Bai Muajjal agreements entered into with State Bank of Pakistan (SBP) / other commercial banks,
whereby the Bank sold Sukuks having carrying value of Rs. 24,497 million on deferred payment basis. The rates of
return range from 5.62% to 5.97% per annum (December 2015: 6.94% to 8.26%), and these are due to mature by
June 2017 (2015: March 2016).

8.3 These represent short term lending to financial institutions against investement securities. These carry markup
rates upto 6.15% per annum (2015: Nil) with maturities upto January 2017 (2015: Nil).

8.3.1 Securities held as collateral against lending to financial institutions

2016 2015
Held by Further Total Held by Further Total
bank given as bank given as
collateral collateral
--------------------------------(Rupees in ‘000)--------------------------------

Market Treasury Bills 345,212 - 345,212 - - -

2016 2015
(Restated)
(Rupees in ‘000)
8.4 Particulars of lendings to financial institutions

In local currency 28,842,439 12,610,451

In foreign currencies 1,306,590 15,015,899
30,149,029 27,626,350

211
 9 INVESTMENTS - NET

9.1 Investments by types

2016 2015 (Restated)
Held by Given as Held by Given as
Total Total
Note Bank collateral Bank collateral
---------------------------------------(Rupees in '000)---------------------------------------
Held for trading securities
Market Treasury Bills 14,120,130 - 14,120,130 13,480,197 - 13,480,197
Pakistan Investment Bonds 20,207 - 20,207 2,423,862 - 2,423,862
Overseas Bonds 549,615 - 549,615 2,990,933 - 2,990,933
Sukuk Bonds - - - - - -
Fully paid up ordinary shares / units - Listed 740,776 - 740,776 197,998 - 197,998
15,430,728 - 15,430,728 19,092,990 - 19,092,990

Available for sale securities

Market Treasury Bills 38,584,821 38,584,821 78,391,879 494,563 78,886,442
Pakistan Investment Bonds 78,936,759 128,150,711 207,087,470 28,914,704 128,577,363 157,492,067
Fully paid up ordinary shares / units - Listed 6,223,937 - 6,223,937 5,000,753 - 5,000,753
Fully paid up ordinary shares / units - Unlisted 109,662 - 109,662 4,454,223 - 4,454,223
Term Finance Certificates 514,483 - 514,483 829,594 - 829,594
Preference Shares - Listed 108,835 - 108,835 108,835 - 108,835
Preference Shares - Unlisted 25,000 - 25,000 325,000 - 325,000
Redeemable Participating Certificates 501,938 - 501,938 - - -
Pakistan Euro Bonds 2,688,770 - 2,688,770 2,409,043 - 2,409,043
Overseas Bonds 7,819,677 4,839,993 12,659,670 4,804,159 - 4,804,159
Sukuk Bonds 38,663,395 5,023,937 43,687,332 33,280,442 - 33,280,442
174,177,277 138,014,641 312,191,918 158,518,632 129,071,926 287,590,558

Held to maturity securities

Market Treasury Bills 1,995,857 - 1,995,857 - - -
Pakistan Investment Bonds 31,793,773 - 31,793,773 66,180,991 - 66,180,991
Other Federal Government Securities - Bai Muajjal - - - 26,002,520 - 26,002,520
Term Finance Certificates 524,266 - 524,266 524,266 - 524,266
Pakistan Euro Bonds 706,255 - 706,255 3,347,785 - 3,347,785
Commercial Papers 661,557 - 661,557 266,822 - 266,822
Overseas Bonds 9,714,052 1,036,079 10,750,131 7,653,735 - 7,653,735
Sukuk Bonds 3,847,273 - 3,847,273 4,230,816 - 4,230,816
49,243,033 1,036,079 50,279,112 108,206,935 - 108,206,935

Investments in Associates and Mutual Funds established

under Trust Structure not considered for consolidation
Alfalah Insurance Limited 282,909 - 282,909 241,560 - 241,560
Sapphire Wind Power Company Limited 1,221,237 - 1,221,237 1,006,054 - 1,006,054
Alfalah GHP Money Market Fund 57,287 - 57,287 54,415 - 54,415
Alfalah GHP Income Multiplier Fund 298,473 - 298,473 283,699 - 283,699
Alfalah GHP Sovereign Fund 253,490 - 253,490 423,475 - 423,475
Appollo Pharma Limited - - - 802,130 - 802,130
Alfalah GHP Income Fund 169,745 - 169,745 113,036 - 113,036
Alfalah GHP Islamic Income Fund 6,683 - 6,683 6,384 - 6,384
Alfalah GHP Value Fund - - - 187,684 - 187,684
Alfalah GHP Islamic Stock Fund 439,502 - 439,502 359,958 - 359,958
Alfalah GHP Cash Fund 534,264 - 534,264 540,918 - 540,918
3,263,590 - 3,263,590 4,019,313 - 4,019,313

Investments 242,114,628 139,050,720 381,165,348 289,837,870 129,071,926 418,909,796

Provision for diminution in the value of investments 9.25 (1,253,781) - (1,253,781) (5,519,811) - (5,519,811)

Investments (net of provisions) 240,860,847 139,050,720 379,911,567 284,318,059 129,071,926 413,389,985

Surplus on revaluation of held for trading securities - net 9.27 109 - 109 229,063 - 229,063

Surplus on revaluation of available for sale securities - net 20.2 7,677,435 2,077,811 9,755,246 9,377,825 522,095 9,899,920

Total investments 248,538,391 141,128,531 389,666,922 293,924,947 129,594,021 423,518,968

9.1.1 Market value of held to maturity securities is Rs. 48,528 million (2015: Rs. 83,866 million) excluding non-government overseas bonds.

212
 9.2
Strategic Investments

Strategic investments are those which the Bank makes with the intention of holding them for a long term duration
and are marked as such at the time of investment. Disposals of such investments can only be made subject to the
fulfilment of the requirements prescribed by the SBP. Further, as per the SBP instructions in BPD Circular Letter
No. 16 of 2006 dated August 01, 2006, investments marked as strategic have a minimum retention period of 5
years from the original purchase date. However, these can be sold before the stipulated period with the prior
permission of the SBP.

Strategic Investments are restricted to and the same as those reflected in the Bank’s separate financial statements
and do not include investments resulting by way of consolidation of holding through subsidiaries.

Note 2016 2015
(Restated)
9.3 Investments by segments (Rupees in ‘000)

Federal Government Securities

- Market Treasury Bills 9.5 54,700,808 92,366,639
- Pakistan Investment Bonds 9.6 238,901,450 226,096,920
- Overseas Government Bonds 9.7 18,042,785 11,799,149
- Sukuk Bonds 9.8 41,567,768 31,096,239
- Pakistan Euro Bonds 9.9 3,395,025 5,756,828
- Commercial Papers 9.10 132,277 -
- Other Federal Government Securities - Bai Muajjal 9.11 - 26,002,520
356,740,113 393,118,295

Fully Paid up Ordinary Shares / Preference Shares /

Units / Certificates
- Listed companies / mutual funds 9.12 6,964,713 5,198,751
- Un-listed companies 9.13 109,662 4,454,223
- Preference Shares - Listed 9.14 108,835 108,835
- Preference Shares - Unlisted 9.15 25,000 325,000
7,208,210 10,086,809

Term Finance Certificates, Debentures, Bonds,

Notes and Participation Term Certificates
- Listed TFCs 9.16 99,900 99,940
- Un-listed TFCs 9.17 938,849 1,253,920
- Sukuk Bonds 9.18 5,966,837 6,415,019
- Commercial Papers 9.19 529,280 266,822
- Overseas Bonds 9.20 5,916,631 3,649,678
- Redeemable Participating Certificates 9.21 501,938 -
13,953,435 11,685,379

Investments in Associates and Mutual Funds established

under trust structure not considered for consolidation 9.22 3,263,590 4,019,313

Total investments 381,165,348 418,909,796

Provision for diminution in the value of investments 9.25 (1,253,781) (5,519,811)

Investments (net of provisions) 379,911,567 413,389,985

Surplus on revaluation of held for trading securities - net 9.27 109 229,063
Surplus on revaluation of available for sale securities - net 20.2 9,755,246 9,899,920

Total investments 389,666,922 423,518,968

213
9.4 Investments include certain approved / government securities which are held by the Holding Company to comply
with the Statutory Liquidity Requirement determined on the basis of the Holding Company’s demand and time
liabilities as set out under section 29 of the Banking Companies Ordinance, 1962.

9.5 Market Treasury Bills are for the periods of three months, six months and one year. The effective rates of profit on
Market Treasury Bills range between 5.85% to 6.21% per annum (2015: 6.26% to 7.99% per annum) with maturities
upto September 2017 (2015: October 2016).

9.6 Pakistan Investment Bonds (PIBs) are for the periods of three, five, seven, ten years and fifteen years. The rates
of profit range from 6.21% to 12.73% per annum (2015: 8.75% to 12% per annum) with maturities from July 2017
to July 2022 (2015: May 2016 to July 2022). These also include PIBs having face value of Nil (2015: Rs. 35 million)
pledged with the National Bank of Pakistan as security to facilitate Telegraphic Transfer discounting facility.

9.7 These represent Overseas Government Bonds issued by the Government of Bahrain, the Government of Kazakhistan,
the Government of Afghanistan, the Government of Bangladesh, the Government of Mexico, the Government of
Indonesia, the Government of Sri Lanka, the Government of Qatar, the Government of Saudi Arabia and the
Government of Oman amounting to USD 5 million (2015: USD 5 million), USD 3 million (2015: USD 3 million), AFN
2,338 million (2015: AFN 1,214 million), BDT 4,208 million (2015: BDT 6,605 million), EUR 0.5 million (2015: EUR 0.5
million), USD 2 million (2015: USD 2 million) and EUR 2.5 million (2015: Nil), USD 1.5 million (2015: Nil), USD 22 million
(2015: Nil), USD 19 million (2015: Nil) and USD 22 million (2015: Nil) respectively. The rate of profit on Government
of Bahrain bond is 5.50% (2015: 5.50%), Government of Kazakhistan bond is 3.88% (2015: 3.88%) and Government
of Afghanistan bond ranging from 1.80% to 6.67% per annum (2015: 1.80% to 6.70% per annum), Government of
Bangladesh bonds carry profit rate ranging from 6.62% to 12.55% per annum (2015: 8.50% to 12.48% per annum),
Government of Mexico bonds is 1.63% (2015: 1.63%), Government of Indonesia bonds ranging from 2.63% to 4.35%
(2015: 3.38%), Government of Sri Lanka bond is 5.75% (2015: Nil), Government of Qatar bond ranging from 2.38%
to 3.28% (2015: Nil), Government of Saudi Arabia bonds ranging from 2.38% to 3.25% (2015: Nil) and Government
of Oman bond is 4.75% (2015: Nil). The bonds are due to mature by March 2020 (2015: March 2020), October 2024
(2015: October 2024), December 2017 (2015: December 2016), November 2034 (2015: November 2034), March 2024
(2015: March 2024), January 2027 (2015: July 2025), January 2022 (2015: Nil), June 2026 (2015: Nil), October 2026
(2015: Nil), and June 2026 (2015: Nil) respectively.

9.8 These represent sukuk bonds of Rs. 1,381 million (2015: Rs. 1,790 million) issued by Water and Power Development
Authority (WAPDA) for a period of eight and ten years, ijarah sukuk of Rs. 30,126 million (2015: Rs. 27,451 million)
issued by the State Bank of Pakistan for a period of three years, sukuk bond issued of Rs. 2,600 million by Neelum
Jhelum Power Project and ijarah sukuk of USD 71.33 million (2015: USD 17.70 million) issued by the Government
of Indonesia, the Government of South Africa, the Government of Pakistan, Government of Turkey and Bahrain.
The rates of profit on these bonds range between 5.81% to 7.06% per annum (2015: 6.78% to 7.59% per annum),
between 5.45% to 6.10% per annum (2015: 5.89% to 6.15% per annum) and between 7.19% to 7.28% per annum
(2015: Nil) and 3.90% to 6.75% per annum respectively. These sukuk bonds are due to mature by October 2021,
March 2019, October 2026, and September 2024 respectively.

9.9 These represent Pakistan Euro Bonds of US Dollar 33.14 million (2015: US Dollar 55.05 million) issued by the
Government of Pakistan. These bonds carry interest between 7.25% to 8.25% per annum (2015: 7.13% to 8.25%
per annum) with maturities upto September 2025 (2015: September 2025).

9.10 These represent Commercial papers amounting to BDT 99.94 million (2015: Nil ), Interest rate on these commercial
papers is 2.97% per annum (2015: Nil) and are due for maturity on January 2017 (2015: Nil ).

9.11 This represents Bai Muajjal agreements entered into with Ministry of Finance (MoF), whereby the Bank sold Sukuks
having carrying value of Rs. 26,002 million were sold on deferred payment basis.

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9.12 Particulars of investments in listed companies / mutual funds include the following:
2016 2015 2016 2015
(Number of shares / (Rupees in ‘000)
certificates / units)
OIL AND GAS
2,275,000 800,000 Oil and Gas Development Corporation Limited 324,333 110,368
475,000 655,200 Pakistan Oilfields Limited 147,629 203,635
591,800 1,125,000 Pakistan Petroleum Limited 75,012 142,597
560,100 955,000 Pakistan State Oil Company Limited 209,845 350,923
140,000 213,000 Attock Petroleum Limited 74,552 113,732
200,000 - Hi-Tech Lubricants Limited 22,898 -
AGRIBUSINESS
592,200 - Agriauto Industries Limited 139,293 -
CHEMICALS AND PHARMACEUTICAL
1,773,800 1,144,600 Engro Corporation Limited 497,166 296,555
3,745,500 - Engro Fertilizer Limited 277,450 -
1,200,000 540,500 Fatima Fertilizer Company Limited 37,184 14,290
1,875,000 1,250,000 Fauji Fertilizer Company Limited 232,121 162,897
4,429,500 2,000,000 Fauji Bin Qasim Limited 232,669 111,594
300,000 - Abbot Laboratories (Pakistan) Limited 255,055 -
2,273,531 1,948,333 Agritech Limited 17,909 15,100
CONSTRUCTION AND MATERIALS
- 750,000 Attock Cement Company Limited - 138,493
1,200,000 - Fauji Cement Company Limited 44,363 -
2,191,400 2,250,000 D G Khan Cement Limited 322,308 285,827
997,700 828,500 Lucky Cement Limited 532,555 356,351
1,300,000 1,750,000 Amreli Steels Limited 69,969 89,250
550,000 - Avanceon Limited 19,416 -
851,300 - Cherat Cement Company Limited 128,283 -
128,900 - Cherat Packaging Limited 48,034 -
124,000 - Mughal Iron and Steel Industries Limited 11,810 -
2,722,000 - Pioneer Cement Limited 330,591 -
200,000 - Thal Limited 83,906 -
REAL ESTATE
41,622,117 71,003,617 Dolmen City Real Estate Investment Trust (REIT) 457,843 781,040
PERSONAL GOODS
- 1,090,100 Nishat Mills Limited - 119,233
100,250 153,750 Al Shaheer Corporation Limited 5,432 9,593
624,500 - Gul Ahmed Textile Mills Limited 34,007 -
250,000 - Nishat (Chunian) Limited 14,434 -
250,000 - Pak Elektron Limited 17,480 -
ELECTRICITY
6,116,700 5,391,000 The Hub Power Company Limited 553,530 424,458
1,942,500 2,325,000 Kot Addu Power Company Limited 148,452 175,968
4,000,000 4,475,000 Nishat (Chunian) Power Company Limited 132,117 147,806
2,500,000 2,650,000 Nishat Power Company Limited 106,994 111,650
- 3,703,706 Engro Powergen Qadirpur Limited - 126,735
5,540,000 - K-Electric Limited 51,055 -
221,000 - Altern Energy Limited 7,949 -
TELECOMMUNICATION
- 250,000 Pakistan Telecommunication Company Limited - 4,008
BANKS
891,700 841,700 Allied Bank Limited 88,485 83,782
5,500,000 5,449,000 Bank Al Habib Limited 226,069 220,770
1,227,200 925,000 MCB Bank Limited 301,077 230,466
1,800,000 1,300,000 United Bank Limited 299,826 210,949
1,775,000 700,000 Habib Bank Limited 331,519 145,681
1,800,720 1,800,720 First Dawood Investment Bank Limited 15,000 15,000
525,000 - National Bank of Pakistan Limited 39,093 -
FINANCIAL SERVICES
47,460 47,460 Visa Inc. - -
6,964,713 5,198,751

215
 9.13 Investments in unlisted companies

2016 2015 2016 2015

(Number of shares) (Rupees in ‘000)

572,531 572,531 Pakistan Export Finance Guarantee Agency Limited 5,725 5,725
Chief Executive: Mr. S.M. Zaeem
Break-up value per share: Rs. 0.5
Date of financial statements: June 30, 2010 (Audited)

24 24 Society for Worldwide Interbank Financial Telecommunication 4,096 4,096

Chief Executive: Mr. Gottfried Leibbrandt
Break-up value per share: Rs. 425,866 (2012: Rs. 330,035)
Date of financial statements: December 31, 2013 (Audited)

5,000,000 5,000,000 Al-Hamra Avenue (Private) Limited 50,000 50,000

Chief Executive: Mr. Habib Ahmed
Break-up value per share: Rs. 9.52
Date of financial statements: June 30, 2010 (Un-audited)

- 319,054,124 Warid Telecom (Private) Limited (Related party) note 9.13.1 - 4,366,796

2,223,452 - Pakistan Mobile Communication Limited (Related party) note 9.13.1 22,235 -
Chief Executive: Mr. Aamir Ibrahim
Break-up value per share: Rs. 15.52 (2015: Rs. 8.23)
Date of financial statements: September 30, 2016 (unaudited)

4,007,383 4,007,383 Pakistan Stock Exchange Limited (PSX) (note 9.13.2) 27,606 27,606
Managing Director: Mr. Nadeem Naqvi
Break-up value per share: Rs. 9.98 (2015: Rs. 10.17)
Date of financial statements: June 30, 2016 (Audited)
109,662 4,454,223

9.13.1 During the year, the existing shareholders of Warid Telecom (Private) Limited including the Bank transferred their
holding in Warid Telecom (Private) Limited to Pakistan Mobile Communications Limited (PMCL), in lieu of acquiring
an overall stake of 15 percent in PMCL. This development was in furtherance of the Acquisition Agreement dated
November 26, 2015.

Pursuant to the said transfer, the Bank has received 2,223,452 shares of Rs. 10 each in PMCL in lieu of its holding
in Warid Telecom (Private) Limited (pre-acquisition). As a result of this share exchange, the Bank has recorded the
shares acquired in PMCL while its investment in Warid Telecom (Private) Limited and the related provision held
thereagainst stands de-recognised.

The merger of PMCL and Warid Telecom (Private) Limited was approved by Islamabad High Court in December
2016.

9.13.2 This represents shares of Pakistan Stock Exchange Limited (PSX) held by Alfalah Securities (Private) Limited
acquired in persuance of corporisation and demutualization of PSX as a public company limited by shares. As per
the arrangements, the authorized and paid-up capital of PSX is Rs. 10 billion and Rs. 8.015 billion respectively with
a par value of Rs. 10 each. The paid-up capital of PSX is equally distributed among 200 members (termed as initial
shareholders of exchange after corporatization) of PSX by issuance of 4,007,383 to each initial shareholders in the
following manner:

216
 - 40 % of the total shares allotted (i.e. 1,602,953 shares) are transferred in the House Account of Central
Depository Company of Pakistan Limited (CDC) to each initial shareholder.

- 60% of the total shares (i.e. 2,404,430 shares) have been deposited in a sub-account in Company’s name
under PSX’s participant ID with CDC which will remain blocked until they are divested to strategic investor(s),
general public and financial institutions.

In the current year, the Securities and Exchange Commission of Pakistan (SECP) accorded its approval to
Pakistan Stock Exchange Limited (PSX) for issuing letter of acceptance to a Chinese Consortium for the
strategic sale of 40% of these blocked shares.

PSX vide their letter dated 29 December 2016 has informed Alfalah Securities (Private) Limited that 40%
shares (out of 60% of total shareholding in PSX), which were held in blocked form, have been sold to Chinese
Consortium by the Divestment Committee at an offer price of Rs. 28 per share. Subsequently, a formal signing
ceremony was held on 20 January 2017 to mark the signing of the Share Purchase Agreement between the
Chinese Consortium and the equity sale committee of PSX.

9.14 Investments in preference shares - Listed

2016 2015 2016 2015

(Number of shares) (Rupees in ‘000)

10,883,486 10,883,486 Agritech Limited 108,835 108,835

Chief Executive: Mr. Faisal Muzammil
Redemption: Any time after the issuance of preference shares
Break-up value per share: Rs. 12.51 (2014: Rs. 17.96)
Date of financial statements: December 31, 2015 (Audited)
108,835 108,835

9.15 Investments in preference shares - Unlisted

2016 2015 2016 2015

(Number of shares) (Rupees in ‘000)

- 120,000,000 Silk Bank Preference Shares - 300,000

2,500,000 2,500,000 Trust Investment Bank Limited 25,000 25,000

Chief Executive: Mr. Ahsan Rafique
Redemption: Any time after the issuance of preference shares
Break-up value per share: Rs. (17.60) (2015: Rs. (17.96))
Date of financial statements: June 30, 2016 (Audited)
25,000 325,000

217
9.16 Particulars of Term Finance Certificates - Listed 2016 2015
(Rupees in ‘000)

NIB Bank Limited - (2nd Issue) 99,900 99,940

20,000 (2015: 20,000) certificates of Rs. 5,000 each

Mark up: Average six months KIBOR + 115 basis points per annum with no floor.

Redemption: The TFC is structured to redeem 0.3 percent of principal semi-annually

in the first ninety months followed by remaining 99.70% on maturity
at the end of the ninety sixth month. The repayment obligations of the
issuer pursuant to the TFCs unsecured and sub-ordinated to all other
financial obligations of the issuer.

Maturity: June 2022

Rating: AA- (PACRA)
Chief Executive: Mr. Yameen Karai
99,900 99,940

9.17 Particulars of Term Finance Certificates - Unlisted

Askari Bank Limited 99,920 99,960

20,000 (2015: 20,000) certificates of Rs. 5,000 each

Mark up: Average six months KIBOR plus 120 basis points per annum

Redemption: TFC is structured to redeem 0.36% of the issue amount during the tenor
of the issue with 99.64% of the issue amount in year ten in 2 equal semi
annual instalments of 49.82% each. The TFCs shall be sub-ordinated
to the payment of the principal and profit to all other indebtness of
the issuer including deposits, and are not redeemable before maturity
without the prior approval of the State Bank of Pakistan.

Maturity: September 2024

Rating: AA+ (PACRA)
Chief Executive: Mr. Syed Majeedullah Hussaini

Faysal Bank Limited 74,850 149,700

30,000 (2015: 30,000) certificates of Rs. 5,000 each

Mark up: Average 6 month KIBOR plus 225 basis points per annum

Redemption: The instrument is structured to redeem 0.20 percent of principal semi-

annually in the first 60 months and remaining amount in 4 equal semi-
annual instalments of 24.95% each starting from 66th month. The
TFCs are sub-ordinated to all other indebtness of the issuer including
deposits.

Maturity: December 2017

Rating: AA (PACRA)
Chief Executive: Mr. Nauman Ansari

218
 2016 2015
(Rupees in ‘000)

Bank AL Habib Limited - 299,520

Agritech Limited 499,586 499,586

100,000 (2015: 100,000) certificates of Rs. 5,000 each

Mark up: Average six months KIBOR (Ask Side) + 175 basis point per annum (no
floor & no cap)
Redemption: Repayment will be made in stepped up instalments where 35 percent
of principal amount will be paid in the years 3 to 5 and remaining 65
percent will be paid in years 6 to 8.

Maturity: July 2017

Rating: Unrated
Chief Executive: Mr. Muhammad Faisal Muzammil

Zulekha Textile Mills Limited 24,680 24,680

300 (2015: 300) certificates of Rs. 100,000 each

Mark-up: Average Six Months KIBOR + 300 basis points per annum

Redemption: 10 equal semi-annual instalments commencing from the 24th months

from first draw down.

Maturity: October 2019

Rating: Unrated
Chief Executive: Shanzae Amjad

Azgard Nine Limited - Note 9.17.1 43,350 43,350

20,000 (2015: 20,000) certificates of Rs.5,000 each

Mark-up: Average Six months KIBOR (Ask Side) + 100 basis points per annum

Redemption: Principal will be repaid in 12 semi annual instalments with stepped

up repayment plan whereby 47 percent of principal amount will
be repaid in the years 3 to 6 and remaining 53 percent will be
repaid in the years 7 and 8.

Maturity: December 2017

Rating: Unrated
Chief Executive: Mr. Ahmed H. Shaikh

Azgard Nine Limited - Note 9.17.2 32,870 32,870

6,574 (2015: 6,574) certificates of Rs.5,000 each

Mark-up: Zero Rated
Principal to be repaid in 7 semi annual instalments starting
Redemption:
from March 2014
Maturity: March 2017
Rating: Unrated
Chief Executive: Mr. Ahmed H. Shaikh

219
 2016 2015
(Rupees in ‘000)

New Allied Electronics - Note 9.17.3 2,185 2,185

437 (2015: 437) certificates of Rs. 5,000 each

Mark up: Average three months KIBOR plus 275 basis points
Redemption: 17 equal quarterly instalments
Maturity: May 2011
Rating: Unrated
Chief Executive: Mr. Zeeshan Pervaiz Akhtar

Fauji Akber Portia Marine Terminals Limited (FAP) - Note 9.17.4 161,408 102,069

6 certificates of various PKR denominations (2015: 4 certificates of various PKR denominations)

Mark up: Zero rated
Redemption: Repayment will commence after the repayment of entire principal of
reduced STF facility of FAP and will be made in 3 un-equal semi-annual
instalments commencing from 2021.
Maturity: May 2022
Rating: Unrated
Chief Executive: Commodore (Retd) Pervaiz Ahmed Khan
938,849 1,253,920

9.17.1 In the year 2012, the Bank’s exposure in the TFCs of Azgard Nine Limited (ANL) amounting to Rs. 99.920 million
was restructured under a Debt / Asset Swap arrangement. As per the terms of the restructuring, the Bank received
1,616,036 shares of Agritech Limited (AGL) (valued at Rs. 35 per share) as partial settlement of the ANL’s TFC
exposure. In addition, the Bank also injected additional equity amounting to Rs. 11.631 million for acquisition of
additional 332,297 shares in AGL. Subsequent to this settlement, Bank’s exposure in the TFC of ANL has reduced
to Rs. 43.350 million (as reflected in note 9.17). This exposure in TFC is fully provided while investment in shares
has been held at fair value.

As per the terms of agreement, AGL shares shall be held by the respective trustees for the TFC issue in their name
and on behalf of the TFC Holders who shall be the beneficial owners of the subject shares in proportion to their
holdings. The Trustees of the TFC issue are authorised pursuant to shareholders investors agreement to hold the
said ordinary shares for and on behalf of TFC holders for a period of five years from the date of transfer. Hence,
1,616,036 shares received by the Bank are held by the trustees of the TFCs.

Further, under the terms of Investor’s Buy-Back Agreement entered into by the Bank in 2012, the strategic investor
issued a put option notice to the Bank in January 2016. The Bank being one of the financing investors has purchase
325,198 shares of AGL at a price of Rs. 35 per share.

9.17.2 This represents Zero Rated Term Finance Certificates of Azgard Nine Limited (ANL) received in settlement of
overdue mark-up outstanding on the actual TFC exposure of the Bank, amounting to Rs. 99.920 million. The
settlement was made as per the Investor Agreement entered into between ANL and the Bank. As at December 31,
2016, this investment is fully provided.

9.17.3 These represent TFCs of New Allied Electronics amounting to Rs. 2.185 million, received partially in lieu of the fully
impaired unlisted TFCs of First Dawood Investment Bank previously held by the Bank. As at December 31, 2016,
this investment is fully provided.

220
9.17.4 During the year 2016, the Bank received zero rated TFCs of Fauji Akbar Portia Marine Terminal Limited (FAP)
amounting to Rs. 59.339 million (2015: Rs. 51.034 million). These TFCs were received in settlement of overdue mark-
up instalments on reduced STF facility of FAP. The Bank will continue to receive TFCs in settlement of mark-up to
be accrued on semi-annual basis till May 2021. As at December 31, 2016, the exposure in the TFCs amounts to Rs.
161.408 million which stands fully provided.

9.18 Investments in sukuk bonds

Number of
Investee company Date of maturity Profit rate per annum 2016 2015
Certificates
(Rupees in ‘000)

Security Leasing Corporation Limited - II September 2022 6 months KIBOR plus 1.95% 35,000 52,350 52,350

BRR Guardian Modaraba December 2016 1 months KIBOR 20,000 36,177 58,750

Sitara Peroxide (Private) Limited August 2016 3 months KIBOR plus 1.00% 60,000 118,052 157,813

Liberty Power Tech Limited March 2021 3 months KIBOR plus 3.00% 100,000 297,132 356,674

Amreli Steel (Private) Limited December 2016 3 months KIBOR plus 2.5 % - - 95,000

Security Leasing Corporation Limited - I January 2022 3% Cash + 3% accrual 5,000 6,418 6,418

Quetta Textile Mills Limited September 2019 6 months KIBOR plus 1.50% 30,000 72,619 74,483

Pakistan Mobile Communication Limited December 2019 3 months KIBOR plus 0.88 % 340,000 1,700,000 1,700,000

Sui Southern Gas Company Limited October 2019 3 months KIBOR plus 0.4% 300,000 1,500,000 1,500,000

TF Varlik Kiralama AS April 2019 5.38% 317,005 317,005 318,711

Kuveyt Turk Katilim Bankasi June 2019 5.16% 522,993 522,993 523,705

Albaraka Turk Katilim Bankasi June 2019 6.25% 925,697 925,697 -

Sharjah International Bank May 2021 3.08% 418,394 418,394 1,571,115

5,966,837 6,415,019

9.19 These represent Commercial papers amounting to BDT 400 million (2015: BDT 200 million), Interest rates on these
commercial papers ranges between 7.75% to 9.50% per annum (2015: 10.25% per annum), and are due for maturity
upto April 2017 (2015: March 2016).

9.20 These represent overseas bonds amounting to US Dollar 52 million (2015: USD 30 million) and EUR 5 million (2015:
EUR 5 million) issued by TC ZIRRAT Bankasi A.S, Qatar National Bank, Turkey Halk Bankasi, RAK Funding Cayman
Limited, Turkey IS Bankasi A.S, African Finance Corporation, Abu Dhabi Commercial Bank, Turkiye Sinai Kalkinma
Bankasi AS, Burgan Senior SPC Limited, Union National Bank African Import Export, Turkiye Garanti Bankasi A.S
and Deutsche Bank respectively. Interest rates on these bonds range between, 2.18% to 5.00% per annum (2015:
1.57% to 5.00% per annum) and 1.13% to 3.38% per annum (2015: 1.13% to 3.38% per annum) and are due for
maturity upto, December 2021 (2015: June 2021), and March 2025 (2015: March 2025) respectively.

9.21 These represents redeemable participating certificates amounting to USD 4.8 million (2015: Nil) issued by Baltoro
Growth Fund, registered in Mauritius. The fund has a life of ten years and distributions would be made at the end
of the life.

221
9.22 Particulars of investments in associates and mutual funds established under trust structure not considered for
consolidation.
The paid up value of these shares / units is Rs. 10 unless otherwise stated.
2016 2015 2016 2015
(Number of shares / units) (Rupees in ‘000)
14,997,825 14,997,825 Alfalah Insurance Limited 282,909 241,560
Percentage of holding: 30% (2015: 30%)
Break-up value per share: Rs. 18.61 (2015: Rs. 16.07)
Date of un-audited financial statements: December 31, 2016
Chief Executive: Mr. Nasar us Samad Qureshi
97,812,317 97,812,317 Sapphire Wind Power Company Limited 1,221,237 1,006,054
Percentage of holding: 30% (2015: 30%)
Break-up value per share: Rs. 12.19 (2015: Rs. 11.14)
Date of un-audited financial statements: December 31, 2016
Chief Executive: Mr. Nadeem Abdullah
567,660 524,771 Alfalah GHP Money Market Fund 57,287 54,415
Percentage of holding: 4.16% (2015: 2.71%)
NAV per unit: Rs. 100.92 (2015: 103.69)
Date of reviewed financial statements: December 31, 2016
Management Company - Alfalah GHP Investment Management Limited
(Paid-up value of each unit is Rs. 100)
5,481,236 5,481,236 Alfalah GHP Income Multiplier Fund 298,473 283,699
Percentage of holding: 13.17% (2015: 10.68%)
NAV per unit: Rs. 54.45 (2015: Rs. 52.58)
Date of reviewed financial statements: December 31, 2016
Management Company - Alfalah GHP Investment Management Limited
(Paid-up value of each unit is Rs. 50)
2,340,809 3,976,926 Alfalah GHP Sovereign Fund 253,490 423,475
Percentage of holding: 10.67 % (2015: 5.22%)
NAV per unit: Rs.108.29 ( 2015: Rs. 106.48)
Date of reviewed financial statements: December 31, 2016
Management Company - Alfalah GHP Investment Management Limited
(Paid-up value of each unit is Rs. 100)
- 20,800,000 Appollo Pharma Limited - 802,130
1,496,542 1,034,037 Alfalah GHP Income Fund 169,745 113,036
Percentage of holding: 12.88% (2015: 7.18%)
NAV per unit: Rs. 113.42 (2014: Rs. 109.32)
Date of reviewed financial statements: December 31, 2016
Management Company - Alfalah GHP Investment Management Limited
(Paid-up value of each unit is Rs. 50)
64,663 62,274 Alfalah GHP Islamic Income Fund 6,683 6,384
Percentage of holding: 0.14 % (2015: 84.1%)
NAV per unit: Rs. 103.35 (2015: Rs. 104.35)
Date of reviewed financial statements: December 31, 2016
Management Company - Alfalah GHP Investment Management Limited
(Paid-up value of each unit is Rs. 50)
- 2,889,739 Alfalah GHP Value Fund - 187,684
5,590,077 5,590,077 Alfalah GHP Islamic Stock Fund 439,502 359,958
Percentage of holding: 6.45% (2015: 52.92%)
NAV per unit: Rs. 78.62 (2015: Rs. 64.39)
Date of reviewed financial statements: December 31, 2016
Management Company - Alfalah GHP Investment Management Limited
(Paid-up value of each unit is Rs. 50)
1,050,926 1,050,926 Alfalah GHP Cash Fund 534,264 540,918
Percentage of holding: 38.85 % (2015: 70.09%)
NAV per unit: Rs. 508.37 (2015: Rs. 514.71)
Date of reviewed financial statements: December 31, 2016
Management Company - Alfalah GHP Investment Management Limited
(Paid-up value of each unit is Rs. 500)

3,263,590 4,019,313

222
 2016 2015
(Rupees in ‘000)
9.23 Particulars of assets and liabilities of associates and mutual funds established
under trust structure not considered for consolidation.
Alfalah Insurance Limited
Date of un-audited financial statements: December 31, 2016
Assets 2,781,815 2,358,908
Liabilities 1,851,276 1,553,592
Revenue 173,803 180,158
Profit for the year 126,723 115,214
Sapphire Wind Power Company Limited
Date of un-audited financial statements: December 31 , 2016
Assets 13,634,295 13,041,994
Liabilities 9,658,325 9,408,801
Revenue 873,864 285,310
Profit for the year 155,593 116,553
Alfalah GHP Money Market Fund
Date of reviewed financial statements: December 31, 2016
Assets 1,399,008 2,028,461
Liabilities 20,981 18,783
Revenue 48,073 66,801
Profit for the six months period 36,852 55,933
Alfalah GHP Income Multiplier Fund
Date of reviewed financial statements: December 31, 2016
Assets 2,306,511 2,731,883
Liabilities 39,851 32,415
Revenue 83,746 120,263
Profit for the six months period 60,141 95,698
Alfalah GHP Sovereign Fund
Date of reviewed financial statements: December 31, 2016
Assets 2,440,650 8,181,233
Liabilities 64,362 63,938
Revenue 133,688 332,892
Profit for the six months period 54,916 280,920
Alfalah GHP Income Fund
Date of reviewed financial statements: December 31, 2016
Assets 1,340,145 1,623,353
Liabilities 22,087 48,363
Revenue 50,141 60,603
Profit for the six months period 31,455 57,313
Alfalah GHP Islamic Income Fund
Date of reviewed financial statements: December 31, 2016
Assets 4,850,249 127,877
Liabilities 11,356 1,837
Revenue 100,574 4,160
Profit for the six months period 128,231 2,481
Alfalah GHP Islamic Stock Fund
Date of reviewed financial statements: December 31, 2016
Assets 7,032,923 699,117
Liabilities 217,862 18,867
Revenue 1,190,543 56,222
Profit for the six months period 1,280,850 46,241

223
 2016 2015
(Rupees in ‘000)
Alfalah GHP Cash Fund
Date of reviewed financial statements: December 31, 2016
Assets 1,406,671 801,763
Liabilities 31,510 30,004
Revenue 28,077 33,271
Profit for the six months period 34,543 20,604

9.23.1 Movement in values of investments accounted for under equity method of accounting

The details of investments accounted for under equity method of accounting is as follows.

