Quarterly Report March 2018 (Un-audited)

Transcription

1 Quarterly Report March 2018 (Un-audited)

2 Quarterly Report March 2018 (Un-audited)

3 CONTENTS 04 Corporate Information 12 Condensed Interim Cash Flow Statement 05 Directors Review 13 Condensed Interim Statement of Changes in Equity 09 Condensed Interim Statement of Financial Position 14 Notes to the Condensed Interim Financial Information 10 Condensed Interim Profit & Loss Account 36 List of Branches 11 Condensed Interim Statement of Comprehensive Income

4 CORPORATE INFORMATION CHAIRMAN MR. ALAUDDIN FEERASTA CHIEF EXECUTIVE OFFICER MR. MOHAMMAD AFTAB MANZOOR DIRECTORS MR. NOORUDDIN FEERASTA MR. AMIN A. FEERASTA (EXECUTIVE DIRECTOR) MR. MUHAMMAD RASHID ZAHIR MR. MANZOOR AHMED (NIT NOMINEE) MR. INAM ELAHI MR. JAMIL HASSAN HAMDANI CHIEF FINANCIAL OFFICER MR. MIRZA ZAFAR BAIG COMPANY SECRETARY MR. MUHAMMAD ALTAF BUTT LEGAL ADVISORS MANAN ASSOCIATES, ADVOCATES REGISTERED OFFICE RUPALI HOUSE , UPPER MALL SCHEME, ANAND ROAD, LAHORE CENTRAL OFFICE 10TH FLOOR, PNSC BUILDING, M.T. KHAN ROAD, KARACHI REGISTRAR AND SHARE TRANSFER AGENT THK ASSOCIATES (PRIVATE) LTD., 1ST FLOOR, 40-C, BLOCK-6, P.E.C.H.S., KARACHI UAN: (021) FAX: (021) AUDITORS A.F. FERGUSON & CO. CHARTERED ACCOUNTANTS SHARI AH BOARD MUFTI EHSAN WAQUAR AHMAD (CHAIRMAN) MUFTI MUHAMMAD ZAHID (RESIDENT MEMBER) MUFTI BILAL AHMED QAZI (MEMBER)

5 Soneri Bank Limited Quarterly Report DIRECTORS REVIEW On behalf of the Board of Directors, we are pleased to present the Directors Review of Soneri Bank Limited ( the Bank ) along with the un-audited condensed interim financial statements for the quarter ended 31 March Economy Pakistan s economy is poised to grow by 5.80 percent in CPI inflation has remained moderate during January-February FY18, averaging 4.1 percent mainly because of subdued food prices and lower than anticipated increase in house rents. High growth and low inflation has been accompanied by a higher current account deficit. Along with a high fiscal deficit, this could affect medium-term stability of the economy. The agriculture sector performed better due to exceptional growth in cotton ginning and better performance of crops. The sector grew at a pace of 3.81 percent this year, against target of 3.5 percent. Production of major crops saw 3.6 percent growth against the target of 2 percent. The minor crops also grew by 3.33 percent against contraction in the last year. Heavy taxation and blockage of tax refunds affected the performance of Industrial sector. Against a target of 7.3 percent, the output in the industrial sector stood at 5.8 percent. The output of large-scale manufacturing stood at 6.2 percent, which was below the official target while small-scale manufacturing grew to 6.1 percent, also below the target. The services sector, which accounts for more than half of the economy, grew by 6.43 percent, slightly above the target. The wholesale and retail trade posted 7.5 percent growth against a target of 7.2 percent. Transport, storage and communication sub sector saw 3.6 percent growth and fell short of the 5.1 percent target. Finance and insurance witnessed 6.1 percent growth against a target of 9.5 percent. The housing services saw a growth of 4 percent and the general government services 11.4 percent against the target of 7 percent. Although the full impact of recent exchange rate depreciation is yet to unfold, financing of the high current account deficit is challenging as the healthy growth in FDI and official inflows were insufficient to finance it completely. Consequently, SBP s foreign exchange reserves declined to USD billion as of 30 March Going forward, the Government s plan to timely mobilize external inflows, both official and commercial, will play a pivotal role in maintaining adequate level of SBP s foreign exchange reserves and anchoring sentiments in the FX markets. By the end of fiscal year , private investment has been projected to fall to the lowest level in five years, despite the China-Pakistan Economic Corridor. In addition, the national savings to Gross Domestic Product (GDP) ratio also fell to a ten-year low. Failure to achieve these two crucial targets has limited the government s ability to spend on deteriorating infrastructure and social sectors. Operating Results and Business Overview The summarized operating results of the Bank for the quarter ended 31 March 2018 along with key financial indicators are as follows: Profit & Loss Account 31 March March 2017 Variance % (Rs. in 000) Net markup income 1,735,684 1,609, Non markup income 875,930 1,179,978 (25.77) Non markup expenses 1,806,492 1,697, Profit before tax 1,015, , Profit after tax 660, , Earnings per share - Rupee Statement of Financial Position 31 March December 2017 Variance % (Rs. in 000) Shareholders equity (excluding surplus) 16,326,787 16,441,710 (0.70) Deposits 215,187, ,348,454 (5.35) Advances - net 161,603, ,292,915 (1.64) Investments - net 94,970, ,428,516 (19.12)

