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Bankers Equity |
|
|
16TH |
|
|
ANNUAL REPORT 1996 |
|
|
THE NEW FACE OF FINANCE |
|
|
| Contents |
|
|
| Mission
Statement |
|
4 |
|
|
|
|
| Board
of Directors |
|
5 |
|
|
|
|
| Operational
and Financial Highlights |
|
6 |
|
| Notice
of Annual General Meeting |
|
7 |
|
|
|
|
| Directors'
Report |
|
8 |
|
|
|
|
| Statistical
Information |
|
12 |
|
|
|
|
| Auditors'
Report |
|
15 |
|
|
|
|
| Balance
Sheet |
|
16 |
|
|
|
|
| Profit
and Loss Account |
|
18 |
|
|
|
|
| Statement
of Changes in Financial Position |
19 |
|
|
|
|
| Notes
to the Accounts |
|
20 |
|
|
|
|
| Pattern
of Shareholdings |
|
42 |
|
|
|
|
| Offices
and Branches |
|
45 |
|
|
| Mission
Statement |
|
| Our
vision for Bankers Equity is to develop into a |
|
| professional
"one stop" world class financial |
|
| institution
providing a full range of investment, |
|
| commercial
and development banking services. |
|
|
| Board
of Directors as of December, 1996 |
|
|
| Mr.
Khurshid Hadi |
|
Chairman |
|
|
| Mr.
Rauf Baksh Kadri |
|
President & CEO |
|
|
| Mr.
Khalid Malik |
|
Director |
|
|
| Mr.
Inam-ul Haq |
|
Director |
|
|
| Mr.
Shaukat A. Kazmi |
|
Director |
|
|
| Mian
Mumtaz Abdullah |
|
Director |
|
|
| Mr.
Milton J. Walters |
|
Director |
|
|
| Mr.
Adnan Aziz AI Bahar |
|
Director |
|
|
| Mian
Muhammad Mansha |
|
Director |
|
|
| Mr.
Shahid Ghaffar |
|
Director |
|
|
| Operational
and Financial Highlights |
|
|
(Rs. in Million) |
|
| Year
Ending June 30, |
|
1995 |
1996 |
|
|
| OPERATIONAL |
|
|
| Commitments |
|
| Bankers
Equity |
|
2,040 |
1,236 |
|
| Syndicate
Members |
|
2,470 |
1,735 |
|
| Total |
|
4,510 |
2,974 |
|
| Local |
|
3,755 |
2,934 |
|
| Foreign |
|
756 |
40 |
|
|
|
|
| Disbursements |
|
| Bankers
Equity |
|
1,941 |
499 |
|
| Syndicate
Members |
|
154 |
116 |
|
| Total |
|
2,095 |
616 |
|
| Local |
|
2,074 |
616 |
|
| Foreign |
|
21 |
0 |
|
|
|
|
| Offices
& Staff |
|
| Number
of Offices |
|
21 |
21 |
|
| Number
of Staff |
|
356 |
350 |
|
|
| FINANCIAL |
|
|
| Profit
and Loss Account |
|
| Income
from term financing |
|
1,279 |
1,355 |
|
| Income
from investments |
|
638 |
442 |
|
| Gross
income |
|
1,948 |
1,836 |
|
| Borrowing
cost |
|
1,287 |
1,479 |
|
| Operating
profit |
|
468 |
70 |
|
| Profit
for the year |
|
118 |
0.90 |
|
| Dividend
(Bonus share %) |
|
-- |
-- |
|
|
| Balance
Sheet |
|
|
| Shareholders'
equity |
|
1,335 |
1,336 |
|
| Break-up
value (Rs.) |
|
20.35 |
20.35 |
|
| Redeemable
Capital |
|
700 |
700 |
|
| Long-term
loan |
|
5,526 |
5,147 |
|
| Deposits |
|
5,170 |
4,404 |
|
| Term
Financing |
|
11,556 |
11,615 |
|
| Total
Assets |
|
14,949 |
14,778 |
|
|
| Notice
of Annual General Meeting |
|
| NOTICE
IS HEREBY GIVEN that Annual General Meeting of the shareholders of BANKERS
EQUITY LIMITED (BEL) |
|
| will
be held on Tuesday, the 4th February, 1997 at 10:30 a.m. at Best Western
Hotel Islamabad, 6, Islamabad Club |
|
| Road,
Islamabad, to transact the following business: |
|
|
| 1.