Alfalah Insurance Company Limited

Investment as at January 1 241,560 213,069
Remeasurement of defined benefit plan (499) (752)
Dividend received during the year - (5,311)
Share of profit 41,848 34,554
Balance as at December 31 282,909 241,560

Sapphire Wind Power Company Limited

Investment as at January 1 1,006,054 342,216
Investments made during the year - 633,071
Dividend received during the year - -
Share of profit 215,183 30,767
Balance as at December 31 1,221,237 1,006,054

Alfalah GHP Money Market Fund

Investment as at January 1 54,415 543,985
Purchased during the year 8,480 -
Dividend received during the year (8,480) -
Redeemed during the year - (500,000)
Share of profit 2,872 10,430
Balance as at December 31 57,287 54,415

Alfalah GHP Income Multiplier Fund

Investment as at January 1 283,699 386,907
Investment made during the year - 109,500
Redeemed during the year - (220,191)
Dividend received during the year (10,271) (23,284)
Share in reserves of associate (536) 536
Share of profit 25,581 30,231
Balance as at December 31 298,473 283,699

Alfalah GHP Sovereign Fund

Investment as at January 1 423,475 270,828
Purchased during the year 7,012 -
Investments made during the year - 220,529
Redeemed during the year (181,237) (76,228)
Dividend received during the year (18,602) (26,944)
Share of profit 22,842 35,290
Balance as at December 31 253,490 423,475

224
 2016 2015
(Rupees in ‘000)
Appollo Pharma Limited
Investment as at January 1 802,130 -
Investments made during the year - 790,400
Dividend received during the year - -
Divestment during the year (847,886) -
Share of profit 45,756 11,730
Balance as at December 31 - 802,130

Alfalah GHP Income Fund

Investment as at January 1 113,036 93,164
Investment made during the year 52,030 110,000
Redeemed during the year - (96,175)
Dividend received during the year (2,706) -
Share of profit 7,385 6,047
Balance as at December 31 169,745 113,036

Alfalah GHP Islamic Income Fund

Investment as at January 1 6,384 44,992
Investment made during the year 8,225 4,210
Redeemed during the year (8,051) (41,985)
Dividend received during the year (300) (2,966)
Share of profit 425 2,133
Balance as at December 31 6,683 6,384

Alfalah GHP Value Fund

Investment as at January 1 187,684 174,470
Dividend received during the year - (22,434)
Redeemed during the year (204,799) -
Share of profit 17,115 35,648
Balance as at December 31 - 187,684

Alfalah GHP Islamic Stock Fund

Investment as at January 1 359,958 328,011
Investment made during the year - -
Redeemed during the year - -
Dividend received during the year (45,320) (40,867)
Share of profit 124,864 72,814
Balance as at December 31 439,502 359,958

Alfalah GHP Cash Fund

Investment as at January 1 540,918 1,048,628
Investment made during the year - -
Dividend received during the year (32,925) (47,081)
Redeemed during the year - (500,001)
Share of profit 26,271 39,372
Balance as at December 31 534,264 540,918

Total 3,263,590 4,019,313

225
9.24 Quality of available for sale securities
Market value / Fair value Cost
Long / Rated by
2016 2015 2016 2015
Medium Term
----------------------Rupees in ‘000)---------------------- Credit Rating

Market Treasury Bills 38,574,968 78,961,247 38,584,821 78,886,442 (Unrated - Government Securities)

Pakistan Investment Bonds 213,763,528 166,465,955 207,087,470 157,492,067 (Unrated - Government Securities)

Term Finance Certificates

Askari Bank Limited 101,769 99,741 99,920 99,960 AA+ PACRA
NIB Bank Limited (2nd Issue) 101,034 98,941 99,900 99,940 AA- PACRA
Faysal Bank Limited 75,457 153,068 74,850 149,700 AA PACRA
Bank Al-Habib Limited - 330,930 - 299,520 AA+ PACRA
New Allied Electronics * Not Applicable Not Applicable 2,185 2,185 ------(Unrated)------
Fauji Akbar Portia Marine Terminals Limited Not Applicable Not Applicable 161,408 102,069 ------(Unrated)------
Azgard Nine Limited * Not Applicable Not Applicable 43,350 43,350 ------(Unrated)------
Azgard Nine Limited (Zero rated) * Not Applicable Not Applicable 32,870 32,870 ------(Unrated)------
278,260 682,680 514,483 829,594

*These Term Finance Certificates are quoted, however due to absence of trading their market value is not available. Adequate provision has
been made against these certificates.

Shares in Listed Companies / Certificates / Units

Agritech Limited 28,828 18,217 17,909 15,100 ------(Unrated)------
Allied Bank Limited 106,300 79,339 88,485 83,782 AA+ PACRA
Amreli Steels Limited 86,567 105,123 69,969 89,250 A PACRA
Attock Cement Pakistan Limited - 125,813 - 138,493 A+ JCR-VIS
Altern Energy Limited 9,116 - 7,949 - ------(Unrated)------
Abbot Laboratories (Pakistan) Limited 287,127 - 255,055 - ------(Unrated)------
Agriauto Industries Limited 212,002 - 139,293 - ------(Unrated)------
Attock Petroleum Limited 95,847 107,591 74,552 113,732 ------(Unrated)------
Bank Al Habib Limited 324,445 226,678 226,069 220,770 AA+ PACRA
Cherat Cement Company Limited 121,828 - 103,254 - A PACRA
Cherat Packaging Limited 43,566 - 48,034 - ------(Unrated)------
Dolmen City Real Estate Investment Trust (REIT) 452,432 761,869 457,843 781,040 RR1 JCR-VIS
Engro Fertilizer Limited 254,619 - 277,450 - AA- PACRA
Engro Corporation Limited 458,330 279,390 397,140 256,728 AA PACRA
Engro Powergen Qadirpur Limited - 126,593 - 126,735 ------(Unrated)------
Fatima Fertilizer Limited 44,268 22,365 37,184 12,613 AA- PACRA
Fauji Bin Qasim Limited 226,835 86,922 232,669 93,215 ------(Unrated)------
Fauji Cement Company Limited 49,588 - 40,218 - ------(Unrated)------
Fauji Fertilizer Company Limited 195,694 147,475 232,121 162,897 AA PACRA
First Dawood Investment Bank Limited 6,501 2,394 15,000 15,000 ------(Unrated)------
Kot Addu Power Company Limited 153,069 188,325 148,452 175,968 AA+ JCR-VIS
Lucky Cement Limited 779,634 358,904 452,197 306,277 ------(Unrated)------
DG Khan Cement Limited 443,460 332,078 281,352 285,827 ------(Unrated)------
Habib Bank Limited 485,019 140,084 331,519 145,681 AAA JCR-VIS
MCB Bank Limited 219,984 200,586 230,466 230,466 AAA PACRA
Nishat (Chunian) Power Company Limited 221,920 246,349 132,117 147,806 ------(Unrated)------
Nishat Mills Limited - 103,418 - 119,233 AA PACRA
Nishat Power Company Limited 160,225 142,252 106,994 111,650 A+ PACRA
Oil and Gas Development Corporation Limited 330,700 93,872 279,433 110,368 AAA PACRA
Pakistan Oilfields Limited 253,945 175,607 147,629 203,635 ------(Unrated)------
Pioneer Cement Limited 351,673 - 300,277 - A PACRA
Pakistan Petroleum Limited 111,365 137,036 75,012 142,597 ------(Unrated)------
Thal Limited 101,706 - 83,906 - ------(Unrated)------
Pakistan State Oil Company Limited 217,105 311,110 185,526 350,923 AA PACRA
The Hub Power Company Limited 648,269 478,732 449,037 350,018 AA+ PACRA
United Bank Limited 430,020 201,435 299,826 210,949 AAA JCR-VIS
Visa Shares 387,310 385,502 - - ------(Unrated)------
8,299,297 5,585,059 6,223,937 5,000,753

226
 Market value / Fair value Cost
2016 2015 2016 2015 Long / Rated by
Medium Term
----------------------Rupees in ‘000)----------------------
Credit Rating
Shares in Un-listed Companies
Pakistan Export Finance Guarantee Agency Limited Not Applicable 5,725 5,725 ------(Unrated)------
Society for Worldwide Interbank Financial
Telecommunication Not Applicable 4,096 4,096 ------(Unrated)------
Al-Hamra Avenue (Private) Limited Not Applicable 50,000 50,000 ------(Unrated)------
Warid Telecom (Private) Limited Not Applicable - 4,366,796 ------(Unrated)------
Pakistan Stock Exchange (PSX) formerly
Karachi Stock Exchange 68,927 40,073 27,606 27,606 ------(Unrated)------
Pakistan Mobile Communication Limited Not Applicable 22,235 - AA- PACRA
109,662 4,454,223
Preference Shares in Listed Companies
Agritech Limited Not Applicable 108,835 108,835 ------(Unrated)------

Preference Shares in Un-listed Companies

Silk Bank Preference Shares Not Applicable - 300,000 ------(Unrated)------
Trust Investment Bank Limited Not Applicable 25,000 25,000 ------(Unrated)------
25,000 325,000
Overseas Bonds
Kingdom of Bahrain Bond 545,314 533,639 553,251 563,025 BB+ Fitch
Kazakhistan Sovereign Bond 315,076 296,774 309,038 308,943 BBB Fitch
Qatar National Bank Finance Limited - 524,634 - 524,114 A+ S&P
State of Qatar 2026 1,010,354 - 1,035,677 - AA Fitch
Oman International Bond 2021 1,045,906 - 1,044,923 - BBB- S&P
Oman International Bond 2026 504,363 - 521,073 - BBB- S&P
Republic of Sri lanka 152,043 - 156,898 - B+ Fitch
Republic of Indonesia (2027) 156,959 - 156,261 - BBB- Fitch
Republic of Indonesia (2022) 52,536 - 52,179 - BBB- Fitch
Saudi International Bond 1,028,153 - 1,032,378 - AA- Fitch
Abu Dhabi Commercial Bank Cayman Limited 1,047,062 1,049,268 1,045,995 1,048,228 A+ Fitch
United Mexican State 53,781 44,572 55,069 53,922 BBB+ Fitch
Indonesia Government Bond 226,902 226,503 218,302 228,590 BBB- Fitch
Republic of Indonesia 2023 (Euro) 55,712 - 54,825 - BB+ S&P
Kingdom of Saudi Arabia 913,644 - 932,332 - AA- Fitch
Oman International Bond 2026 706,087 - 724,341 - BBB- S&P
Qatar 21 512,815 - 517,972 - AA Fitch
Qatar 26 202,221 - 207,291 - AA Fitch
TC Zirrat Bankasi A.S 257,677 258,114 260,908 261,087 BBB- Fitch
Turkiye Halk Bankasi 51,493 51,865 52,281 52,346 BBB- Fitch
Syndicate Bank - 53,557 - 52,371 - -
RAK Funding Cayman Limited 209,189 206,566 208,412 208,398 BBB+ Fitch
Turkiye IS Bankasi A.S 298,865 306,129 310,991 310,874 BBB- Fitch
Turkiye Garanti Bankasi A.S 330,617 344,622 326,014 342,365 BBB Fitch
Africa Finance Corporation 644,304 630,010 623,370 623,004 A3 Moody’s
Deutsche Bank 207,408 213,449 216,011 226,892 BBB+ S&P
Turkiey Sanai 48,965 - 51,945 - BBB- Fitch
Halk Bank 21 514,499 - 521,933 - BBB- Fitch
Burgan Senior SPC Limited 412,850 - 415,625 - A+ Fitch
Qatar National Bank 497,486 - 502,176 - A+ S&P
Union National Bank 540,718 - 552,199 - A+ Fitch
Pakistan Euro Bonds 2,790,198 2,482,952 2,688,770 2,409,043 B Fitch
15,333,197 7,222,654 15,348,440 7,213,202

Redeemable Participating Certificates

Baltoro Growth Fund 501,938 - 501,938 - ------(Unrated)------

227
 Market value / Fair value Cost
Long /
2016 2015 2016 2015 Rated by
Medium Term
----------------------Rupees in ‘000)---------------------- Credit Rating

Sukuk Bonds
Pakistan Sukuk Bond 19 964,535 927,157 909,084 910,044 B Fitch
Pakistan Sukuk Bond 21 4,273,644 - 4,183,940 - B Fitch
Ijarah Sukuk Bonds - 905,742 - 944,663 ------(Unrated)------
TF Varlik Kiralama AS 321,644 322,437 317,005 318,711 BBB Fitch
Kuveyt Turk Katilim Bankasi 534,917 539,254 522,992 523,705 BBB Fitch
Albaraka Turk Katilim Bankasi 923,623 1,562,521 925,697 1,571,115 BB- S&P
Sharjah International Bank 414,984 - 418,394 - A3 Moody’s
Pakistan International Sukuk 534,173 - 535,094 - B Fitch
Indonesia Sovereign 524,687 - 524,754 - BBB- Fitch
South Africa Sovereign 424,448 - 418,394 - BBB- Fitch
Turkey Sukuk 355,372 - 366,095 - BBB- Fitch
Kingdom of Bahrain 536,643 - 522,993 - BB+ Fitch
GoP - Ijara Sukuk XIV - 7,462,130 - 7,432,655 ------(Unrated)------
GoP - Ijara Sukuk XVI 21,021,100 20,244,608 20,519,468 20,018,400 ------(Unrated)------
GoP - Ijara Sukuk XVII 5,782,560 - 5,606,994 - ------(Unrated)------
GoP - Ijara Sukuk XVIII 4,080,400 - 4,000,000 - ------(Unrated)------
Neelam Jehlum Hydel Power Company 2,600,000 - 2,600,000 - AAA JCR-VIS
Wapda Sukuk III 1,267,973 1,411,426 1,214,286 1,457,143 ------(Unrated)------
Security Leasing Corporation Limited I Not Applicable Not Applicable 6,418 6,418 ------(Unrated)------
Security Leasing Corporation Limited II Not Applicable Not Applicable 23,105 23,105 ------(Unrated)------
Quetta Textile Mills limited Not Applicable Not Applicable 72,619 74,483 ------(Unrated)------
44,560,703 33,375,275 43,687,332 33,280,442

2016 2015
9.25 Particulars of provision for diminution in value of investments - net (Rupees in ‘000)

Opening balance 5,519,811 5,390,757

Charge for the year 100,766 136,691
Reversals during the year - -
100,766 136,691
Provision written off during the year (4,366,796) (7,637)
Closing balance 1,253,781 5,519,811

228
 2016 2015
(Rupees in ‘000)

9.26 Particulars of provision for diminution in value of investments

by type and segment

Available for sale securities

Listed companies / mutual funds
- Fully paid up ordinary shares / units
- First Dawood Investment Bank Limited 15,000 15,000

- Preference shares
- Agritech Limited 108,835 108,835

Unlisted companies
- Fully paid up ordinary shares of Rs. 10 each
- Pakistan Export Finance Guarantee Agency Limited 5,725 5,725
- Al-Hamra Avenue (Private) Limited 50,000 50,000
- Warid Telecom (Private) Limited (Related party) - 4,366,796
- Pakistan Mobile Communications Limited (Related party) 3,936 -

Unlisted securities
- Term finance certificates / sukuk bonds
- Azgard Nine Limited 76,220 76,220
- Security Leasing Corporation Limited I 6,418 6,418
- Security Leasing Corporation Limited II 23,105 23,105
- New Alied Electronics 2,185 2,185
- Fauji Akbar Portia Marine Terminals Limited 161,407 102,069
- Quetta Textile Mills Limited 72,619 37,242

- Preference shares
- Trust Investment Bank Limited 25,000 25,000

Held to maturity securities

Unlisted securities
- Term finance certificates / sukuk bonds
- Agritech Limited 499,586 499,586
- BRR Guardian Modaraba 36,177 34,062
- Security Leasing Corporation Limited 29,245 29,245
- Sitara Peroxide (Private) Limited 113,643 113,643
- Zulekha Textile Mills (formerly Khunja Textile Mills Limited) 24,680 24,680

1,253,781 5,519,811

229
9.27 Unrealised gain / (loss) on revaluation of investments classified as held for trading - net

Unrealised gain / (loss) Cost

2016 2015 2016 2015
--------------------- (Rupees in ‘000) ---------------------

Market Treasury Bills (3,790) (6,414) 14,120,130 13,480,197

Pakistan Investment Bonds (441) 4,060 20,207 2,423,862
Overseas Bonds (16,137) 229,460 549,615 2,990,933
Fully paid up ordinary shares / units - Listed 20,477 1,957 740,776 197,998
109 229,063 15,430,728 19,092,990

Note 2016 2015

(Restated)
(Rupees in ‘000)
10 ADVANCES - NET

Loans, cash credits, running finances, etc.

In Pakistan 309,127,177 278,766,376
Outside Pakistan 13,181,132 11,007,287
322,308,309 289,773,663
Net investment in finance lease
In Pakistan 10.2 4,181,047 3,638,627
Outside Pakistan - -
4,181,047 3,638,627

Islamic financing and related assets (gross) 10.3 57,908,118 43,062,240

Bills discounted and purchased (excluding market treasury bills)

Payable in Pakistan 5,033,339 6,186,509
Payable outside Pakistan 6,437,718 7,692,258
11,471,057 13,878,767
10.1 395,868,531 350,353,297
Provision against advances
Specific provision against non-performing loans and advances 10.5 (16,368,263) (15,452,915)
General provision against advances 10.5 (775,968) (739,904)
(17,144,231) (16,192,819)

378,724,300 334,160,478

10.1 Particulars of advances - gross of provisions

In local currency 362,264,908 307,320,918

In foreign currencies 33,603,623 43,032,379
395,868,531 350,353,297

Short term (upto one year) 249,583,708 204,669,071

Long term (over one year) 146,284,823 145,684,226
395,868,531 350,353,297

230
 10.2 Net investment in finance lease
2016 2015
Later than Later than
Not later Not later
one and less Over five one and less Over five
than one Total than one Total
than five years than five years
year year
years years
----------------------------------------------(Rupees in '000)-------------------------------------------------

Lease rentals receivable 501,660 2,568,669 55,185 3,125,514 361,008 2,399,850 - 2,760,858
Residual value 146,820 1,237,330 - 1,384,150 63,767 1,109,316 - 1,173,083
Minimum lease payments 648,480 3,805,999 55,185 4,509,664 424,775 3,509,166 - 3,933,941
Financial charges for
future periods (48,731) (276,485) (3,401) (328,617) (90,913) (204,401) - (295,314)
Present value of minimum
lease payments 599,749 3,529,514 51,784 4,181,047 333,862 3,304,765 - 3,638,627

10.3 These represents financing and related assets placed under shariah permisible modes and presented in note A-II.1
and A-II.2

10.4 Advances include Rs. 19,020 million (2015: Rs. 18,456 million) which have been placed under non-performing status
as detailed below:

2016
Classified advances Provision required Provision held
Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total
Category of Classification --------------------------------------------------- (Rupees in '000) -----------------------------------------------------

Other Assets Especially

Mentioned (Agri Financing) 149,224 - 149,224 4,318 - 4,318 4,318 - 4,318
Substandard 2,336,995 - 2,336,995 577,634 - 577,634 577,634 - 577,634
Doubtful 1,990,208 - 1,990,208 1,483,906 - 1,483,906 1,483,906 - 1,483,906
Loss 14,224,437 318,921 14,543,358 14,063,267 239,138 14,302,405 14,063,267 239,138 14,302,405
18,700,864 318,921 19,019,785 16,129,125 239,138 16,368,263 16,129,125 239,138 16,368,263

2015
Classified advances Provision required Provision held
Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total
Category of Classification --------------------------------------------------- (Rupees in '000) -----------------------------------------------------

Other Assets Especially

Mentioned (Agri Financing) 115,219 - 115,219 2,547 - 2,547 2,547 - 2,547
Substandard 2,052,587 54,595 2,107,182 524,432 70,795 595,227 524,432 70,795 595,227
Doubtful 2,554,443 5,506 2,559,949 1,502,617 1,587 1,504,204 1,502,617 1,587 1,504,204
Loss 13,111,084 562,325 13,673,409 12,936,545 414,392 13,350,937 12,936,545 414,392 13,350,937
17,833,333 622,426 18,455,759 14,966,141 486,774 15,452,915 14,966,141 486,774 15,452,915

231
 10.5 Particulars of provisions against non-performing loans and advances
2016 2015
Note Specific General Total Specific General Total
-------------------------------(Rupees in '000)-----------------------------

Opening balance 15,452,915 739,904 16,192,819 13,601,667 649,503 14,251,170

Exchange adjustment and other movements 1,258 (1,135) 123 31,406 3,300 34,706

Charge for the year 3,408,124 157,644 3,565,768 3,921,493 146,652 4,068,145
Reversals / recoveries during the year (2,362,817) (120,445) (2,483,262) (1,858,385) (59,551) (1,917,936)
1,045,307 37,199 1,082,506 2,063,108 87,101 2,150,209

Amounts written off 10.6.1 (131,217) - (131,217) (243,266) - (243,266)

Closing balance 16,368,263 775,968 17,144,231 15,452,915 739,904 16,192,819

10.5.1 The additional profit arising from availing the forced sales value (FSV) benefit - net of tax at December 31, 2016
which is not available for distribution as either cash or stock dividend to shareholders/ bonus to employees
amounted to Rs. 95.817 million (2015: Rs. 110.774 million).

10.5.2 General provision against consumer loans represents provision maintained at an amount equal to 1.5% of the
fully secured performing portfolio and 5% of the unsecured performing portfolio as required by the Prudential
Regulations issued by the State Bank of Pakistan. General reserve of at least equivalent to 1% of the secured and
performing SE portfolio and 2% of the unsecured and performing SE portfolio is also maintained as required
under Prudential Regulations for Small and Medium Enterprise Financing.

10.5.3
Particulars of provisions against advances

2016 2015
Specific General Total Specific General Total
------------------------------------(Rupees in ‘000)---------------------------------

In local currency 16,129,125 655,225 16,784,350 14,966,141 639,433 15,605,574

In foreign currencies 239,138 120,743 359,881 486,774 100,471 587,245
16,368,263 775,968 17,144,231 15,452,915 739,904 16,192,819

10.5.4 Although the Group has made provision against its non-performing portfolio as per the category of classification
of the loan, the Group holds enforceable collateral in the event of recovery through litigation. These securities
comprise of charge against various tangible assets of the borrower including land, building and machinery, stock
in trade etc.

2016 2015
10.6 Particulars of write-offs (Rupees in ‘000)

10.6.1 Against provisions 131,217 243,266

Directly charged to profit and loss account - -
131,217 243,266

10.6.2 Write offs of Rs. 500,000 and above 75,143 172,501

Write offs of below Rs. 500,000 56,074 70,765
131,217 243,266

232
10.7 Details of loans written-off of Rs. 500,000/- and above

In terms of sub-section (3) of Section 33A of the Banking Companies Ordinance, 1962 the statement in respect of
loans written-off or any other financial relief of five hundred thousand rupees or above allowed to a person(s)
during the year ended December 31, 2015 is given in Annexure-I to the unconsolidated financial statements.

Note 2016 2015
10.8 Particulars of loans and advances to directors, executives, (Rupees in ‘000)
associated companies, etc.

Debts due by directors, executives or officers of the Bank or any

of them either severally or jointly with any other persons

- Balance at beginning of the year 5,735,039 5,139,055

- Loans granted during the year 2,722,298 1,867,232
- Repayments during the year (2,183,888) (1,271,248)
- Balance at end of the year 6,273,449 5,735,039

Debts due by companies or firms in which the directors of the Bank

are interested as directors, partners or in the case of private
companies as members

- Balance at beginning of the year 1,499,410 901,426

- Loans granted during the year 5,374,930 3,099,590
- Repayments during the year (3,565,509) (2,501,606)
- Balance at end of the year 3,308,831 1,499,410

Debts due by other related parties

- Balance at beginning of the year 4,840,040 2,927,096

- Loans granted during the year 16,687,444 19,048,202
- Repayments during the year (16,796,079) (17,135,258)
- Balance at end of the year 4,731,405 4,840,040

Total 14,313,685 12,074,489

11 OPERATING FIXED ASSETS

Capital work-in-progress 11.1 775,408 704,981

Property and equipment 11.2 16,144,219 15,532,465
Intangible assets 11.3 1,297,310 1,080,245
18,216,937 17,317,691

11.1 Capital work-in-progress

Civil works 292,809 286,041

Equipment / intangibles 432,288 412,113
Advances to suppliers and contractors 54,015 18,239
Others 1,496 3,913
Provision against capital work-in-progress (5,200) (15,325)
775,408 704,981

233
11.2 Property and equipment
2016
Surplus on Depreciation/
Cost / Accumulated
Cost / revaluation / Accumulated Impairment Accumulated Net book
Additions / Revaluation Write Off depreciation Rate of
revaluation (adjustment Write Off depreciation for the Depreciation value as at
Description (disposals) / as at Accumulated as at depreciation
as at January against Cost as at January year / (on Reversed on December 31,
*adjustments December 31, Depreciation December 31, %
1, 2016 accumulated 1, 2016 disposal) / Revaluation 2016
2016 2016
depreciation) *adjustments
----------------------------------------------------------------------------(Rupees in '000)---------------------------------------------------------------------------- per annum

Office premises 4,893,362 751,091 - - 5,732,324 75,982 - - 82,593 5,649,731 2.5% - 5.5%
(36,519) - - - -
*124,390 - - *6,611 - -

Revaluation 5,399,467 - - 5,435,838 49,995 - 49,995 5,385,843 2.5% - 5.5%

(11,191) - - - -
*47,562 - - - - -
10,292,829 751,091 - 11,168,162 - 75,982 49,995 - 132,588 11,035,574
(47,710) - - -
*171,952 - *6,611 -

Lease hold improvements 4,777,757 160,912 - - 4,802,297 2,909,432 336,691 - - 3,200,899 1,601,398 10% - 20%
(1,516) (128,096) (1,471) (37,390)
*(6,760) *(6,363)

Furniture and fixtures 1,961,330 69,700 - - 1,998,853 1,292,140 160,287 - - 1,426,287 572,566 10% - 25%
(32,408) (26,332)
*231 *192

Office equipment 9,468,732 1,169,792 - - 10,422,935 6,870,097 1,012,334 - - 7,670,344 2,752,591 10% - 33%
(209,961) (205,693)
*(5,628) *(6,394)

Vehicles 360,402 144,518 - - 423,486 256,916 65,886 - - 241,396 182,090 25%

(81,501) (81,501)
*67 *95

26,861,050 2,296,013 - - 28,815,733 11,328,585 1,651,180 49,995 - 12,671,514 16,144,219

(373,096) - (128,096) (314,997) (37,390)
*159,862 *(5,859)

2015
Surplus on Depreciation/
Cost / Accumulated
Cost / revaluation / Accumulated Impairment Accumulated Net book
Additions / Revaluation Write Off depreciation Rate of
revaluation (adjustment Write Off depreciation for the Depreciation value as at
Description (disposals) / as at Accumulated as at depreciation
as at January against Cost as at January year / (on Reversed on December 31,
*adjustments December 31, Depreciation December 31, %
1, 2015 accumulated 1, 2015 disposal) / Revaluation 2015
2015 2015
depreciation) *adjustments
----------------------------------------------------------------------------(Rupees in '000)---------------------------------------------------------------------------- per annum

Office premises 5,158,963 11,157 - 4,893,362 187,629 86,278 (272,715) - 4,893,362 2.5% - 5.5%
- (272,715) - - - -
*(4,043) - - *(1,192) - -

Revaluation 3,917,799 - 1,643,150 5,399,467 107,966 53,516 (161,482) - 5,399,467 2.5% - 5.5%
- (161,482) -
-
9,076,762 11,157 1,643,150 10,292,829 295,595 139,794 (434,197) - 10,292,829
- (434,197) - -
*(4,043) *(1,192) -

Lease hold improvements 4,214,355 591,081 - (16,922) 4,777,757 2,573,351 360,878 - (16,922) 2,909,432 1,868,325 10% - 20%
- -
*(10,757) *(7,875)

Furniture and fixtures 2,094,569 75,649 - (176,145) 1,961,330 1,285,070 206,277 - (176,145) 1,292,140 669,190 10% - 25%
(14,238) (13,422)
*(18,505) *(9,640)

Office equipment 9,368,429 1,153,764 - (1,011,440) 9,468,732 6,916,993 1,020,988 - (1,011,440) 6,870,097 2,598,635 10% - 33%
(68,029) (64,033)
*26,008 *7,589

Vehicles 395,307 36,957 - (28,939) 360,402 234,444 88,292 - (28,939) 256,916 103,486 25%
(39,882) (33,245)
*(3,041) *(3,636)

25,149,422 1,868,608 1,643,150 (1,233,446) 26,861,050 11,305,453 1,816,229 (434,197) (1,233,446) 11,328,585 15,532,465
(122,149) (434,197) (110,700) -
*(10,338) *(14,754) -

* This includes cost and surplus of two properties transferred from non-banking assets acquired in satisfaction of claims

234
11.2.1 Include in cost of property and equipment are fully depreciated items still in use having cost of Rs. 7,648.44 million
(2015: 6,094 million)

11.2.2 Office premises were last revalued on December 31, 2015 on the basis of market values determined by independent
valuer M/s. Akbani & Javed Associates, M/s. Harvester Services (Private) Limited and M/s. Asif Associates (Private)
Limited. Had there been no revaluation, the net book value of the office premises would have been Rs. 5,649.731
million (2015: Rs. 4,893.362 million).

11.3 Intangible assets

2016
Cost Accumulated Amortisation
Additions/ As at Amortisation Write Off As at Book value as Rate of
As at January As at January
Description (deletions)/ Write Off Cost December 31, (deletions) / accumulated December 31, at December amortisation
1, 2016 1, 2016
*adjustment 2016 *adjustment depreciation 2016 31, 2016 %
--------------------------------------------------(Rupees in '000)---------------------------------------------------

Computer
software 2,366,634 579,747 - 2,944,380 1,320,995 361,118 - 1,681,676 1,262,704 20% - 33%
- -
*(2,001) *(437)

Goodwill 85,711 - - 85,711 56,031 - - 56,031 29,680

Membership
Card / DGCEX
(Note 11.3.2) 6,011 - (6,011) - 6,011 - (6,011) - -
-
Membership
Card PSX TRE 4,926 - 4,926 - - - 4,926

2,463,282 579,747 (6,011) 3,035,017 1,383,037 361,118 (6,011) 1,737,707 1,297,310

- -
*(2,001) *(437)

2015
Cost Accumulated Amortisation
Additions/ As at Amortisation Write Off As at Book value as Rate of
As at January As at January
Description (deletions)/ Write Off Cost December 31, (deletions) / accumulated December 31, at December amortisation
1, 2015 1, 2015
*adjustment 2015 *adjustment depreciation 2015 31, 2015 %
--------------------------------------------------(Rupees in '000)---------------------------------------------------

Computer
software 1,982,322 536,650 (151,690) 2,366,634 1,198,390 275,439 (151,690) 1,320,995 1,045,639 20% - 33%
(1,802) (1,802)
*1,154 *658

Goodwill 85,711 - - 85,711 56,031 - - 56,031 29,680

Membership
Card / DGCEX 6,011 - - 6,011 6,011 - 6,011 -
(Note 11.3.2)
-
Membership
Card PSX TRE 4,926 - - 4,926 - - - 4,926

2,078,970 536,650 (151,690) 2,463,282 1,260,432 275,439 (151,690) 1,383,037 1,080,245

(1,802) (1,802) -
*1,154 *658 -

235
11.3.1 Included in cost of intangible assets are fully amortized items still in use having cost of Rs. 856.61 million (2015:
Rs. 1,057 million)

11.3.2 The membership of Dubai Gold and Commodities Exchange has been terminated by the Board due to the non-
payment of annual membership fee and therefore this has been written off in the current year.

11.4 Details of disposals of operating fixed assets

Details of disposals of operating fixed assets having cost of more than Rs. 1,000,000 or net book value of
Rs. 250,000 or above are given below:

Accumulated Net book Sale

Description Cost Mode of disposal Particulars of purchaser
depreciation value proceeds
--------------------- (Rupees in ‘000) ---------------------
Lease hold Land & Building
Freehold Land 4,710 - 4,710 18,906 Negotiation Government of Punjab
Freehold Land 43,000 - 43,000 50,000 Negotiation Mr. Afzaal
47,710 - 47,710 68,906

Leasehold Improvements
Civil & Electrical Works 1,174 1,155 19 38 Bid M/s Shahbaz Haider
Items having book value of less
than Rs. 250,000 or cost of
less than Rs. 1,000,000 342 316 26 17 Various Various
1,516 1,471 45 55
Furniture and fixtures
Items having book value of less
than Rs. 250,000 or cost of
less than Rs. 1,000,000 32,408 26,332 6,076 4,521 Various Various
32,408 26,332 6,076 4,521
Computers
Server Machine 1,885 1,885 - - Insurance Claim M/s Alfalah Insurance
Server Machine 1,482 1,482 - 121 Bid M/s Ahsan & Brothers
Items having book value of less
than Rs. 250,000 or cost of
less than Rs. 1,000,000 26,187 25,280 907 2,250 Various Various
29,554 28,647 907 2,371
Office equipment
ATM 1,625 1,625 - 3 Bid M/s Star Network
ATM 3,637 3,637 - 6 Bid M/s Star Network
ATM 1,270 1,270 - 2 Bid M/s Star Network
ATM 1,138 1,136 2 447 Insurance Claim M/s Alfalah Insurance
Generator 2,050 2,050 - 659 Bid M/s Arsalan Brothers
Generator 1,243 696 547 290 Bid M/s Abdul Rasheed
Generator 2,455 2,455 - 740 Bid M/s F.F Trading Company
Generator 2,150 2,150 - 440 Bid M/s Pak Power Moves
Generator 1,192 1,192 - 153 Bid M/s Bismillah Insaf Scrap
Generator 1,145 1,145 - 282 Bid M/s Arsalan Brothers
Generator 1,013 1,013 - 273 Bid M/s Arsalan Brothers
Generator 1,013 1,013 - 273 Bid M/s Arsalan Brothers
Generator 1,200 1,200 - 631 Bid M/s Mars Engineering
Generator 1,200 1,200 - 631 Bid M/s Mars Engineering
Generator 1,180 1,180 - 309 Bid M/s Mars Engineering
Generator 1,200 1,200 - 631 Bid M/s Mars Engineering
Generator 1,070 1,070 - 309 Bid M/s Mars Engineering
Generator 1,112 1,022 90 690 Insurance Claim M/s Alfalah Insurance
Generator 1,195 1,195 - 257 Bid M/s Haji Muhammad Azam & Sons
Generator 2,713 2,713 - 794 Bid M/s MTS Garments Limited
POS Terminals 28,901 28,901 - - Trade In M/s Marshal Engg. & Electronics
Card Printer 1,800 1,800 - - Trade In M/s Crest Technologies
DVR 1,034 1,034 - 33 Bid M/s Shahbaz Haider
Electrical Panel 9,902 9,902 - 321 Bid M/s Shahbaz Haider
HVAC 63,980 63,980 - 2,037 Bid M/s Shahbaz Haider
Items having book value of less
than Rs. 250,000 or cost of
less than Rs. 1,000,000 43,989 41,267 2,722 6,330 Various Various
180,407 177,046 3,361 16,541

236
 Accumulated Net book Sale
Description Cost Mode of disposal Particulars of purchaser
depreciation value proceeds
--------------------- (Rupees in ‘000) ---------------------
Vehicles
Honda Civic 1,178 1,178 - 698 Bid Mr. M. Kamran Khan
Honda Civic 1,382 1,382 - 906 Bid Mr. Usman Shahid
Honda Civic 1,506 1,506 - 917 Bid Mr. Muhammad Ansar Khan
Honda Civic 1,422 1,422 - 677 Bid Mr. Muhammad Ansar Khan
Honda Civic 1,523 1,523 - 1,081 Bid Mr. Sajid Hussain
Honda Accord 5,866 5,866 - 587 As per Policy Mr. Yasir Rashid
Honda Accord 6,617 6,617 - 662 As per Policy Mr. Faisal Farooq Khan
Honda Accord 7,017 7,017 - 702 As per Policy Mr. Ali Sultan
Honda City 1,376 1,376 - 1,001 Bid Mr. Muhammad Hanif
Honda City 1,376 1,376 - 906 Bid Mr. Usman Shahid
Honda City 1,490 1,490 - 149 As per Policy Mr. Riaz Hamdani
Mercedes-Benz 8,427 8,427 - 843 As per Policy Mr. Saad Ur Rehman
Mercedes-Benz 8,427 8,427 - 843 As per Policy Mr. Mirza Zafar Baig
Mercedes-Benz 8,462 8,462 - 846 As per Policy Mr. Khurram Hussain
Mercedes-Benz 8,500 8,500 - 850 As per Policy Ms. Mehreen Ahmed
Toyota Yaris 2,138 2,138 - 787 As per Policy Mr. Zeeshan Khan
Toyota Yaris 2,138 2,138 - 808 As per Policy Mr. Md. Nurul Islam Dewan
Toyota Corolla 1,691 1,691 - 169 As per Policy Mr. Sharif Khawar
Toyota Corolla 1,608 1,608 - 161 As per Policy Mr. Mian Ejaz
Honda Civic 1,506 1,506 - 962 Bid Mr. Iqbal Ahmed Khan
Honda Civic 1,309 1,309 - 1,050 Bid Mr. Ather H. Medina
Items having book value of less
than Rs. 250,000 or cost of
less than Rs. 1,000,000 6,542 6,542 - 5,394 Various Various
81,501 81,501 - 20,999

Total - December 31, 2016 (Note 11.2) 373,096 314,997 58,099 113,393

Total - December 31, 2015 122,149 110,700 11,449 25,424

* Disposal as per Bank’s policy represents vehicles sold to employees as per the terms of their employment.

