KHALEEJI COMMERCIAL BANK BSC 30 September 2016 CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

Transcription

1 KHALEEJI COMMERCIAL BANK BSC 30 September 2016 CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION Commercial registration : (registered with Central Bank of Bahrain as a retail Islamic bank). Office : Bahrain Financial Harbour Harbour Tower East PO Box 60002, Manama, Kingdom of Bahrain Directors : Dr. Ahmed Khalil Al Mutawa, Chairman Abdulrahman Mohamed Jamsheer, Vice Chairman Abdulla Abdulkareem Showaiter Bashar Mohamed Al Mutawa Hisham Ahmed Al Rayes Khalid Rashid Al-Thani Mohammed Barrak Al-Mutair Mosobah Saif Al-Mutairy Tariq Qassim Fakhroo Chief Executive Officer : Khalil Ismaeel Al-Meer Company secretary : Mohammed Abdulla Saleh Reviewing Accountants : KPMG Fakhro, Bahrain

2 KHALEEJI COMMERCIAL BANK BSC CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION CONTENTS Page Independent auditors report on review of condensed consolidated interim financial information 1 Condensed consolidated interim financial information Condensed consolidated statement of financial position 2 Condensed consolidated income statement 3 Condensed consolidated statement of changes in equity 4-5 Condensed consolidated statement of cash flows 6 Condensed consolidated statement of changes in restricted investment accounts 7 Condensed consolidated statement of sources and uses of charity and zakah fund 8 Notes to the condensed consolidated interim financial information 9-17

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5 KHALEEJI COMMERCIAL BANK BSC 3 CONDENSED CONSOLIDATED INCOME STATEMENT BD 000's Note Nine months ended 30 September Three months ended 30 September (Reviewed) (Reviewed) (Reviewed) (Reviewed) Income from financing assets and assets acquired for leasing 19,223 16,004 6,508 5,547 Income from sukuk 2,090 2, Income from equity securities (4) (173) Income from placements with financial institutions Share of loss from associate - (57) - (57) Other income 2,303 2, Total income before return to investment account holders 24,422 22,390 7,791 6,987 Less: Return to investment account holders before Bank s share as Mudarib (12,184) (12,545) (3,996) (4,381) Bank s share as a Mudarib 6,909 6,968 2,161 2,522 Return to investment account holders (5,275) (5,577) (1,835) (1,859) Expense on placements from financial institutions, non-financial institutions and individuals (1,948) (1,750) (753) (567) Total income 17,199 15,063 5,203 4,561 Staff cost 5,141 4,470 1,585 1,428 Depreciation Other expenses 3,642 3,307 1,236 1,180 Total expenses 9,173 8,131 2,942 2,714 Profit before impairment allowances 8,026 6,932 2,261 1,847 Impairment allowances 12 (3,706) (847) (2,114) (167) PROFIT FOR THE PERIOD 4,320 6, ,680 Attributable to: Shareholders of the parent 4,576 6, ,920 Non-controlling interest (256) 48 (212) (240) 4,320 6, ,680 Earnings per share Basic earnings per share (fils) Diluted earnings per share (fils) The condensed consolidated interim financial information consists of pages 2 to 17.

6 KHALEEJI COMMERCIAL BANK BSC 4 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY BD 000's Equity attributable to shareholders of the parent 30 September 2016 (Reviewed) Share Capital Share premium Statutory reserve Treasury shares Employee share incentive scheme Investment fair value reserve Retained earnings Total Non- Controlling interest Total equity Balance at 1 January ,000-7,411 (8,136) (284) (86) 8, ,903 3, ,701 Changes in fair value of investment in equity securities Disposal of equity securities (236) - (236) - (236) Profit for the period ,576 4,576 (256) 4,320 Total recognised income and expense for the period ,576 4,662 (256) 4,406 Issue of bonus shares 5, (5,000) Transfer to statutory reserve (20) Net treasury shares - purchased (696) - - (696) - (696) Issue of shares under incentive scheme Tranfer to Zakah fund (6) (6) - (6) Balance at 30 September ,000-7,431 (8,832) (126) - 8, ,021 3, ,563 The condensed consolidated interim financial information consists of pages 2 to 17.