To confirm the minutes of the last Extraordinary General Meeting of
Shareholders of the Company held on October |
|
| 12, 1996. |
|
|
| 2.
To receive and consider the Audited Accounts of the Company for the year
ended 30th June, 1996 and the |
|
| Directors' and Auditors' Report thereon. |
|
|
| 3.
To appoint Auditors of the Company for the next financial year and fix their
remuneration. |
|
|
| 4.
To approve the reduction in number of directors from 13 to 7 as recommended
by the Board of Directors of the |
|
| Company in terms of Section 178 (1) of the
Companies Ordinance, 1984 and pass the following resolution: |
|
|
| Resolved
that: |
|
| "The
number of directors of the Company be and is hereby reduced from 13 to 7
(including Chief Executive of the |
|
| Company)
as recommended by the Board of Directors of the Company in terms of Section
178 (1) of the Companies |
|
| Ordinance,
1984". |
|
|
| Out
of the 13 existing directors those retiring are namely (1) Mr. Khurshid Hadi,
(2) Mr. Rauf B. Kadri, (3) Mr. lnam-ul |
|
| Haq,
(4) Mian Mumtaz Abdullah, (5) Mr. Khalid Malik, (6) Mr. Shaukat A. Kazmi, (7)
Mr. Adnan Aziz Al Bahar, (8) Mr. |
|
| Milton
J. Wallters, (9) Mian Muhammad Mansha and (10) Mr. Shahid Ghaffar. The
remaining 3 directors namely |
|
| (1)
Mr. Muhammad Ahsan, (2) Mr. Asadullah Khawaja and Mr. Muhammad Abdullah Yusuf
had already resigned |
|
| from
the directorship of the Company. |
|
|
| 5.
To elect seven directors as fixed by them under Section 178 (1) of the
Companies Ordinance, 1984, to be on the |
|
| Board of the Compay for the period of three
years. |
|
| 6.
To transact any other business of the Company with the permission of the
Chair. |
|
| By order of the Board |
|
|
| (Sarwar
All) |
|
| Company
Secretary |
|
|
| Statement
under Section 160 of the |
|
| Companies
Ordinance, 1984. |
|
| The
directors are of the view since Bankers Equity Limited has been privatized
and the management has been transferred |
|
| to
LTV Consortium Group on June 17, 1996, hence, in consequence of the
privatization, the constitution and set-up of |
|
| the
Board of Directors needs to be reviewed. In exercise of the powers conferred
by Section 178 (1) of the Companies |
|
| Ordinance,
1984, the directors have recommended to reduce the number of directors from
13 to 7 including the Chief |
|
| Executive
of the Company. |
|
|
| NOTES: |
|
| 1)
The Share Transfer Books of the Company shall remain closed from 29th
January, 1997 to 2nd February, |
|
| 1997 (both days inclusive). |
|
|
| 2)
Nomination from shareholders who seek to contest election to the office of
Director must be received at least |
|
| not later than 14 days before the Annual
General Meeting at the Head Office of the Company as required |
|
| under section 178(3) of the Companies
Ordinance, 1984. |
|
|
| 3)
A member entitled to attend and vote at the Meeting may appoint a proxy to
attend and vote on his/her behalf. |
|
| A proxy need not be a member of the
Company. |
|
|
| 4)
Proxies duly stamped with Rs. 5/- Revenue Stamp, signed and witnessed must be
deposited at the Head |
|
| Office of the Company not less than 48
hours before the Meeting. |
|
|
| 5)
Shareholders are requested to notify any change in their addresses
immediately. |
|
|
| Head
Office: |
|
| Finance
& Trade Centre, Shahra-e-Faisal, |
|
| Karachi. |
|
|
| Directors
Report for the year 1995-96 |
|
|
| The
Board of Directors presents here the 16th Annual Report on the working of
Bankers Equity, |
|
| together
with the Balance Sheet as on 30th June 1996, Profit and Loss Account, and
Cash Flow |
|
| for
the year ended 30th June, 1996. This report covers the last year of
management control of |
|
| the
Company by Government of Pakistan before private sector management stepped in
on June |
|
| 17,
1996. The new management had no time to affect the results for the year. The
effect of |
|
| measures
taken by them will be reflected in the report of the next year. |
|
|
| OPERATION |
|
|
| Commitments
and Disbursements |
|
| During
1995-96, aggregate investment approved, inclusive of working capital against
bank |
|
| guarantee,
by Bankers Equity Syndicate amounted to Rs. 2,974 billion, 44% of which was |
|
| contributed
by BE. The investment approved in each year is shown in Table I. |
|
|
| Overall
business activity was sluggish during the year, as Bankers Equity underwent
the |
|
| privatization
process and investments were restricted. Of the investments during 1995-96,
the |
|
| highest
share was that of the Food and Beverage sector comprising nearly 48% of the
total |
|
| disbursements,
followed by the Textile sector at 18% and the Paper and Pulp industry at 14%. |
|
|
| For
the past five years, with the privatization of MCB and ABL (2 of the 5 NCBs
which have been |
|
| part
of BE syndicate), the project financing activities of BE have been on a
continuous decline. |
|
| In
1991-92 we had approved about Rs. 11.5 billion while in 1995-96 the figure
was about Rs. 3.0 |
|
| billion.