2016 2015
12 DEFERRED TAX LIABILITIES - NET (Rupees in ‘000)

Deferred debits arising due to

Provision for doubtful debts 392,066 1,434,609
Provision against off-balance sheet obligations 13,078 15,706
Impairment in the value of investments 2,264,329 2,247,184
Provision against other assets 309,218 334,501
2,978,691 4,032,000
Deferred credits arising due to
Accelerated tax depreciation (1,390,407) (1,474,060)
Share of profit from associates (252,053) -
Gain on remeasurement of held for trading investments (858) (80,172)
Surplus on revaluation of available for sale investments (3,406,365) (3,462,071)
Surplus on revaluation of operating fixed assets (840,539) (841,967)
(5,890,222) (5,858,270)

(2,911,531) (1,826,270)

237
 12.1 Reconciliation of deferred tax assets/ liabilities
Recognized Recognized
in Other in Other
Recognized in Comprehensive Recognized in Comprehensive
January 01, December 31, December 31,
Profit and Loss Income / Profit and Loss Income /
2015 2015 2016
Account Surplus on Account Surplus on
revaluation of revaluation of
assets assets
-------------------------------------------(Rupees in '000) -------------------------------------------
Deferred debits arising due to
Provision for doubtful debts 1,106,413 328,196 - 1,434,609 (1,042,543) - 392,066
Provision against off-balance sheet obligations 15,333 373 - 15,706 (2,628) - 13,078
Impairment in the value of investments 2,202,709 44,475 - 2,247,184 17,145 - 2,264,329
Provision against other assets 215,401 119,100 - 334,501 (25,283) - 309,218
Unabsorbed tax losses 36,244 (36,244) - - - - -
3,576,100 455,900 - 4,032,000 (1,053,309) - 2,978,691

Deferred credits arising due to

Accelerated tax depreciation 1,482,713 (8,653) - 1,474,060 (83,653) 1,390,407
Share of profit from associates - - - - 252,053 - 252,053
Gain on remeasurement of held
for trading investments 59,386 20,786 - 80,172 (79,314) 858
Surplus on revaluation of available
for sale investments 2,114,157 - 1,347,914 3,462,071 - (55,706) 3,406,365
Surplus on revaluation of operating fixed assets 740,882 (18,731) 119,816 841,967 (17,500) 16,072 840,539
4,397,138 (6,598) 1,467,730 5,858,270 71,586 (39,634) 5,890,222
Net deferred tax assets / liabilities (821,038) 462,498 (1,467,730) (1,826,270) (1,124,895) 39,634 (2,911,531)

Note 2016 2015

(Restated)
(Rupees in ‘000)
13 OTHER ASSETS

Income / mark-up accrued in local currency 13,797,563 16,770,774

Income / mark-up accrued in foreign currencies 661,808 754,640
Advances, deposits, advance rent and other prepayments 13.5 3,593,670 3,499,927
Non-banking assets acquired in satisfaction of claims 13.1 471,365 675,325
Dividend receivable 42,303 7,103
Unrealised gain on forward foreign exchange contracts 320,749 739,757
Unrealised gain on interest rate swaps 55,336 1,888
Receivable from brokers - 6,143
Stationery and stamps on hand 95,569 82,833
Defined benefit plan 35.1.3 349,317 40,003
Balance held with bank 13.2 413,074 413,657
Others 13.4 477,847 166,406
20,278,601 23,158,456
Provision held against other assets 13.3 (1,163,130) (1,318,151)
19,115,471 21,840,305

13.1 Market value of non-banking assets acquired in satisfaction of claims 519,570 761,755

13.2 This represents an amount of USD 3.949 million held in the Bank’s Nostro Account in New York, United States of
America, which has been put on hold by a commercial bank pursuant to receipt of notice of seizure based on the
order passed by the District Court, District of Columbia, USA.

Based on the fact that the said amount is not readily available for use of the Bank, the amount has been reclassified
from Balances with Other banks to Other Assets. Although the management is confident that the matter will be
decided in the Bank’s favour, as at December 31, 2016, the Bank has maintained full provision against the same
(December 31, 2015: USD 3.949 million).

238
 2016 2015
13.3 Provision held against other assets (Rupees in ‘000)

Opening balance 1,318,151 1,062,842

Charge for the year (106,138) 322,391
Payment out of provisions - (22,097)
Amount written off (35,304) (22,322)
Exchange and other adjustments (13,579) (22,663)
Closing balance 1,163,130 1,318,151

13.4 This includes an amount of Rs. 112.350 million given as advance against issuance of shares to an associated
company Sapphire Wind Power Company Limited.

13.5 This includes advance against seed capital amounting to Rs. 180 million for pension funds managed by Alfalah
GHP Investment Management. The seed capital shall not be redeemable / transferable or tradable for a period of
3 years from the date of issue or as may be determined by the SECP.

Note 2016 2015

(Rupees in ‘000)
14 BILLS PAYABLE
In Pakistan 12,743,285 9,592,804
Outside Pakistan 143,705 141,125
12,886,990 9,733,929
15 BORROWINGS
In Pakistan 161,538,057 164,187,489
Outside Pakistan 17,172,572 8,205,709
178,710,629 172,393,198
15.1 Particulars of borrowings with respect to currencies
In local currency 161,538,057 164,187,489
In foreign currencies 17,172,572 8,205,709
178,710,629 172,393,198

15.2 Details of borrowings secured / unsecured

Secured
Borrowings from State Bank of Pakistan under:
Export refinance scheme 15.3 18,725,467 16,889,852
Long-Term Finance for Export Oriented Projects
Scheme (LTF-EOP) - -
Long-Term Finance Facility 15.4 2,851,400 394,024
Modernisation of SMEs -
Financing Facility for Storage of Agriculture produce (FFSAP) 15.5 92,049 146,235
Repurchase agreement borrowings 15.6 136,763,030 129,071,926
Borrowings from other central banks 198,418 -
Other short term borrowings 399,594 -
159,029,958 146,502,037
Unsecured
Call borrowings 15.7 13,461,835 17,901,900
Bai Muajjal 15.8 6,218,836 7,935,453
Overdrawn nostro accounts - 53,808
19,680,671 25,891,161

178,710,629 172,393,198

239
 15.3 This facility is secured against a demand promissory note executed in favour of the State Bank of Pakistan. The
mark-up rate on this facility ranges from 1.00% to 2.00% per annum (2015: 2.50% to 4.50% per annum) payable
on a quarterly basis.

15.4 This facility is secured against a demand promissory note executed in favour of the State Bank of Pakistan. The
mark-up rate on this facility ranges from 2.00% to 5.00% per annum (2015: 3.00% to 4.50% per annum) payable
on a quarterly basis.

15.5 This facility is secured against a demand promissory note executed in favour of the State Bank of Pakistan. The
mark-up rate on this facility from 3.25% to 6.50% per annum (2015: 6.25% per annum) payable on a quarterly
basis.

15.6 This represents repurchase agreement borrowing from SBP and other banks at the rate of 1.10% and 5.95% per
annum respectively (2015: 6.04%  and 6.50% per annum) having maturities upto February 2017 (2015: January
2016).

15.7 This represents borrowings from financial institutions at mark-up rates ranging from 0.50% to 5.80% per annum
(2015: 0.50% to 6.08% per annum) having maturities upto March 2017 (2015: March 2016).

15.8 This represents borrowings from financial institutions at mark-up rates ranging from 5.60% to 5.70% per annum
(2015: 6.35% to 7.45%) having maturities upto May 2017 (2015: April 2016).

2016 2015
16 DEPOSITS AND OTHER ACCOUNTS (Restated)
(Rupees in ‘000)

Customers
Fixed deposits 94,268,250 137,604,333
Savings deposits 229,010,684 210,368,288
Current accounts - non-remunerative 283,711,087 238,069,847
Others 4,721,828 3,522,762
611,711,849 589,565,230
Financial institutions
Remunerative deposits 27,347,009 48,877,152
Non-remunerative deposits 1,795,367 1,694,779
29,142,376 50,571,931
640,854,225 640,137,161
16.1 Particulars of deposits

In local currency 557,734,309 539,878,360

In foreign currencies 83,119,916 100,258,801
640,854,225 640,137,161

*Call deposits amounting to Rs. 6,205 million (2015: Rs. 3,326 million) have been reclassified from Others to
Current accounts - non-remunerative for better presentation.

240
 2016 2015
(Rupees in ‘000)
17 SUB-ORDINATED LOANS

Term Finance Certificates IV - Private, Unsecured 3,324,670 4,988,000

Mark up Either of the following options with the holder:

- Floating coupon of Base Rate + 2.50 percent
(Base Rate is defined as the simple average of the ask rate of the
six months KIBOR prevailing on the first day of the start of each
half yearly period for mark up due at the end of that period).

- Fixed coupon of 15 percent per annum payable semi-annually in

arrears

Subordination The TFCs are subordinated as to the payment of principal and profit
to all other indebtness of the Bank.

Issue date December 2009

Rating AA-

Tenor Eight years

Redemption The instrument is structured to redeem 0.26% of principal, semi-

annually, in the first 78 months and remaining principal of 33.247%
each of the issue amount respectively, starting from the 84th month.

Maturity December 2017

Term Finance Certificates V - Quoted, Unsecured 4,993,000 4,995,000

Mark up Base Rate + 1.25 percent

(Base Rate is defined as the simple average of the ask rate of the six
months KIBOR prevailing on one business day prior to each redemp-
tion date for the redemption amount payable on the beginning of each
semi-annual period for the markup due at the end of that period).

Subordination The TFCs are subordinated as to the payment of principal and profit
to all other indebtness of the bank.

Issue date February 2013

Rating AA-

Tenor Eight years

Redemption The instrument will be structured to redeem semi-annually in such

a way that 0.30% of the principal will be redeemed in the first 90
months and remaining principal of 99.70% at maturity in the 96th
month.

Maturity February 2021

8,317,670 9,983,000

241
 Note 2016 2015
(Rupees in ‘000)
18 OTHER LIABILITIES

Mark-up / return / interest payable in local currency 1,551,758 1,969,052

Mark-up / return / interest payable in foreign currencies 175,609 280,118
Unearned commission and income on bills discounted 238,539 437,666
Accrued expenses 18.3 3,955,913 3,881,060
Branch adjustment account 816,333 947,438
Payable against redemption of credit card reward points 142,453 122,804
Taxation payable 185,936 399,559
Security deposits 5,225,935 4,790,001
Unclaimed dividend 62,660 58,435
Unrealised loss on forward foreign exchange contracts 555,131 729,875
Unrealised loss on interest rate swaps 37,078 88,804
Provision against off-balance sheet obligations 18.1 69,708 77,590
Workers’ Welfare Fund 29.1 595,245 475,569
Compensated Absences 18.2 401,644 313,930
Others 822,983 677,562
14,836,925 15,249,463

18.1 Provision against off-balance sheet obligations

Opening balance 77,590 85,953

Charge for the year (7,508) 1,066
Exchange and other adjustments (374) (9,429)
Closing balance 69,708 77,590

18.2 During the year, a valuation for compensated absences has been carried out by an actuary appointed for the
purpose. Major assumptions considered for the purposes of valuation are as follows:

Mortality Rate SLIC 2001-2005

Withdrawal Rate Age dependant withdrawal table; the average turnover rate over next one year is
around 20.37%.
Salary Increase rate 8.0% p.a.

18.3 This includes defined benefit obligation of Alfalah Securities (Private) Limited amounting to Rs. 3.998 million
(2015: Rs. 1.196 million).

19 SHARE CAPITAL

19.1 Authorised capital

2016 2015 2016 2015

(Number of shares) (Rupees in ‘000)

2,300,000,000 2,300,000,000 Ordinary shares of Rs. 10 each 23,000,000 23,000,000

242
 19.2 Issued, subscribed and paid up capital

2016 2015 Ordinary shares of Rs. 10 each 2016 2015

(Number of shares) (Rupees in ‘000)

870,801,304 865,399,937 Fully paid in cash 8,708,013 8,653,999

724,406,250 724,406,250 Issued as bonus shares 7,244,063 7,244,063

1,595,207,554 1,589,806,187 15,952,076 15,898,062

During the year the Bank has issued 5,401,367 ordinary shares having face value of Rs. 10/- each to its employees
on excercise of options vested under the Employees Stock Option Scheme (ESOS) (note 35.2). The paid-up capital
of the Bank before issuance of shares to employees was Rs. 15,898,061,870 (divided into 1,589,806,187 shares
of Rs. 10 each) and after issuance of shares to the employees has increased to Rs. 15,952,075,540 (divided into
1,595,207,554 shares of Rs. 10 each).

19.3 Material non-controlling interests

19.3.1 Below are details of subsidiaries of the Group that have material non-controlling interests:

Proportion of ownership Proportion of ownership

interests and voting interests and voting Accumulated non-
Name of subsidiary
rights held by the non- rights held by the non- controlling interests
controlling interests controlling interests

2016 2015 2016 2015 2016 2015

(Rupees in ‘000) (Rupees in ‘000)
Alfalah GHP Investment
Management Limited 59.78% 59.78% 50,395 12,287 319,460 269,065

Summarised financial information of material non-controlling interests before intragroup elimination is as follows:

2016 2015
(Rupees in ‘000)
Alfalah GHP Investment Management Limited

Statement of financial position

Total assets 760,053 602,972
Total liabilities 225,661 158,764
Equity 534,392 444,208

Statement of comprehensive income

Total income 395,410 278,278
Total expenses 266,533 203,544
Net profit after tax 90,184 14,669
Other comprehensive income - -

Statement of cash flows

Net cash flows generated from / (used in) operating activities 93,511 25,381
Net cash flows generated from investing activities (70,799) (32,134)
Net cash flows during the year 22,712 (6,753)

243
 Note 2016 2015
(Rupees in ‘000)
20 SURPLUS ON REVALUATION OF ASSETS - NET OF TAX

Surplus arising on revaluation of:

- Operating fixed assets 20.1 4,559,251 4,557,499
- Non-banking assets acquired in satisfaction of claims 20.1 36,942 -
4,596,193 4,557,499

- Pakistan Stock Exchange Membership Card 1,532 1,532

- Available for sale securities 20.2 6,378,214 6,383,901
10,975,939 10,942,932
20.1 Surplus on revaluation of fixed assets

Surplus on revaluation of operating fixed assets at January 01, 11.2 5,399,467 3,809,833

Transferred to retained earnings in respect of incremental depreciation

charged during the year - net of tax (32,497) (34,784)
Revaluation of fixed assets / non-banking assets during the year 50,890 -
Surplus on revaluation of fixed assets recognized during the year 47,562 1,643,150
Related deferred tax liability in respect of incremental depreciation
charged during the year (17,498) (18,732)
Reversal of surplus on account of disposal of property 11.2 (11,191) -
37,266 1,589,634
5,436,733 5,399,467

Related deferred tax liability on surplus as at January 01, 841,968 740,884

Deferred tax liability charge / (reversal) 16,070 119,816

Deferred tax liability in respect of incremental depreciation
charged during the year (17,498) (18,732)
(1,428) 101,084
840,540 841,968

4,596,193 4,557,499
20.2 Surplus on revaluation of available for sale securities and derivative
financial instruments

Government securities 7,642,123 9,257,769

Shares / units / certificates / sukuks / bonds 2,109,533 608,591
Term finance certificates 3,590 33,560
Interest rate swaps 29,332 (55,946)
9,784,578 9,843,974
Related deferred tax liability (3,406,364) (3,460,609)
Share of surplus on revaluation on associates’ available for sale securities - 536
6,378,214 6,383,901

244
 2016 2015
(Rupees in ‘000)

21 CONTINGENCIES AND COMMITMENTS

21.1 Direct credit substitutes

i) Government 1,632,063 743,580

ii) Banking companies & other financial institutions - 311,835
iii) Others 53,167 2,094,645
1,685,230 3,150,060
21.2 Transaction-related contingent liabilities

i) Government 32,243,564 27,412,625

ii) Banking companies & other financial institutions 544,762 163,826
iii) Others 11,725,088 12,719,286
44,513,414 40,295,737
21.3 Trade-related contingent liabilities

Letters of credit 73,061,529 52,107,916

Acceptances 12,188,691 15,797,161

21.4 Other contingencies

21.4.1 Claims against the Bank not acknowledged as debts 13,847,649 14,861,738

These mainly represents counter claims filed by the borrowers for restricting the Bank from disposal of assets
(such as hypothecated / mortgaged / pledged assets kept as security), damage to reputation and cases filed
by Ex. employees of the Bank for damages sustained by them consequent to the termination from the Bank’s
employment. Based on legal advice and / or internal assessment, management is confident that the matters will
be decided in Bank’s favour and the possibility of any outcome against the Bank is remote and accordingly no
provision has been made in these financial statements.

2016 2015
(Rupees in ‘000)
21.5 Commitments in respect of forward lendings

Commitments to extend credit 28,450,269 5,222,555

Commitments in respect of investments 3,596,186 -

21.6 Commitments in respect of forward exchange contracts

Purchase 53,992,848 98,261,212

Sale 41,084,440 106,520,120

21.7 Commitments for the acquisition of fixed assets 336,774 291,237

21.8 Commitments in respect of repo transactions

Repurchase 136,912,078 129,226,010

Resale 349,222 -

21.9 Other commitments

Interest rate swaps 7,622,307 6,962,920

Donations 22,000 22,000

21.10 Contingency for tax payable (note 30.1)

245
 22 DERIVATIVE INSTRUMENTS

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 characteristics of forwards, futures, swaps and
options.

At present the Group deals in the following instruments:

- Forward Exchange Contracts

- Interest Rate Swaps
- Share Options (note 9.17.1)

22.1 Product analysis

Interest Rate Swaps Forward Rate Agreements

2016 2015 2016 2015
Counter Parties No. of Notional No. of Notional No. of Notional No. of Notional
Contracts Principal * Contracts Principal * Contracts Principal * Contracts Principal *
(Rupees in ‘000) (Rupees in ‘000)
With Banks for
Hedging 20 7,622,307 18 6,962,920 - - - -
Market Making - - - - 179 80,299,452 215 191,003,452
With FIs other than banks
Hedging - - - - - - - -
Market Making - - - - - - - -
With other entities for
Hedging - - - - - - - -
Market Making - - - - 620 14,777,835 730 13,777,880
Total
Hedging 20 7,622,307 18 6,962,920 - - - -
Market Making - - - - 799 95,077,287 945 204,781,332

* At the exchange rate prevailing at the year end

22.2 Unrealised (loss) on derivatives financial instruments.

Contractual / notional amount Unrealised gain / (loss)

2016 2015 2016 2015
--------------------- (Rupees in ‘000) ----------------------

Interest Rate Swaps 7,622,307 6,962,920 18,258 (17,668)

Forward Exchange Contract Purchase 53,992,848 98,261,212 (513,325) (523,544)
Forward Exchange Contract Sale 41,084,440 106,520,120 278,942 533,426

246
22.3 Maturity Analysis - Forward Exchange Contract Purchase
Forward Exchange Contract Sale and Interest Rate Swap (Fixed Rate)

Mark to Market
Remaining Maturity Number of Notional Negative Positive Net
Contracts Principal
----------------------(Rupees in ‘000) --------------------------
Upto 1 month 226 47,296,545 (195,790) 143,932 (51,858)
1 to 3 months 225 30,873,282 (169,046) 82,595 (86,451)
3 to 6 months 219 12,695,144 (153,658) 65,939 (87,719)
6 months to 1 year 129 4,212,317 (36,637) 28,282 (8,355)
1 to 2 years - - - - -
2 to 3 years 11 4,222,856 (15,058) 942 (14,116)
3 to 5 years 5 2,039,671 (9,118) 9,715 597
5 to 10 years 4 1,359,780 (12,902) 44,679 31,777
Above 10 years - - - - -
819 102,699,595 (592,209) 376,084 (216,125)

2016 2015
23 MARK-UP / RETURN / INTEREST EARNED (Rupees in ‘000)

a) On loans and advances to:

i) customers 23,827,434 25,438,492
ii) financial institutions 106,941 272,510

b) On investments in:
i) held for trading securities 969,854 1,140,627
ii) available for sale securities 22,420,671 22,521,676
iii) held to maturity securities 6,962,638 9,105,351

c) On deposits with financial institutions 2,704,680 2,636,634

d) On securities purchased under resale agreements 253,041 288,888
57,245,259 61,404,178

24 MARK-UP / RETURN / INTEREST EXPENSED

Deposits 18,552,709 22,651,179

Securities sold under repurchase agreements 7,189,657 6,755,279
Other short term borrowings 1,558,522 2,042,429
Term finance certificates 953,301 1,102,752
Brokerage and commission 220,394 258,830
28,474,583 32,810,469

25 INCOME FROM DEALING IN FOREIGN CURRENCIES

This includes Rs. 405.4 million (2015: Rs. 783.6 million) being income on account of interest on cross currency swap
transactions, which corresponds to the cost included under ‘Mark-up / return / interest expensed’ in this regard.

247
26 GAIN ON SALE OF SECURITIES - NET Note 2016 2015
(Rupees in ‘000)
Federal Government Securities
- Market Treasury Bills 41,607 350,718
- Pakistan Investment Bonds 748,725 774,197
Overseas Government Bonds 65,553 170,371
Shares / Mutual Funds 610,404 185,356
Sukuk Bonds 53,046 54,352
1,519,335 1,534,994
27 OTHER INCOME

Gain on sale of operating fixed assets 11.4 55,294 13,975

Gain on exchange of assets 22,235 -
Postage, telex service charges etc. 629,151 736,858
706,680 750,833
28 ADMINISTRATIVE EXPENSES

Non executive directors fee & allowances 110,609 91,967

Salaries, allowances, etc. 28.1 8,905,981 8,330,547
Charge for defined benefit plan 28.2 & 35.1.4 260,795 290,282
Contribution to defined contribution plan 36 326,341 302,691
Charge for employee stock option scheme 35.2 109,615 94,830
Charge for staff compensated absences 87,714 88,210
Staff training expenses 226,702 172,315
Rent, taxes, insurance, electricity, etc. 3,552,107 3,392,584
Legal and professional charges 669,844 431,737
Communications 898,551 744,093
Repairs and maintenance 1,571,879 1,530,904
Stationery and printing 422,326 406,288
Advertisement and publicity 910,097 842,370
Donations 28.3 31,960 57,638
Auditors’ remuneration 28.4 32,264 23,449
Depreciation 11.2 1,701,175 1,816,229
Amortisation of intangible assets 11.3 361,118 275,439
Travelling, conveyance and fuel expenses 473,354 496,615
Entertainment 207,405 200,281
Subscription 32,499 37,178
Charge for outsourced services 1,198,399 1,164,174
Security service charges 984,093 838,223
Others 633,616 491,696
23,708,444 22,119,740

28.1 The Bank operates a short term employee benefit scheme which includes cash awards/ performance bonus for
all eligible employees. Under this scheme, the bonus for all executives, including the CEO is determined on the
basis of employees’ evaluation and Bank’s performance during the year. The aggregate amount determined for
the eligible employees in respect of the above scheme relating to the Key Management Personnel of the Bank and
for Other Executives amounted to Rs. 423.464 million (2015: Rs. 396.718 million) and Rs. 549.710 million (2015: Rs.
476.717 million) respectively.

28.2 This includes an amount of Rs. 2,999 thousand (2015: Rs. 171 thousand) being charge considered by the subsidiary
against its unfunded gratuity scheme.

248
 2016 2015
28.3 Donations (Rupees in ‘000)

Alif Noon Parents Foundation 20,000 -

Network of Organizations Working for People with Disabilities - Pakistan 3,000 -
Karachi Vocational Training Centre 2,460 -
Family Education Services Foundation 6,500 -
Institute of Business Administration - 22,000
Jaipur Foot - 5,638
Karachi Education Initiative (KEI) - 25,000
The Aga Khan University - 5,000
31,960 57,638

The CEO of the Bank is one of the directors of the KEI. Other than this none of the directors or their spouses had
any interest in the donees.
Note 2016 2015
28.4 Auditors’ remuneration (Rupees in ‘000)

Audit fee 9,660 8,836

Half yearly review 2,368 2,000
Special certifications and sundry advisory services 10,858 5,358
Tax Services 222 372
Out-of-pocket expenses 2,037 1,188
25,145 17,754
Fee for audit of foreign branches 7,119 5,695
32,264 23,449

29 OTHER CHARGES

Penalties imposed by the State Bank of Pakistan 5,690 42,892

Workers’ Welfare Fund 29.1 112,709 286,897
118,399 329,789

29.1 Through Finance Act 2008, the Federal Government introduced amendments to the Workers’ Welfare Fund
(WWF) Ordinance, 1971 whereby the definition of industrial establishment was extended. The amendments were
challenged and conflicting judgments were rendered by various courts. Appeals against these orders were filed in
the Supreme Court.

During the current year, 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 the above judgment. These petitions
are currently pending with the Supreme Court of Pakistan.

A legal advice has been obtained by the Pakistan Banks Association which highlights that consequent to filing of
these review petitions, a risk has arisen and the judgment is not conclusive until the review petition is decided.
Accordingly, the amount charged for Workers Welfare Fund since 2008 has not been reversed.

249
 2016 2015
30 TAXATION (Rupees in ‘000)

For the year

Current 4,729,131 5,036,065
Deferred 95,333 (461,035)

For prior years

Current (437,633) 567,813
Deferred 1,028,098 -
590,465 567,813
5,414,929 5,142,843

30.1 The income tax assessments of the Bank have been finalized upto and including tax year 2016. Matters of
disagreement exist between the Bank and tax authorities for various assessment years and are pending with the
Commissioner of Inland Revenue (Appeals), Appellate Tribunal Inland Revenue (ATIR), High Court of Sindh and
Supreme Court of Pakistan. These issues mainly relate to addition of mark up in suspense to income, taxability
of profit on government securities, bad debts written off and disallowances relating to profit and loss expenses.

In respect of tax years 2008, 2011, 2012, 2013, 2015 and 2016, the tax authorities have raised certain issues
including disallowance of expenditure on account of non-deduction of withholding tax, default in payment of
WWF, allocation of expenses to dividend and capital gains and dividend income from mutual funds not being
taken under income from business, resulting in additional demand of Rs.1,467.175 million. As a result of appeal
filed before Commissioner Appeals against these issues, relief has been provided for tax amount of Rs.1,023.719
million whereas appeal effect orders are pending. The management’s appeals on certain issues are pending before
Commissioner Appeals. The management is confident that these matters will be decided in favour of the Bank and
consequently has not made any provision in respect of these amounts.

The Bank has received amended assessment orders for Tax Years from 2010 to 2013 wherein Tax Authorities have
disallowed depreciation on Ijara Assets considering it Finance Lease and raised a tax demand of Rs. 990.423
million. As a result of appeal filed before Commissioner Appeal, relief is provided to the Bank. Accordingly tax
amount is reduced to Rs. 96.160 million. The Bank has filed appeal before Appellate Tribunal. The Bank has not
made any provision against these orders and the management is of the view that the matter will be settled in
Bank’s favour through appellate process.

In respect of monitoring of withholding taxes, the Bank has received various orders from tax authorities. The
Bank has not made provision amounting to Rs. 433.377 million against tax demand for tax years 2009, 2011, 2015
and 2016. The Bank intends to obtain relief through rectification orders. The management is of the view that the
matter will be settled in Bank’s favour.

The Bank has received an order from a provincial tax authority wherein tax authority has disallowed certain
exemptions of sales tax on banking services and demanded sales tax and penalty amounting to Rs. 97.560 million
(excluding default surcharge) for the period from July 2011 to June 2014. Bank’s appeal against this order is
currently pending before Commissioner Appeals. The Bank has not made any provision against this order and the
management is of the view that the matter will be settled in Bank’s favour through appellate process.

250
 2016 2015
30.2 Relationship between tax expense and accounting profit (Rupees in ‘000)

Profit before taxation 13,354,055 12,657,172

Tax at the applicable rate of 35% (2015: 35%) 4,673,919 4,430,010

Effect of:
- income chargeable to tax at reduced rates (1,955) (6,631)
- permanent differences 2,775 15,525
- tax charge pertaining to overseas branches 60,628 88,715
- tax for prior years 590,786 567,813
- others (163,277) 47,411
Tax expense for the year 5,162,876 5,142,843

31 EARNINGS PER SHARE

31.1 BASIC EARNINGS PER SHARE

Profit after taxation for the year attributable to equity holders of the Bank 7,889,794 7,502,660

(Number of shares in thousand)

Weighted average number of ordinary shares 1,593,898 1,590,888

(Rupees)

Basic earnings per share 4.95 4.72

31.2 DILUTED EARNINGS PER SHARE (Rupees in ‘000)

Profit after taxation for the year attributable to equity holders of the Bank 7,889,794 7,502,660

(Number of shares in thousand)

Weighted average number of ordinary shares 1,602,937 1,590,888

(Rupees)

Diluted earnings per share 4.92 4.72

31.3 Reconciliation of basic and diluted earning per share

(Number of shares in thousand)

Weighted average number of ordinary shares 1,593,898 1,590,888

Plus: Employee stock option scheme 9,039 -
Shares under agreement with International Finance Corporation - -
Dilutive potential ordinary shares 1,602,937 1,590,888

251
 Note 2016 2015
32 CASH AND CASH EQUIVALENTS (Rupees in ‘000)

Cash and balances with treasury banks 6 74,071,394 62,368,827

Balances with other banks 7 9,498,787 16,583,138
Call money lendings 8.1 5,306,590 14,728,532
Overdrawn nostro accounts 15.2 - (53,808)
88,876,771 93,626,689
33 CREDIT RATING

PACRA has assigned a long term credit rating of AA [Double A] and a short term credit rating of A1+ [A one plus]
to the holding company as at June 2016 with a positive outlook (2015: AA [Double A] for long term and A1+ [A one
plus] for short term with a stable outlook).

Subsequent to the year end JCR-VIS has assigned a long term credit rating of AA+ [Double A plus] and a short term
credit rating of A1+ [A one plus] with a stable outlook to the holding company.

2016 2015
34 STAFF STRENGTH (Number of employees)

Permanent 7,709 7,642

Temporary / on contractual basis 193 233
Total staff strength 7,902 7,875

35 EMPLOYEE BENEFITS

35.1 DEFINED BENEFIT PLAN

35.1.1 Principal actuarial assumptions

The projected unit credit method, as required by the International Accounting Standard 19 - ‘Employee Benefits’,
was used for actuarial valuation based on the following significant assumptions:

2016 2015

Valuation discount rate (p.a) 9.50% 10.00%

Salary increase rate (p.a) - Short term (3 years) 7.50% 10.00%
Salary increase rate (p.a) - Long term 9.50% 10.00%
Expected rate of return on plan assets 0.095 10.00%
Normal retirement age 60 Years 60 Years
Duration 10.46 Years 13.63 Years

The disclosures made in notes 35.1 to 35.1.13 are based on the information included in the actuarial valuation
report of the Bank as of December 31, 2016.

Note 2016 2015
35.1.2 Reconciliation of receivable from defined benefit plan (Rupees in ‘000)

Present value of defined benefit obligations 35.1.6 1,920,065 1,743,133

Fair value of plan assets 35.1.7 (2,269,382) (1,783,136)
(349,317) (40,003)

252
 Note 2016 2015
(Rupees in ‘000)

35.1.3 Movement in (receivable) / payable from defined benefit plan

Opening balance (40,003) (238,523)
Charge for the year - in profit and loss account 35.1.4 260,795 290,111
Other comprehensive Income (309,314) 198,962
Adjustments - (442)
Bank’s contribution to fund made during the year (260,795) (290,111)
Closing balance (349,317) (40,003)

35.1.4 Charge for defined benefit plan

Recognised in profit and loss account

Current service cost 277,835 332,822
Net interest (17,040) (42,711)
260,795 290,111
Recognised in other comprehensive income
Actuarial gain on obligations 55,216 252,372
Actuarial (loss) / gain on Assets 254,098 (451,334)
309,314 (198,962)

Total (48,519) 489,073

35.1.5 Actual return on plan assets 434,975 225,357

35.1.6 Reconciliation of present value of obligation

Present value of obligation as at January 1 1,743,133 1,770,352

Current service cost 277,835 332,822
Interest cost 163,837 182,824
Benefits paid (209,524) (290,493)
Remeasurement gain on obligation (55,216) (252,372)
Present value of obligation as at December 31 1,920,065 1,743,133

35.1.7 Changes in the fair value of plan assets are as follows:

Opening fair value of plan assets 1,783,136 2,008,875

Expected return 180,877 225,977
Contributions by the Bank 260,795 290,111
Benefits paid (209,524) (290,493)
Remeasurement (loss) / gain 254,098 (451,334)
Fair value at end of the year 35.1.8 2,269,382 1,783,136

35.1.8 Plan assets consist of the following:

2016 2015
(Rupees in ‘000) % (Rupees in ‘000) %

Ordinary shares 1,047,132 46% 366,896 21%

Term Finance Certificates - 0% 27,572 1%
Pakistan Investment Bonds 536,864 24% 562,446 32%
Units of mutual funds 283,810 12% 301,916 17%
Cash and bank balances 401,576 18% 524,306 29%
2,269,382 100% 1,783,136 100%

253
 35.1.9 Amount for the current year and the previous four years of the present value of the defined benefit obligation,
the fair value of plan assets, surplus / deficit and experience adjustments arising thereon are as follows:

2016 2015 2014 2013 2012

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

Defined benefit obligation 1,920,065 1,743,133 1,770,352 1,547,856 1,372,290

Fair value of plan assets 2,269,382 1,783,136 2,008,875 1,429,334 1,182,931
Surplus / (deficit) 349,317 40,003 238,523 (118,522) (189,359)

Experience adjustments on plan liabilities 55,216 252,372 267 (56,337) 56,038

Experience adjustments on plan assets 254,098 (451,334) 356,778 127,174 (16,931)

35.1.10 Expected gratuity expense for the next year

Expected gratuity expense for the year ending December 31, 2017, works out to Rs. 250.153 million.

35.1.11 Sensitivity Analysis

Present Value of Defined Benefit

Particulars Obligation Percentage Change
(Rupees in ‘000)

Current Liability 1,864,585

+1% Discount Rate 1,683,534 -9.71%
-1% Discount Rate 2,077,893 11.44%
+1% Salary Increase Rate 2,086,284 11.89%
-1% Salary Increase Rate 1,673,465 -10.25%
+10% Withdrawal Rates 1,864,585 0.00%
-10% Withdrawal Rates 1,864,585 0.00%
1 Year Mortality age set back 1,864,585 0.00%
1 Year Mortality age set forward 1,864,585 0.00%

35.1.12 Maturity Profile

Undiscounted Payments
Particulars
(Rupees in ‘000)
Year 1 137,138
Year 2 156,103
Year 3 119,610
Year 4 132,377
Year 5 124,023
Year 6 to Year 10 687,012
Year 11 and above 5,484,788

35.1.13 Risks Associated with Defined Benefit Plans

(a) Investment Risks:

The risk arises when the actual performance of the investments is lower than expectation and thus creating
a shortfall in the funding objectives.

254
 (b)
Longevity Risks:

The risk arises when the actual lifetime of retirees is longer than expectation. This risk is measured at the
plan level over the entire retiree population.

(c)
Salary Increase Risk:

The most common type of retirement benefit is one where the benefit is linked with final salary. The risk
arises when the actual increases are higher than expectation and impacts the liability accordingly.

(d) Withdrawal Risk:

The risk of actual withdrawals varying with the actuarial assumptions can impose a risk to the benefit
obligation. The movement of the liability can go either way.

35.2
EMPLOYEES STOCK OPTION SCHEME

The holding company grants share options to its employees under the Bank’s Employee Stock Options Scheme
(ESOS), as approved by the shareholders and SECP vide its letter No. SMD/CIW/ESOS/02/2013 dated 27 December
2013.