6 DIRECTORS REVIEW The Bank posted profit before tax of Rs. 1, million and profit after tax of Rs million for the quarter ended 31 March These amounts are higher than the corresponding period last year by percent and percent respectively. Earnings per share of the Bank thus stood at Re which is also percent higher than corresponding period of Net mark-up income of the Bank registered a healthy increase of 7.84 percent during the first quarter of 2018 when compared with the corresponding period of last year. This depicts continuous efforts by the management to improve the spreads by enhancing the earning assets portfolio and reducing the cost of deposits. Non mark-up income decreased by percent versus first quarter of 2017 owing primarily to lower non-recurring capital gains; however notable growth has been delivered in fee, dividend and exchange earnings growing by percent, percent and percent respectively. Non mark-up expenses increased by 6.45 percent as compared to corresponding period last year. One factor mainly responsible for the increase in these expenses was larger branch network which presently stood at 290 fully-operational branches as against 282 branches in March Through prudent management of non-performing loans, the Bank was able to recover higher amounts from the nonperforming portfolio which resulted in reversal of provision to the tune of Rs million as against a charge of Rs million in the corresponding period last year. It is pertinent to mention here that the overall Coverage Ratio of your Bank also increased from percent at the end of December 2017 to percent at the end of March Your Bank s net assets (including surplus) amounted to Rs billion as at 31 March 2018, being 1.48 percent lower than 2017 base of Rs billion. This was due to appropriation of 2017 final cash dividend during the quarter. Deposits declined by 5.35 percent during the period closing at Rs billion (December 2017: Rs billion) depicting the management s strategy to shed high cost deposit to reduce the cost of deposits and improve on spreads. Net Advances also declined marginally by 1.64 percent standing at Rs billion (December 2017: Rs billion). Your Bank continues to operate with adequate liquidity and capital adequacy levels and maintains reputable standing with international financial institutions. We are confident that with effective risk management, strong internal controls and compliance systems the Bank will remain satisfactorily compliant with all the regulatory requirements. We would also like to highlight that your Bank is on track to transform its Core banking system planned for migration in the second quarter of 2018 enabling the Bank to derive further efficiencies and modernization. Credit Rating The Pakistan Credit Rating Agency (PACRA) maintained the long term credit rating of AA- (Double A Minus) and short term rating of A1+ (A One Plus) with Stable Outlook through its notification dated: 15 December 2017 [2016: long term AA- (Double A Minus): short term A1+ (A One Plus)] PACRA has also maintained credit rating of unsecured, subordinated and listed Term Finance Certificates (TFC 2) issue of worth PKR 3,000 million at A+ (Single A plus) with Stable Outlook vide its notification dated: 15 December Acknowledgment We would like to take this opportunity to thank the State Bank of Pakistan, the Securities and Exchange Commission of Pakistan and the Ministry of Finance for their continued support and guidance. We are also thankful to our valued customers for their patronage and confidence and want to extend our appreciation to the Bank employees as the driving force in the growth of the Bank over the years. On behalf of the Board of Directors MOHAMMAD AFTAB MANZOOR President & Chief Executive Officer ALAUDDIN FEERASTA Chairman Karachi: 20 April 2018