Now that BE has been privatized, the management of BE will be looking to
replace the |
|
| present
form of syndicate financing by a much more efficient and capable syndicate. |
|
|
| During
the year the local currency component in the total financing disbursed was
100% as |
|
| compared
to 99% in 1994-95. This reflects not only the unavailability of economically
feasible |
|
| foreign
currency lines but also the inability of the previous management to disburse
the few lines |
|
| that
were available. The situation is expected to improve in the current year. |
|
|
| The
majority of disbursements in the current year was funded by the LMM line
available from the |
|
| State
Bank of Pakistan (nearly 42%). The government policy is clear on such
subsidized lines |
|
| and
in future the company will need to seek alternate funding sources at
reasonable cost. These |
|
| sources
include a retail deposit base and development of capital and money market
instruments. |
|
|
| A
region wise analysis shows that during 1995-96 disbursement for all regions
registered a |
|
| decline,
while it was nil for NWFP and Azad Kashmir. The highest disbursement of 65.7%
was in |
|
| Sindh
while in the Punjab region it was 33.62%. In 1994-95, Sindh's share of
disbursements |
|
| also
exceeded 50%. In the past few years, politically motivated lending has
affected the company |
|
| as
it has affected many other financial institutions in the country. |
|
|
| RUPEE
RESOURCES |
|
| The
resources of Bankers Equity, in addition to the paid-up-capital of Rs. 656
million, reserves of |
|
| Rs.
680 million and Redeemable capital of Rs. 700 million; consists of
concessional reference |
|
| by
SBP (LMM) which stood at Rs. 4.0 billion on June 30, 1996, short term
borrowing from banks |
|
| and
financial institutions and a COl deposit base. |
|
|
| As
the LMM lines are on a continous decrease, as per government policy, the main
source of |
|
| future
fundings is the deposit base. Unfortunately, due to mismanagement of the bank
affairs by |
|
| the
government, the deposit base has also been eroding over the years. On June
30th, 1996 the |
|
| deposits
stood at Rs. 4.4 billion down from Rs. 5.3 billion in 1994. The problem
accentuated post |
|
| privatization
as government issued instructions to government bodies to hold deposits only
in |
|
| government
owned scheduled banks. This was totally against the spirit of privatization.
If a level |
|
| playing
field is not provided by the government not only will the privatization
process fail, but the |
|
| government
owned banks will continue to spread corruption and economic disaster. |
|
|
| FOREIGN
CURRENCY RESOURCES |
|
| Bankers
Equity has two credit lines for DM 30 million and DM 20 million from Berliner
Handles- |
|
| und
Frankfurter Bank, Frankfurt, and Bayerische Vereins Bank, Munich
respectively. BE also |
|
| has
access to credit lines of Kreditastalt fin Wiederantbau (KfW), Frankfurt and
General Bank, |
|
| Brussels.