Under the Scheme, the holding company has granted options to certain critical employees selected by the Board
Compensation Committee to subscribe to new ordinary shares over a period from 2014 to 2016 as detailed below.
As per the Scheme, the entitlement and exercise price are subject to adjustments because of issue of right shares
and bonus shares. The options carry neither right to dividends nor voting rights till shares are issued to employees
on exercise of options.

The grant dates and the vesting period for the options are laid down under the scheme. The options vest over a
three year period with one third of the options vesting on completion of each year of service from the date of
grant. The options not exercised on completion of first and second year of vesting may be carried forward to be
exercised on completion of three year period. After the expiry of the third exercise period, the option holder will
lose all the rights of exercise for any remaining options not exercised.

The details of the options under the scheme as at December 31, 2016 were as follows:

Granted in the Granted in the Granted in the

year 2016 year 2015 year 2014
(Rupees in ‘000)

Options issued 13,737 12,614 11,331

Options no longer in issue 492 1,010 1,594

Options vested N/A 4,063 6,837

Options exercised N/A 2,782 5,183

Vested Options cumulatively carried forward N/A 1,191 1,470

Shares issued under ESOS grants N/A 2,782 5,183

Exercise price per share Rs. 14.95 Rs. 15.15 Rs. 16.32

Option discount per share Rs. 9.96 Rs. 10.10 Rs. 10.88

255
36 DEFINED CONTRIBUTION PLAN

The Bank operates an approved provident fund scheme for all its permanent employees to which both the Bank
and employees contribute @ 8.33% of basic salary in equal monthly contributions. The subsidiary - Alfalah GHP
Investment Management Limited operates an approved funded contributory provident fund for all its permanent
employees to which equal monthly contributions are made both by the Company and the employees at the rate
of 10% of basic salary.

Contribution made during the year by the Bank amounted to Rs. 326.341 million (2015: Rs. 295.929 million),
whereas the contribution made by the subsidiary - Alfalah GHP Investment Management Limited amounted to Rs.
2.582 million (2015: Rs. 3.381 million) in their respective funds.

37 COMPENSATION OF DIRECTORS AND EXECUTIVES

Chief Executive Directors Executives

2015
2016 2015 2016 2015 2016
(Restated)
------------------------------- (Rupees in ‘000) -------------------------------

Fee - - 110,609 91,967 345 720

Managerial remuneration - note 37.2 82,669 77,707 - - 3,384,648 2,951,089
Post employment benefits 9,481 8,989 - - 387,415 329,255
Rent and house maintenance 3,840 5,024 - - 990,893 850,205
Utilities 5,691 5,394 - - 254,404 221,135
101,681 97,114 110,609 91,967 5,017,705 4,352,404

Number of persons* 1 1 6 8 2,166 1,871

*As a result of Election of Directors held during the year, three new non executive directors were appointed on
the Board who replaced two of the outgoing non executive directors.

37.1 The Chief Executive and certain Executives have been provided with the free use of cars and household equipment
as per Bank’s policy.

37.2 All executives, including the CEO are entitled to certain short term employee benefits which are disclosed in note
28.1 to these financial statements. In addition, the Bank has also granted share options to certain key employees
- refer note 35.2.

38 FAIR VALUE OF FINANCIAL INSTRUMENTS

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 and subsidiaries, 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.

38.1 The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs
used in making the measurements:

256
 Level 1: Fair value measurements using quoted prices (unadjusted) in active markets for identical assets or liabilities.

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).

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:
2016
Carrying Amount Fair value
Derivative
Loans and Instrument Other financial
HFT AFS HTM Associates Total Level 1 Level 2 Level 3 Total
Receivables Held for Risk liabilities
Management
On balance sheet financial instruments --------------------------------------------------------------------(Rupees in ‘000)---------------------------------------------------------------------------
Financial assets measured at fair value
- Other assets
Forward foreign exchange contracts 320,749 - - - - - - 320,749 320,749 320,749
Interest rate swaps 55,336 - - - - - - 55,336 55,336 55,336
- Investments
Government Securities (Tbills, PIBs, GoP Sukuks,
Overseas Govt. Sukkuk, Overseas and Euro bonds) 14,371,242 304,976,096 - - - - - 319,347,338 319,347,338 319,347,338
Overseas Bonds - others 298,341 5,061,134 - - - - - 5,359,475 5,359,475 5,359,475
Ordinary shares of listed companies 761,255 8,292,796 - - - - - 9,054,051 9,054,051 9,054,051
Ordinary shares of unlisted companies - 68,927 - - - - - 68,927 68,927 68,927
Debt securities (TFCs) - 278,260 - - - - - 278,260 278,260 278,260
Sukuk-Other than Govt - 2,195,167 - - - - - 2,195,167 2,195,167 2,195,167

Financial assets not measured at fair value

- Cash and bank balances with treasury banks - - - 74,071,394 - - - 74,071,394
- Balances with other banks - - - 9,498,787 - - - 9,498,787
- Lending to financial institutions - - - 30,149,029 - - - 30,149,029
- Advances - - - 378,724,300 - - - 378,724,300
- Other assets - - - 18,172,457 - - - 18,172,457
- Investments
Government Securities (PIBs, WAPDA Sukuks,
Overseas and Euro bonds) - - 45,026,708 - - - - 45,026,708 45,937,908 45,937,908
Overseas Bonds - Others - - 518,251 - - - - 518,251
Unlisted Shares (Ordinary & Preference) - 22,396 - - - - - 22,396
Redeemable Participating Certificate - 501,938 - - - - - 501,938
Commercial Paper - - 529,280 - - - - 529,280
Sukuk-Other than Govt - - 3,501,541 - - - - 3,501,541

Associates
- Mutual Funds - - - - 1,759,443 - - 1,759,443 1,759,443 1,759,443
- Ordinary shares of unlisted companies - - - - 1,504,147 - - 1,504,147
15,806,923 321,396,714 49,575,780 510,615,967 3,263,590 - - 900,658,974

Financial liabilities measured at fair value

- Other liabilities
Forward foreign exchange contracts 555,131 - - - - - - 555,131 555,131 555,131
Interest rate swaps 37,078 - - - - - - 37,078 37,078 37,078

Financial liabilities not measured at fair value

- Bills Payable - - - - - - 12,886,990 12,886,990
- Borrowings - - - - - - 178,710,629 178,710,629
- Deposits and other accounts - - - - - - 640,854,225 640,854,225
- Subordinated Loans - - - - - - 8,317,670 8,317,670
- Other liabilities - - - - - - 13,155,288 13,155,288

592,209 - - - - - 853,924,802 854,517,011

Off balance sheet financial instruments

- Forward Exchange Contracts Purchase - - - - - 53,992,848 - 53,992,848 53,479,523 53,479,523
- Forward Exchange Contracts Sale - - - - - 41,084,440 - 41,084,440 40,805,498 40,805,498
- Interest Rate Swaps - - - - - 7,622,307 - 7,622,307 7,640,565 7,640,565

257
 2015
Carrying Amount Fair value
Derivative
Loans and Instrument Other financial
HFT AFS HTM Associates Total Level 1 Level 2 Level 3 Total
Receivables Held for Risk liabilities
Management

--------------------------------------------------------------------(Rupees in ‘000)---------------------------------------------------------------------------
On balance sheet financial instruments
Financial assets measured at fair value
- Other assets
Forward foreign exchange contracts 739,757 - - - - - - 739,757 739,757 739,757
Interest rate swaps 1,888 - - - - - - 1,888 1,888 1,888
- Investments
Government Securities (Tbills, PIBs, GoP Sukuks,
Overseas Govt. Sukkuk, Overseas and Euro bonds) 19,122,097 279,962,706 - - - - - 299,084,803 299,084,803 299,084,803
Overseas Bonds - others - 3,638,213 - - - - - 3,638,213 3,638,216 3,638,216
Ordinary shares of listed companies 199,954 5,582,663 - - - - - 5,782,617 5,782,612 5,782,612
Ordinary shares of unlisted company - 40,073 - - - - - 40,073 40,073 40,073
Debt securities (TFCs) - 682,680 - - - - - 682,680 682,680 682,680
Sukuk-Other than Govt - 2,424,212 - - - - - 2,424,212 2,424,212 2,424,212

Financial assets not measured at fair value

- Cash and bank balances with treasury banks - - - 62,368,827 - - - 62,368,827
- Balances with other banks - - - 16,583,138 - - - 16,583,138
- Lending to financial institutions - - - 27,626,350 - - - 27,626,350
- Advances - - - 334,160,478 - - - 334,160,478
- Other assets - - - 20,340,513 - - - 20,340,513
- Investments
Government Securities (PIBs, WAPDA Sukuks,
Overseas and Euro bonds) - - 77,515,845 - - - - 77,515,845 80,144,714 80,144,714
Other Federal Government Securities - Bai Muajjal - - 26,002,520 - - - - 26,002,520 26,002,520 26,002,520
Commercial Papers - - 266,822 - - - - 266,822
Unlisted Shares (Ordinary & Preference) 304,096 - - - - - 304,096
Sukuk-Other than Govt - 37,242 3,720,532 - - - - 3,757,774
Debt securities (TFCs) - - - - - - - -
Ordinary and preference shares - - - - - - - -

Associates
- Mutual Funds - - - - 1,969,571 - - 1,969,571 1,969,571 1,969,571
- Ordinary shares of unlisted companies - - - - 2,049,742 - - 2,049,742
20,063,696 292,671,885 107,505,719 461,079,306 4,019,313 - - 885,339,919

Financial liabilities measured at fair value

Forward foreign exchange contracts 729,875 - - - - - - 729,875 729,875 729,875
Interest rate swaps 88,804 - - - - - - 88,804 88,804 88,804

Financial liabilities not measured at fair value

- Bills Payable - - - - - - 9,733,929 9,733,929
- Borrowings - - - - - - 172,393,198 172,393,198
- Deposits and other accounts - - - - - - 640,137,161 640,137,161
- Subordinated Loans - - - - - - 9,983,000 9,983,000
- Other liabilities - - - - - - 13,515,970 13,515,970

818,679 - - - - - 845,763,258 846,581,937

Off balance sheet financial instruments

- Forward Exchange Contracts Purchase - - - - - 98,261,212 - 98,261,212 97,746,522 97,746,522
- Forward Exchange Contracts Sale - - - - - 106,520,120 - 106,520,120 105,986,695 105,986,695
- Interest Rate Swaps - - - - - 6,962,920 - 6,962,920 6,876,004 6,876,004

38.2 Fixed assets have been carried at revalued amounts determined by professional valuers (level 3 measurement) based on their assessment of the market values
as disclosed in note 11. The valuations are conducted by the valuation experts appointed by the Bank which are also on the panel of State Bank of Pakistan.
The valuation experts used a market based approach to arrive at the fair value of the Bank’s properties. The market approach used prices and other relevant
information generated by market transactions involving identical or comparable or similar properties. These values are adjusted to reflect the current condition
of the properties. 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 financial statements.

258
39 SEGMENT DETAILS WITH RESPECT TO BUSINESS ACTIVITIES

The segment analysis with respect to business activity is as follows:

2016
Retail Corporate Consumer Islamic International Retail Asset
Treasury Others* Total
Banking Banking Banking Banking Operations Brokerage Management
----------------------------------------------------------------- (Rupees in ‘000) -----------------------------------------------------------------

Segment income 7,184,495 13,531,759 28,638,451 4,112,573 8,341,049 3,574,977 106,472 375,860 859,471 66,725,107
Inter-segment income 16,118,158 (5,651,265) (10,352,823) (953,836) - - 839,766 -
Segment expenses 19,221,682 6,209,065 8,041,695 1,847,509 6,682,172 1,919,015 124,309 158,852 9,166,753 53,371,052
Profit before tax 4,080,971 1,671,429 10,243,933 1,311,228 1,658,877 1,655,962 (17,837) 217,008 (7,467,516) 13,354,055
Segment assets 140,225,720 205,760,792 312,980,625 21,723,442 138,753,216 68,423,352 1,114,783 627,471 29,833,439 919,442,840
Segment non-performing loans 8,620,164 7,771,668 - 435,243 1,785,331 318,921 1,270 - 87,188 19,019,785
Segment provision required against -
loans and advances 7,959,603 6,703,930 - 909,939 1,187,405 361,707 1,270 - 20,377 17,144,231
Segment liabilities 428,263,389 80,262,575 143,261,894 1,490,927 127,051,522 59,363,853 906,963 116,691 17,800,156 858,517,970
Segment return on assets (ROA) (%)* 0.87% 0.60% 1.57% 6.17% 1.24% 2.78% -7.51% 0.79%
Segment cost of funds (%)* 3.25% 5.07% 5.56% 5.46% 2.98% 2.10% 3.44% 6.12%

2015
Retail Corporate Consumer Islamic International Retail Asset
Treasury Others* Total
Banking Banking Banking Banking Operations Brokerage Management
----------------------------------------------------------------- (Rupees in ‘000) -----------------------------------------------------------------

Segment income 7,280,467 15,410,965 30,913,732 3,806,283 8,447,458 4,031,911 10,662 279,532 346,517 70,527,527
Inter-segment income 19,346,496 (6,412,101) (12,799,878) (998,213) - - 863,696 -
Segment expenses 22,719,223 6,760,000 8,079,909 1,829,767 6,632,459 2,396,077 41,344 128,921 9,282,655 57,870,355
Profit before tax 3,907,740 2,238,864 10,033,945 978,303 1,814,999 1,635,834 (30,682) 150,611 (8,072,442) 12,657,172
Segment assets - net 106,129,202 205,820,951 358,426,849 17,482,403 129,872,172 59,007,149 229,125 529,985 25,917,921 903,415,757
Segment non-performing loans 8,977,326 7,204,259 - 463,094 1,089,699 622,426 360 - 98,595 18,455,759
Segment provision required against -
loans and advances 8,414,604 5,245,658 - 829,809 1,006,092 587,245 360 - 109,051 16,192,819
Segment liabilities 407,407,312 116,775,732 144,255,333 1,356,670 120,561,328 49,349,369 27,467 91,188 9,498,622 849,323,021
Segment return on assets (ROA) (%)* 0.87% 0.82% 1.62% 5.30% 0.67% 3.26% -8.92% 1.60%
Segment cost of funds (%)* 4.22% 6.49% 6.89% 6.62% 3.76% 2.60% 4.46% 4.63%

* Profit before tax of this segment includes head office related expenses

40 TRUST ACTIVITIES

The Group is not engaged in any significant trust activities. However, it acts as security agent for various Term
Finance Certificates it arranges and distributes on behalf of its customers. In addition, the holding company is also
holding investments of other entities in its IPS account maintained with the State Bank of Pakistan.

41 RELATED PARTY TRANSACTIONS

Parties are considered to be related if one party has the ability to control the other party or exercise significant
influence over the other party in making financial or operational decisions and include major shareholders,
subsidiary company, associated companies with or without common directors, retirement benefit funds and
directors and key management personnel and their close family members.
Banking transactions with the related parties are executed substantially on the same terms, including mark-up
rates and collateral, as those prevailing at the time for comparable transactions with unrelated parties and do not
involve more than a normal risk.
Contributions to and accruals in respect of staff retirements and other benefit plans are made in accordance with
the actuarial valuations / terms of the contribution plan. Remuneration to executives is determined in accordance
with the terms of their appointment.

259
 Details of transactions with related parties and balances with them as at the year-end are as follows:

2016
Key Group
Directors management companies / Associates Total
personnel Others
-------------------------------- (Rupees in ‘000) --------------------------------
41.1 Deposits

Balance at beginning of the year 14,825 120,281 6,095,252 350,316 6,580,674

Placements during the year 306,363 1,257,912 117,678,110 44,962,231 164,204,616
Withdrawals / adjustments* during the year (310,987) (1,213,687) (115,084,595) (44,280,890) (160,890,159)
Balance at end of the year 10,201 164,506 8,688,767 1,031,657 9,895,131

2015
Key Group
Directors management companies / Associates Total
personnel Others
-------------------------------- (Rupees in ‘000) --------------------------------
Balance at beginning of the year 38,398 71,170 5,054,223 453,398 5,617,189
Placements during the year 168,409 1,271,256 81,661,921 29,668,778 112,770,364
Withdrawals / adjustments* during the year (191,982) (1,222,145) (80,620,892) (29,771,860) (111,806,879)
Balance at end of the year 14,825 120,281 6,095,252 350,316 6,580,674

2016
Key Group
Directors management companies / Associates Total
personnel Others
41.2 Advances -------------------------------- (Rupees in ‘000) --------------------------------
Balance at beginning of the year 89,000 328,280 6,339,450 - 6,756,730
Disbursements during the year - 287,570 22,062,374 - 22,349,944
Repayments / adjustments* during the year (9,870) (264,515) (20,361,588) - (20,635,973)
Balance at end of the year 79,130 351,335 8,040,236 - 8,470,701

Provisions held against advances - - 1,543,054 - 1,543,054

2015 (Restated)
Key Group
Directors management companies / Associates Total
personnel Others
-------------------------------- (Rupees in ‘000) --------------------------------
Balance at beginning of the year - 280,630 3,828,522 - 4,109,152
Disbursements during the year 90,000 324,922 22,147,792 - 22,562,714
Repayments / adjustments* during the year (1,000) (277,272) (19,636,864) - (19,915,136)
Balance at end of the year 89,000 328,280 6,339,450 - 6,756,730

Provisions held against advances - - 185,627 - 185,627

2016
Key Group
Directors management companies / Associates Total
personnel Others
41.3 Investments -------------------------------- (Rupees in ‘000) --------------------------------
Balance at beginning of the year - - 4,716,796 4,019,314 8,736,110
Investments during the year - - 1,977,290 67,267 2,044,557
(Redemptions) / adjustments* during the year - - (4,666,796) (822,991) (5,489,787)
Balance at end of the year - - 2,027,290 3,263,590 5,290,880

Provisions held against investments - - 53,936 - 53,936

260
 2015
Key Group
Directors management companies / Associates Total
personnel Others
-------------------------------- (Rupees in ‘000) --------------------------------

Balance at beginning of the year - - 4,416,796 3,446,271 7,863,067

Investments during the year - - - 1,867,710 1,867,710
(Redemptions) / adjustments* during the year - - 300,000 (1,294,667) (994,667)
Balance at end of the year - - 4,716,796 4,019,314 8,736,110

Provisions held against investments - - 4,416,796 - 4,416,796

2016
Key Group
Directors management companies / Associates Total
personnel Others
-------------------------------- (Rupees in ‘000) --------------------------------
41.4 Call borrowings / Repo
Balance at beginning of the year - - - - -
Borrowings during the year - - 2,200,000 - 2,200,000
Repayments during the year - - (2,200,000) - (2,200,000)
Balance at end of the year - - - - -

2015
Key Group
Directors management companies / Associates Total
personnel Others
-------------------------------- (Rupees in ‘000) --------------------------------
Balance at beginning of the year - - - - -
Borrowings during the year - - 1,300,000 - 1,300,000
Repayments during the year - - (1,300,000) - (1,300,000)
Balance at end of the year - - - - -

2016
Key Group
Directors management companies / Associates Total
personnel Others
41.5 Call lendings / Reverse Repo -------------------------------- (Rupees in ‘000) -------------------------------
Balance at beginning of the year - - - - -
Placements during the year - - 17,250,000 - 17,250,000
Withdrawals during the year - - (17,250,000) - (17,250,000)
Balance at end of the year - - - - -

2015
Key Group
Directors management companies / Associates Total
personnel Others
-------------------------------- (Rupees in ‘000) -------------------------------
Balance at beginning of the year - - - - -
Placements during the year - - 17,825,000 - 17,825,000
Withdrawals during the year - - (17,825,000) - (17,825,000)
Balance at end of the year - - - - -

*Adjustments include changes on account of retirement / appointment of Directors, changes in Key Management Personnel and
Sponsor shareholders.

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 2016 2015
41.6 Advances (Rupees in ‘000)

Running finance 753,858 760,958

Long term loans 7,716,843 5,995,772

41.7 Contingencies and commitments

Letters of credit, acceptance & guarantees outstanding 1,724,344 3,134,931

41.8 Customer accounts

PLS accounts 5,869,154 3,264,885

Current accounts 1,211,423 1,047,644
Fixed deposit accounts 2,814,554 2,268,145

41.9 Transactions with Associates and Others

Associates and Funds not considered for consolidation

Mark-up expense on deposits / TFCs 51,335 53,878
Rent Income from Alfalah Insurance Company Limited 1,955 1,997
Insurance premium paid to Alfalah Insurance Company Limited 546,837 534,335
Insurance claims received from Alfalah Insurance Company Limited against
operating fixed assets 1,137 2,614
Dividend paid to Alfalah Insurance Company Limited 500 1,000
Dividend income from Alfalah Insurance Company Limited - 5,311
Capital Gain on sale of shares of Apollo Pharma Limited 57,486 -
Other Income from Sapphire Wind Power Company Limited 7,905 -
Dividend income from fund 106,250 160,611
Management fee earned from fund 292,999 90,303
Other fee income from fund 24,554 -
Sales load earned from fund 57,676 7,583
Realized gain on redemption in investment from fund 106,561 71,757
Realized loss on redemption in investment from fund (51) -
Dividend income from fund 12,356 -
Purchase of units of from fund 67,267 -
Redemption of units of from fund 189,289 -
Advisory income from fund 866 -

262
 2016 2015
(Rupees in ‘000)
Others
Mark-up income 624,937 421,942
Mark-up expense on deposits 269,117 362,903
Dividend income from Pakistan Mobile Communication Limited 2,454 -
Rent income from Wateen Telecom (Private) Limited - 1,766
Rent income from Warid Telecom (Private) Limited / Pakistan Mobile
Communication Limited 17,096 16,937
Rent expense paid pertaining to Wateen Telecom (Private) Limited 3,304 11,200
Interest received on placements with Silk Bank 3,350 5,061
Interest paid on Borrowings from Silk Bank 362 372
Mark-up paid to Taavun (Private) Limited on TFCs Issued 74,813 74,845
Mark-up paid to Key Management Personnel on TFCs Issued 29,407 26,108
Mark-up received on Sukuk from Pakistan Mobile Communication Limited 29,249 -
Amount received on Redemtption of Silk Bank Preference Shares 439,200 -
Interest paid on Borrowings from Silk Bank 362 372
Payment to Institute of Bankers of Pakistan for calendars and diaries etc. 2,900 464
Payment to Wateen Telecom Limited and Wateen Solutions (Private) Limited for
purchase of equipment and maintenance charges 142,723 143,993
Provision against advances on Wateen Telecom (Private) Limited 1,357,594 -
Provision against advances on Wateen Wimax (Private) Limited 185,460 185,627
Provision against investment in Warid Telecom (Private) Limited - 4,366,796
Provision against investment in Pakistan Mobile Communication Limited 3,936 -
Gain on exchange of shares of Warid Telecom (Private) Limited 22,235 -
Commission received from Warid Telecom (Private) Limited 1,828 9,656
Payment to Monet (Private) Limited for Branchless banking services 166,452 197,588
Payment to Al-Qudees & Co 10,263 27,505
Payment to Intelligens Financials - 3,407
Payment to Locker Smiths (Private) Limited 10,675 -
Payment to Sundar Interiors & Architects 4,525 57,412
Payment to Timber Links 2,850 10,428
Payment to Expressive Safety & Security Solutions 10,201 7,540
Payment to Olive International (Private) Limited 1,652 6,590
Payment to Computer Marketing Co. (Private) Limited. 23,407 11,396
Payment to K-Tabs 16,112 19,345
Payment to MEC Engineer 10,885 2,894
Payment to Printeria - 40,321
Payment to Tahiri Printers 8,671 -
Payment to Bawany Traders 4,102 -
Payment to MEK Steel Furniture 100 -
Payment to S-TECH 4,215 -
Payment to The Pakistan Business Council 1,500 1,500
Charges for Security Services to Wackenhut Pakistan (Private) Limited - 136,393
Contribution to employees provident fund 326,341 302,691
Contribution to gratuity fund 260,795 290,282

263
 2016 2015
(Rupees in ‘000)
41.10 Balances with Associates and Others

Associates and Funds not considered for consolidation

Advance against issuance of Shares - Sapphire Wind Power Company Limited 112,350 112,350
Advance Rent from Alfalah Insurance Company Limited - 1,955
Rent receivable from Alfalah Insurance Company Limited 416 -
TFCs held by Alfalah GHP Income Multiplier Fund 6,116 6,119
TFCs held by Alfalah GHP Income Fund 72,887 87,899
Management fee receivable from fund 137,853 102,998
Sales load receivable from fund 14,982 8,477
Receivable against formation for fund 2,647 7,901
Insurance payable for general and health 480 183
Receivable against allocation of expenses from fund 13,127 -
Seed Capital in fund 180,000 -
Advisory income receivable from fund 976 -

Others
Mark-up suspended on advances to Warid Telecom (Private) Limited 61,267 42,582
Mark-up suspended on advances to Wateen Telecom (Private) Limited 808,508 644,122
Mark-up suspended on advances to Wateen Wimax 16,808 5,587
Mark-up receivable on Sukuk from Pakistan Mobile Communication Limited 3,247 -
Advance Rent from Warid Telecom (Private) Limited 9,164 8,206
Rent payable to Wateen Telecom (Private) Limited - 750
TFCs held by Taavun (Private) Limited 332,467 498,800
TFCs held by Key Management Personnel 132,348 186,591

41.11 The key management personnel / directors compensation are as follows:

Salaries and Allowances (also refer note 28.1) 1,297,506 1,170,228

Fair value charge against employee stock option scheme 109,615 94,830

In addition, the Chief Executive and certain Executives are provided with Bank maintained cars and other benefits.

42 CAPITAL ASSESSMENT AND ADEQUACY

42.1 Scope of Applications

Amounts subject to Pre - Basel III treatment

The Basel-III Framework is applicable to the Group at the consolidated level (comprising of wholly/partially owned
subsidiaries and associates). Subsidiaries are included while calculating Consolidated Capital Adequacy for the
Group using full consolidation method whereas associates in which the Group has significant influence on equity
method. Standardized Approach is used for calculating the Capital Adequacy for Credit and Market risks, whereas,
higher of Alternate Standardized Approach (ASA) or 70% of Basic Indicator Approach (BIA) is used for Operational
Risk Capital Adequacy purpose.

42.2 Capital Management

42.2.1 Objectives and goals of managing capital

The Group manages its capital to attain following objectives and goals:

- an appropriately capitalized status, as defined by Banking regulations;

264
 - acquire strong credit ratings that enable an optimized funding mix and liquidity sources at lesser costs;
- cover all risks underlying business activities and
- retain flexibility to harness future investment opportunities, build and expand even in stressed times.

42.2.2 Statutory Minimum Capital Requirement and Capital Adequacy Ratio

The State Bank of Pakistan through its BSD Circular No.07 of 2009 dated April 15, 2009 requires the minimum paid
up capital (net of losses) for all locally incorporated Banks to be raised to Rs. 10 billion in a phased manner from
the financial year December 2013. The paid up capital of the Bank for the year ended December 31, 2016 stands at
Rs. 15.952 billion and is in compliance with the SBP requirement for the said year.

The capital adequacy ratio of the Group is subject to the Basel III capital adequacy guidelines stipulated by the
State Bank of Pakistan through its BPRD Circular No. 06 of 2013 dated August 15, 2013. These instructions are
effective from December 31, 2013 in a phased manner with full implementation intended by December 31, 2019.
Under Basel III guidelines Banks are required to maintain the following ratios on an ongoing basis:

Phase-in arrangement and full implementation of the minimum capital requirements:

As of
Sr. No Ratio 2015 2016 2017 2018 December 31,
2019
1 CET 1 6.0% 6.0% 6.0% 6.0% 6.0%
2 ADT 1 1.5% 1.5% 1.5% 1.5% 1.5%
3 Tier 1 7.5% 7.5% 7.5% 7.5% 7.5%
4 Total Capital 10.0% 10.0% 10.0% 10.0% 10.0%
5 *CCB 0.25% 0.65% 1.28% 1.90% 2.50%
6 Total Capital Plus CCB 10.25% 10.65% 11.28% 11.90% 12.50%

* Capital conservation buffer

42.2.3 Group’s regulatory capital is analysed into three tiers

Common Equity Tier 1 capital (CET1), which includes fully paid up capital (including the bonus shares), balance in
share premium account, general reserves, statutory reserves as per the financial statements and net unappropriated
profits after all regulatory adjustments applicable on CET1 (refer note 42.4).
Additional Tier 1 Capital (AT1), which includes perpetual non-cumulative preference shares and share premium
resulting from the issuance of preference shares balance in share premium account after all regulatory adjustments
applicable on AT1 (refer to note 42.4).
Tier 2 capital, which includes Subordinated debt/ Instruments, share premium on issuance of Subordinated debt/
Instruments, general provisions for loan losses (up to a maximum of 1.25% of credit risk weighted assets), net
reserves on revaluation of fixed assets and equity investments up to a maximum of 45% of the balance, further
in the current year additional benefit of revaluation reserves (net of tax effect) is availed at the rate of 60% per
annum for the remaining portion of 55% of revaluation reserve and foreign exchange translation reserves after all
regulatory adjustments applicable on Tier 2 (refer to note 42.4).
The required capital adequacy ratio (10.65% of the risk-weighted assets) is achieved by the Group through
improvement in the capital base, asset quality at the existing volume level, ensuring better recovery management
and composition of asset mix with low risk. Banking operations are categorized as either trading book or Banking
book and risk-weighted assets are determined according to specified requirements of the State Bank of Pakistan
that seek to reflect the varying levels of risk attached to assets and off-balance sheet exposures. The total risk-
weighted exposures comprise of the credit risk, market risk and operational risk.

265
 Basel-III Framework enables a more risk-sensitive regulatory capital calculation to promote long term viability
of the Group. As the Group carry on the business on a wide area network basis, it is critical that it is able to
continuously monitor the exposure across entire organization and aggregate the risks so as to take an integrated
approach/view. Maximization of the return on risk-adjusted capital is the principal basis to be used in determining
how capital is allocated within the Group to particular operations. The Group remained compliant with all externally
imposed capital requirements through out the year. Further, there has been no material change in the Group’s
management of capital during the year.

42.2.4 Leverage Ratio

The leverage ratio of the Group as at December 31, 2016 is 3.51 % (2015: 3.47%). The ratio has been computed as
prescribed by State Bank of Pakistan through Instructions for Basel-III Implementation in Pakistan.

As on December 31, 2016; Total Tier 1 capital of the Group amounts to Rs. 43,167,583 thousand (2015: Rs. 37,445,383
thousand) whereas the total exposure measure amounts to Rs. 1,230,215,639 thousand (2015: Rs. 1,080,351,619
thousand).

Favourable shift in leverage ratio is mainly due to an increase in Bank’s Tier 1 capital and a decrease in unconditionally
cancellable commitment.

42.3 Capital Adequacy

Group’s approach for assessing the adequacy of the capital to support current and future business operations based on the
following:
a. Capital Adequacy plays key consideration for not only arriving at the business projections / plans but is religiously
monitored while undertaking transactions.
b. The Group has demonstrated the capability to comfortably meet new & enhanced capital adequacy standards, therefore
it is now following controlled growth strategy. The TFC was issued by the Bank to support the growth but gradually the
Bank is enriching the Tier 1 capital while ensuring regular dividend to share holders.
c. The capital base forms the very basic foundation of business plans. The capital base is sufficient to support the
envisaged business growth and this would be monitored regularly.
d. Current and potential risk exposures across all the major risk types are:

Materiality Level for Bank– Adequacy of controls (Adequate /

Risk Type
High/Medium/Low Partially adequate/ Not adequate)
Credit High Adequate
Market High Adequate
Operational High Adequate
Model Low Adequate
Concentration Medium Adequate
Interest rate risk in Banking Book High Adequate
Liquidity High Adequate
Country Medium Adequate
Reputation Medium Adequate
Strategic / Business Medium Adequate
Legal Risk Medium Adequate

e. The Group enjoys strong sponsor support from Abu Dhabi Group, and more recently, IFC has acquired a 15% stake in
the Bank. This alliance has further solidified the Group’s position and indicates increased investor confidence. The Bank
has successfully managed five TFCs issues in the past, two of which are currently in issue. These are indicative of the
Group’s capacity to raise capital where required.
f. The Group follows Standardised Approach for Credit and Market Risk, and Alternative Standardized Approach for
Operational Risk. The assessment of capital adequacy is based on regulatory requirements.

266
42.4 Capital Adequacy Ratio as at December 31, 2016
 2016 2015
(Restated)
(Rupees in ‘000)
Common Equity Tier 1 capital (CET1): Instruments and reserves
1 Fully Paid-up Capital/ Capital deposited with SBP 15,952,076 15,898,062
2 Balance in Share Premium Account 4,417,126 4,329,648
3 Reserve for issue of Bonus Shares - -
4 Discount on Issue of shares - -
5 General/ Statutory Reserves 9,894,506 8,261,506
6 Gain/(Losses) on derivatives held as Cash Flow Hedge - -
7 Unappropriated/unremitted profits/ (losses) 17,777,737 12,813,488
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) 168,183 170,969
9 CET 1 before Regulatory Adjustments 48,209,628 41,473,673
10 Total regulatory adjustments applied to CET1 (Note 42.4.1) 5,042,045 4,028,290
11 Common Equity Tier 1 43,167,583 37,445,383

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) 6,795 1,521
16 of which: instrument issued by subsidiaries subject to phase out - -
17 AT1 before regulatory adjustments 6,795 1,521
18 Total regulatory adjustment applied to AT1 capital (Note 42.4.2) 163,435 399,036
19 Additional Tier 1 capital after regulatory adjustments - -
20 Additional Tier 1 capital recognized for capital adequacy - -

21 Tier 1 Capital (CET1 + admissible AT1) (11+20) 43,167,583 37,445,383

Tier 2 Capital
22 Qualifying Tier 2 capital instruments under Basel III plus any related share premium 3,990,400 4,989,000
23 Tier 2 capital instruments subject to phaseout arrangement issued under pre-Basel 3
rules - 465,454
24 Tier 2 capital instruments issued to third parties by consolidated subsidiaries (amount
allowed in group Tier 2) 11,337 2,554
25 of which: instruments issued by subsidiaries subject to phase out - -
26 General provisions or general reserves for loan losses-up to maximum of 1.25% of Credit
Risk Weighted Assets 820,776 780,744
27 Revaluation Reserves (net of taxes) c=a+b 8,532,418 7,331,765
28 of which: Revaluation reserves on fixed assets a 3,556,216 3,054,551
29 of which: Unrealized gains/losses on AFS b 4,976,202 4,277,214
30 Foreign Exchange Translation Reserves 1,584,020 1,572,966
31 Undisclosed/Other Reserves (if any) - -
32 T2 before regulatory adjustments 14,938,951 15,142,483
33 Total regulatory adjustment applied to T2 capital (Note 42.4.3) 506,382 1,011,621
34 Tier 2 capital (T2) after regulatory adjustments 14,432,569 14,130,862

35 Tier 2 capital recognized for capital adequacy 14,432,569 14,130,862

36 Portion of Additional Tier 1 capital recognized in Tier 2 capital - -
37 Total Tier 2 capital admissible for capital adequacy 14,432,569 14,130,862

38 TOTAL CAPITAL (T1 + admissible T2) (21+37) 57,600,152 51,576,245

39 Total Risk Weighted Assets (RWA) {for details refer Note 42.7} 433,975,024 384,907,258

267
 2016 2015
(Restated)
(Rupees in ‘000)
Capital Ratios and buffers (in percentage of risk weighted assets)
40 CET1 to total RWA 9.95% 9.73%
41 Tier-1 capital to total RWA 9.95% 9.73%
42 Total capital to total RWA 13.27% 13.40%
43 Bank specific buffer requirement (minimum CET1 requirement plus capital conservation buffer
plus any other buffer requirement) 6.65% 6.25%
44 of which: capital conservation buffer requirement 0.65% 0.25%
45 of which: countercyclical buffer requirement - -
46 of which: D-SIB or G-SIB buffer requirement - -
47 CET1 available to meet buffers (as a percentage of risk weighted assets) 3.95% 4.23%

National minimum capital requirements prescribed by SBP

48 CET1 minimum ratio 6.00% 6.00%
49 Tier 1 minimum ratio 7.50% 7.50%
50 Total capital minimum ratio (Inclusive of 0.65% CCB for 2016 (2015: 0.25%)) 10.65% 10.25%

2016 2015
Amounts Amounts
subject to subject to
Regulatory Adjustments and Additional Information Amount Amount
Pre-Basel III Pre-Basel III
treatment* treatment*
(Restated)
(Rupees in ‘000)
42.4.1 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) 1,761,370 1,372,124
3 Shortfall in provisions against classified assets - -
Deferred tax assets that rely on future profitability excluding those arising
4 1,787,215 1,191,476 1,612,215 2,418,323
from temporary differences (net of related tax liability)
5 Defined-benefit pension fund net assets 209,590 16,001
Reciprocal cross holdings in CET1 capital instruments of banking, financial and
6 1,026,250 630,434
insurance entities
7 Cash flow hedge reserve - -
8 Investment in own shares/ CET1 instruments 100,980 -
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 156,640 397,516
22 Total regulatory adjustments applied to CET1 (sum of 1 to 21) 5,042,045 4,028,290

*The amount represents regulatory deductions that are still subject to pre-Basel-III treatment during the transitional period.