7 KHALEEJI COMMERCIAL BANK BSC 5 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Continued) BD 000's 30 September 2015 (Reviewed) Share Capital Share premium Equity attributable to shareholders of the parent Employee share Investment Statutory Treasury incentive fair value reserve shares scheme reserve Retained earnings Total Non- Controlling interest Total equity Balance at 1 January 2015 As reported previously 115,416 1,535 6,730 (6,351) - - (14,273) 103, ,057 Impact of consolidation ,791 2,838 Balance at 1 January (as restated) 115,416 1,535 6,730 (6,351) - - (14,226) 103,104 2, ,895 Changes in fair value of investment in equity securities - (314) - (314) - (314) Profit for the period ,037 6, ,085 Total recognised income and (314) 6,037 5, ,771 expense for the period - Capital reduction (15,416) (1,535) , Net treasury shares purchased (424) (424) - (424) Adjustment for shares forfeited Transfer to Zakah fund (19) (19) - (19) Adjustment for issue of shares under the incentive scheme (89) - (41) (130) - (130) Balance at 30 September ,000-6,730 (6,742) (89) (314) 8, ,287 2, ,126 The condensed consolidated interim financial information consists of pages 2 to 17.

8 KHALEEJI COMMERCIAL BANK BSC 6 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS BD 000's Note (Reviewed) (Reviewed) OPERATING ACTIVITIES (Disbursements) / receipts for financing assets, net (24,518) 1,163 Payment for asset acquired for leasing, net (24,628) (22,549) Income from short-term placements received Returns paid to investment account holders (5,650) (6,422) Receipts from investment account holders, net 16,153 52,092 Payment for expenses (10,536) (4,047) Other receipts 2,303 2,102 Payment for charity (36) (71) Net receipts in customers current accounts 1,864 13,209 Placements from financial institutions, net (15,588) (14,036) Placements from non-financial institutions and individuals, net 50,489 7,321 Net receipt in / (payment to) CBB reserve account 80 (2,566) Expense paid on placements (1,948) (1,750) Net cash (used in) / generated from operating activities (11,524) 24,857 INVESTING ACTIVITIES Purchase of sukuk (22,709) (65,952) Purchase of equity securities (84) (10,085) Proceed from redemption / sale of sukuk 22,361 29,713 Proceed from redemption / sale of equity securities 12, Proceed from disposal of investment property 3,088 - Income from sukuk received 2,792 2,127 Income from equity securities received (Purchase) / disposal of property and equipment (70) 120 Net cash generated from / (used in) investing activities 18,127 (42,930) FINANCING ACTIVITIES Purchase of treasury shares (696) (771) Receipt of advances to purchase treasury shares Net cash used in financing activities (556) (771) Net increase /(decrease) in cash and cash equivalents 6,047 (18,844) Cash and cash equivalents at beginning of the period 66,369 96,489 Cash and cash equivalents at the end of the period 72,416 77,645 Cash and cash equivalents comprise: Cash and bank balances (excluding CBB reserve) 23,529 28,776 Placement with financial institutions 48,887 48,869 The condensed consolidated interim financial information consists of pages 2 to ,416 77,645

9 KHALEEJI COMMERCIAL BANK BSC 7 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN RESTRICTED INVESTMENT ACCOUNTS 30 September 2016 (Reviewed) Balance at 1 January 2016 Movements during the period Balance at 30 September 2016 Average value Gross Bank's Adminstration Average No of per Investment / income Dividends fees as an value per units share Total (withdrawals) Revaluation BD paid agent expenses No of units share Total (000) BD BD 000's BD 000's BD 000's 000's BD 000's BD 000's BD 000's (000) BD BD 000's Safana Investment WLL (RIA 1) 8, ,313 (20) , ,293 Janayen Holding Limited (RIA 4) 48, ,500 (8,500) Shaden Real Estate Investment WLL (RIA 5) 3, ,728 (76) , ,652 Locata Corporation Pty Ltd (RIA 6) 2, , ,534 (8,596) , September 2015 (Reviewed) Balance at 1 January 2015 Movements during the period Balance at 30 September 2015 Average value Gross Bank's Adminstration Average No of per Investment / income Dividends fees as an value per units share Total (withdrawals) Revaluation BD paid agent expenses No of units share Total (000) BD BD 000's BD 000's BD 000's 000's BD 000's BD 000's BD 000's (000) BD BD 000's Safana Investment WLL (RIA 1) 8, , , ,313 Janayen Holding Limited (RIA 4) 48, , (94) 48, ,858 Shaden Real Estate Investment WLL (RIA 5) 8, ,100 (4,372) , ,728 Locata Corporation Pty Ltd (RIA 6) 2, , ,966 (4,372) (94) 17,892 The condensed consolidated interim financial information consists of pages 2 to 17.