These lines are without the guarantee from Government of Pakistan. BE was
appointed |
|
| administrator
on behalf of Government of Pakistan for World Bank Financial Sector Deepening |
|
| and
Intermediation Loan Project (FSDIP) for US $ 200 million and Asian
Development Bank for |
|
| US
$ 100 million. BE is also administering a World Bank line of US $ 26 Million
on behalf of |
|
| Government
of Pakistan for micro-enterprises leasing. |
|
|
| Bankers
Equity is also member of European Community Investment Partners Scheme (ECIP) |
|
| for
promoting joint venture between Pakistan and European Community. |
|
|
| STOCK
MARKET OPERATIONS |
|
| The
stock market during the year under review remained very volatile mainly due
to uncertain |
|
| economic
and political conditions. This is reflected in the marginal increase in the
KSE 100 |
|
| index.
The index which stood at 1611.70 on June 30, 1995 was at 1703.28 on June 30,
1996, an |
|
| appreciation
of only 5.682%. |
|
|
| BE
is actively involved in stock market operations and income generated through
capital gains |
|
| and
dividends have in the past constituted the major portion of the company's
earning. This has |
|
| obviously
been on the decline and we expect it will decline more in the future.
However, BE still |
|
| managed
to realize a capital gain of Rs. 186.19 million in 1995-96 (as compared to
Rs. 354.554 |
|
| million
in 1994-95). The company also received dividend of Rs. 47.13 million as
compared to Rs. |
|
| 54.547
million in 1994-95. |
|
|
| In
1995-96, Bankers Equity underwrote one public issue to the extent of Rs. 15
million. The |
|
| issue
was heavily undersubscribed and out of the public offering of Rs. 60.00
million a subscription |
|
| of
only Rs. 2.665 million was received. Unrealized capital losses of the share
portfolio as of June |
|
| 30,
1996 have been recognized in the accounts as a matter of prudence. The
company's over |
|
| dependence
on the stock market will have a negative effect in 1996-97 as the market
continues |
|
| to
slide. The new management is taking all measures to minimize this loss and
reduce the |
|
| exposure
to the stock market by liquidating mature investments. We expect to reduce
our portfolio |
|
| by
over Rs. 500 million by June 30, 1997. |
|
|
| FINANCIAL
RESULTS |
|
| The
gross income for the year showed a decrease of 5.74% to Rs. 1,836 million
from Rs. 1,948 |
|
| million
in 1994-95. The gross expenditure excluding provisions increased to Rs. 1,767
million |
|
| from
Rs. 1,480 million in 1994-95 owing to an increase in borrowing cost by Rs.
192 million. |
|
|
| The
operating profit declined to Rs. 69.535 million from Rs. 467.754 million in
1994-95, mainly |
|
| due
to the uncertainty prevailing on the stock market which prevented active
trading on the |
|
| portfolio
which had provided the bulk of the profits in the last three years. Provision
for |
|
| contingencies
provided during the year is Rs. 177.409 million against Rs. 407.629 million
made |
|
| in
1994-95. The net loss for the year is Rs. 107.874 million as compared to Rs.
60.126 million net |
|
| profit
before tax in the preceding year. The future profitability of the company
will depend primarily |
|
| on
the recovery rate of the loan portfolio and the ability to raise lower cost
resources. |
|
|
| DEVELOPMENTS
UNDER NEW MANAGEMENT |
|
| Pursuant
to the sale of 26 percent of Governments shareholding in the company to the
LTV |
|
| Consortium
the new management took over the company on 17th June, 1996. The balance of |
|
| 25%
of Government of Pakistan shareholding was acquired on the due date bringing
LTV |
|
| Consortium
acquisition to 51%. The ultimate impact of privatization should bring a new
vigor and |
|
| a
new direction amidst all the attendant advantages that private sector
ownership is deemed to |
|
| confer.