268
 2016 2015
Amounts Amounts
subject to subject to
Regulatory Adjustments and Additional Information Amount Amount
Pre-Basel III Pre-Basel III
treatment* treatment*
(Restated)
(Rupees in ‘000)
42.4.2 Additional Tier 1 & Tier 1 Capital: regulatory adjustments
23 Investment in mutual funds exceeding the prescribed limit [SBP specific
-
adjustment]
24 Investment in own AT1 capital instruments - -
25 Reciprocal cross holdings in Additional Tier 1 capital instruments of banking,
- -
financial and insurance entities
26 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)
27 Significant investments in the capital instruments of banking, financial and
- -
insurance entities that are outside the scope of regulatory consolidation
28 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 163,435 (163,435) 399,036 (399,036)
deduction from additional Tier 1 capital
29 Adjustments to Additional Tier 1 due to insufficient Tier 2 to cover deductions - -
30 Total regulatory adjustment applied to AT1 capital (sum of 23 to 29) 163,435 399,036

42.4.3 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 163,435 (163,435) 399,036 (399,036)
deduction from Tier 2 capital
32 Reciprocal cross holdings in Tier 2 instruments of banking, financial and
342,120 611,920
insurance entities
33 Investment in own Tier 2 capital instrument 827 665
34 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)
Significant investments in the capital instruments issued by banking, financial
35 - -
and insurance entities that are outside the scope of regulatory consolidation
36 Total regulatory adjustment applied to T2 capital (sum of 31 to 35) 506,382 1,011,621

*The amount represents regulatory deductions that are still subject to pre-Basel-III treatment during the transitional period.

2016 2015
(Restated)
42.4.4 Additional Information (Rupees in ‘000)

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) 370,547,972 317,366,911
(i) of which: deferred tax assets 1,191,476 2,418,323
(ii) of which: Defined-benefit pension fund net assets 139,727 24,002
(iii) of which: Recognized portion of investment in capital of banking, financial and insurance
105,041 222,688
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 326,869 798,072

Amounts below the thresholds for deduction (before risk weighting)

38 Non-significant investments in the capital of other financial entities 105,041 222,688

39 Significant investments in the common stock of financial entities 490,304 532,048
40 Deferred tax assets arising from temporary differences (net of related tax liability) - -

269
 2016 2015
(Restated)
(Rupees in ‘000)
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) 820,776 780,744
42 Cap on inclusion of provisions in Tier 2 under standardized approach 4,653,889 4,010,375
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 - -

42.5 Capital Structure Reconciliation

Balance
Under
sheet as in
regulatory
Table: 42.5.1 published
scope of
financial
consolidation
statements
2016
(Rupees in ‘000)
Assets
Cash and balances with treasury banks 74,071,394 74,071,394
Balances with other banks 9,498,787 9,498,787
Lending to financial institutions 30,149,029 30,149,029
Investments 389,666,922 389,666,922
Advances 378,724,300 378,724,300
Operating fixed assets 18,216,937 18,216,937
Deferred tax assets - -
Other assets 19,115,471 19,115,471
Total assets 919,442,840 919,442,840

Liabilities & Equity

Bills payable 12,886,990 12,886,990
Borrowings 178,710,629 178,710,629
Deposits and other accounts 640,854,225 640,854,225
Sub-ordinated loans 8,317,670 8,317,670
Liabilities against assets subject to finance lease - -
Deferred tax liabilities 2,911,531 2,911,531
Other liabilities 14,836,925 14,836,925
Total liabilities 858,517,970 858,517,970

Share capital/ Head office capital account 15,952,076 15,952,076

Reserves 15,895,652 15,895,652
Unappropriated/ Unremitted profit/ (losses) 17,777,737 17,777,737
Minority Interest 323,466 323,466
Surplus on revaluation of assets 10,975,939 10,975,939
Total equity 60,924,870 60,924,870

270
 Balance sheet as in Under regulatory
Table: 42.5.2 published financial scope of
statements consolidation
2016 Reference
(Rupees in ‘000)
Assets
Cash and balances with treasury banks 74,071,394 74,071,394
Balances with other banks 9,498,787 9,498,787
Lending to financial institutions 30,149,029 30,149,029
Investments 389,666,922 389,666,922
- of which: Non-significant investments in the capital instruments of banking,
- - a
financial and insurance entities exceeding 10% threshold
- of which: significant investments in the capital instruments issued by banking,
- - b
financial and insurance entities exceeding regulatory threshold
- of which: Mutual Funds exceeding regulatory threshold - - c
- of which: reciprocal crossholding of capital instrument -
CET1 1,026,250 1,026,250
d
AT1 - -
T2 276,726 276,726
- of which: others (mention details) - - e
Advances 378,724,300 378,724,300
- shortfall in provisions/ excess of total EL amount over eligible provisions under IRB - - f
- general provisions reflected in Tier 2 capital 775,968 775,968 g
Fixed Assets 18,216,937 18,216,937
of which: Intangibles 1,761,370 1,761,370 h
Deferred Tax Assets - -
- of which: DTAs that rely on future profitability excluding those arising from
2,978,691 2,978,691 i
temporary differences
- of which: DTAs arising from temporary differences exceeding regulatory threshold - - j
Other assets 19,115,471 19,115,471
- of which: Goodwill - - k
- of which: Defined-benefit pension fund net assets 349,317 349,317 l
Total assets 919,442,840 919,442,840

Liabilities & Equity

Bills payable 12,886,990 12,886,990
Borrowings 178,710,629 178,710,629
Deposits and other accounts 640,854,225 640,854,225
Sub-ordinated loans 8,317,670 8,317,670
- of which: eligible for inclusion in AT1 - - m
- of which: eligible for inclusion in Tier 2 3,990,400 3,990,400 n
Liabilities against assets subject to finance lease - -
Deferred tax liabilities 2,911,531 2,911,531
- 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 - - r
Other liabilities 14,836,925 14,836,925
Total liabilities 858,517,970 858,517,970

Share capital 15,952,076 15,952,076

- of which: amount eligible for CET1 15,952,076 15,952,076 s
- of which: amount eligible for AT1 - - t
Reserves 15,895,652 15,895,652
- of which: portion eligible for inclusion in CET1 14,311,632 14,311,632 u
General Reserve 9,894,506 9,894,506
Share Premium 4,417,126 4,417,126
- of which: portion eligible for inclusion in Tier 2 1,584,020 1,584,020 v
Unappropriated profit/ (losses) 17,777,737 17,777,737 w
Minority Interest 323,466 323,466
- of which: portion eligible for inclusion in CET1 168,183 168,183 x
- of which: portion eligible for inclusion in AT1 6,795 6,795 y
- of which: portion eligible for inclusion in Tier 2 11,337 11,337 z
Surplus on revaluation of assets 10,975,939 10,975,939
- of which: Revaluation reserves on Fixed Assets 4,559,251 4,559,251
- of which: Non-banking assets acquired in satisfaction of claims 36,942 36,942 aa
- of which: Unrealized Gains/Losses on AFS 6,379,746 6,379,746
- In case of Deficit on revaluation (deduction from CET1) - - ab
Total equity 60,924,870 60,924,870

Total liabilities & equity 919,442,840 919,442,840

271
 Component of
Table: 42.5.3 regulatory capital Reference
reported by bank
2016
(Rupees in ‘000)
Common Equity Tier 1 capital (CET1): Instruments and reserves
1 Fully Paid-up Capital/ Capital deposited with SBP 15,952,076
2 Balance in Share Premium Account 4,417,126 (s)
3 Reserve for issue of Bonus Shares -
4 General/ Statutory Reserves 9,894,506
(u)
5 Gain/(Losses) on derivatives held as Cash Flow Hedge -
6 Unappropriated/unremitted profits/ (losses) 17,777,737 (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) 168,183 (x)
8 CET 1 before Regulatory Adjustments 48,209,628
Common Equity Tier 1 capital: Regulatory adjustments
9 Goodwill (net of related deferred tax liability) - (k) - (o)
10 All other intangibles (net of any associated deferred tax liability) 1,761,370 (h) - (p)
11 Shortfall of provisions against classified assets - (f)
12 Deferred tax assets that rely on future profitability excluding those arising from temporary
1,787,215 {(i) - (r} * 60%
differences (net of related tax liability)
13 Defined-benefit pension fund net assets 209,590 {(l) - (q)} * 60%
14 Reciprocal cross holdings in CET1 capital instruments 1,026,250 (d)
15 Cash flow hedge reserve -
16 Investment in own shares/ CET1 instruments 100,980
17 Securitization gain on sale -
18 Capital shortfall of regulated subsidiaries -
19 Deficit on account of revaluation from bank’s holdings of fixed assets/ 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) - ( j)
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 of which: Investment in TFCs of other banks exceeding the prescribed limit -
28 of which: Any other deduction specified by SBP (mention details) -
29 Regulatory adjustment applied to CET1 due to insufficient AT1 and Tier 2 to cover deductions 156,640
30 Total regulatory adjustments applied to CET1 (sum of 9 to 29) 5,042,045
31 Common Equity Tier 1 43,167,583
Additional Tier 1 (AT 1) Capital
32 Qualifying Additional Tier 1 instruments plus any related share premium -
33 of which: Classified as equity - (t)
34 of which: Classified as liabilities - (m)
35 Additional Tier 1 capital instruments issued by consolidated subsidiaries and held by third parties
(amount allowed in group AT 1) 6,795 (y)
36 of which: instrument issued by subsidiaries subject to phase out -
37 AT1 before regulatory adjustments 6,795
Additional Tier 1 Capital: regulatory adjustments
38 Investment in mutual funds exceeding the prescribed limit (SBP specific adjustment) -
39 Investment in own AT1 capital instruments -
40 Reciprocal cross holdings in Additional Tier 1 capital instruments -
41 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) - (ac)
42 Significant investments in the capital instruments issued by banking, financial and insurance
entities that are outside the scope of regulatory consolidation - (ad)
43 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 163,435
44 Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover deductions -
45 Total of Regulatory Adjustment applied to AT1 capital (sum of 38 to 43) 163,435
46 Additional Tier 1 capital -
47 Additional Tier 1 capital recognized for capital adequacy -
48 Tier 1 Capital (CET1 + admissible AT1) (31+47) 43,167,583

272
 Component of
Table: 42.5.3 regulatory capital Reference
reported by bank
2016
(Rupees in ‘000)
Tier 2 Capital
49 Qualifying Tier 2 capital instruments under Basel III plus any related share premium 3,990,400
(n)
50 Capital instruments subject to phase out arrangement from tier 2 (Pre-Basel III instruments) -
51 Tier 2 capital instruments issued to third party by consolidated subsidiaries (amount allowed in
group tier 2) 11,337 (z)
52 of which: instruments issued by subsidiaries subject to phase out -
53 General Provisions or general reserves for loan losses-up to maximum of 1.25% of
Credit Risk Weighted Assets 820,776 (g)
54 Revaluation Reserves 8,532,418
55 of which: Revaluation reserves on fixed assets 3,556,216
portion of (aa)
56 of which: Unrealized Gains/Losses on AFS 4,976,202
57 Foreign Exchange Translation Reserves 1,584,020 (v)
58 Undisclosed/Other Reserves (if any) -
59 T2 before regulatory adjustments 14,938,951

Tier 2 Capital: regulatory adjustments

60 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 163,435
61 Reciprocal cross holdings in Tier 2 instruments 342,120
62 Investment in own Tier 2 capital instrument 827
63 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) - (ae)
64 Significant investments in the capital instruments issued by banking, financial and insurance
entities that are outside the scope of regulatory consolidation - (af)
65 Amount of Regulatory Adjustment applied to T2 capital (sum of 60 to 64) 506,382
66 Tier 2 capital (T2) 14,432,569
67 Tier 2 capital recognized for capital adequacy 14,432,569
68 Excess Additional Tier 1 capital recognized in Tier 2 capital -
69 Total Tier 2 capital admissible for capital adequacy 14,432,569

70 TOTAL CAPITAL (T1 + admissible T2) (48+69) 57,600,152

273
42.6 Main Features Template of Regulatory Capital Instruments

Disclosure template for main features of regulatory capital instruments

S. No. Main Features Common Shares Instrument - 2 Instrument - 3
1 Issuer Bank Alfalah Limited Bank Alfalah Limited Bank Alfalah Limited
2 Unique identifier (e.g. KSE Symbol or Bloomberg BAFL BAFL BAFL TFC 5
identifier etc.)
3 Governing law(s) of the instrument Laws of Islamic Laws of Islamic Laws of Islamic Republic of Pakistan
Republic of Pakistan Republic of Pakistan
Regulatory treatment
4 Transitional Basel III rules Common Equity Tier 1 Tier 2 Tier 2
5 Post-transitional Basel III rules Common Equity Tier 1 Ineligible Ineligible
6 Eligible at solo/ group/ group & solo Solo and Group Solo and Group Solo and Group
7 Instrument type Ordinary shares Subordinated debt Subordinated debt
8 Amount recognized in regulatory capital Rs. 15,952,076 Nil Rs. 3,990,400
(Currency in PKR thousands, as of reporting date)
9 Par value of instrument Rs. 10 Rs. 5,000 Rs. 5,000
10 Accounting classification Share holders’ equity Liability Liability
11 Original date of issuance 21-Jun-92 Dec 2009 Feb 19 & 20, 2013
12 Perpetual or dated NA Dated Dated
13 Original maturity date NA Dec 2017 Feb 2021
14 Issuer call subject to prior supervisory approval NA NA No
15 Optional call date, contingent call dates and NA NA NA
redemption amount
16 Subsequent call dates, if applicable NA NA NA
Coupons / dividends
17 Fixed or floating dividend/ coupon NA Fixed to floating Floating
18 Coupon rate and any related index/ benchmark NA Option 1: Fixed at Floating at 6 Months KIBOR*(Base Rate) plus 125 basis points per annum without any
15.50% per annum floor or CAP
Option 2: 6 Months
KIBOR plus 250 basis
points per annum
19 Existence of a dividend stopper No No No
20 Fully discretionary, partially discretionary or NA Fully discretionary Fully discretionary
mandatory
21 Existence of step up or other incentive to redeem NA No No
22 Noncumulative or cumulative NA Cumulative Cumulative
23 Convertible or non-convertible NA Non convertible Convertible
24 If convertible, conversion trigger (s) NA NA At the option of supervisor it can be converted into common equity upon occurrence of
certain trigger events , called point of non viability(PONV). The PONV is the earlier of;
1. A decision made by SBP that a conversion or temporary/ permanent write off is
necessary without which the bank would become non viable.
2. the decision to make a public sector injection of capital, or equivalent support,
without which the bank would have become non viable, as determined by SBP.
25 If convertible, fully or partially NA NA May convert fully or partially
26 If convertible, conversion rate NA NA To be determined in the case of trigger event
27 If convertible, mandatory or optional conversion NA NA Optional
28 If convertible, specify instrument type NA NA Common Equity Tier 1
convertible into
29 If convertible, specify issuer of instrument it NA NA Bank Alfalah Limited
converts into
30 Write-down feature No NA Yes
31 If write-down, write-down trigger(s) NA NA At the option of supervisor it can be either written off upon occurrence of a certain
trigger event , called point of non viability(PONV). The PONV is the earlier of;
1. A decision made by SBP that a conversion or temporary/ permanent
write off is necessary without which the bank would become non viable.
2. The decision to make a public sector injection of capital, or equivalent support,
without which the bank would have become non viable, as determined by SBP.
32 If write-down, full or partial NA NA Either may be written-down fully or may be written down partially.
33 If write-down, permanent or temporary NA NA Temporary
34 If temporary write-down, description of write-up NA NA As may be determined by reversal of trigger event and subject to regulator’s approval
mechanism
35 Position in subordination hierarchy in liquidation NA Deposits Deposits
(specify instrument type immediately senior to
instrument
36 Non-compliant transitioned features NA NA No
37 If yes, specify non-compliant features NA NA N/A

274
42.7 Risk Weighted Assets
The capital requirements for the banking group as per the major risk categories should be indicated in the manner given below:-

Capital Requirements Risk Weighted Assets

2015 2015
2016 2016
(Restated) (Restated)
(Rupees in ‘000)
Credit Risk
On-Balance sheet
Portfolios subject to standardized approach (Comprehensive)
Cash & cash equivalents - - - -
Sovereign 3,038,749 2,969,181 28,532,859 28,967,616
Public Sector entities 485,776 986,853 4,561,275 9,627,832
Banks 1,534,305 1,125,068 14,406,619 10,976,271
Corporate 20,651,590 15,731,681 193,911,644 153,479,814
Retail 4,050,033 3,220,951 38,028,482 31,423,916
Residential Mortgages 348,457 313,969 3,271,896 3,063,114
Past Due loans 271,911 266,037 2,553,152 2,595,479
Operating Fixed Assets 1,752,518 1,634,421 16,455,568 15,945,566
Other assets 603,813 1,432,032 5,669,603 13,971,041
32,737,152 27,680,193 307,391,098 270,050,649
Portfolios subject to Internal Rating Based (IRB) Approach
e.g. Corporate, Sovereign, Corporate, Retail, Securitization etc. - - - -
Off-Balance sheet
Non-market related
Financial guarantees 2,767,404 936,061 25,985,017 9,132,300
Acceptances 120,141 1,143,764 1,128,089 11,158,670
Performance Related Contingencies 1,235,126 825,039 11,597,424 8,049,163
Trade Related Contingencies 1,197,543 830,617 11,244,536 8,103,584
5,320,214 3,735,481 49,955,066 36,443,717
Market related
Foreign Exchange contracts 52,978 57,548 497,446 561,441
Derivatives 5,225 2,770 49,064 27,026
58,203 60,318 546,510 588,467
Equity Exposure Risk in the Banking Book
Under simple risk weight method
Listed Equity Investment 774,420 516,131 7,271,546 5,035,426
Unlisted Equity Investment 761,141 892,953 7,146,865 8,711,737
1,535,561 1,409,084 14,418,411 13,747,163
Under Internal models approach - - - -
39,651,130 32,885,076 372,311,085 320,829,996
Market Risk
Capital Requirement for portfolios subject to Standardized Approach
Interest rate risk 207,250 307,488 2,590,625 3,843,600
Equity position risk 161,175 31,993 2,014,688 399,913
Foreign Exchange risk 10,455 886,466 130,688 11,080,825
378,880 1,225,947 4,736,001 15,324,338
Capital Requirement for portfolios subject to Internal Models Approach
Operational Risk [70% of BIA or ASA whichever is higher is taken
as capital charge (2015-80%)]*
Capital Requirement for operational risks 4,554,235 3,900,234 56,927,938 48,752,924
Total Risk Weighted Exposures 44,584,245 38,011,257 433,975,024 384,907,258
* SBP has accorded approval to the bank vide SBP letter No. BPRD/ BA&CP/ 614/ 17838/2013 dated December 03, 2013 for adoption of ASA
based on the following capital floor i.e. operational risk charge under ASA should not fall below a certain percentage of operational risk capital
charge calculated under Basic Indicator Approach (BIA)

Capital Floor (for operational risk capital charge only)

December 2013 - December 2014 Year 2015 Year 2016
90% 80% 70%
2016 2015
Capital Adequacy Ratios
Required Actual Required Actual
CET1 to total RWA 6.00% 9.95% 6.00% 9.73%
Tier-1 capital to total RWA 7.50% 9.95% 7.50% 9.73%
Total capital to total RWA 10.65% 13.27% 10.25% 13.40%

275
43 RISK MANAGEMENT

The variety of business activities undertaken by the Group requires effective identification, measurement,
monitoring, integration and management of different financial and non-financial risks that are constantly
evolving as business activities change in response to concurrent internal and external developments. The Board
Risk Management Committee (BRMC) is appointed and authorized by the Board of Directors (BOD) to assist
in design, regular evaluation and timely updating of the risk management framework of the Bank. The Board
has further authorized management committees i.e. Central Management Committee (CMC) and Central Credit
Committee (CCC). To complement CMC and to supervise risk management activities within their respective
scopes, CMC has further established sub-committees such as Assets & Liabilities Committee (ALCO), Investment
Committee, Principal Investment Committee, Information Technology Steering Committee (ITSC), Internal Control
& Compliance Committee (ICCC) and Process Improvement Committee.

The risk management framework endeavours to be a comprehensive and evolving guideline to cater to changing
business dynamics. The framework includes:

- Clearly defined risk management policies and procedures.

- Well constituted organizational structure, in the form of a separate risk management department, which
ensures that individuals responsible for risk approval are independent from risk taking units i.e. Business
Units.

- Mechanism for ongoing review of policies and procedures and risk exposures.

The primary objective of this architecture is to inculcate risk management into the organization flows to ensure
that risks are accurately identified & assessed, properly documented, approved, and adequately monitored &
managed in order to enhance long term earnings and to protect the interests of the Bank’s depositors and
shareholders.

The Group’s risk management framework has a well-defined organizational structure for effective management
of credit risk, market risk, liquidity risk, operational risk, IT security risk and environment and social risk.

43.1 Credit risk

Credit risk is the identification of probability that counterparty will cause a financial loss to the Group due to
its inability or unwillingness to meet its contractual obligation. This credit risk arises mainly from both direct
lending activities as well as contingent liabilities. Credit risk management processes encompass identification,
assessment, measurement, monitoring and control of Group’s exposure to credit risk. The Group’s credit risk
management philosophy is based on Group’s overall business strategy / direction as established by the Board.
The Group is committed to the appropriate level of due diligence to ensure that credit risks have been properly
analysed, fully disclosed to the approving authorities and appropriately rated, also ensuring that the credit
commitment is appropriately structured, priced (in line with market practices) and documented.
The Group has built and maintained a sound loan portfolio in terms of well-defined credit policy approved by
BOD. Its credit evaluation system comprises of well-designed credit appraisal, sanctioning and review procedures
for the purpose of emphasizing prudence in lending activities and ensuring the high quality of asset portfolio. In
order to have an effective and efficient risk assessment, and to closely align its functions with Business, Credit
Division has separate units for corporate banking, Islamic banking, commercial & SME banking, agricultural
financing, and overseas operations.
The Group manages its portfolio of loan assets with a view to limit concentrations in terms of risk quality,
industry, maturity and large exposure. Internal rating based portfolio analysis is also conducted on regular basis.
This portfolio level oversight is maintained by Risk Management Division.

276
 A sophisticated internal credit rating system is in place, which is capable of quantifying counter-party &
transaction risk in accordance with the best practices. The risk rating system takes into consideration qualitative
and quantitative factors of the counter-party, transaction structure & security and generates internal ratings
at Obligor and Facility levels. The facility rating system, developed in line with SBP’s guidelines, also provides
estimated LGD (Loss Given Default). This has been implemented in Corporate Banking and Retail & Middle Market
segments with other business units to follow. Furthermore, this system has an integrated loan origination module,
which is currently being used in Corporate Banking, Islamic Banking and Retail & Middle Market segments.
The system is regularly reviewed for improvements as per SBP’s guidelines for Internal Credit Rating and Risk
Management. Furthermore, Group has also automated Internal Rating validation process based on statistical tests
for Corporate, Commercial, ME, SE & Agri rating models. It covers both discrimination & calibration statistical
tests as per best international practices. The system is backed by secured database with backup support and
is capable of generating MIS reports providing snapshot of the entire portfolio for strategizing and decision
making. The system has been enhanced to generate the risk weighted assets required for supporting the credit
facilities at the time of credit origination and computation of Risk Weighted Assets for the quarterly credit risk
related Basel submissions.
A centralized Credit Administration Division (CAD) under Operations Group is working towards ensuring that
terms of approval of credit sanctions and regulatory stipulations are complied, all documentation including
security documentation is regular & fully enforceable and all disbursements of approved facilities are made only
after necessary authorization by CAD. Credit Monitoring, under CAD, keeps a watch on the quality of the credit
portfolio in terms of borrowers’ behaviour, identifies weakening accounts relationships and reports it to the
appropriate authority with a view to arrest deterioration.
To handle the specialized requirements of managing delinquent and problem accounts, the Bank has a separate
client facing unit to negotiate repayment/ settlement of the Group’s non-performing exposure and protect
the interests of the Bank’s depositors and stakeholders. Unlike other banking groups, where the priority is the
maximization of Bank’s revenue, the priority of the Special Asset Management Group (SAMG) is recovery of funds
and/or to structure an arrangement (such as rescheduling, restructuring, settlement or a combination of these)
by which the interests of the Bank are protected. Where no other recourse is possible, SAMG may proceed with
legal recourse so as to maximize the recovery of the Bank’s assets. The Risk Management Division also monitors
the NPL portfolio of the Bank and reports the same to CCC/ BRMC.

43.1.1 Credit Risk - General Disclosures Basel Specific

Bank Alfalah Limited is using Standardized Approach (SA) of SBP Basel accord for the purpose of estimating
Credit Risk Weighted Assets. Under SA, banks are allowed to take into consideration external rating(s) of
counter-party(s) for the purpose of calculating Risk Weighted Assets. A detailed procedural manual specifying
return-based formats, methodologies and processes for deriving Credit Risk Weighted Assets in accordance with
the SBP Basel Standardized Approach is in place and firmly adhered to.

43.1.2 Disclosures for portfolio subject to the Standardised Approach & Supervisory risk weights

43.1.2.1 External ratings

SBP Basel III guidelines require banks to use ratings assigned by specified External Credit Assessment Agencies
(ECAIs) namely PACRA, JCR-VIS, Moodys, Fitch and Standard & Poors.

The State Bank of Pakistan through its letter number BSD/BAI-2/201/1200/2009 dated December 21, 2009 has
accorded approval to the Bank for use of ratings assigned by CRAB and CRISL. The Bank uses these ECAIs to
rate its exposures denominated in Bangladeshi currency on certain corporate and banks incorporated
in Bangladesh.

277
 The Bank uses external ratings for the purposes of computing the risk weights as per the Basel III framework.
For exposures with a contractual maturity of less than or equal to one year, short-term rating given by approved
Rating Agencies is used, whereas for long-term exposure with maturity of greater than one year, long-term
rating is used.

Where there are two ratings available, the lower rating is considered and where there are three or more ratings
the second - lowest rating is considered.

43.1.3 Disclosures with respect to Credit Risk Mitigation for Standardised Approach

43.1.3.1 Credit risk mitigation policy

The Bank defines collateral as the assets or rights provided to the Bank by the borrower or a third party in order
to secure a credit facility. The Bank would have the rights of secured creditor in respect of the assets / contracts
offered as security for the obligations of the borrower / obligor.

43.1.3.2Collateral valuation and management

As stipulated in the SBP Basel II / III guidelines, the Bank uses the comprehensive approach for collateral
valuation. Under this approach, the Bank reduces its credit exposure to a counterparty when calculating
its capital requirements to the extent of risk mitigation provided by the eligible financial collateral as specified
in the Basel III guidelines. In line with Basel II / III guidelines, the Bank makes adjustments in eligible collaterals
received for possible future fluctuations in the value of the collateral in line with the requirements specified
by SBP guidelines. These adjustments, also referred to as ‘haircuts’, to produce volatility-adjusted amounts for
collateral, are reduced from the exposure to compute the capital charge based on the applicable risk weights.

43.1.3.3Types of collateral taken by the Bank

Bank Alfalah Limited determines the appropriate collateral for each facility based on the type of product and
counterparty. In case of corporate and SME financing, fixed assets are generally taken as security for long
tenor loans and current assets for working capital finance usually backed by mortgage or hypothecation.
For project finance, security of the assets of the borrower and assignment of the underlying project contracts
is generally obtained. Additional security such as pledge of shares, cash collateral, TDRs, SSC/DSCs, charge on
receivables may also be taken. Moreover, in order to cover the entire exposure Personal Guarantees of Directors
/ Borrowers are also obtained generally by the Bank. For retail products, the security to be taken is defined in
the product policy for the respective products. Housing loans and automobile loans are secured by the security
of the property/automobile being financed respectively. The valuation of the properties is carried out by an
approved valuation agency.
The Bank also offers products which are primarily based on collateral such as shares, specified securities and
pledged commodities. These products are offered in line with the SBP prudential regulations and approved
product policies which also deal with types of collateral, valuation and margining.
The decision on the type and quantum of collateral for each transaction is taken by the credit approving
authority as per the credit approval authorization approved by the Central Credit Committee (CCC) under its
delegation powers. For facilities provided as per approved product policies (retail products, loan against shares
etc.), collateral is taken in line with the policy.

43.1.3.4 Types of eligible financial collateral

For credit risk mitigation purposes (capital adequacy purposes), the Group considers all types of financial
collaterals that are eligible under SBP Basel III accord. This includes Cash / TDRs, Gold, securities issued by
Government of Pakistan such as T-Bills and PIBs, National Savings Certificates, certain debt securities rated
by a recognised credit rating agency, mutual fund units where daily Net Asset Value (NAV) is available in public
domain and guarantees from certain specified entities (Government of Pakistan, Banks etc.) under substitution

278
 effect of Basel in general, for capital calculation purposes, in line with the SBP Basel III requirements,
the Bank recognises only eligible collaterals as mentioned in the SBP Basel III accord.

43.1.3.5 Credit concentration risk

Credit concentration risk arises mainly due to concentration of exposures under various categories viz. industry,
geography, and single/group borrower exposures. Within credit portfolio, as a prudential measure aimed at
better risk management and avoidance of concentration of risks, the SBP has prescribed regulatory limits on
banks’ maximum exposure to single borrower and group borrowers. Moreover, in order to restrict the industry
concentration risk, Bank’s annual credit plan spells out the maximum allowable exposure that it can take on
specific industries. Additionally, the Internal Rating System allows the Bank to monitor risk rating concentration
of borrowers against different grades / scores ranging from 1 - 12 (1 being the best and 12 being loss category) .

43.1.4 Segmental information

43.1.4.1 Segments by class of business

2016
Advances (Gross) Deposits Contingent liabilities*
(Note 10) (Note 16)
(Rupees Percent (Rupees Percent (Rupees Percent
in ‘000) in ‘000) in ‘000)

Agribusiness 25,146,203 6.35% 4,512,814 0.70% 676,226 0.51%

Automobile & Transportation Equipment 6,716,530 1.70% 6,896,102 1.08% 4,942,532 3.76%
Chemical and Pharmaceuticals 4,074,952 1.03% 4,367,174 0.68% 4,036,635 3.07%
Cement 6,310,583 1.59% 998,229 0.16% 4,105,149 3.12%
Communication 6,316,495 1.60% 5,688,168 0.89% 2,894,449 2.20%
Electronics and Electrical Appliances 4,299,732 1.09% 2,686,895 0.42% 4,467,410 3.40%
Educational Institutes 1,915,871 0.48% 7,980,970 1.25% 267,878 0.20%
Financial 8,621,617 2.18% 26,229,211 4.09% 16,187,989 12.32%
Fertilizers 10,855,791 2.74% 418,538 0.07% 130,998 0.10%
Food & Allied Products 16,426,146 4.15% 8,758,225 1.37% 2,755,962 2.10%
Glass & Ceramics 361,281 0.09% 401,428 0.06% 349,719 0.27%
Ghee & Edible Oil 9,421,674 2.38% 3,419,859 0.53% 5,259,148 4.00%
Housing Societies / Trusts 2,535,735 0.64% 23,360,992 3.65% 54,801 0.04%
Insurance - 0.00% 3,497,192 0.55% - 0.00%
Import & Export 6,645,776 1.68% 3,618,472 0.56% 8,483 0.01%
Iron / Steel 9,725,608 2.46% 4,467,572 0.70% 6,357,746 4.84%
Oil & Gas 18,578,938 4.69% 20,598,300 3.21% 17,873,323 13.60%
Paper & Board 3,652,792 0.92% 495,440 0.08% 1,361,049 1.04%
Production and Transmission of Energy 58,281,948 14.72% 19,430,454 3.03% 5,256,974 4.00%
Real Estate / Construction 10,281,339 2.60% 31,372,965 4.90% 5,653,556 4.30%
Retail / Wholesale Trade 14,605,147 3.69% 28,724,702 4.48% 12,486,802 9.50%
Rice Processing and Trading/ Wheat 9,470,043 2.39% 2,189,755 0.34% 67,897 0.05%
Sugar 8,501,559 2.15% 1,635,158 0.26% 733,111 0.56%
Shoes and Leather garments 2,373,883 0.60% 2,173,422 0.34% 342,355 0.26%
Sports Goods 402,310 0.10% 443,678 0.07% 126,329 0.10%
Surgical Goods 490,108 0.12% 521,150 0.08% 25,256 0.02%
Textile Spinning 31,099,133 7.86% 2,747,373 0.43% 6,469,700 4.92%
Textile Weaving 14,184,418 3.58% 3,147,400 0.49% 2,783,776 2.12%
Textile Composite 21,445,047 5.42% 4,963,715 0.77% 5,202,455 3.96%
Welfare Institutions 1,000,000 0.25% 17,551,301 2.74% - 0.00%
Individuals 36,642,361 9.26% 241,987,139 37.76% 684,330 0.52%
Others 45,485,511 11.49% 155,570,432 24.26% 19,886,826 15.11%
395,868,531 100.00% 640,854,225 100.00% 131,448,864 100.00%

279
 2015
Advances (Gross) Deposits Contingent liabilities*
(Note 10) (Note 16)
(Rupees Percent (Rupees Percent (Rupees Percent
in ‘000) in ‘000) in ‘000)

Agribusiness 25,426,115 7.26% 9,268,099 1.45% 403,097 0.36%

Automobile & Transportation Equipment 3,621,759 1.03% 12,494,496 1.95% 2,310,736 2.08%
Chemical and Pharmaceuticals 6,569,859 1.88% 6,943,315 1.08% 4,826,490 4.33%
Cement 5,050,929 1.44% 3,012,779 0.47% 1,679,342 1.51%
Communication 6,795,506 1.94% 7,408,672 1.16% 2,033,797 1.83%
Electronics and Electrical Appliances 5,450,802 1.56% 3,981,446 0.62% 1,463,169 1.31%
Educational Institutes 1,579,472 0.45% 10,393,163 1.62% 166,705 0.15%
Financial 6,012,279 1.72% 43,427,905 6.78% 16,388,180 14.72%
Fertilizers 10,761,359 3.07% 13,237,190 2.07% 2,243,982 2.02%
Food & Allied Products 10,422,249 2.97% 9,009,487 1.41% 2,366,516 2.13%
Glass & Ceramics 400,958 0.11% 1,858,994 0.29% 136,529 0.12%
Ghee & Edible Oil 7,625,148 2.18% 4,018,647 0.63% 3,314,775 2.98%
Housing Societies / Trusts 1,011,819 0.29% 10,340,871 1.62% 62,421 0.06%
Insurance 1,247 0.00% 1,774,999 0.28% - 0.00%
Import & Export 3,679,806 1.05% 14,074,053 2.20% 448,922 0.40%
Iron / Steel 10,082,093 2.88% 7,888,480 1.23% 5,970,084 5.36%
Oil & Gas 32,560,786 9.29% 41,076,943 6.42% 13,674,007 12.28%
Paper & Board 3,107,556 0.89% 2,399,688 0.37% 669,425 0.60%
Production and Transmission of Energy 55,783,228 15.92% 12,261,946 1.92% 10,895,232 9.78%
Real Estate / Construction 9,589,567 2.74% 20,256,601 3.16% 6,593,492 5.92%
Retail / Wholesale Trade 8,153,916 2.33% 28,219,596 4.41% 5,239,175 4.71%
Rice Processing and Trading/ Wheat 9,290,979 2.65% 6,134,412 0.96% 8,572 0.01%
Sugar 6,787,255 1.94% 3,522,207 0.55% 143,569 0.13%
Shoes and Leather garments 2,301,645 0.66% 5,307,073 0.83% 448,764 0.40%
Sports Goods 104,205 0.03% 964,705 0.15% 37,579 0.03%
Surgical Goods 404,717 0.12% 928,481 0.15% 71,983 0.06%
Textile Spinning 25,064,417 7.15% 2,963,234 0.46% 4,204,188 3.78%
Textile Weaving 10,375,119 2.96% 3,086,072 0.48% 876,232 0.79%
Textile Composite 16,144,130 4.61% 4,578,195 0.72% 5,493,318 4.93%
Welfare Institutions 73,341 0.02% 8,209,978 1.28% 3,050 0.00%
Individuals 32,873,698 9.38% 194,754,585 30.42% 1,547,964 1.39%
Others 33,247,338 9.48% 146,340,849 22.86% 17,629,579 15.83%
350,353,297 100.00% 640,137,161 100.00% 111,350,874 100.00%

43.1.4.2 Segment by sector 2016

Advances (Gross) Deposits Contingent liabilities*
(Note 10) (Note 16)
(Rupees Percent (Rupees Percent (Rupees Percent
in ‘000) in ‘000) in ‘000)

Public / Government 86,223,360 22% 18,982,770 3% 22,410,079 17%

Private 309,645,171 78% 621,871,455 97% 109,038,785 83%
395,868,531 100% 640,854,225 100% 131,448,864 100%

*Contingent liabilities for the purpose of this note are presented at cost and includes direct credit substitutes,
transaction related contingent liabilities and trade related contingent liabilities.