7 Soneri Bank Limited Quarterly Report (25.77) ,609,525 1,179,978 1,697, , , ,735, ,930 1,806,492 1,015, , (0.70) (5.35) (1.64) (19.12) 16,441, ,348, ,292, ,428,516 16,326, ,187, ,603,237 94,970,941

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9 Soneri Bank Limited Quarterly Report CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2018 (Un-audited) (Audited) Note 31 March 31 December (Rupees in 000) ASSETS Cash and balances with treasury banks 7 19,492,133 19,431,256 Balances with other banks 8 884,195 1,151,015 Lendings to financial and other institutions 9 8,046,546 6,544,152 Investments - net 10 94,970, ,428,516 Advances - net ,603, ,292,915 Operating fixed assets 12 6,577,740 6,581,465 Deferred tax assets - net - - Other assets - net 5,751,878 6,704, ,326, ,133,976 LIABILITIES Bills payable 4,679,282 4,895,447 Borrowings 13 51,058,968 64,584,236 Deposits and other accounts ,187, ,348,454 Sub-ordinated loans 15 2,997,000 2,997,600 Liabilities against assets subject to finance lease - - Deferred tax liabilities - net 844, ,711 Other liabilities 4,327,543 2,867, ,095, ,629,377 NET ASSETS 18,231,237 18,504,599 REPRESENTED BY Share capital 11,024,636 11,024,636 Reserves 1,884,496 1,752,494 Unappropriated profit 3,417,655 3,664,580 16,326,787 16,441,710 Surplus on revaluation of assets - net of tax 1,904,450 2,062,889 18,231,237 18,504,599 CONTINGENCIES AND COMMITMENTS 16 The annexed notes 1 to 26 form an integral part of this condensed interim financial information. Mirza Zafar Baig Chief Financial Officer Alauddin Feerasta Chairman Mohammad Aftab Manzoor President & Chief Executive Officer Manzoor Ahmed Director Nooruddin Feerasta Director

10 CONDENSED INTERIM PROFIT AND LOSS ACCOUNT (UN-AUDITED) FOR THE QUARTER ENDED 31 MARCH 2018 Note (Rupees in 000) Mark-up / return / interest earned 4,657,512 4,256,620 Mark-up / return / interest expensed 2,921,828 2,647,095 Net mark-up / return / interest income 1,735,684 1,609,525 (Reversal of provision ) / provision against loans and advances - net 11.3 (210,681) 176,142 Provision for diminution in the value of investments - - Bad debts written off directly-net - 12 (210,681) 176,154 Net mark-up / return / interest income after provisions 1,946,365 1,433,371 Non mark-up / interest income Fee, commission and brokerage income 410, ,673 Dividend income 47,197 39,434 Income from dealing in foreign currencies-net ,242 66,150 Unrealised gain / (loss) on revaluation of investments classified as held-for-trading-net 402 (5,052) Gain on sale of securities - net 243, ,963 Other income 8,682 7,810 Total non mark-up / interest income 875,930 1,179,978 2,822,295 2,613,349 Non mark-up / interest expenses Administrative expenses 1,783,687 1,673,964 Provision against other assets - net - - Other charges 22,805 23,055 Total non mark-up / interest expenses 1,806,492 1,697,019 1,015, ,330 Extraordinary / unusual items - - Profit before taxation 1,015, ,330 Taxation - Current 389, ,206 - Prior year Deferred (33,600) (39,499) 355, ,707 Profit after taxation 660, , (Rupee) Earnings per share - basic and diluted The annexed notes 1 to 26 form an integral part of this condensed interim financial information. Mirza Zafar Baig Chief Financial Officer Alauddin Feerasta Chairman Mohammad Aftab Manzoor President & Chief Executive Officer Manzoor Ahmed Director Nooruddin Feerasta Director