However, this will require a number of measures for immediate improvements
and long |
|
| term
changes, which the new management has already initiated. |
|
|
| The
period since the transfer of management has been a time of severe economic
decline with |
|
| attendant
ramifications for the financial sector. The Government's voluminous appetite
for funds |
|
| and
the consequential need for stringent control on monetary growth have
coalesced to create a |
|
| most
difficult financial environment. This environment has been increasingly
clouded by political |
|
| developments
whose outcome is consistently uncertain. The ramifications for an investment |
|
| bank,
historically sponsored and supported by the government, have included
inordinate |
|
| investment
of management time and resources in maintaining financial stability rather
than |
|
| planning
for growth. |
|
|
| The
new management has focused on reorganization of systems and structures,
providing focus |
|
| and
direction to the company and overseeing the mobilization and recovery of
assets. In the last |
|
| six
months the management has achieved remarkable success in resolution of the
non-performing |
|
| portfolio;
about one-third has been converted into an earning asset and the balance is
now |
|
| under
active supervision with the expectancy that by the end of this financial
year, at least another |
|
| third
would have been activated. |
|
|
| Resource
mobilization measures have been developed - our principal financial products
have |
|
| been
advertised extensively, sales staff training programme initiated. The results
have been |
|
| encouraging
and we shall continue to market aggressively in order to broad base our
funding |
|
| sources. |
|
|
| SCOPE
OF SERVICES |
|
| Our
vision for the future is to develop the company into a professional
"one-stop" world class |
|
| financial
institution providing a full range of investment and development banking
services. |
|
|
| To
proceed along that vision the quickest way is to develop a strategtic
partnership with an |
|
| appropriate
international financial institution whose strengths complement our local
expertise. |
|
| We
intend to pursue this option once the initial phase of consolidation is
complete. Our scope of |
|
| services
are envisaged to cover the range of corporate and investments banking: |
|
|
| Corporate
Finance |
- |
Long-term and Corporate
debt |
|
|
- |
Advisory |
|
|
- |
Privatization issues |
|
|
- |
International placement |
|
|
|
|
| Merchant
Banking |
- |
Trade finance |
|
|
|
- |
Finance leases |
|
|
|
- |
Underwriting |
|
|
|
- |
Guarantees |
|
|
|
- |
Specialized finance |
|
|
|
|
|
| Property |
|
- |
Development |
|
|
- |
Syndication |
|
|
| Operating
Lease |
|
| Division |
|
- |
construction and road
building industry |
|
|
|
|
| Treasury |
|
- |
domestic money market
operations |
|
|
- |
correspondent banking |
|
|
|
|
| Private
Banking |
- |
services covering all
aspects of private clients |
|
|
banking, financial and
investment needs |
|
|
| Capital
Market |
- |
Equities |
|
|
- |
Bond |
|
|
- |
Research |
|
|
|
|
| Administration |
- |
for multi-lateral agency
programmes |
|
|
|
|
| FUTURE
OUTLOOK |
|
| Our
immediate task is the continuation of a business strategy that seeks to
revive the sluggish |
|
| performance
of assets primarily invested in textiles, sugar and cement industries and to
diversify |
|
| funding
sources through mobilization of domestic savings and to source mid-term lines
of credit |
|
| both
from multilateral credit agencies and increasingly through financial
instruments limited to |
|
| regional
Islamic institutions. |
|
|
| The
Company has already obtained permission to mobilise foreign currency
certificates of |
|
| investments
and these will be accepted as soon as preliminary arrangements have been |
|
| completed. |
|
|
| AUDITORS |
|
| The
auditors Sidat Hyder Qamar Maqbool & Co. Chartered Accountants retired
and being eligible |
|
| offer
themselves for reappointment. |
|
|
| It
is axiomatic that the banking sector is a microcosm of the macro economic
environment. We |
|
| pray
for a long period of political stability that is a prerequisite for economic
regeneration. The |
|
| removal
of fundamental distortions in the economy and effective control on defaults
that have |
|
| created
turmoil in the banking system are vital for successful recuperation and
growth. The |
|
| government
must also provide a level playing field between government and non-government |
|
| financial
institutions, or else the entire financial system will collapse and the
privatization of |
|
| banks
will definitely not be possible. |
|
|
| Statistical
Information |
|
|
| TABLE I |
|
| Year
wise Distribution of Approved Investments |
|
| (Net
of Cancellations) |
|
|
(Rs. in Million) |
|
|
|
Total |
|
|
No. of |
Syndicate |
Bankers |
|
| Year |
Projects |
Financing |
Equity |
|
|
| 1980-81* |
8 |
715.374 |
553.880 |
|
| 1981-82 |
16 |
567.535 |
405.214 |
|
| 1982-83 |
14 |
733.262 |
369.749 |
|
| 1983-84 |
30 |
1088.978 |
615.478 |
|
| 1984-85 |
44 |
1025.398 |
712.156 |
|
| 1985-86 |
45 |
1118.463 |
742.454 |
|
| 1986-87 |
68 |
3216.264 |
2161.224 |
|
| 1987-88 |
79 |
2957.514 |
2457.828 |
|
| 1988-89 |
123 |
4691.974 |
3508.600 |
|
| 1989-90 |
228 |
13729.695 |
6346.058 |
|
| 1990-91 |
246 |
10283.269 |
8997.358 |
|
| 1991-92 |
321 |
11594.750 |
9757.188 |
|
| 1992-93 |
174 |
5583.836 |
5507.780 |
|
| 1993-94 |
140 |
7074.483 |
6321.715 |
|
| 1994-95 |
35 |
4510.000 |
2040.000 |
|
| 1995-96 |
38 |
2974.381 |
1235.716 |
|
| ---------- |
---------- |
---------- |
---------- |
|
| TOTAL |
1,609 |
71865.176 |
51732.398 |
|
| ---------- |
---------- |
---------- |
---------- |
|
|
| *
For 17 months |
|
|
| Notes: |
|
| 1.