280
 2015
Advances (Gross) Deposits Contingent liabilities*
(Rupees Percent (Rupees Percent (Rupees Percent
in ‘000) in ‘000) in ‘000)

Public / Government 94,312,609 27% 36,469,841 6% 16,132,091 14%

Private 256,040,688 73% 603,667,320 94% 95,218,783 86%
350,353,297 100% 640,137,161 100% 111,350,874 100%

*Contingent liabilities for the purpose of this note are presented at cost and includes direct credit substitutes,
transaction related contingent liabilities and trade related contingent liabilities.

43.1.4.3 Details of non-performing advances and specific provisions by class of business segment

2016 2015
Specific Specific
Classified Classified
provision provision
advances advances
held held
----------------------(Note 10.4)----------------------
-------------------(Rupees in ‘000)-------------------

Agribusiness 378,541 216,924 293,088 150,383

Automobile & Transportation equipment 1,131,004 417,619 141,121 87,666
Chemical & Pharmaceuticals 225,513 225,513 110,231 98,165
Communication 1,870,813 1,870,813 519,376 519,376
Educational Institutes 52,322 45,972 - -
Electronic & Electrical Appliances - - 413,838 411,590
Financial 1,302,880 1,288,470 79,330 79,330
Fertilizers 765,136 765,136 790,636 794,048
Food and allied products 257,302 175,802 273,119 202,843
Glass / Ceramics 17,133 17,133 26,559 26,559
Ghee & Edible Oil 457,638 457,638 392,526 454,547
Import & Export 885,121 829,730 626,525 603,525
Iron and steel 227,394 187,622 246,643 213,770
Oil and gas 1,701,406 1,356,224 2,271,267 1,368,285
Paper & Board 90,892 90,892 133,651 133,551
Production and transmission of energy 148,839 148,839 1,948 1,948
Real Estate / Construction 557,536 534,411 655,948 348,688
Retail Trade & Wholesale 2,002,294 1,400,352 895,584 824,676
Rice processing and trading / wheat 1,092,534 1,048,501 521,589 501,232
Sugar 7,322 6,737 - -
Shoes & Leather garments 94,654 94,654 95,251 94,301
Sports 30,990 30,990 3,900 3,900
Surgical goods 32,153 32,153 15,047 15,047
Textile Spinning 1,398,435 1,391,135 628,397 644,892
Textile Weaving 1,104,051 1,024,229 316,201 309,064
Textile Composite 1,051,420 937,481 3,090,643 2,899,945
Individuals 983,682 791,325 1,119,034 918,437
Others 1,152,780 981,968 4,794,307 3,747,147
19,019,785 16,368,263 18,455,759 15,452,915

281
43.1.4.4 Details of non-performing advances and specific provisions by sector
2016 2015
Specific Specific
Classified Classified
provision provision
advances advances
held held
-----------------------(Rupees in ‘000)-----------------------

Public / Government - - - -
Private 19,019,785 16,368,263 18,455,759 15,452,915
19,019,785 16,368,263 18,455,759 15,452,915

43.1.4.5 Geographical segment analysis 2016

Profit before Total assets Net assets Contingent
taxation employed employed liabilities*
-----------------------(Rupees in ‘000)-----------------------

Pakistan 11,698,093 851,019,488 51,865,371 125,163,263

Asia Pacific (including South Asia) 1,107,779 48,111,705 8,201,003 4,665,616
Middle East 548,183 20,311,647 858,496 1,619,985
13,354,055 919,442,840 60,924,870 131,448,864

2015
Profit Total
Net assets Contingent
before assets
taxation employed employed liabilities*
-----------------------(Rupees in ‘000)-----------------------

Pakistan 11,021,338 844,408,608 44,434,956 97,080,642

Asia Pacific (including South Asia) 1,355,228 46,078,322 8,741,448 5,081,365
Middle East 280,606 12,928,827 916,332 9,188,867
12,657,172 903,415,757 54,092,736 111,350,874

*Contingent liabilities for the purpose of this note are presented at cost and includes direct credit substitutes,
transaction related contingent liabilities and trade related contingent liabilities.
43.2 Market risk
Market risk exposes the Group to the risk of financial losses resulting from movements in market prices. It is the
risk associated with changes in the interest rates, foreign exchange rates, equity prices and commodity prices.
To manage and control market risk, a well-defined risk management structure, under Board approved Market &
Liquidity Risk Management Policy, is in place. The policy outlines methods to measure and control market risk
which are carried out at a portfolio level. Moreover, it also includes controls which are applied, where necessary,
to individual risk types, to particular books and to specific exposures. These controls include limits on exposure
to individual market risk variables as well as limits on concentrations of tenors and issuers. This structure is re-
viewed, adjusted and approved periodically.
The Bank’s Asset and Liability Committee (ALCO) and Investment Committee (IC) are primarily responsible for the
oversight of the market risk, supported by Market Risk Management Unit of Risk Management Division (RMD). The
Bank uses the Standardized Approach to calculate capital charge for market risk as per the current regulatory
framework under Basel II / III. Currently, the Bank calculates ‘Value at Risk (VaR)’ on a regular basis. Moreover, the
Bank also carries out stress testing on regular intervals by applying shocks on fixed income, equity and foreign
exchange positions.
43.2.1 Foreign exchange risk

Foreign exchange (FX) risk arises from the fluctuation in the value of financial instruments due to the changes in
foreign exchange rates. The Bank manages this risk by setting and monitoring dealer and currency-wise limits.

FX risk is mainly managed through matched positions. Unmatched positions are covered substantially through
derivative instruments such as forwards and swaps. VaR analysis are conducted on regular basis to measure and
monitor the FX risk.

282
 The currency risk is regulated and monitored against the regulatory/statutory limits enforced by the State Bank
of Pakistan. The foreign exchange exposure limits in respective currencies are managed against the prescribed
limits.
The analysis below represents the concentration of the Group’s foreign currency risk for on and off balance sheet
financial instruments:
2016
Net foreign
Off-balance
Assets Liabilities currency
sheet items
exposure
-------------------------(Rupees in ‘000)-------------------------

Pakistan Rupee 906,243,042 834,323,223 (10,905,418) 61,014,401

United States Dollar 11,742,423 16,364,610 4,491,512 (130,675)
Great Britain Pound 1,344,791 4,904,811 3,574,955 14,935
Arab Emirates Dirham 16,408 1,343 - 15,065
Euro 72,409 2,917,512 2,850,232 5,129
Other currencies 23,767 6,471 (11,281) 6,015
Total foreign currency exposure 13,199,798 24,194,747 10,905,418 (89,531)
Total currency exposure 919,442,840 858,517,970 - 60,924,870

2015
Net foreign
Off-balance
Assets Liabilities currency
sheet items
exposure
------------------------ (Rupees in ‘000) ------------------------

Pakistan Rupee 868,394,987 811,691,692 8,236,601 64,939,896

United States Dollar 33,991,224 29,601,732 (15,445,404) (11,055,912)
Great Britain Pound 293,051 4,988,182 4,706,822 11,691
Japanese Yen 151,675 2,998 (152,303) (3,626)
Euro 216,986 2,984,674 2,774,062 6,374
Other currencies 367,834 53,743 (119,778) 194,313
Total foreign currency exposure 35,020,770 37,631,329 (8,236,601) (10,847,160)
Total currency exposure 903,415,757 849,323,021 - 54,092,736

43.2.2 Equity investment risk

Equity investment risk arises due to the risk of changes in the prices of individual stocks held by the bank. The
Group’s equity investments are classified as Available for Sale (AFS) and Held for Trading (HFT) investments. The
objective of investments classified as HFT portfolio is to take advantage of short term capital gains, while the
AFS portfolio is maintained with a medium term view of capital gains and dividend income. The Bank’s Investment
Committee is primarily responsible for the oversight of the equity investment risk. Market Risk Management Unit
of RMD monitors and reports portfolio and scrip level internal and external limits.
43.3 Interest rate risk
Interest Rate Risk is the adverse impact on the Bank’s shareholder’s equity due to changes in the interest rates.
It may be further elaborated as changes in the present value of the asset, liabilities and commitments due to
changes in the term structure of the interest rates. The Bank is exposed to interest rate risk primarily as a
result of mismatches in the amounts of assets and liabilities and off-balance sheet instruments within a certain
range of maturity due to re-pricing (whichever is earlier). The Bank has formulated a separate Interest Rate Risk
Management (IRRM) framework which establishes aggregate and tenor-wise balance sheet level PV01 (Price Value
of 1bps) limits to manage interest rate risk within the Board approved risk appetite. Treasury and FI Group is
primarily responsible for management of interest rate risk on a daily basis, and the Asset and Liability Committee
(ALCO) oversees the interest rate risk at Bank level. Market Risk Management Unit of Risk Management Division
independently monitors, analyses and reports various limits including management action point limits and re-
pricing of the assets and liabilities on a regular basis.

283
 43.3.1 Mismatch of interest rate sensitive assets and liabilities

2016
Exposed to yield / interest rate risk

Effective yield/ Non-interest

Total Over 1 to 3 Over 3 to 6 Over 6 months Over 1 to 2 Over 2 to 3 Over 3 to 5 Over 5 to 10
interest rate Upto 1 month Above 10 years bearing finan-
months months to 1 year years years years years
cial instruments

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

On-balance sheet financial instruments

Financial Assets

Cash and balances with treasury banks - 74,071,394 6,651,460 - - - - - - - - 67,419,934

Balances with other banks 0.78% 9,498,787 3,335,337 1,435,399 - - - - - - - 4,728,051
Lendings to financial institutions 4.90% 30,149,029 3,857,883 11,892,500 14,398,646 - - - - - - -
Investments 7.61% 389,666,922 29,919,378 27,023,435 1,542,424 58,458,677 88,541,189 97,689,618 46,175,864 27,259,389 647,989 12,408,959
Advances 7.27% 378,724,300 29,811,581 128,342,849 186,756,558 28,900,748 63,943 154,176 266,903 195,322 4,232,220 -
Other assets 18,548,542 - - - - - - - - - 18,548,542
900,658,974 73,575,639 168,694,183 202,697,628 87,359,425 88,605,132 97,843,794 46,442,767 27,454,711 4,880,209 103,105,486

Financial Liabilities

Bills payable 12,886,990 - - - - - - - - - 12,886,990

Borrowings 5.12% 178,710,629 147,956,698 8,014,324 19,796,157 - - - - 2,943,450 - -
Deposits and other accounts 3.04% 640,854,225 290,491,729 20,059,108 23,733,050 15,172,690 753,186 477,159 27,860 - - 290,139,443
Sub-ordinated loans 9.68% 8,317,670 - 4,993,000 2,524,154 800,516 - - - - - -
Other liabilities 13,747,497 - - - - - - - - - 13,747,497
854,517,011 438,448,427 33,066,432 46,053,361 15,973,206 753,186 477,159 27,860 2,943,450 - 316,773,930

On-balance sheet gap 46,141,963 (364,872,788) 135,627,751 156,644,267 71,386,219 87,851,946 97,366,635 46,414,907 24,511,261 4,880,209 (213,668,444)

Off-balance sheet financial instruments

Forward exchange contracts - purchase 53,992,848 26,259,608 15,818,226 8,080,646 3,834,368 - - - - -

Forward exchange contracts - sale 41,084,440 21,036,937 15,055,056 4,614,498 377,949 - - - - -
Repo transaction - resale 349,222 349,222 - - - - - - - -
Repo transaction - repurchase 136,912,078 135,683,547 1,228,531 - - - - - - -
Interest Rate Swaps - receipts 7,622,307 1,586,974 6,035,333 - - - - - - -
Interest Rate Swaps - payments 7,622,307 - - - - - 4,222,855 2,039,671 1,359,781 -
Off-balance sheet gap (123,654,448) (128,524,680) 5,569,972 3,466,148 3,456,419 - (4,222,855) (2,039,671) (1,359,781) -

Total yield / interest rate risk sensitivity gap (493,397,468) 141,197,723 160,110,415 74,842,638 87,851,946 93,143,780 44,375,236 23,151,480 4,880,209

284
Cumulative yield / interest rate risk sensitivity gap (493,397,468) (352,199,745) (192,089,330) (117,246,692) (29,394,746) 63,749,034 108,124,270 131,275,750 136,155,959
 2015
Exposed to yield / interest rate risk

285
Non-interest
Effective yield/
Total Over 1 to 3 Over 3 to 6 Over 6 months Over 1 to 2 Over 2 to 3 Over 3 to 5 Over 5 to 10 bearing finan-
interest rate Upto 1 month Above 10 years cial instruments
months months to 1 year years years years years

On-balance sheet financial instruments -------------------------------------------------------------------------------- (Rupees in ‘000) --------------------------------------------------------------------------------

Financial Assets

Cash and balances with treasury banks - 62,368,827 7,880,965 - - - - - - - - 54,487,862

Balances with other banks 0.81% 16,583,138 2,934,025 2,074,384 - - - - - - - 11,574,729
Lendings to financial institutions 7.58% 27,626,350 13,895,000 13,193,983 533,644 3,723 - - - - - -
Investments 9.19% 423,518,968 2,592,747 52,449,451 38,355,780 146,346,231 56,712,435 64,174,242 27,040,219 25,706,276 295,487 9,846,100
Advances 8.66% 334,160,478 46,954,707 94,165,043 139,459,234 49,457,007 95,146 123,260 287,372 434,434 3,184,275 -
Other assets 21,082,158 - - - - - - - - - 21,082,158
885,339,919 74,257,444 161,882,861 178,348,658 195,806,961 56,807,581 64,297,502 27,327,591 26,140,710 3,479,762 96,990,849

Financial Liabilities

Bills payable 9,733,929 - - - - - - - - - 9,733,929

Borrowings 6.22% 172,393,198 143,210,497 4,381,324 24,580,883 - - - - 166,686 - 53,808
Deposits and other accounts 4.00% 640,137,161 289,527,760 47,840,572 33,572,157 22,311,911 1,874,012 966,744 199,291 - - 243,844,714
Sub-ordinated loans 11.04% 9,983,000 - 4,995,000 2,588,455 799,847 1,599,698 - - - - -
Other liabilities 14,334,649 - - - - - - - - - 14,334,649
846,581,937 432,738,257 57,216,896 60,741,495 23,111,758 3,473,710 966,744 199,291 166,686 - 267,967,100

On-balance sheet gap 38,757,982 (358,480,813) 104,665,965 117,607,163 172,695,203 53,333,871 63,330,758 27,128,300 25,974,024 3,479,762 (170,976,251)

Off-balance sheet financial instruments

Forward exchange contracts - purchase 98,261,212 48,466,074 38,285,002 10,163,560 1,346,576 - - - - -

Forward exchange contracts - sale 106,520,120 29,830,025 72,780,665 3,850,461 58,969 - - - - -
Repo transactions - repurchase 129,226,010 129,226,010 - - - - - - - -
Interest Rate Swaps - receipts 6,962,920 1,600,180 5,100,887 261,853 - - - - - -
Interest Rate Swaps - payments 6,962,920 - - - - - - 5,287,064 1,675,856 -
Off-balance sheet gap (137,484,918) (108,989,781) (29,394,776) 6,574,952 1,287,607 - - (5,287,064) (1,675,856) -

Total yield / interest rate risk sensitivity gap (467,470,594) 75,271,189 124,182,115 173,982,810 53,333,871 63,330,758 21,841,236 24,298,168 3,479,762

Cumulative yield / interest rate risk sensitivity gap (467,470,594) (392,199,405) (268,017,290) (94,034,480) (40,700,609) 22,630,149 44,471,385 68,769,553 72,249,315

43.3.2 Reconciliation of Assets and Liabilities exposed to yield / interest rate risk with Total Assets and Liabilities 2016 2015
(Rupees in ‘000)

Total financial assets as per note 43.3.1 900,658,974 885,339,919

Add: Non financial assets
Operating fixed assets 18,216,937 17,317,691
Deferred tax assets - -
Other assets 566,929 758,147
Total assets as per statement of financial position 919,442,840 903,415,757

Total liabilities as per note 43.3.1 854,517,011 846,581,937

Add: Non financial liabilities

Deferred tax liabilities 2,911,531 1,826,270
Other liabilities 1,089,428 914,814
Total liabilities as per statement of financial position 858,517,970 849,323,021
 43.4 Country risk
Country risk, refers to the possibility that economic and political conditions in a foreign country could adversely impact the Group’s exposure in that country. For the Group,
country risk arises as a result of the Bank’s foreign currency lending, trade and treasury business with counterparties domiciled in other countries as well as investments and
capital transactions. In order to monitor and mitigate the risk, Bank has in place a comprehensive country risk management framework. Under this framework, the transfer risk
is measured using financial market and economic factors. Political risk is measured using a variety of indicia indicative of relative certainty of payment of foreign obligations.
Based on this framework, risk limits are assigned to countries within the Board approved limits. The limits and their utilization are monitored and controlled at head office level
and country risk exposures are reported to Central Credit Committee at a defined frequency.
43.5 Liquidity risk
Liquidity risk is the potential for loss to the Group arising from either its inability to meet its obligations or to fund increases in assets as they fall due without incurring an
unacceptable cost.
The Bank’s Asset and Liability Committee (ALCO) is primarily responsible for the formulation of the overall strategy and oversight of the asset liability function including liquidity
management. The BOD has approved a comprehensive Market & Liquidity Risk Management Policy which stipulates the various parameters to monitor and control liquidity
risk including maintenance of various liquidity ratios. Liquidity Risk Management Unit of RMD is responsible for independent monitoring of the overall liquidity risk in line
with regulatory requirements and BoD approved Risk Framework. It also monitors & reports the maintenance of liquidity buffer in form of excess Government securities over
regulatory requirement, liquidity ratios and depositors’ concentration both in terms of the overall funding mix and avoidance of undue reliance on large volume deposits. As core
retail deposits form a considerable part of the Bank’s overall funding mix, significant importance is being given to the stability and growth of these deposits. Maturity gaps and
sources of funding are also reviewed in order to ensure diversification in terms of tenor, currency and geography. Moreover, Bank also prepares a ‘Contingency Funding Plan’
(CFP) to address liquidity issues in times of stress / crisis situations containing early warning indicators to pre-empt unforeseen liquidity crisis. In addition to this, the Bank has
designed different scenarios of cash outflows to stress test adequacy of its liquid assets.
43.5.1 Maturities of assets and liabilities - based on working prepared by the Asset and Liability Management Committee (ALCO) of the Holding Company

2016
Over 6
Over 1 to 3 Over 3 to 6 Over 1 to 2 Over 2 to 3 Over 3 to 5 Over 5 to 10
Total Upto 1 month months to 1 Above 10 years
months months years years years years
year
------------------------------------------------------------------- (Rupees in ‘000) -------------------------------------------------------------------
Assets
Cash and balances with treasury banks 74,071,394 36,846,833 1,772,930 2,425,381 3,867,441 6,757,184 1,307,969 2,639,200 6,211,747 12,242,709
Balances with other banks 9,498,787 8,063,388 1,435,399 - - - - - - -
Lendings to financial institutions 30,149,029 3,857,883 11,892,500 14,398,646 - - - - - -
Investments 389,666,922 29,609,263 26,624,534 1,365,933 66,439,619 88,541,189 97,689,618 47,972,996 27,512,192 3,911,578
Advances 378,724,300 60,429,569 74,260,351 74,378,153 40,514,365 10,088,682 19,127,442 55,801,997 28,726,832 15,396,909
Operating fixed assets 18,216,937 124,129 248,257 372,386 744,772 1,489,544 1,489,544 2,735,072 2,519,946 8,493,287
Other assets 19,115,471 15,322,197 375,295 562,943 586,835 830,732 359,367 539,051 539,051 -
919,442,840 154,253,262 116,609,266 93,503,442 112,153,032 107,707,331 119,973,940 109,688,316 65,509,768 40,044,483
Liabilities
Bills payable 12,886,990 12,886,990 - - - - - - - -
Borrowings 178,710,629 147,956,698 8,014,324 19,796,157 - - - - 2,943,450 -
Deposits and other accounts 640,854,225 43,064,153 42,456,232 50,334,127 77,042,382 119,344,554 23,551,675 47,278,680 108,153,793 129,628,629
Sub-ordinated loans 8,317,670 - 1,000 1,662,330 1,663,340 2,000 2,000 4,987,000 - -
Deferred tax liabilities 2,911,531 - - - 2,911,531 - - - - -
Other liabilities 14,836,925 7,897,252 591,454 946,816 2,579,399 705,501 705,501 1,411,002 - -
858,517,970 211,805,093 51,063,010 72,739,430 84,196,652 120,052,055 24,259,176 53,676,682 111,097,243 129,628,629

Net assets 60,924,870 (57,551,831) 65,546,256 20,764,012 27,956,380 (12,344,724) 95,714,764 56,011,634 (45,587,475) (89,584,146)

Share capital 15,952,076

Reserves 15,895,652
Unappropriated profit 17,777,737
Non-controlling interest 323,466
Surplus on revaluation of assets - net of tax 10,975,939
60,924,870

286
 2015

287
Over 6
Over 1 to 3 Over 3 to 6 Over 1 to 2 Over 2 to 3 Over 3 to 5 Over 5 to 10
Total Upto 1 month months to 1 Above 10 years
months months years years years years
year

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

Assets
Cash and balances with treasury banks 62,368,827 24,957,569 4,141,354 4,768,934 6,095,093 188,315 1,156,125 2,286,746 5,538,959 13,235,732
Balances with other banks 16,583,138 14,508,754 2,074,384 - - - - - - -
Lendings to financial institutions 27,626,350 13,895,000 13,193,983 533,644 3,723 - - - - -
Investments 423,518,968 2,520,869 48,493,577 15,046,677 152,167,038 58,248,104 84,418,850 30,240,219 28,068,833 4,314,801
Advances 334,160,478 50,087,461 95,441,110 62,922,984 27,555,564 12,149,602 18,790,119 45,449,363 10,238,566 11,525,709
Operating fixed assets 17,317,691 116,487 232,965 349,447 698,894 1,397,787 1,397,787 2,612,653 2,586,013 7,925,658
Other assets 21,840,305 17,939,116 363,798 545,697 566,406 1,025,317 349,993 524,989 524,989 -
903,415,757 124,025,256 163,941,171 84,167,383 187,086,718 73,009,125 106,112,874 81,113,970 46,957,360 37,001,900

Liabilities
Bills payable 9,733,929 9,733,929 - - - - - - - -
Borrowings 172,393,198 143,264,305 4,381,324 24,580,883 - - - - 166,686 -
Deposits and other accounts 640,137,161 92,787,084 89,129,568 95,301,606 104,349,741 3,455,351 19,119,701 36,480,821 90,692,116 108,821,173
Sub-ordinated loans 9,983,000 - 1,000 1,000 1,663,330 3,326,670 2,000 4,000 4,985,000 -
Deferred tax liabilities 1,826,270 - - - 1,826,270 - - - - -
Other liabilities 15,249,463 9,035,319 559,055 947,999 2,120,490 646,650 646,650 1,293,300 - -
849,323,021 254,820,637 94,070,947 120,831,488 109,959,831 7,428,671 19,768,351 37,778,121 95,843,802 108,821,173

Net assets 54,092,736 (130,795,381) 69,870,224 (36,664,105) 77,126,887 65,580,454 86,344,523 43,335,849 (48,886,442) (71,819,273)

Share capital 15,898,062

Reserves 14,164,120
Unappropriated profit 12,813,488
Non-controlling interest 274,134
Surplus on revaluation of assets - net of tax 10,942,932
54,092,736

In line with SBP BSD Circular Letter No. 03 of 2011 on “Maturity and Interest Rate Sensitivity Gap Reporting” the Bank conducted a behavioural study of non-maturity deposits
(non-contractual deposits) and performed regression analysis to determine deposit withdrawal pattern on Current and Savings Accounts (CASA). Regression analysis is used to
investigate the relationship between time, the amount of deposits and deposits withdrawals in order to arrive at an estimated deposits withdrawals pattern. This methodology is
in line with the industry best practices and regulatory guidance.
43.5.2 Maturities of assets and liabilities based on contractual maturities
2016
Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5
Total Upto 1 to 3 to 6 Months to 1 to 2 to 3 to 5 to 10 Above
Month Months Months Year Years Years Years Years 10 Years
--------------------------------------------------------------------- (Rupees in ‘000) ---------------------------------------------------------------------
Assets
Cash and balances with treasury banks 74,071,394 66,265,760 564,904 804,133 919,594 1,515,407 284,447 584,019 1,426,447 1,706,683
Balances with other banks 9,498,787 8,063,388 1,435,399 - - - - - - -
Lendings to financial institutions 30,149,029 3,857,883 11,892,500 14,398,646 - - - - - -
Investments 389,666,922 37,514,748 26,624,534 1,365,933 58,534,134 88,541,189 97,689,618 47,972,996 27,512,192 3,911,578
Advances 378,724,300 60,429,569 74,260,351 74,378,153 40,514,365 10,088,682 19,127,442 55,801,997 28,726,832 15,396,909
Operating fixed assets 18,216,937 124,129 248,257 372,386 744,772 1,489,544 1,489,544 2,735,072 2,519,946 8,493,287
Other assets 19,115,471 15,322,197 375,295 562,943 586,835 830,732 359,367 539,051 539,051 -
919,442,840 191,577,674 115,401,240 91,882,194 101,299,700 102,465,554 118,950,418 107,633,135 60,724,468 29,508,457
Liabilities
Bills payable 12,886,990 12,886,990 - - - - - - - -
Borrowings 178,710,629 147,956,698 8,014,324 19,796,157 - - - - 2,943,450 -
Deposits and other accounts 640,854,225 565,930,998 23,078,405 21,267,387 18,908,902 3,077,594 2,121,544 4,418,418 1,003,136 1,047,841
Sub-ordinated loans 8,317,670 - 1,000 1,662,330 1,663,340 2,000 2,000 4,987,000 - -
Deferred tax liabilities 2,911,531 - - - 2,911,531 - - - - -
Other liabilities 14,836,925 7,897,252 591,454 946,816 2,579,399 705,501 705,501 1,411,002 - -
858,517,970 734,671,938 31,685,183 43,672,690 26,063,172 3,785,095 2,829,045 10,816,420 3,946,586 1,047,841
Net assets 60,924,870 (543,094,264) 83,716,057 48,209,504 75,236,528 98,680,459 116,121,373 96,816,715 56,777,882 28,460,616

Share capital 15,952,076

Reserves 15,895,652
Unappropriated profit 17,777,737
Non-controlling interest 323,466
Surplus on revaluation of investments 10,975,939
60,924,870

2015
Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5
Total Upto 1 to 3 to 6 Months to 1 to 2 to 3 to 5 to 10 Above
Month Months Months Year Years Years Years Years 10 Years
--------------------------------------------------------------------- (Rupees in ‘000) ---------------------------------------------------------------------
Assets
Cash and balances with treasury banks 62,368,827 52,140,800 2,212,246 1,375,203 1,931,132 48,645 333,150 665,974 1,664,542 1,997,135
Balances with other banks 16,583,138 14,508,754 2,074,384 - - - - - - -
Lendings to financial institutions 27,626,350 13,895,000 13,193,983 533,644 3,723 - - - - -
Investments 423,518,968 7,718,030 48,493,577 15,046,677 146,969,878 58,248,104 84,418,850 30,240,219 28,028,759 4,354,874
Advances 334,160,478 50,088,614 95,441,110 62,922,984 27,554,695 12,149,602 18,789,835 45,449,363 10,238,566 11,525,709
Operating fixed assets 17,317,691 116,487 232,965 349,447 698,894 1,397,787 1,397,787 2,612,653 2,586,013 7,925,658
Other assets 21,840,305 17,939,116 363,798 545,697 566,406 1,025,317 349,993 524,989 524,989 -
903,415,757 156,406,801 162,012,063 80,773,652 177,724,728 72,869,455 105,289,615 79,493,198 43,042,869 25,803,376
Liabilities
Bills payable 9,733,929 9,733,929 - - - - - - - -
Borrowings 172,393,198 143,264,305 4,381,324 24,580,883 - - - - 166,686 -
Deposits and other accounts 640,137,161 538,211,260 47,840,572 28,733,371 22,311,911 1,874,012 966,744 199,291 - -
Sub-ordinated loans 9,983,000 - 1,000 1,000 1,663,330 3,326,670 2,000 4,000 4,985,000 -
Deferred tax liabilities 1,826,270 - - - 1,826,270 - - - - -
Other liabilities 15,249,463 9,035,319 559,055 947,999 2,120,490 646,650 646,650 1,293,300 - -
849,323,021 700,244,813 52,781,951 54,263,253 27,922,001 5,847,332 1,615,394 1,496,591 5,151,686 -
Net assets 54,092,736 (543,838,012) 109,230,112 26,510,399 149,802,727 67,022,123 103,674,221 77,996,607 37,891,183 25,803,376

Share capital 15,898,062

Reserves 14,164,120
Unappropriated profit 12,813,488
Non-controlling interest 274,134
Surplus on revaluation of investments 10,942,932
54,092,736

Current and Saving deposits have been classified under maturity upto one month as these do not have any contractual maturity. Further, the
Group estimates that these deposits are a core part of its liquid resources and will not fall below the current year’s level.

288
43.6 Operational risk

Basel II defines Operational risk as, “the risk of loss resulting from inadequate or failed internal processes,
people and systems or from external events.” In compliance with the Risk Management Guidelines, issued by
SBP, an Operational Risk Management (ORM) Unit is established within RMD.
The Operational risk management policy of the Bank is duly approved by the Board and Operational Risk
Management Manual covers the processes, structure and functions of Operational risk management and provides
guidelines to identify, assess, monitor, control and report operational risk in a consistent and transparent manner
across the Bank.

43.6.1 Operational Risk Disclosures - Basel II Specific

Bank was given approval for adoption of Alternative Standardized Approach (ASA) under Basel II for determining
capital charge on Operational Risk in December 2013 and Bank started calculating its capital charge for
operational risk on ASA in its financials from December 31, 2013. The SBP Approval stipulated a capital floor
i.e. operational risk charge under ASA should not fall below as a certain percentage of operational risk capital
charge calculated under Basic Indicator Approach for initial 3 years. These floors are 90% for 2013 and 2014,
80% for 2015 and 70% for 2016. Bank Alfalah is one of the first few banks in Pakistan to achieve this milestone.
As per SBP requirements, Bank’s operational risk assessment systems have also been reviewed by the external
auditors during 2014.
The Bank’s ORM framework and practices address all the significant areas of ORM within the Bank including Risk
Control Self Assessment (RCSA), Key Risk Indicators (KRIs), Operational Loss Data Management, and Operational
Risk Reporting. The ORM Unit engages with Bank’s business / support units and regularly collaborates in
determining and reviewing the risks, and suggests controls on need basis. Additionally, all the policies and
procedures of the Bank are reviewed from the operational risk perspective, and the recommendations of RMD
are taken into consideration before their approval. A Process Improvement Committee (PIC) in this regard has
been formed to evaluate and consider the recommendations of all the reviewers. Further, the unit also reviews
functional specification documents (FSDs) and reviews / test the functionalities and systems prepared on premise
of the FSD. The Operational Loss Database and KRIs systems introduced in 2010 have been further enhanced and
the reports are submitted to Central Management Committee and Board Risk Management Committee. From April
2017 loss data base reports shall also be shared with the regulator on its prescribed format.
As required by Basel, Bank has categorized all its operational loss/near miss incidents into following loss event
categories:

- Internal Fraud
- External Fraud
- Employment Practice & Workplace Safety
- Client, Product & Business Practice
- Damage to Physical Assets
- Business Disruption & System Failure
- Execution, Delivery & Process Management

43.6.2 IT Security Risk

The Bank has in place an IT Security Risk Management Policy and an IT Management Policy, duly approved by the
Board of Directors, which derive from the regulatory mandates and the ISO 27001:2013 international standards
framework. A dedicated IT Security Risk Management unit, functioning within RMD manages IT and information
security risks to bank’s technology assets by developing IT security baselines for IT solutions that support
products and services, monitoring of threats and vulnerabilities, investigation of reported information security
incidents, reinforcement of IT security risk awareness to employees via periodic communications, following
up on due dates with stakeholders responsible for remediation of open issues, and reporting the status of IT
security risk to the management and BRMC/Board.

289
43.7 Environmental & Social Risk Management Unit

Initiative to integrate sustainable finance approach in credit evaluation and approval process.

Being a responsible corporate citizen wherever BAFL operates, the Bank has integrated sustainable finance
approach in its lending activities. In this regard, an Environmental & Social Management System (ESMS), duly
approved by the Board of Directors, has been put in place in close coordination with IFC. The ESMS Framework
essentially requires that any relevant lending opportunity is to be reviewed and evaluated against;

- IFC Exclusion List

- Applicable national laws on environment, health, safety and social issues
- IFC Performance Standards.

This Framework is an integral part of the credit approval process and all relevant credit proposals require clearance
of E&S Officer prior to approval of the competent authority. The Environmental & Social Risk Management Unit,
part of RMD and headed by a senior risk officer with environmental and social risk management qualifications,
is responsible for identifying, vetting and approving projects from an ESRM perspective. This role also entails
coordination with provincial Environmental Protection Agencies (EPA) to remove ambiguities related to the
EPA approval requirements and to educate the clients. BAFL is also in assisting SBP to promote ESRM practices
across the banking industry. The Bank firmly believes that the integration of financial, social and environmental
considerations into its decision making would enable higher & sustainable gains for all stakeholders.

44 GENERAL

Comparative information has been re-classified, re-arranged or additionally incorporated in these financial
statements, wherever necessary to facilitate comparison.

44.1 During the year, the State Bank of Pakistan (SBP), vide BPRD Circular Letter No. 05 of 2016 dated February 29,
2016 has issued instructions on revised forms of annual financial statements, which further supplements the
requirements laid down earlier, vide SBP’s BSD Circular No. 4 of 2006 and BSD Circular Letter No. 03 of 2013
on the matter.
In order to standardize the financial statements and to bring comparability, banks having IBBs have been advised
to show Islamic Financing and Related Assets under the head of “Advances” in their financial statements. In
addition, banks have also been advised to show Bai Muajjal of Government of Pakistan Ijara Sukuk with State
Bank of Pakistan and other Financial Institutions under the head “Lendings to Financial Institutions” , whereas
Bai Muajjal transactions with Government of Pakistan are required to be reported under investment category as
other Federal Government securities.

The effect of re-classification on comparative information presented for the year ended December 31, 2015 as
part of the Statement of Financial Position is as follows:

As at December 31, 2015

(Rupees in ‘000)
As previously Effect of
As restated
reported Re-classification

Lending to Financial Institutions 53,628,870 (26,002,520) 27,626,350

Investments - net 397,097,214 26,002,520 423,099,734
Advances - net 327,297,821 6,860,918 334,158,739
Other assets 28,420,651 (6,860,918) 21,559,733

290
44.2 In addition to the aforementioned, no significant reclassification has been made except as follows:

Reclassified

Description Rupees in ‘000 From To

Insurance expenses on Ijarah assets (294,962) Other Income Mark-up / return / interest earned

Registration expenses on Ijarah assets (68,243) Other Income Mark-up / return / interest earned

Rental income on Ijarah assets 342,671 Other Income Mark-up / return / interest earned

45 NON-ADJUSTING EVENT AFTER THE YEAR END REPORTING DATE

There were no appropriation or distribution made after the reporting date.

46 DATE OF AUTHORISATION

These consolidated financial statements were authorised for issue on February 23, 2017 by the Board of Directors
of the Bank.