10 KHALEEJI COMMERCIAL BANK BSC 8 CONDENSED CONSOLIDATED STATEMENT OF SOURCES AND USES OF CHARITY AND ZAKAH FUND BD 000's (Reviewed) (Reviewed) Sources of charity and zakah fund At 1 January Contribution by the bank 6 - Non-Islamic income Total sources Uses of charity and zakah fund Contributions to charitable organisations (36) (71) Total uses (36) (71) Undistributed charity and zakah fund at end of the period The condensed consolidated interim financial information consists of pages 2 to 17.

11 KHALEEJI COMMERCIAL BANK BSC 9 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 1 Reporting entity Khaleeji Commercial Bank BSC ( the Bank ), a public shareholding company, was incorporated on 24 November 2004 in the Kingdom of Bahrain under Commercial Registration No The Bank operates under an Islamic retail license granted by the Central Bank of Bahrain ( CBB ). The Bank is listed on the Bahrain Bourse. The interim financial information comprises financial information of the Bank and its subsidiaries (together the Group ). 2 Basis of preparation and presentation The condensed consolidated interim financial information has been prepared in accordance with Financial Accounting Standards ( FAS ) issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). In line with the requirement of AAOIFI and the CBB Rule Book, for matters that are not covered by AAOIFI standards, the Group uses guidance from the relevant International Financial Reporting Standards (IFRS). Accordingly, the condensed consolidated interim financial information has been presented in condensed form in accordance with the guidance provided by International Accounting Standard 34 Interim Financial Reporting. The condensed consolidated interim financial information does not include all of the information required for full annual financial statements and should be read in conjunction with the audited consolidated financial statements of the Bank for the year ended 31 December However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group s financial position and performance since the last annual consolidated financial statements as at and for the year ended 31 December Significant accounting policies The accounting policies and methods of computation applied by the Group in the preparation of the condensed consolidated interim financial information are the same as those used in the preparation of the audited financial statements for the period ended 31 December FAS 27 Investments Accounts FAS 27 Investments accounts was issued in December 2014 replacing FAS 5 Disclosures of Bases for Profit Allocation between Owner s Equity and Investment Account Holders and FAS 6 Equity of Investment Account Holders and their Equivalent. This standard is effective for financial periods beginning 1 January The adoption of this standard expanded the disclosures related to equity of Investment Account Holders. The standard had no significant impact on the condensed consolidated interim financial information of the Group. 4 Financial risk management The Group s financial risk management objectives and policies are consistent with those disclosed in the audited financial statements as at and for the year ended 31 December Estimates Preparation of condensed interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. The significant judgements made by management in applying the Group s accounting policies and the key sources of estimation uncertainty were same as applied to the consolidated financial statements as at and for the year ended 31 December 2015.