Total Syndicate includes Bankers Equity |
|
| 2.
Projects means No. of proposals as distinct from No. of companies financed.
Also includes proposals for working |
|
| capital financing. |
|
| 3.
Figures relating to previous years have been revised to account for revision
and reallocations in financing. |
|
|
| TABLE II |
|
| Project
Financing since inception |
|
|
(Rs. in Million) |
|
|
|
Total |
|
|
No. of |
Syndicate |
Bankers |
|
| Year |
Projects |
Financing |
Equity |
|
|
| 1980-81* |
8 |
79.991 |
51.719 |
|
| 1981-82 |
16 |
121.733 |
101.712 |
|
| 1982-83 |
14 |
641.560 |
422.985 |
|
| 1983-84 |
30 |
568.379 |
435.971 |
|
| 1984-85 |
44 |
904.048 |
644.695 |
|
| 1985-86 |
45 |
926.502 |
652.306 |
|
| 1986-87 |
68 |
1856.696 |
1523.465 |
|
| 1987-88 |
79 |
2315.248 |
1887.866 |
|
| 1988-89 |
123 |
2733.983 |
2493.304 |
|
| 1989-90 |
228 |
5131.368 |
4940.228 |
|
| 1990-91 |
246 |
6247.499 |
6058.926 |
|
| 1991-92 |
321 |
7681.583 |
7382.035 |
|
| 1992-93 |
174 |
7798.926 |
6659.248 |
|
| 1993-94 |
140 |
6528.797 |
6318.512 |
|
| 1994-95 |
33 |
2095.197 |
1941.474 |
|
| 1995-96 |
38 |
616.037 |
499.544 |
|
| ---------- |
---------- |
---------- |
---------- |
|
| TOTAL |
1,607 |
46247.510 |
42013.446 |
|
| ---------- |
---------- |
---------- |
---------- |
|
|
|
|
|
| *
For 17 months |
|
|
| Notes: |
|
| 1.
Total Syndicate includes Bankers Equity |
|
| 2.
Projects means No. of proposals as distinct from No. of companies financed.
Also includes proposals for working capital financing. |
|
| 3.
Figures relating to previous years have been revised to account for revision
and reallocations in financing. |
|
|
| TABLE III |
|
| Sectoral
Distribution of Disbursements |
|
|
(Rs. in Million) |
|
|
|
1993-94 |
|
|
1994-95 |
|
|
|
|
|
|
Bankers |
|
Bankers |
|
|
| INDUSTRIAL
SECTOR |
|
Equity |
Total |
% |
Equity |
Total |
% |
|
|
| Food,
Tobacco & Beverages |
|
1,575.00 |
1,589.36 |
24.34 |
323.96 |
434.18 |
20.72 |
|
| Textiles |
|
2,591.64 |
2,694.16 |
41.27 |
629.01 |
660.37 |
31.52 |
|
| Leather
and Leather Products |
92.11 |
92.11 |
1.41 |
32.92 |
32.92 |
1.57 |
|
| Paper
and Pulp |
|
144,531 |
144.53 |
2.21 |
71.04 |
71.04 |
3.39 |