CHIEF EXECUTIVE OFFICER DIRECTOR DIRECTOR CHAIRMAN

291
PATTERN OF SHAREHOLDING AS AT DECEMBER 31, 2016

Number of Shareholding Number of

Sharehoders From To Shares Held

2,046 1 - 100 56,497

2,022 101 - 500 600,373
1,817 501 - 1,000 1,355,266
4,372 1,001 - 5,000 12,716,560
1,125 5,001 - 10,000 8,001,201
231 10,001 - 15,000 2,869,408
156 15,001 - 20,000 2,819,062
106 20,001 - 25,000 2,441,553
62 25,001 - 30,000 1,766,042
48 30,001 - 35,000 1,571,592
37 35,001 - 40,000 1,419,282
31 40,001 - 45,000 1,335,205
40 45,001 - 50,000 1,973,777
23 50,001 - 55,000 1,219,800
27 55,001 - 60,000 1,558,067
10 60,001 - 65,000 622,235
22 65,001 - 70,000 1,501,171
10 70,001 - 75,000 733,416
15 75,001 - 80,000 1,169,134
6 80,001 - 85,000 500,369
5 85,001 - 90,000 440,790
3 90,001 - 95,000 274,713
31 95,001 - 100,000 3,099,500
5 100,001 - 105,000 509,560
5 105,001 - 110,000 544,333
6 110,001 - 115,000 674,000
4 115,001 - 120,000 476,437
7 120,001 - 125,000 870,375
4 125,001 - 130,000 514,833
2 130,001 - 135,000 266,500
4 135,001 - 140,000 548,071
2 140,001 - 145,000 283,981
5 145,001 - 150,000 745,654
8 150,001 - 155,000 1,213,570
1 155,001 - 160,000 158,162
4 160,001 - 165,000 660,000
2 165,001 - 170,000 336,488
1 170,001 - 175,000 175,000
3 180,001 - 185,000 551,950
2 185,001 - 190,000 379,378
2 190,001 - 195,000 383,412
13 195,001 - 200,000 2,592,695
1 200,001 - 205,000 203,000
6 205,001 - 210,000 1,249,036
2 210,001 - 215,000 424,820

292
 Number of Shareholding Number of
Sharehoders From To Shares Held

1 215,001 - 220,000 218,000

4 220,001 - 225,000 895,164
4 225,001 - 230,000 910,602
3 230,001 - 235,000 698,999
3 235,001 - 240,000 719,413
3 240,001 - 245,000 727,056
8 245,001 - 250,000 1,993,935
4 250,001 - 255,000 1,012,453
3 260,001 - 265,000 785,268
2 265,001 - 270,000 536,500
1 270,001 - 275,000 274,873
2 275,001 - 280,000 554,625
1 280,001 - 285,000 284,959
1 290,001 - 295,000 291,875
5 295,001 - 300,000 1,498,715
1 300,001 - 305,000 305,000
1 305,001 - 310,000 308,333
1 315,001 - 320,000 320,000
1 320,001 - 325,000 321,000
1 325,001 - 330,000 328,000
1 330,001 - 335,000 331,000
5 345,001 - 350,000 1,739,533
1 355,001 - 360,000 357,654
1 360,001 - 365,000 361,000
1 370,001 - 375,000 374,695
2 385,001 - 390,000 774,500
1 390,001 - 395,000 392,000
4 395,001 - 400,000 1,600,000
1 400,001 - 405,000 400,500
1 405,001 - 410,000 406,000
1 420,001 - 425,000 425,000
1 435,001 - 440,000 440,000
1 445,001 - 450,000 448,000
1 455,001 - 460,000 457,500
1 465,001 - 470,000 467,346
3 470,001 - 475,000 1,416,659
2 475,001 - 480,000 953,500
2 480,001 - 485,000 965,744
1 485,001 - 490,000 486,500
6 495,001 - 500,000 3,000,000
1 510,001 - 515,000 514,500
2 520,001 - 525,000 1,045,500
1 525,001 - 530,000 530,000
5 545,001 - 550,000 2,743,000
1 550,001 - 555,000 553,343

293
 Number of Shareholding Number of
Sharehoders From To Shares Held

1 555,001 - 560,000 560,000

2 560,001 - 565,000 1,127,000
3 575,001 - 580,000 1,734,300
1 580,001 - 585,000 582,375
1 590,001 - 595,000 591,532
4 595,001 - 600,000 2,400,000
1 600,001 - 605,000 604,350
1 605,001 - 610,000 609,000
1 610,001 - 615,000 613,409
1 620,001 - 625,000 623,807
1 625,001 - 630,000 629,887
1 630,001 - 635,000 630,800
1 645,001 - 650,000 650,000
1 650,001 - 655,000 655,000
1 655,001 - 660,000 657,500
1 660,001 - 665,000 660,500
2 665,001 - 670,000 1,336,319
1 685,001 - 690,000 688,186
2 695,001 - 700,000 1,398,000
1 715,001 - 720,000 718,000
1 720,001 - 725,000 720,837
1 735,001 - 740,000 740,000
1 745,001 - 750,000 750,000
1 795,001 - 800,000 800,000
1 800,001 - 805,000 801,500
1 815,001 - 820,000 818,187
1 825,001 - 830,000 827,000
1 835,001 - 840,000 837,016
1 880,001 - 885,000 884,500
1 885,001 - 890,000 885,500
1 925,001 - 930,000 927,000
1 950,001 - 955,000 952,500
2 975,001 - 980,000 1,957,000
9 995,001 - 1,000,000 8,997,500
1 1,055,001 - 1,060,000 1,059,000
1 1,105,001 - 1,110,000 1,110,000
1 1,195,001 - 1,200,000 1,200,000
1 1,205,001 - 1,210,000 1,209,474
1 1,245,001 - 1,250,000 1,250,000
1 1,270,001 - 1,275,000 1,274,199
1 1,285,001 - 1,290,000 1,285,750
1 1,295,001 - 1,300,000 1,300,000
1 1,330,001 - 1,335,000 1,333,000
1 1,350,001 - 1,355,000 1,354,020
1 1,360,001 - 1,365,000 1,364,145

294
 Number of Shareholding Number of
Sharehoders From To Shares Held

1 1,400,001 - 1,405,000 1,403,122

1 1,480,001 - 1,485,000 1,482,300
1 1,485,001 - 1,490,000 1,487,000
1 1,535,001 - 1,540,000 1,536,500
1 1,605,001 - 1,610,000 1,609,394
1 1,615,001 - 1,620,000 1,616,800
2 1,630,001 - 1,635,000 3,264,000
1 1,820,001 - 1,825,000 1,822,000
1 1,970,001 - 1,975,000 1,971,000
2 1,995,001 - 2,000,000 4,000,000
1 2,015,001 - 2,020,000 2,016,500
1 2,040,001 - 2,045,000 2,044,500
1 2,130,001 - 2,135,000 2,131,004
1 2,135,001 - 2,140,000 2,136,507
1 2,150,001 - 2,155,000 2,154,000
1 2,235,001 - 2,240,000 2,236,538
1 2,340,001 - 2,345,000 2,345,000
1 2,400,001 - 2,405,000 2,405,000
1 2,550,001 - 2,555,000 2,552,947
1 2,670,001 - 2,675,000 2,673,000
1 2,685,001 - 2,690,000 2,689,500
1 2,700,001 - 2,705,000 2,700,500
1 2,735,001 - 2,740,000 2,736,000
1 2,790,001 - 2,795,000 2,791,500
1 2,890,001 - 2,895,000 2,895,000
1 2,945,001 - 2,950,000 2,947,000
1 2,980,001 - 2,985,000 2,981,861
1 3,030,001 - 3,035,000 3,033,188
1 3,060,001 - 3,065,000 3,065,000
1 3,085,001 - 3,090,000 3,090,000
1 3,160,001 - 3,165,000 3,163,740
1 3,385,001 - 3,390,000 3,387,603
1 3,405,001 - 3,410,000 3,410,000
1 3,425,001 - 3,430,000 3,429,198
1 3,465,001 - 3,470,000 3,466,700
1 3,495,001 - 3,500,000 3,500,000
1 3,530,001 - 3,535,000 3,531,369
1 3,775,001 - 3,780,000 3,777,500
1 3,995,001 - 4,000,000 4,000,000
1 4,075,001 - 4,080,000 4,076,000
1 4,095,001 - 4,100,000 4,100,000
1 4,100,001 - 4,105,000 4,104,940
1 4,325,001 - 4,330,000 4,325,500
1 4,355,001 - 4,360,000 4,356,359
1 4,395,001 - 4,400,000 4,399,500

295
 Number of Shareholding Number of
Sharehoders From To Shares Held

1 4,560,001 - 4,565,000 4,562,000

1 5,105,001 - 5,110,000 5,107,700
1 5,195,001 - 5,200,000 5,200,000
1 5,230,001 - 5,235,000 5,234,113
1 5,660,001 - 5,665,000 5,660,500
1 6,515,001 - 6,520,000 6,516,248
1 6,730,001 - 6,735,000 6,734,000
1 7,370,001 - 7,375,000 7,375,000
1 7,740,001 - 7,745,000 7,742,605
1 9,050,001 - 9,055,000 9,053,000
1 11,260,001 - 11,265,000 11,262,500
1 11,405,001 - 11,410,000 11,408,300
1 11,815,001 - 11,820,000 11,816,000
1 11,825,001 - 11,830,000 11,825,818
1 12,285,001 - 12,290,000 12,287,453
1 12,515,001 - 12,520,000 12,517,540
1 13,240,001 - 13,245,000 13,243,384
2 13,495,001 - 13,500,000 27,000,000
1 13,990,001 - 13,995,000 13,991,780
1 15,060,001 - 15,065,000 15,060,500
1 17,500,001 - 17,505,000 17,501,603
1 18,980,001 - 18,985,000 18,984,068
1 19,095,001 - 19,100,000 19,096,875
1 19,125,001 - 19,130,000 19,128,259
1 27,585,001 - 27,590,000 27,585,147
1 32,145,001 - 32,150,000 32,149,947
1 32,615,001 - 32,620,000 32,615,500
1 36,690,001 - 36,695,000 36,694,424
1 38,565,001 - 38,570,000 38,566,171
1 53,090,001 - 53,095,000 53,090,599
1 53,965,001 - 53,970,000 53,966,250
1 55,040,001 - 55,045,000 55,044,258
1 68,805,001 - 68,810,000 68,805,322
1 75,685,001 - 75,690,000 75,687,166
2 103,205,001 - 103,210,000 206,415,966
1 119,260,001 - 119,265,000 119,263,433
1 238,085,001 - 238,090,000 238,086,450
12,579 1,595,207,554

296
CATEGORIES OF SHAREHOLDERS
AS AT DECEMBER 31, 2016

Number of Number of
S.No. Shareholder's Category Percentage
Shareholders Shares

1 Directors, Chief Executive Officer their Spouse(s) & Minor Children. 8 217,670,783 13.65
2 Associated Companies, Undertakings & Related Parties. 11 106,316,386 6.66
3 NIT & ICP 1 613,409 0.04
4 Banks DFI & NBFI. 11 22,123,595 1.39
5 Insurance Companies 12 23,143,538 1.45
6 Modarabas & Mutual Funds 32 64,313,025 4.03
7 Public Sector Companies & Corporations 10 39,648,749 2.49
8 General Public - Local 12,284 207,787,313 13.03
9 General Public - Foreign 22 458,511,656 28.74
10 Foreign Companies 44 428,534,531 26.86
11 Joint Stock Companies 106 21,414,616 1.34
12 Others 38 5,129,953 0.32
12,579 1,595,207,554 100.00

297
PATTERN OF SHAREHOLDING UNDER CODE OF CORPORATE GOVERNANCE
AS AT DECEMBER 31, 2016

Number of Number of Category Wise Percentage

S. No. Shareholder's Category
Shareholders Shares Held No. of Shares %

1- Associated Companies, Undertakings 11 106,316,386 6.66

and Related Parties
Dhabi One Investments Services LLC 38,566,171 2.42
Trustee of Bank Alfalah Ltd - Employees Gratuity Fund Trust 27,585,147 1.73
Trustee of Bank Alfalah Ltd - Employees Provident Fund Trust 19,125,000 1.20
Wincom (Pvt) Limited 18,984,068 1.19
Alfalah Insurance Company Limited 500,000 0.03
CDC- Trustee Alfalah GHP Stock Fund 698,000 0.04
CDC- Trustee Alfalah GHP Alpha Fund 457,500 0.03
CDC- Trustee Alfalah GHP Income Fund - Mt 328,000 0.02
CDC- Trustee Alfalah GHP Income Multiplier Fund - Mt 55,500 0.00
CDC- Trustee Alfalah GHP Sovereign Fund - Mt 16,000 0.00
CDC- Trustee Alfalah GHP Value Fund 1,000 0.00
2- Mutual Funds 32 64,313,025 4.03
CDC- Trustee PICIC Growth Fund 15,060,500 0.94
CDC- Trustee Atlas Stock Market Fund 7,375,000 0.46
CDC- Trustee PICIC Investment Fund 6,734,000 0.42
CDC- Trustee NAFA Income Opportunity Fund - Mt 5,660,500 0.35
CDC- Trustee Nit-Equity Market Opportunity Fund 5,234,113 0.33
CDC- Trustee Atlas Income Fund - Mt 3,429,198 0.21
CDC- Trustee NAFA Stock Fund 2,895,000 0.18
MCFSL - Trustee JS Growth Fund 2,700,500 0.17
CDC- Trustee UBL Stock Advantage Fund 2,673,000 0.17
CDC- Trustee MCB Pakistan Stock Market Fund 2,016,500 0.13
CDC- Trustee Faysal Savings Growth Fund - Mt 1,631,000 0.10
CDC- Trustee HBL - Stock Fund 1,487,000 0.09
CDC -Trustee NAFA Asset Allocation Fund 660,500 0.04
CDC- Trustee National Investment (Unit) Trust 613,409 0.04
CDC- Trustee Askari High Yield Scheme - Mt 609,000 0.04
CDC- Trustee NIT Income Fund - Mt 562,000 0.04
CDC- Trustee APF-Equity Sub Fund 550,000 0.03
CDC -Trustee NAFA Savings Plus Fund - Mt 546,500 0.03
CDC- Trustee UBL Asset Allocation Fund 530,000 0.03
CDC- Trustee PIML Asset Allocation Fund 525,000 0.03
CDC- Trustee Pakistan Income Enhancement Fund - Mt 514,500 0.03
CDC- Trustee NAFA Multi Asset Fund 486,500 0.03
CDC- Trustee UBL Retirement Savings Fund - Equity Sub Fund 386,500 0.02
CDC- Trustee Faysal MTS Fund - Mt 254,000 0.02
CDC- Trustee HBL Multi - Asset Fund 245,500 0.02
CDC- Trustee PICIC Stock Fund 207,500 0.01
CDC- Trustee PIML Strategic Multi Asset Fund 200,000 0.01
CDC- Trustee PIML Value Equity Fund 165,000 0.01
CDC- Trustee AKD Index Tracker Fund 154,805 0.01
CDC- Trustee Askari Equity Fund 80,000 0.01
CDC- Trustee Askari Asset Allocation Fund 66,000 0.00
CDC- Trustee HBL PF Equity Sub Fund 60,000 0.00
3- Directors their spouse(s) and minor children 8 217,670,783 13.65
H.H. Sheikh Hamdan Bin Mubarak Al Nahayan 135,357,930 8.49
Mr. Abdulla Nasser Hawaileel Al Mansoori, Director 82,203,414 5.15
Mr. Abdulla Khalil Al Mutawa, Director 11,331 0.00
Mr. Khalid Mana Saeed Al Otaiba, Director 67,457 0.00
Mr. Atif Aslam Bajwa, Director / CEO 500 0.00
Mr. Kamran Y. Mirza, Director 29,151 0.00
Mr. Efstratios Georgios Arapoglou, Director 500 0.00
Mr. Khalid Qurashi, Director 500 0.00

298
 Number of Number of Category Wise Percentage
S. No. Shareholder's Category
Shareholders Shares Held No. of Shares %

4- Executives 331 6,854,943 0.43

5- Public Sector Companies and Corporations 10 39,648,749 2.49

6- Banks, Development Finance Institutions,

Non-Banking Finance Companies, Insurance 29 46,387,391 2.91
Companies, Takaful, Modarabas & Pension Funds.

Shareholders holding 5% or more Voting Rights

1,595,207,554
Total Paid Up Capital
Shares
79,760,378
5% of the Paid Up Capital
Shares
Holding %
M/S. International Finance Corporation 238,086,450 14.93
H.H. Sheikh Nahayan Mabarak Al Nahayan, Chairman 172,354,032 10.80
H.H. Sheikh Hamdan Bin Mubarak Al Nahayan 135,357,930 8.49
H.E. Sheikh Suroor Bin Mohammad Al Nahyan 115,033,801 7.21
M/S. Electro Mechanical Company LLC 87,933,581 5.51
Mr. Abdulla Nasser Hawaileel Al Mansoori , Director 82,203,414 5.15

299
SALE/PURCHASE OF SHARES OF THE BANK
BY DIRECTORS/EXECUTIVES/SPOUSES AND THEIR MINOR CHILDREN DURING THE YEAR 2016

Sr. No. of Shares

Name Date Rate (Rs.)
No. Purchase Sale
1 Mr. Abdulla Nasser Hawaileel Al Mansoori 03-Oct-16 - 99,000 Rs. 29.10
04-Oct-16 - 46,500 Rs. 29.10
05-Oct-16 - 100,000 Rs. 29.10
06-Oct-16 - 250,000 Rs. 29.05
06-Oct-16 - 250,000 Rs. 29.09
06-Oct-16 - 250,000 Rs. 29.10
10-Oct-16 - 165,000 Rs. 29.24
17-Oct-16 - 250,000 Rs. 30.30
17-Oct-16 - 105,500 Rs. 30.40
17-Oct-16 - 50,000 Rs. 30.42
17-Oct-16 - 53,000 Rs. 30.45
17-Oct-16 - 500 Rs. 30.55
31-Oct-16 - 250,000 Rs. 29.50
01-Nov-16 - 250,000 Rs. 29.90
01-Nov-16 - 250,000 Rs. 30.10
01-Nov-16 - 500,000 Rs. 30.25
01-Nov-16 - 250,000 Rs. 30.39
01-Nov-16 - 250,000 Rs. 30.55
01-Nov-16 - 250,000 Rs. 30.75
01-Nov-16 - 250,000 Rs. 30.95
02-Nov-16 - 250,000 Rs. 31.66
02-Nov-16 - 250,000 Rs. 31.84
02-Nov-16 - 250,000 Rs. 31.99
02-Nov-16 - 250,000 Rs. 32.16
02-Nov-16 - 250,000 Rs. 32.29
02-Nov-16 - 25,000 Rs. 32.39
02-Nov-16 - 26,000 Rs. 32.40
03-Nov-16 - 250,000 Rs. 32.29
03-Nov-16 - 250,000 Rs. 32.39
03-Nov-16 - 68,000 Rs. 32.54
04-Nov-16 - 261,500 Rs. 32.69
2 Mr. Muhammad Ayyaz Ashraf 07-Apr-16 - 500 Rs. 25.18
07-Apr-16 - 500 Rs. 25.17
07-Apr-16 - 500 Rs. 25.16
07-Apr-16 - 500 Rs. 25.24
07-Apr-16 - 500 Rs. 25.24
07-Apr-16 - 1,500 Rs. 25.24
07-Apr-16 - 5,000 Rs. 25.25
07-Apr-16 - 1,000 Rs. 25.30
07-Apr-16 - 1,000 Rs. 25.30
08-Apr-16 - 5,000 Rs. 25.45
08-Apr-16 - 10,000 Rs. 25.45
08-Apr-16 - 5,000 Rs. 25.50
08-Apr-16 - 5,000 Rs. 25.50
08-Apr-16 - 4,000 Rs. 25.50

300
Sr. No. of Shares
Name Date Rate (Rs.)
No. Purchase Sale
3 Mr. Ali A Karimjee 11-Apr-16 1,000 - Rs. 25.25

4 Mr. Aasim Wajid Jawad 24-May-16 - 29,000 Rs. 24.91

24-May-16 - 5,000 Rs. 24.90
26-May-16 - 500 Rs. 24.90
26-Aug-16 - 5,000 Rs. 29.15
26-Aug-16 - 6,000 Rs. 29.12
26-Aug-16 - 89,000 Rs. 29.11
5 Mr. Syed Ahmar Nizam 24-May-16 - 30,000 Rs. 24.80
21-Jul-16 - 15,000 Rs. 26.50
27-Jul-16 - 10,000 Rs. 27.05
07-Sep-16 - 12,500 Rs. 29.50
07-Sep-16 - 96 Rs. 29.40
6 Mr. Muhammad Umer Farooq Mallick 26-May-16 - 5,000 Rs. 24.51
26-May-16 - 1,500 Rs. 24.52
26-May-16 - 30,000 Rs. 24.55
26-May-16 - 2,000 Rs. 24.56
26-May-16 - 1,500 Rs. 24.60
7 Mr. Mian Ejaz Ahmad 30-May-16 - 500 Rs. 24.50
30-May-16 - 2,500 Rs. 24.51
30-May-16 - 25,000 Rs. 24.55
30-May-16 - 75,000 Rs. 24.60
30-May-16 - 25,000 Rs. 24.65
30-May-16 - 25,000 Rs. 24.66
30-May-16 - 22,500 Rs. 24.70
30-May-16 - 5,000 Rs. 24.71
30-May-16 - 14,500 Rs. 24.75
8 Mr. Farooq Qamar Khan 30-May-16 - 16,000 Rs. 24.60
30-May-16 - 24,000 Rs. 24.65
9 Mr. Muhammed Omer 31-May-16 - 76,560 Rs. 24.50
10 Mr. Muhammad Qasim Rashid 31-May-16 - 20,000 Rs. 24.45
31-May-16 - 10,000 Rs. 24.60
01-Jun-16 - 486 Rs. 24.30
01-Jun-16 - 500 Rs. 24.35
01-Jun-16 - 1,000 Rs. 24.36
01-Jun-16 - 5,000 Rs. 24.39
01-Jun-16 - 7,500 Rs. 24.40
01-Jun-16 - 4,500 Rs. 24.42
01-Jun-16 - 2,000 Rs. 24.43
01-Jun-16 - 3,500 Rs. 24.47
01-Jun-16 - 25,000 Rs. 24.48
01-Jun-16 - 10,000 Rs. 24.50
02-Jun-16 - 4,000 Rs. 24.35
11 Mr. Shahzad Ishaq 31-May-16 - 40,000 Rs. 24.60
01-Jun-16 - 20,000 Rs. 24.50
01-Jun-16 - 5,000 Rs. 24.59
02-Jun-16 - 5,000 Rs. 24.50

301
Sr. No. of Shares
Name Date Rate (Rs.)
No. Purchase Sale
03-Jun-16 - 30,000 Rs. 24.50
03-Jun-16 - 33,000 Rs. 24.60
03-Jun-16 - 332 Rs. 24.45
03-Jun-16 - 1 Rs. 24.50
12 Mr. Kamran Mahmood 01-Jun-16 - 80,000 Rs. 24.30
13 Mr. Tahir Khurshid 03-Jun-16 - 4,000 Rs. 24.55
29-Jun-16 - 4,000 Rs. 25.02
29-Jun-16 - 2,000 Rs. 25.03
20-Jul-16 - 5,000 Rs. 26.09
20-Jul-16 - 10,000 Rs. 26.10
20-Jul-16 - 15,000 Rs. 26.12
20-Jul-16 - 5,000 Rs. 26.17
20-Jul-16 - 5,000 Rs. 26.18
07-Nov-16 - 3,000 Rs. 32.74
22-Dec-16 - 3 Rs. 36.20
14 Mr. Haroon Khalid 06-Jun-16 - 45,000 Rs. 24.35
06-Jun-16 - 6,000 Rs. 24.50
06-Jun-16 - 9,000 Rs. 24.40
17-Jun-16 - 30,000 Rs. 27.50
22-Jun-16 8,000 - Rs. 25.10
27-Jun-16 5,000 - Rs. 24.50
27-Jun-16 5,000 - Rs. 24.80
27-Jun-16 10,000 - Rs. 24.89
28-Jun-16 91,500 - Rs. 24.80
04-Aug-16 - 10,000 Rs. 29.00
04-Aug-16 - 10,000 Rs. 28.89
04-Aug-16 - 500 Rs. 28.81
04-Aug-16 - 10,000 Rs. 28.98
09-Aug-16 6,500 - Rs. 29.19
09-Aug-16 10,000 - Rs. 29.20
09-Aug-16 500 - Rs. 29.24
09-Aug-16 3,000 - Rs. 29.25
09-Aug-16 - 5,000 Rs. 28.60
09-Aug-16 - 10,000 Rs. 28.65
09-Aug-16 - 5,000 Rs. 28.73
09-Aug-16 - 10,000 Rs. 28.85
09-Aug-16 - 15,000 Rs. 28.95
09-Aug-16 - 89,500 Rs. 29.00
09-Aug-16 - 15,500 Rs. 29.35
09-Aug-16 - 41,000 Rs. 29.40
11-Aug-16 - 35,000 Rs. 29.40
11-Aug-16 - 10,000 Rs. 29.45
11-Aug-16 - 10,000 Rs. 29.48
12-Aug-16 - 25,000 Rs. 29.65
12-Aug-16 - 10,000 Rs. 29.75
07-Sep-16 500 - Rs. 29.25
16-Sep-16 10,000 - Rs. 29.40

302
Sr. No. of Shares
Name Date Rate (Rs.)
No. Purchase Sale
16-Sep-16 5,000 - Rs. 29.50
19-Sep-16 50,500 - Rs. 29.40
02-Nov-16 - 100,000 Rs. 32.00
08-Nov-16 25,000 - Rs. 32.40
08-Nov-16 25,000 - Rs. 32.50
08-Nov-16 50,000 - Rs. 32.81
08-Nov-16 - 50,000 Rs. 27.71
16-Nov-16 50,000 - Rs. 27.75
16-Nov-16 - 50,000 Rs. 33.25
15 Mr. Amin Dawood Saleh 07-Jun-16 5 - Rs. 24.95
07-Jun-16 100 - Rs. 24.98
07-Jun-16 33 - Rs. 25.00
07-Jun-16 45 - Rs. 25.00
14-Jun-16 - 15,000 Rs. 25.04
14-Jun-16 - 15,000 Rs. 25.04
14-Jun-16 - 1,500 Rs. 25.10
14-Jun-16 - 28,500 Rs. 25.10
14-Jun-16 - 23,000 Rs. 25.15
14-Jun-16 - 7,000 Rs. 25.15
15-Jun-16 - 20,000 Rs. 26.00
16-Jun-16 - 238 Rs. 26.25
10-Aug-16 - 10,000 Rs. 29.65
02-Nov-16 - 20,000 Rs. 31.70
03-Nov-16 - 20,000 Rs. 32.50
01-Dec-16 - 5,000 Rs. 33.10
15-Dec-16 - 5,000 Rs. 35.25
20-Dec-16 - 5,000 Rs. 35.90
20-Dec-16 - 5,500 Rs. 36.00
16 Mr. Khawaja Zia Abbas 10-Jun-16 - 10,000 Rs. 24.50
10-Jun-16 - 10,000 Rs. 24.50
13-Jun-16 - 500 Rs. 24.50
14-Jun-16 - 27,500 Rs. 24.50
14-Jun-16 - 174 Rs. 24.16
17 Mr. Syed Muhammad Asif 10-Jun-16 - 10,000 Rs. 24.50
10-Jun-16 - 500 Rs. 24.60
14-Jun-16 - 5,000 Rs. 24.65
14-Jun-16 - 30,000 Rs. 24.70
14-Jun-16 - 5,000 Rs. 24.80
14-Jun-16 - 10,000 Rs. 24.85
14-Jun-16 - 5,000 Rs. 24.90
14-Jun-16 - 5,000 Rs. 25.00
14-Jun-16 - 9,000 Rs. 25.10
14-Jun-16 - 1,000 Rs. 25.11
14-Jun-16 - 31,000 Rs. 25.10
15-Jun-16 - 340 Rs. 25.10

303
 Sr. No. of Shares
Name Date Rate (Rs.)
No. Purchase Sale
18 Mr. Ahmed Nauman Anees 14-Jun-16 - 65,000 Rs. 25.00
14-Jun-16 - 10,000 Rs. 25.10
19 Mr. Faisal Farooq Khan 15-Jun-16 - 32,500 Rs. 25.00
15-Jun-16 - 500 Rs. 25.01
20 Mr. Riaz Hussain Hamdani 17-Jun-16 - 50,000 Rs. 27.90
09-Aug-16 - 10,000 Rs. 29.40
10-Aug-16 - 10,000 Rs. 29.50
10-Aug-16 - 5,000 Rs. 29.60
21 Mr. Amaar Naveed Ikhlas 22-Jun-16 - 4,500 Rs. 25.15
22 Mr. Mirza Zafar Baig 28-Jun-16 - 23,000 Rs. 25.00
28-Jun-16 - 12,000 Rs. 25.01
15-Aug-16 - 13,500 Rs. 29.60
15-Aug-16 - 1,000 Rs. 29.65
15-Aug-16 - 95,500 Rs. 29.95
15-Aug-16 - 10,000 Rs. 29.96
23 Mr. Javed Iqbal 18-Jul-16 - 10,000 Rs. 25.95
18-Jul-16 - 10,000 Rs. 25.75
20-Jul-16 - 10,000 Rs. 26.95
17-Oct-16 - 3,500 Rs. 30.27
17-Oct-16 - 6,500 Rs. 30.30
24 Mr. Khurram Hussain 27-Jul-16 - 100,000 Rs. 27.00
12-Aug-16 - 40,000 Rs. 29.59
12-Aug-16 - 333 Rs. 29.11
12-Aug-16 - 3,000 Rs. 29.61
25 Mr. Fakhar Ahmad 28-Jul-16 - 8,000 Rs. 27.01
28-Jul-16 - 25,000 Rs. 27.02
28-Jul-16 - 10,000 Rs. 27.05
28-Jul-16 - 34,000 Rs. 27.10
28-Jul-16 - 10,000 Rs. 27.11
28-Jul-16 - 25,000 Rs. 27.12
28-Jul-16 - 29,000 Rs. 27.15
28-Jul-16 - 19,000 Rs. 27.20
26 Mr. Amin Sukhiani 15-Aug-16 - 81,000 Rs. 29.95
27 Mr. Rizwan Ata 18-Jul-16 - 50,000 Rs. 25.35
18-Jul-16 - 20,000 Rs. 25.70
18-Jul-16 - 20,000 Rs. 25.75
18-Jul-16 - 166 Rs. 25.88
18-Jul-16 - 76,500 Rs. 25.95
28 Dr. Mushtaq Ali Khan 22-Sep-16 69,000 - Rs. 29.04
425,683 8,829,229

Executives for the purpose of disclosure of trades in shares of the Bank means the CEO, CFO, Head of Internal Audit,
Company Secretary, and all employees of Bank Alfalah Limited working in salary Range VIII and IX, as per the threshold
set by the Board of Directors of the Bank.

304
Annexure
Employees Stock Option Scheme
The Bank has granted share options to certain critical employees, (the “employees”) under the Employee Stock Options
Scheme (ESOS) as approved by the shareholders and Securities and Exchange Commission of Pakistan (SECP) vide its
letter no. SMD/CIW/ESOS/02/2013 dated December 27, 2013.

Under the Scheme, the Bank has granted options to these employees (as selected by the Board Compensation Committee,
specifically formulated as required under the Public Companies (Employees Stock Option Scheme) Rules, 2001) to subscribe
for fresh ordinary shares of the Bank (being issuance of further capital without issue of rights) in the years 2014, 2015
and 2016. The options entitle the selected employees to purchase shares at 40% discount (the Option Discount), of the
market price prevailing at the date of the grant. As per the Scheme, the entitlements and exercise price are subject to
adjustments because of issue of right shares and bonus shares. The options carry neither right to dividends nor voting
rights till shares are issued to employees on exercise of options.

Details of share options granted under the scheme together with the status as at December 31, 2016 are as follows:

Particulars Granted in 2016 Granted in 2015 Granted in 2014

Total Number of options issued 13.737 million 12.614 million 11.331 million
Date of Grant April 01, 2016 April 01, 2015 April 01, 2014
Options no longer in issue 0.492 million 1.099 million 1.594 million
Options vested during the years:
- 2014 N/A Nil
N/A
- 2015 Nil 3.553 million
- 2016 Nil 4.063 million 3.283 million
Options exercised during the years:
- 2014 N/A
N/A
- 2015 N/A 2.563 million
- 2016 2.782 million 2.620 million
Vested Options cumulatively carried forward N/A 1.192 million 1.471 million
Options not yet vested upto December 31, 2016 13.245 million 7.540 million 3.083 million
Number of Senior Managerial Personnel, including the CEO
to whom options were granted and remained outstanding 35 35 30
at the year end 2016
Options granted to Senior Managerial Personnel which 8.262 million 6.390 million 3.526 million
remained outstanding at the year end 2016 shares shares shares
Option Exercise Price Rs. 14.95 per share Rs. 15.15 per share Rs. 16.32 per share
Option discount Rs. 9.96 per share Rs. 10.10 per share Rs. 10.88 per share
Total Shares issued on account of Options exercised :
- During the year 2014 N/A
N/A
- During the year 2015 N/A 2.563 million
- During the year 2016 2.782 million 2.620 million
Amount Received against exercise of options:
- During the year 2014 N/A
N/A
- During the year 2015 N/A Rs. 41.836 million
- During the year 2016 Rs. 42.146 million Rs. 42.749 million
Shares issued to Senior Managerial Personnel on account of options availed:
- During the year 2014 N/A
N/A
- During the year 2015 N/A 1.685 million
- During the year 2016 1.774 million 1.937 million
3 years (with 3 years (with 3 years (with
one third of the one third of the one third of the
options vesting on options vesting on options vesting on
Vesting period
completion of each completion of each completion of each
year of service year of service year of service
from April 1, 2016) from April 1, 2015) from April 1, 2014)

305
The options granted to the CEO were more than 5% of the total options granted during the years 2014, 2015 and 2016.

No employee was granted with options more than 1% of the issued / paid up capital of the Bank.

Tax under Salary has been deducted in respect of shares issued on account of Options exercised by the employees
during the relevant years, in accordance with applicable laws.
The above information has been presented as per the requirements of the Scheme and the Public Companies (Employees
Stock Option Scheme) Rules, 2001 (the Rules) issued by the SECP vide S.R.O. 300(I) 2001 dated May 11, 2001, and in
accordance with the relaxation granted to the Bank by the SECP vide their letter No. SMD/CIW/ESOP/02/2013 dated
February 24, 2015 in clubbed form instead of employee wise.