12 KHALEEJI COMMERCIAL BANK BSC 10 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 6 The condensed consolidated interim financial information is reviewed, not audited. The comparatives for the condensed consolidated statement of financial position have been extracted from the Group s audited consolidated financial statements for the year ended 31 December 2015 and comparatives for the condensed consolidated statements of income, changes in equity, cash flows, changes in restricted investment accounts and sources and uses of charity and zakah fund have been extracted from the Group s reviewed condensed consolidated interim financial information for the nine months ended 30 September The Bank does not have income of a seasonal nature. 8 Financing Assets 30 September December 2015 (Reviewed) (Audited) Murabaha 330, ,130 Musharaka 9,219 22,412 Wakala 34,833 31,717 Mudharaba 1,154 1,188 Istisna , ,482 Less: Impairment allowances specific (13,931) (10,284) Less: Impairment allowances collective (3,354) (3,484) 358, ,714 Murabaha financing receivables are net of deferred profits of BD 33,192 thousand (2015: BD 33,583 thousand). Of the total financing asset portfolio, consumer financing receivables amounted to BD 74,949 thousand (2015: BD 55,049 thousand). 9 Investment in Sukuk 30 September December 2015 (Reviewed) (Audited) Debt type instruments: - Unquoted sukuk (at amortised cost) 63,685 63,533 63,685 63,533

13 KHALEEJI COMMERCIAL BANK BSC 11 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 10 Investment in equity securities 30 September December 2015 (Reviewed) (Audited) Fair value through income statement: - Unquoted equity securities 15,148 15,148 Fair value through equity: - Unquoted equity securities* 43,759 49,099 - Listed equity securities - 3,554 58,907 67,801 * These investments are carried at cost less impairment in the absence of a reliable measure of fair value. 11 Bonus shares The shareholders in their extraordinary general meeting held on 15 March 2016 approved dividend in the form of bonus shares, 5 shares for every 100 shares held. 12 Impairment allowances (Reviewed) (Reviewed) Financing assets - specific provision, net 3, collective provision Investment in equity securities - write back of impairment allowance (264) - Investment in Sukuk - specific provision 197-3,

14 KHALEEJI COMMERCIAL BANK BSC 12 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 13 Significant related party transactions The significant related party transactions and balances included in this condensed consolidated interim financial information are as follows: 30 September 2016 Associates Key management personnel Significant shareholders / entities in which directors have an interest Assets under management (including special purpose entities) Total Assets Investment in equity securities - - 2,284 25,987 28,271 Investment in associates 2, ,605 Other assets ,008 Liabilities Placement from financial institutions and others Customers current accounts ,817 1,995 Equity of investment account holders , ,407 Nine month ended 30 September 2016 Associates Key management personnel Significant shareholders / entities in which directors have an interest Assets under management (including special purpose entities) Total Income Income from financing assets and assets acquired for leasing Expenses Returns to investment account holders Staff costs Other expenses

15 KHALEEJI COMMERCIAL BANK BSC 13 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 13 Significant related party transactions (continued) 30 September 2015 Associates Key management personnel Significant shareholders / entities in which directors have an interest Assets under management (including special purpose entities) Total Assets Financing assets ,853 4,187 Investment in equity securities - - 2,284 24,498 26,782 Investment in associates 2, ,548 Other assets ,216 2,333 Liabilities Customers current accounts ,967 2,249 Equity of investment account holders 110-1,510 8,390 10,010 Nine months ended 30 September 2015 Associates Key management personnel Significant shareholders / entities in which directors have an interest Assets under management (including special purpose entities) Total Income Income from financing assets and assets acquired for leasing Expenses Returns to investment account holders Staff costs Other expenses

16 KHALEEJI COMMERCIAL BANK BSC 14 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 14 Commitments and contingencies: 30 September 2016 (Reviewed) 31 December 2015 (Audited) Undrawn commitments to extend finance 83,202 60,994 Financial guarantees 20,296 19, Appropriations of net profit, if any, are made only after obtaining approval of the shareholders. 16 Assets under management The Bank provides corporate administration, investment management and advisory services to its investment entities, which involve the Group making decisions on behalf of such entities. Assets that are held in such capacity are not included in these consolidated financial statements. 30 September 2016 (Reviewed) 31 December 2015 (Audited) Restricted investment accounts 12,938 21,534 Other assets under management 171, , Segment information 30 September 2016 Investment Retail Unallocated Total (Reviewed) Banking Banking Segment revenue ,029-17,199 Segment results (237) 9,807 (5,250) 4,320 Segment assets 88, ,088 9, , September 2015 Investment Retail Unallocated Total (Reviewed) Banking Banking Segment revenue ,168-15,063 Segment results ,703 (4,766) 6,085 Segment assets 31, ,955 9, , Financial instruments Fair values Fair value is an amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm s length transaction. Underlying the definition of fair value is a presumption that an enterprise is a going concern without any intention or need to liquidate, curtail materially the scale of its operations or undertake a transaction on adverse terms.

17 KHALEEJI COMMERCIAL BANK BSC 15 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 18 Financial instruments (continued) (i) Financial instruments at fair value: The table below analyses the financial instruments carried at fair value, by valuation method. 30 September 2016 (Reviewed) Level 1 Level 2 Level 3 Total Investment in equity securities Equity type instruments carried at fair value through income statement ,148 15,148 Equity type instruments carried at fair value through equity ,148 15, December 2015 (Audited) Level 1 Level 2 Level 3 Total Investment in equity securities Equity type instruments carried at fair value through income statement ,148 15,148 Equity type instruments carried at fair value through equity 3, ,554 3,554-15,148 18,702 The following table analyses the movement in Level 3 financial assets during the quarter: 30 September 2016 (Reviewed) 31 December 2015 (Audited) At 1 January 15,148 15,148 Gains (losses) in income statement - - Purchases - - Settlements - - Transfers into (out) of Level ,148 15,148 During the nine month period ended 30 September 2016, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into or out of Level 3 fair value measurements.

18 KHALEEJI COMMERCIAL BANK BSC 16 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 18 Financial Instruments (continued) (ii) Financial Instruments not at fair value Set out below is a comparison of the carrying amounts and fair values of financial instruments: 30 September 2016 Carrying amount (Reviewed) Fair value (Reviewed) Financial assets: Financing assets 358, ,683 Investment in sukuk 63,685 63,685 Investment in equity securities (1) 15,148 15,148 Assets acquired for leasing 91,601 91,601 Lease rentals receivables 2,127 2, , ,244 Financial liabilities: Customers current accounts 67,712 67, December 2015 Carrying amount (Audited) 67,712 67,712 Fair value (Audited) Financial assets: Financing assets 318, ,714 Investment in sukuk 63,533 63,533 Investment in equity securities (1) 18,702 18,702 Assets acquired for leasing 67,811 67,811 Lease rentals receivables 1,289 1, , ,049 Financial liabilities: Customers current accounts 65,848 65,848 65,848 65,848 (1) Excludes investment securities carried at cost less impairment due to absence of reliable measure of fair value of BD 43,759 thousand (31 December 2015: BD 49,099 thousand). Valuation techniques Investment securities The Group measures the fair value of quoted investments using the market bid-prices in an active market for that instrument.

19 KHALEEJI COMMERCIAL BANK BSC 17 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 18 Financial Instruments (continued) Valuation techniques (continued) For certain unquoted investments, the Group uses proprietary models, which usually are developed from recognised valuation models for fair valuation. Some or all of the inputs into these models may not be market observable, but are estimated based on assumptions. Inputs to valuation techniques reasonably represent market expectations and measures of the risk-return factors inherent in the financial instrument. Valuation adjustments are recorded to allow for bid-ask spreads, liquidity risks, as well as other factors. Management believes that these valuation adjustments are necessary and appropriate to fairly state the values of these investments. The potential effect of using reasonable possible alternative assumptions for valuing the investments resulting in 5% decrease / increase in the market multiple would increase / decrease the reported fair value by BD 734 thousand. The corresponding impact would be on the profit or loss reported by the Group. Financing assets In case of financing assets and lease receivables, the average profit rate of the portfolio is in line with current market rates for similar facilities and hence after consideration of adjustment for prepayment risk and impairment charges it is expected that the current value would not be materially different to fair value of these assets. Other financial instruments Placements with financial institutions and placements from financial institutions are for short term tenure hence their carrying value is not different from the fair value. Placements from non-financial institutions and individuals which are not short term are re-priced at regular intervals hence carrying value reflects the fair value. Fair value of other financial assets and liabilities are not significantly different from their carrying values due to their short term nature.