306
BRANCH NETWORK
BANK ALFALAH PRESENCE IN PAKISTAN

Sr # Location No. of branches

Conventional Islamic Total
1 Karachi 75 35 110
2 Lahore 62 30 92
3 Islamabad 25 10 35
4 Rawalpindi 23 8 31
5 Faisalabad 19 10 29
6 Quetta 14 4 18
7 Multan 11 6 17
8 Peshawar 10 4 14
9 Gujranwala 11 2 13
10 Sialkot 8 3 11
11 Hyderabad 6 2 8
12 Gujrat 5 2 7
13 Sargodha 5 2 7
14 Sahiwal 3 1 4
15 Okara 3 1 4
16 Jhang 2 1 3
17 Sheikhupura 3 - 3
18 Taxila 3 - 3
19 Rahim Yar Khan 2 1 3
20 Jhelum 2 1 3
21 Bahawalpur 2 1 3
22 Mingora 2 1 3
23 Abbottabad 2 1 3
24 Mansehra 1 1 2
25 Bahawalnagar 1 1 2
26 Nankana Sahib 1 1 2
27 Charsadda 2 - 2
28 Chakwal 2 - 2
29 Chichawatni 2 - 2
30 Mirpurkhas 1 1 2
31 Dera Ghazi Khan 2 - 2
32 Jaranwala 2 - 2
33 Dera Ismail Khan 1 1 2
34 Kohat 2 - 2
35 Mandi Bahauddin 1 1 2
36 Gilgit 2 - 2
37 Mianwali 1 1 2
38 Gojra 2 - 2
39 Muzaffarabad 1 1 2
40 Haripur 2 - 2
41 Attock 2 - 2
42 Sukkur 1 1 2
43 Ghotki 1 - 1
44 Sanghar 1 - 1
45 Dhudial - 1 1
46 Mardan 1 - 1
47 Ali Pur 1 - 1
48 Pishin 1 - 1
49 Farooqabad 1 - 1
50 Dukki 1 - 1
51 Fateh Jang 1 - 1
52 Chillas 1 - 1
53 Fort Abbas 1 - 1
54 Pano Aqil 1 - 1
55 Gaggo Mandi 1 - 1
56 Bhimber 1 - 1
57 Gawadar 1 - 1
58 Burewala 1 - 1
59 Ghazi 1 - 1
60 Daultala 1 - 1

307
Sr # Location No. of branches
Conventional Islamic Total
61 Chishtian 1 - 1
62 Depalpur 1 - 1
63 Ghourgushti 1 - 1
64 Murree 1 - 1
65 Chitral 1 - 1
66 Nowshera Virkan 1 - 1
67 Choa Saidan Shah 1 - 1
68 Phalia 1 - 1
69 Gujar Khan 1 - 1
70 Rabwah 1 - 1
71 Allahabad 1 - 1
72 Bhowana 1 - 1
73 Arifwala 1 - 1
74 Shahdadkot 1 - 1
75 Hafizabad 1 - 1
76 Shujaabad 1 - 1
77 Hangu 1 - 1
78 Malakwal 1 - 1
79 Chowk Azam 1 - 1
80 Mandi Quaidabad 1 - 1
81 Haroonabad 1 - 1
82 Mehrabpur. 1 - 1
83 Hasan Abdal - 1 1
84 Mirpur Mathelo 1 - 1
85 Hasilpur 1 - 1
86 Battagram 1 - 1
87 Haveli Lakha 1 - 1
88 Chiniot 1 - 1
89 Havelian 1 - 1
90 Nawabshah 1 - 1
91 Hazro 1 - 1
92 Besham 1 - 1
93 Hub 1 - 1
94 Pattoki 1 - 1
95 Hunza Nagar 1 - 1
96 Pindi Ghaib - 1 1
97 D.G Khan - 1 1
98 Bhakkar 1 - 1
99 Badin 1 - 1
100 Rajanpur 1 - 1
101 Islamgarh 1 - 1
102 Renala Khurd 1 - 1
103 Jacobabad 1 - 1
104 Sambrial 1 - 1
105 Jahania 1 - 1
106 Serai Alamgir - 1 1
107 Jalalpur Bhattian 1 - 1
108 Shakargarh 1 - 1
109 Jalalpur Jattan - 1 1
110 Shinkiari 1 - 1
111 Jampur 1 - 1
112 Sibi 1 - 1
113 Dadu 1 - 1
114 Mailsi - 1 1
115 Jauharabad 1 - 1
116 Mamukanjan 1 - 1
117 Jehlum 1 - 1
118 Mandi Faizabad 1 - 1
119 Dadyal 1 - 1
120 Deharki 1 - 1

308
Sr # Location No. of branches
Conventional Islamic Total
121 Ahmedpur East 1 - 1
122 Mehar 1 - 1
123 Kabirwala - 1 1
124 Mian Channu 1 - 1
125 Kahirpur 1 - 1
126 Batkhela 1 - 1
127 Kahuta 1 - 1
128 Mirpur, AJK 1 - 1
129 Kallar Syedan 1 - 1
130 Moro 1 - 1
131 Kamalia - 1 1
132 Muridke 1 - 1
133 Kamoke 1 - 1
134 Muslim Bagh 1 - 1
135 Kamra 1 - 1
136 Muzaffargarh 1 - 1
137 Kandhkot 1 - 1
138 Narowal 1 - 1
139 Bakhshi Pul 1 - 1
140 Nowshera 1 - 1
141 Kasur 1 - 1
142 Oghi 1 - 1
143 Khan Bela 1 - 1
144 Pakpattan 1 - 1
145 Khanewal 1 - 1
146 Pasrur 1 - 1
147 Khanna 1 - 1
148 Bewal - 1 1
149 Khanpur 1 - 1
150 Phool Nagar 1 - 1
151 Kharian 1 - 1
152 Pir Mahal 1 - 1
153 Khoiratta 1 - 1
154 Qaboola 1 - 1
155 Khushab - 1 1
156 Qutba 1 - 1
157 Khuzdar - 1 1
158 Bhalwal 1 - 1
159 Kkurrianwala 1 - 1
160 Rawalakot 1 - 1
161 Daharki 1 - 1
162 Rawat 1 - 1
163 Kot Abdul Malik - 1 1
164 Sadiqabad 1 - 1
165 Zhob 1 - 1
166 Saidqabad - 1 1
167 Skardu 1 - 1
168 Samundri 1 - 1
169 Swabi 1 - 1
170 Buner 1 - 1
171 Tando Adam 1 - 1
172 Shahdad Pur 1 - 1
173 Tank Adda 1 - 1
174 Shahkot - 1 1
175 Daska 1 - 1
176 Sharakpur - 1 1
177 Tench Bhatta 1 - 1
178 Shikarpur 1 - 1
179 Turbat 1 - 1
180 Shorkot 1 - 1

309
Sr # Location No. of branches
Conventional Islamic Total
181 Umerkot 1 - 1
182 Chak Khasa 1 - 1
183 Vehari - 1 1
184 Sillanwali 1 - 1
185 Waisa 1 - 1
186 Zafarwal 1 - 1
187 Kotli 1 - 1
188 Talagang 1 - 1
189 Kotmomin 1 - 1
190 Tando Allahyar 1 - 1
191 Kotri District Jamshoro 1 - 1
192 Tarnol 1 - 1
193 Bannu 1 - 1
194 Temargarha 1 - 1
195 Lala Musa 1 - 1
196 Toba Tek Singh 1 - 1
197 Larkana 1 - 1
198 Uch Sharif 1 - 1
199 Layyah 1 - 1
200 Usta Muhammad 1 - 1
201 Liaquat Pur 1 - 1
202 Wah Cantt 1 - 1
203 Lodharan 1 - 1
204 Yazman 1 - 1
205 Lodhran 1 - 1
206 Chaman 1 - 1
207 Loralai 1 - 1
208 Kot Addu - 1 1
Total 475 153 628

310
BANK ALFALAH PRESENCE IN FOREIGN COUNTRIES

Sr # Location No. of branches

Bangladesh
1 Dhaka 4
2 Chittagong 1
3 Sylhet 1
4 Dhanmondi 1
Afghanistan
1 Kabul 2
2 Herat 1
Bahrain (WBU)
1 Manama 1
Total 11

311
Notice of the 25th Annual General Meeting
NOTICE is hereby given that the 25th Annual General Meeting (‘AGM’) of Bank Alfalah Limited (‘the Bank’) will be held
on Tuesday, 28th March, 2017 at 10:00 am at Ballroom, Movenpick Hotel, Karachi to transact the following business:

Ordinary Business:

1. To confirm Minutes of the 24th Annual General Meeting held on 28th March, 2016.

2. To receive, consider and adopt the audited Annual Accounts of the Bank for the year ended 31st December, 2016
together with Directors’ Report and Auditors’ Report thereon including post-facto approval of remuneration paid
to the non-executive directors for attending Board and Board Committees meetings as reported under Notes No.
28 and 37 of the Annual Accounts, in compliance with SBP Prudential Regulations.

3. To appoint Auditors of the Bank for the year 2017 and fix their remuneration.

4. To transact any other business with the permission of the Chair.

Special Business:

5. To consider, and if thought fit, pass the following Special Resolution for alteration of Articles of Association of
the Bank, in order to comply with the legal and regulatory requirements:

“RESOLVED THAT subject to obtaining regulatory approvals, the Articles of Association (‘the Articles’) of Bank
Alfalah Limited (‘the Bank’), be and are hereby altered/amended as follows:

(a) Following two new Clauses (under the new heading of ‘E-Voting’) be added in the Articles:

“E-Voting

46 (A). The Bank shall comply with the E-Voting requirements as may be prescribed by the Securities and
Exchange Commission of Pakistan from time to time.

46 (B). In case of E-Voting, both members and non-members can be appointed as proxy.”

(b) The text/contents of existing Article 57 be and is hereby replaced with the following text/contents:

“Proxy to be in writing

57. The instrument appointing a proxy shall be in writing, under the hand of the appointer or of his attorney, or if
such appointer is an association (whether body corporate or not) under its common seal or stamp and shall be
attested by two witnesses. No person shall be appointed as a proxy who is not a member of the Bank and
qualified to vote, save that an association (whether body corporate or not) being a member of the Bank may
appoint as its proxy one of its officers or any other person though not a member of the Bank”

(c) Following new Clause 58(A) be added/inserted (under the new heading of “Instrument appointing proxy for
E-Voting to be deposited”):

“Instrument appointing proxy for E-Voting to be deposited

58A. The instrument appointing proxy for e-voting under option 2 of the Form of proxy shall be deposited in
writing at least ten days before holding of general meeting at the registered office of the Bank through
courier/in-person, or through email at email address mentioned in the notice of general meeting.”

(d) The text/contents of existing Article 60 be and are hereby replaced as follows:

“Form of proxy

60. Every instrument of proxy, whether for a specified meeting or otherwise, shall, as nearly as circumstances
admit, be in the form or to the effect following:

312
 BANK ALFALAH LIMITED

Option 1: Appointing other person as Proxy

I/We, ______________ of __________________, being a member of Bank Alfalah Limited, holder of ______________
Ordinary Share(s) as per Register Folio No./CDC Account No. ______________ hereby appoint Mr. ____________
Register Folio No. / CDC Account No. (if member) _____________ of __________________ or failing him
Mr. _____________ Register Folio No./CDC Account No. ______________ (if member) of _________________, as
my/our proxy in my/our absence to attend and vote for me/us, on my/our behalf at the Annual General Meeting/Extra
Ordinary General Meeting of the Bank to be held on ___________________ and at any adjournment thereof.

Signed under my/our hand this ___________ day of _________ 20__.

Option 2: E-Voting as per the Companies (E-Voting) Regulations, 2016

I/We, ______________ of __________________, being a member of Bank Alfalah Limited, holder of ______________
Ordinary Share(s) as per Register Folio No./CDC Account No. ______________ hereby opt for e-voting through
intermediary and hereby consent the appointment of execution officer _________ as proxy and will exercise e-voting
as per the Companies (E-Voting) Regulations, 2016 and hereby demand for poll for resolutions.

My secured email address is _____________________________, please send login details, password and other require-
ments through email.

Signed under my/our hand this ___________ day of _________ 20__.

____________________
Signature of Member

Signed in the presence of:

__________________ ______________________
Signature of Witness Signature of Witness

Name:________________________________ Name:________________________________

CNIC/Passport No:______________________ CNIC/Passport No:______________________

Address:______________________________ Address:______________________________

(e)To amend the Article 112 in the following manner in order to incorporate the transmission of annual balance
sheet, profit & loss account, auditor’s report, and directors’ reports, etc., to the members through CD/DVD/USB:

“Copy of Account to be sent to members

112. A copy of the annual report, including but not limited to, annual balance sheet, profit & loss account, auditor’s
report, and directors’ report etc., be sent to the persons, entitled to receive notices of general meetings, at least
twenty-one days preceding the general meeting, through CD/DVD/USB or any other means as may be prescribed by
any law/rule/regulation or by any regulatory authority from time to time. If a member prefers to receive hard copies of
all the future annual audited accounts, then such member shall provide a written request to the Bank, and the Bank will
be bound to provide hard copies of all the future annual audited accounts to the said member only.

313
 RESOLVED FURTHER THAT the Chief Financial Officer and the Company Secretary of the Bank, be and are hereby
authorized jointly to apply/obtain regulatory approvals and do all necessary arrangements for the incorporation of
above alteration/ amendments /additions to the Articles of Association of the Bank, and to do all other acts, deeds,
and things, including signing the necessary documents, as may be necessary and ancillary for the purpose of the same.”

6. To obtain consent of shareholders as per requirements of SRO 470(1)/2016 dated 31st May 2016 for transmission
of the annual report, including but not limited to, annual balance sheet, profit & loss account, auditor’s report,
and directors’ report etc., through CD/DVD/USB instead of transmitting the said accounts in hard copies and to
pass the following resolution as Ordinary Resolution:

“RESOLVED THAT in terms of SRO 470(1)/2016 dated 31st May 2016 issued by the Securities & Exchange
Commission of Pakistan, the shareholders of Bank Alfalah Limited (“the Bank”) do hereby consent and authorize
the Bank for transmission of the annual report, including but not limited to, annual balance sheet, profit & loss
account, auditor’s report, and directors’ report etc. (“annual audited accounts”), to its members through
CD/DVD/USB at their registered addresses.

RESOLVED FURTHER THAT the Bank shall be bound to provide hard copies of all the future annual audited
accounts to those members only, who request the Bank, in writing, to receive hard copies of the same.”

A statement of material facts under Section 160(1)(b) of the Companies Ordinance, 1984 in respect of the aforesaid
special business to be considered at the Annual General Meeting is being sent to the members along with the Notice.

Karachi By Order of the Board

Dated: 7th March 2017

MIAN EJAZ AHMAD

Company Secretary

NOTES:

1. The Share Transfer Books of the Bank will be closed from 21st March 2017 to 28th March 2017 (both days
inclusive). Transfers received at the office of the Share Registrar of the Bank, M/s. F. D. Registrar Services
(SMC-Pvt) Limited, Room No. 1705, 17th Floor, Saima Trade Tower “A”, I.I. Chundrigar Road, Karachi before the
close of business on 20th March 2017 will be treated in time for the purpose of attending meeting by the
transferees.

2. A member entitled to attend, and vote at the Meeting is entitled to appoint another member as a proxy to attend,
speak and vote on his/her behalf. A corporation being a member may appoint as its proxy any of its official or any
other person whether a member of the Bank or otherwise.

3. An instrument of proxy and a Power of Attorney or other authority (if any) under which it is signed, or notarized
copy of such Power of Attorney must be valid and deposited at the Share Registrar of the Bank, F.D. Registrar
Services (SMC-Pvt) Limited, not less than 48 hours before the time of the Meeting.

4. Those shareholders whose shares are deposited with Central Depository Company of Pakistan Limited (CDC) are
requested to bring their original Computerized National Identity Card (CNIC) along with participant’s ID number
and their account/sub-account numbers in CDC to facilitate identification at the time of Annual General Meeting.
In case of Proxy, attested copies of proxy’s CNIC or passport, Account and Participant’s I.D. numbers must be
deposited along with the Form of Proxy with our Share Registrar. In case of Proxy for corporate members, the
Board of Directors’ Resolution/Power of Attorney with specimen signature of the nominee shall be produced at
the time of the meeting (unless it has been provided earlier to the Share Registrar).

5. Change of address
Shareholders are requested to promptly notify change in their address, if any, to our Share Registrar, F.D.
Registrar Services (SMC-Pvt) Limited.

6. Mandatory submission of CNIC

Please be informed that SECP vide its Notification No. SRO.831 (1)2012 of 5th July, 2012 has made mandatory for
Companies to provide CNIC number of registered shareholder on the dividend warrant.

314
 Further, mentioning of CNIC number in the Annual Return ‘Form A’ is also an obligatory requirement, which is required
to be filed with SECP under Section 156 of the Companies Ordinance, 1984.

Also note that SECP vide their letter No. EMD/233/655/2004/2106 dated 20th April, 2016, has allowed the Bank to
withhold all future dividends of those shareholders who have not provided copies of their valid CNICs to the Bank. In
view of the foregoing, those shareholders who have not yet submitted a valid copy of their Computerized National
Identity Card (CNIC) are once again requested to submit the same immediately to our Share Registrar at their address
mentioned above.

A list of shareholders, who have not yet provided copies of their valid CNICs is placed on the Banks website,
www.bankalfalah.com.

7. Payment of Cash Dividend Electronically (e-Dividend)/Dividend Mandate

In accordance with SECP’s letter No. 8(4) SM/CDC 2008 dated 5th April 2013, we would like to apprise the shareholders
that SECP has devised a strategy for implementation and promotion of e-dividend mechanism whereby the cash
dividend amount would be directly credited into the respective bank account of the shareholders through electronic
fund transfer facilities. The benefits associated with this (e-dividend) mechanism include instant credit of cash
dividends, no chances of dividend warrants getting lost in the post, undelivered or delivered to the wrong address, etc.
The shareholders can avail benefits of the e-dividend mechanism by providing dividend mandate in their CDS accounts
through their Participants or to the respective share registrar.

Those shareholders, who have shares in physical form and wish to receive their cash dividend through the afore
mentioned e-dividend mechanism, are requested to send complete details of their bank account to our Share Registrar
at the above address. The CDC sub-account holders are requested to provide the required information/document to
their Participant/CDC Investor Account Services for the purpose.

It is to be noted that the following information are must, when applying for e-Dividend; 1) IBAN number 2) Title of Bank
Account; 3) Bank Account number; 4) Bank Code and Branch; Code 5) Bank Name, Branch Name and Address; 6)
Cell/Landline Number; 7) CNIC number; and 8) Email Address.

8. Financial Statements and Notice of Annual General Meeting through email

SECP vide SRO No. 787(I)2014 dated 8th September, 2014 has allowed companies to circulate the audited financial
statements and notice of Annual General Meeting to shareholders through their email address subject to their written
consent. Desiring shareholders are requested to provide their complete email address through a duly signed letter
along with copy of valid CNIC. Such shareholders are also required to notify immediately any change in email address in
writing to our Share Registrar, F. D. Registrar Services (SMC-Pvt) Limited.

9. Video Conference Facility for Attending General Meetings

With reference to the SECP’s Circular No. 10 of 2014 dated 21st May, 2014 (‘the Circular’), members may avail video
conference facility in Lahore, Islamabad, subject to fulfillment of the requirements and procedures of the Circular,
mentioned below:

The members should provide their consent as per the following format and submit to the registered address of the
Bank, 10 days before holding of AGM.

Consent Form for Video Conference Facility

I/We, __________________________________________ of ____________, being a member of Bank Alfalah Limited, holder of

_______________ Ordinary shares as per Register Folio/CDC Account No. ________________ hereby opt for video

conference facility at _______________ (geographical location).

Signature of member

315
 If the Bank receives consent from members holding in aggregate l0% or more shareholding residing at a geographical
location, to participate in the meeting through video conference at least l0 days prior to date of the meeting, the Bank
will arrange video conference facility in that city subject to availability of such facility in that city.

The Bank will intimate members regarding venue of video conference facility at least 5 days before the date of Annual
General Meeting along with complete information necessary to enable them to access such facility.

STATEMENT OF MATERIAL FACTS UNDER SECTION 160(1)(b) OF THE COMPANIES ORDINANCE, 1984 PERTAINING TO THE
SPECIAL BUSINESS BEING TRANSACTED:

Agenda Item No. 5:

Alteration in the Articles of Association of the Bank, in order to comply with the legal and regulatory requirements

The Companies (E-Voting) Regulations, 2016 (‘the Regulations’) enable the members of listed companies to exercise
their voting rights through electronic means (E-Voting) managed by authorized intermediaries, subject to terms and
conditions mentioned in the Regulations. One of the conditions requires that the articles of association of the compa-
ny shall provide that in case of E-Voting both members and non-members can be appointed as proxy. Further, clause
112 of the Articles pertaining to the “Copy of Account to be sent to members” is being amended to incorporate the
transmission of annual balance sheet, profit & loss account, auditor’s report, directors’ report, etc. to the members
through CD/DVD/USB or any other means as may be prescribed by any law/rule/regulation from time to time.

The approval of the Members is being sought for making appropriate alteration/amendments in the Articles of Associa-
tion of the Bank.

Agenda Item No. 6:

Transmission of annual audited accounts of the Bank (included in the annual reports) through CD/DVD/USB:

The Securities and Exchange Commission of Pakistan vide its S.R.O. 470(I)/2016 dated 31st May 2016 (‘SRO’) has allowed
listed companies to circulate the annual balance sheet and profit and loss account, auditor’s report, directors’ report,
etc. (‘annual audited accounts’) to its members through CD/DVD/USB at their registered addresses, subject to compli-
ance with certain conditions mentioned in the SRO. One of the conditions requires that consent of shareholders should
be obtained for the same in general meeting.

The consent of shareholders is being sought to authorize the Bank to circulate the annual balance sheet and profit and
loss account, auditor’s report, directors' report, etc. (included in the annual reports) to its members through CD/D-
VD/USB at their registered addresses. The Bank will, however, supply the hard copies of the annual audited accounts
(included in the annual reports) to the members, on demand, free of cost upon receipt of Request Form, duly complet-
ed, which will be available at the website of the Bank.

None of the directors of the Bank have any direct or indirect interest in the above said Special Businesses.

316
Issues raised at the last AGM
One of the shareholders present at the meeting highlighted that the net provision charge of the Bank against NPLs
increased from Rs. 1.45 billion in 2014 to Rs. 2.15 billion in the year 2015 and requested for reasons on the same.
The CEO in response mentioned that although the net provisioning charge depicted a year on year increase, the Bank
was able to contain the NPLs at the same level as that of last year. He further added that the Bank used to avail the
benefit of Forced Sale Value (FSV) of collaterals (allowed under SBP regulations); however, for the year 2016, the
benefit consideration was reduced as far as local operations were concerned. This, coupled with the fact that the NPL
levels remained unchanged, additional provisioning considered helped in improving the Bank’s overall coverage ratio
against NPLs significantly.
One of the shareholders appreciated the efforts made by the Management of the Bank during the year 2015 to
achieve sound financial results. He said that although the Bank performed well, the cash dividend payout has been
reduced by 50 percent. He further enquired that as in the past few years, the Bank had been consistently paying out
a cash dividend of 20 percent, then why was it that despite improved financial results in 2015, the payout ratio was
reduced. Another shareholder later enquired about whether the Bank has any plan to issue right shares.
In response to the shareholders’ concerns on cash dividend, the CEO mentioned that the decision was an informed one,
taken with the view of retaining profits for enhancement in the existing capital base, which would in turn improve the
Bank’s lending capacity. The CEO mentioned that with the expansion that has taken place in the economy, coupled with
overall stability witnessed in the macroeconomic environment, there is a need for increased capacity to lend, so as to
improve on returns. He mentioned that at present, the Bank’s Capital Adequacy Ratio (CAR) is at a comfortable level;
however, it is not at that desired level which would support more lending. The possible options available for increasing
capital were through additional equity injection by the shareholders, or by way of retaining a portion of earnings. This he
mentioned was necessary in the long-term in order to adequately grow the Balance Sheet and to secure the future growth
potential of the Bank. Taking these factors into consideration, the CEO mentioned that the Board had proposed to the
shareholders to approve a 10 percent final cash dividend for the year 2015.
On the question on rights issue, the CEO added that the Management shall be exploring other options to generate
Tier 1 or Tier 2 Capital, but for the moment, there was no plan to issue right shares.
Another salient point raised by a shareholder at the meeting was that in the recent past, banks in Pakistan had
generally relied heavily on lending to the Government, being a secure mode of placement offering better yields, as
opposed to conventional mode of private sector lending, where collateral adequacy is a key concern for many.
However, it was suggested that if banks were willing to lend more to private sector, it would in turn contribute
towards the betterment of the overall economy. The shareholder also inquired whether the Bank has any system of
monitoring the profitability of its branches.
In response to the concern on increased investment in Government Securities, the CEO agreed that all banks had
indeed invested in such securities and earned good yields. However, he mentioned that BAFL had not ignored the
lending side, growing its lending book by 13 percent, which was approximately 4 percent more than the market. He
mentioned that the Bank was able to improve its Advances to Deposits ratio from 50 percent to 54 percent, which is
one of the best in the market. He reassured the shareholders that the Bank is indeed focusing on more private sector
lending, and referred back to his response to the question on profit retention, the purpose of which was to increase
the Bank’s lending capacity.
On the question on monitoring the performance of the branches, the CEO mentioned that the Bank has an adequate
system of monitoring the performance of the branches, and the branch wise profitability reports are prepared
regularly.
One of the Bank’s shareholders inquired about the Bank’s expectations on the interest rate environment and growth
in terms of advances.
The CEO mentioned that the interest rate is correlated to inflation, and since it was expected that inflation would
remain low; therefore, the interest rate could be expected to remain at the current low level for some time. He further
mentioned that the Bank’s investment and lending strategy would continue to evolve and be monitored keeping in
view the expected interest rate scenario.
One of the shareholders requested for the progress of the Sapphire Wind Power Project, whereas one other
shareholder requested for information on the sale/merger of Warid Telecom and its impact on the Bank.
The CEO mentioned that the Project had started in November 2015 and it is currently on course and running very well.
With regards to the Bank’s stake in Warid, the CEO mentioned that since the investment in Warid was fully impaired,
there would be no negative impact on the Bank. He added that the Bank shall be getting a small portion of
shareholding in the merged entity in lieu of its holding in Warid, once the transaction stands materialised.

317
 Current Deposits
Glossary and Definition of Terms
Non-remunerative chequing account deposits wherein
withdrawals and deposit of funds can be made
Accrual Basis
frequently by the account holders.
Recognising the effects of transactions and other events
Computer Software (intangible fixed assets)
when they occur without waiting for receipt or payment
of cash, or its equivalent. An asset consisting of computer programmes,
Acceptances programme descriptions and supporting materials for
both systems and applications software; included are
Promise to pay created when the drawee of a time draft purchased software and software developed on own
stamps or writes the words ‘accepted’ above his
account, if the expenditure is large.
signature and a designated payment date.
Contingencies
Activity/Turnover Ratios
A condition or situation existing at date of Statement of
Evaluate the operational efficiency of the company to
Financial Position where the outcome will be confirmed
convert inventory and receivables into cash against time
only by occurrence of one or more future events.
taken to pay creditors, measured in terms of revenue and
cost of sales CAGR
Basis Point An abbreviation for Compound Annual Growth Rate.
One hundredth of a percent i.e. 0.01 per cent. 100 basis Corporate Governance
points is 1 percent. Used when quoting movements in
It is ‘the system by which companies are directed and
interest rates or yields on securities.
controlled’ by the Securities and Exchange Commission
Breakup Value per Share of Pakistan. It involves regulatory and market
mechanisms, which govern the roles and relationships
Represents the total worth (equity) of the business per
between a company’s management, its board, its
share, calculated as shareholders’ equity or Net Assets,
shareholders and other stakeholders.
excluding the impact of revaluation on fixed assets, divided
by the total number of shares outstanding at year end. Currency (cash in hand)
Bonus Issue (Scrip Issue) Notes and coins that are of fixed nominal values and
The issue of new shares to existing shareholders in accepted as legal tender in an economy that are issued
proportion to their shareholdings. It is the process for by the central bank and/or government. This category
converting a company’s reserves (in whole or part) should also include currency that is no longer legal
into issued capital and hence does not involve an tender, but that can be exchanged immediately for
infusion of cash. current legal tender.
Cash Equivalents Defined Contribution
Short-term highly liquid investments that are readily A post-employment benefit plan under which entity
convertible to known amounts of cash. and employee pays fixed contribution into a separate
Capital Adequacy Ratio entity (a fund) and will have no legal or constructive
obligation to pay further contribution if the fund does
The relationship between capital and risk weighted not hold sufficient assets to pay all the employee
assets as defined in the framework developed by the benefits relating to employee service in the current
State Bank of Pakistan and Basel Committee.
and prior periods.
Call Money Rate
Derivatives
Interbank clean (without collateral) lending/borrowing
A financial instrument or a contract where;
rates are called Call Money Rates
• Its value is dependent upon or derived from one or
Capital Structure Ratios
more underlying assets
Provide an indication of the long-term solvency of the
• Requires no or very little initial net investment
Company and its cost of debt, in relation to equity and
profits. • It is settled at a future date
Coupon Rate Defined Benefits
Interest rate payable on bond’s par value at specific In a defined benefit plan, an employer typically
regular periods. In PIBs they are paid on bi-annual basis. guarantees a worker a specific lifetime annual
Call Deposits retirement benefit, based on years of service, final rate
of pay, age and other factors. The risks of paying for the
These include short notice and special notice deposits. plan rest entirely with the plan.

318
Deferred Taxation Guarantees
Sum set aside for tax in financial statements that will A promise to answer for the payment of some debt, or
become payable/receivable in a financial year other than the performance of some duty, in case of the failure of
current financial year due to differences in accounting another person, who is, in the first instance, liable to
policies and applicable taxation legislations. such payment or performance.

Discount Rate Head Office/Branch Adjustment Account

The rate at which SBP provides three-day Repo facility All adjustments made with head offices or branches and
to banks, acting as the lender of last resort. are payable.

Dividends Historical Cost Convention

Distribution of earnings to shareholders prorated by the Recording transactions at the actual value received or
class of security and paid in the form of money, stock, paid.
scrip, and rarely company products or property. Impairment
Dividend Payout Ratio Impairment of an asset is an abrupt decrease of its fair
value and measured in accordance with applicable
Dividends (cash dividend plus bonus shares) paid per
regulations.
share as a fraction of earnings per share (EPS).
Interest Rate Swap (IRS)
Dividend Yield Ratio
An Interest Rate Swap (the swap) is usually ‘fixed to
Dividend per share (DPS) divided by the market value floating’ or ’floating to floating’ exchanges of interest
of share. rate between two parties. As per the contract, on each
Earnings per Share (EPS) payment date during the swap period, the cash
payments based on difference in fixed/floating or
Profit after taxation divided by the weighted average floating/floating rates are exchanged by the parties
number of ordinary shares in issue. from one another. The party incurring a negative
Effective Tax Rate interest rate differential for that leg pays the other
counter-party.
Provision for taxation excluding deferred tax divided by
Interest Spread
the profit before taxation.
Represents the difference between the average interest
Electrical, Office and Computer Equipment
rate earned and the average interest rate paid on funds.
All office equipment, other than those acquired through
Interest in Suspense
financial leases, that are used for the business, including
counting and computing equipment, printers, scanners, Interest suspended on non-performing loans and
photocopiers, fax machines, etc. advances.

Finance Lease Investment/Market Ratios

The one in which risk and rewards incidental to the Investment ratios measure the capability of the Company
ownership of the leased asset is transferred to lessee to earn an adequate return for its shareholders. Market
but not the actual ownership. Ratios evaluate the current market price of a share versus
an indicator of the Company’s ability to generate profits.
Fixed Deposits
KIBOR (Karachi Interbank Offered Rate)
Deposits having fixed maturity dates and a rate of return.
The Interbank lending rate between banks in Pakistan
Forced Sale Value (FSV) and is used as a benchmark for lending.
The value which fully reflects the possibility of price LIBOR (London Interbank Offered Rate)
fluctuations and can currently be obtained by selling
The interest rate at which banks can borrow funds, in
the mortgaged/pledged assets in a forced/distressed marketable size, from other banks in the London
sale conditions. interbank market. The LIBOR is fixed on a daily basis by
Forward Exchange Contract the British Bankers’ Association.

Agreements between two parties to exchange two Liquid Assets

designated currencies at a specific time in the future. An asset that can be converted into cash quickly and
Furniture and Fixture with minimal impact to the price received.

All type of furniture and fixtures other than those Liquidity Ratios
acquired under financial leases for business are The Company’s ability to meet its short-term financial
included. obligations. A higher ratio indicates a greater margin of
safety to cover current liabilities.
319
Market Capitalisation Prudence
Number of ordinary shares in issue multiplied by the Inclusion of degree of caution in the exercise of judgment
market value of share as at any cut-off date. needed in making the estimates required under conditions
of uncertainty, so that assets or income are not overstated
Materiality and liabilities or expenses are not understated.
The relative significance of a transaction or an event, Price Earnings Ratio (P/E Ratio)
the omission or misstatement of which could influence
the economic decisions of users of financial statements. Market price of a share divided by earnings per share.

Non-Performing Loan Risk Weighted Assets

A loan that is in default or close to being in default. On Balance Sheet assets and the credit equivalent of off
Balance Sheet assets multiplied by the relevant risk
Loans become non-performing in accordance with
weighting factors.
provision of prudential regulations issued by SBP.
Repurchase Agreement
Non-Performing Loan-Substandard Category
Contract to sell and subsequently repurchase securities
Where mark-up/interest or principal is overdue by 90 at a specified date and price.
days or more from the due date.
Reverse Repurchase Agreement
Non-Performing Loan-Doubtful Category
Transaction involving the purchase of securities by a
Where mark-up/interest or principal is overdue by 180 bank or dealer, and resale back to the seller at a future
days or more from the due date. date and specified price.
Non-Performing Loan-Loss Category Return on Average Equity
Where mark-up/interest or principal is overdue by one Net profit for the year, less preference share dividends
year or more from the due date and Trade Bill (Import/ if any, expressed as a percentage of average ordinary
Export or Inland Bills) are not paid/adjusted within 180 shareholders’ equity.
days of the due date. Return on Average Assets
Nostro Account Profit after tax divided by the average assets.
An account held with a bank outside Pakistan. Related Parties
Net Interest Income Parties where one party has the ability to control the
The difference between what a bank earns on interest other party or exercise significant influence over the
other party in making financial and operating decisions.
bearing assets such as loans and securities and what it
pays on interest bearing liabilities such as deposits, Retained Earnings
refinance funds and inter-bank borrowings. The category of retained earnings shows all earnings
Off Balance Sheet Transactions (after tax profit) from the overall operations of the
banks/DFIs less any amount allocated to general and
Transactions that are not recognised as assets or special reserves, which is established as a capital
liabilities in the statement of financial position, but cushion to cover operational and financial risks of the
which give rise to contingencies and commitments. banks/DFIs.

Other Deposits Revenue Reserves

Reserves set aside for future distribution and investment.
All claims of customers on banks/DFIs other than
transferable or restricted deposits in national currency Subordinated Loans
or in foreign currency that are represented by evidence Funds raised by the banks/DFIs from subsidiary companies,
of deposits. Banks/DFIs commonly raise funds through managed modarabas, associated undertakings, director or
issuing certificate of deposits. This category also chief executives with the provision that all other liability
includes call deposits and special notice deposits. holders have priority in the event of failure of the
institution. Such debts are created by a subordination
Pakistan Investment Bonds (PIBs) agreement under which a creditor acknowledges that his
claim is secondary to the claim of other creditors, such as
They are the long-term coupon yielding instruments of
depositors.
the Government of Pakistan with tenors available in 3, 5,
10, 15 and 20 year. Subsidiary Company

Profitability Ratios A company is a subsidiary of another company, if the

parent company holds more than 50% of the nominal
Used to assess the Company’s ability to generate profits value of its equity capital or holds some share in it and
in relation to its sales, assets and equity. controls the composition of its Board of Directors.
320
Shareholders’ Funds Glossary – Acronyms
Total of Issued and fully paid share capital and revenue AGM Annual General Meeting
reserves.
BAC Board Audit Committee
Statutory Reserve Funds
BAFL Bank Alfalah Limited
A capital reserve created as per the provisions of the
BCC Board Compensation Committee
Banking Companies Ordinance, 1962.
BHRNC Board Human Resource and Nomination Committee
Treasury bills
BRMC Board Risk Management Committee
These are short-term debt instrument issued by the
government treasury to raise funds for the government BSFC Board Strategy and Finance Committee
or to regulate money supply through open market
BCP Business Continuity Planning
operations of the central bank. The market transactions
are managed by the State Bank of Pakistan on behalf of BOD Board of Directors
the treasury.
CEO Chief Executive Officer
Unrealised Gain on Forward Foreign Exchange Contracts
CFO Chief Financial Officer
In a forward contract, the counter parties agree to
CPIs Critical Performance Indicators
exchange, on a specified date, a specified quantity of an
underlying item (real or financial) at an agreed-upon CSR Corporate Social Responsibility
contract price. Either party to a forward contract is a
ERP Enterprise Resource Planning
potential debtor. The unrealised gain to be received due
to difference between the rates agreed upon and the HR Human Resource
rate prevailing in the market should be reported under
HRLG Human Resource and Learning Group
this item. You lock in today's exchange rate instead of a
volatile currency exchange rate in the future that could L&DD Learning and Development Division
significantly devalue your purchasing power.
Unrealised Gain on Interest Rate Swaps
It is the exchange of one set of cash flows for another. A
pre-set index, notional amount and set of dates of
exchange determine each set of cash flows. The most
common type of interest rate swap is the exchange of
fixed rate flows for floating rate flows.
Vehicles
Vehicles (as assets) other than those acquired through
financial leases consist of equipment for moving people
and objects, other than any such equipment acquired by
households for final consumption. Transport equipment
such as motor vehicles, trailers, ships, aircrafts,
motorcycles, bicycles, etc.
Weighted Average Cost of Deposits
Percentage of the total interest expense on average
deposits of the bank for the period.

321
The website link of JamaPunji is available at the website of Bank Alfalah for the convenience
and facilitation of shareholders and investors.
FORM OF PROXY

Folio/CDC Account No.

I/We, ____________________________________________, of _____________being member(s) of BANK ALFALAH LIMITED

(“the Bank”), holding ________________________ ordinary shares, hereby appoint ________________________________
______ of __________________or failing him/her ______________________________________ of __________________,
who is also a member of the Bank, as my/our proxy to vote for me/us, and on my/our behalf at the 25th Annual General
Meeting of the Bank to be held on Tuesday, March 28, 2017, at 10:00 AM and at any adjournment thereof.

As witness my/our hand this _______________ day of _____________________, 2017

Witness:

Name:

CNIC/Passport No:

Address:
(Member’s signature on
Rs.5/- Revenue Stamp)

1. A member entitled to attend, and vote at the Meeting is entitled to appoint another member as a proxy to attend,
speak and vote on his/her behalf. A corporation being a member may appoint as its proxy any of its official or any
other person whether a member of the Bank or otherwise.

2. An instrument of proxy and a Power of Attorney or other authority (if any) under which it is signed, or notarized
copy of such Power of Attorney must be valid and deposited at the Share Registrar of the Bank, M/s. F. D. Registrar
Services (SMC-Pvt) Limited, Office No: 1705, 17th Floor, Saima Trade Tower-A, I. I. Chundrigar Road, Karachi-74000,
not less than 48 hours before the time of the Meeting.

3. In case of proxy for an individual beneficial owner of CDC, attested copy of beneficial owner’s Computerized
National Identity Card, Account and Participant’s ID numbers must be deposited alongwith the form of proxy with
the Share Registrar. The proxy must produce his/her original identity card at the time of the Meeting. In case of
proxy for corporate members, he/she should bring the usual documents required for such purpose.
2017 25
Bank Alfalah Limited
B. A. Building, I. I. Chundrigar Road
Karachi, Pakistan
111 777 786
bankalfalah.com