11 AS AT 31 MARCH 2018 Soneri Bank Limited Quarterly Report CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME (UN-AUDITED) Note (Rupees in 000) Profit after taxation for the period 660, ,623 Other comprehensive income Items that will not be reclassified to profit and loss account Components of comprehensive income reflected in equity - Remeasurement of defined benefit plan Tax on remeasurements of defined benefit plan Comprehensive income transferred to equity 660, ,623 Items that may be reclassified subsequently to profit and loss account Components of comprehensive income not reflected in equity Net change in value of available-for-sale securities (163,907) (450,753) Net deferred tax asset on changes in value of available-for-sale securities 57, ,763 (i) (106,540) (292,990) Surplus on revaluation of operating fixed assets - - Total comprehensive income 553, ,633 (i) Surplus / (deficit) on revaluation of available-for-sale securities-net of tax has been shown in the Statement of Comprehensive Income in order to comply with the revised Prudential Regulations for Corporate / Commercial Banking issued by the State Bank of Pakistan. The annexed notes 1 to 26 form an integral part of this condensed interim financial information. Mirza Zafar Baig Chief Financial Officer Alauddin Feerasta Chairman Mohammad Aftab Manzoor President & Chief Executive Officer Manzoor Ahmed Director Nooruddin Feerasta Director

12 CONDENSED INTERIM CASH FLOW STATEMENT (UN-AUDITED) FOR THE QUARTER ENDED 31 MARCH 2018 Note CASH FLOWS FROM OPERATING ACTIVITIES (Rupees in 000) Profit before taxation 1,015, ,330 Less: Dividend income (47,197) (39,434) 968, ,896 Adjustments for non-cash and other items: Depreciation on operating fixed assets 185, ,691 Depreciation on ijarah assets 24,841 22,639 Amortisation of intangible assets 22,710 30,037 Operating fixed assets written off directly - 2,026 (Reversal of provison) / provision against non-performing loans and advances - net (210,681) 176,142 Unrealised (gain) / loss on revaluation of investments classified as held-for-trading-net (402) 5,052 Gain on sale of fixed assets (4,272) (2,860) Bad debts written off directly , , ,941 1,253,635 (Increase) / decrease in operating assets Lendings to financial and other institutions (1,502,394) (7,284,627) Held-for-trading securities 10,497,451 (2,089,197) Advances-net 2,875,518 (7,489,048) Others assets (excluding advance taxation) 1,524, ,666 13,395,265 (15,994,206) Increase / (decrease) in operating liabilities Bills payable (216,165) (309,819) Borrowings (13,860,899) 8,632,482 Deposits and other accounts (12,160,559) 6,359,287 Other liabilities 1,459, ,490 (24,778,009) 15,294,440 (10,396,803) 553,869 Income tax paid (946,260) (261,505) Net cash (used in) / generated from operating activities (11,343,063) 292,364 CASH FLOWS FROM INVESTING ACTIVITIES Net investments in available-for-sale securities 11,417,123 (1,405,106) Net investments in held-to-maturity securities 379,496 (148,297) Dividends received 32,155 21,128 Purchase of operating fixed assets (including intangible assets) (205,030) (196,047) Sales proceeds on disposal of operating fixed assets 5,193 3,032 Net cash generated from / (used in) investing activities 11,628,937 (1,725,290) CASH FLOWS FROM FINANCING ACTIVITIES Sub-ordinated loans (600) (600) Dividend paid (826,848) (1,378,079) Net cash used in financing activities (827,448) (1,378,679) Decrease in cash and cash equivalents (541,574) (2,811,605) Cash and cash equivalents at the beginning of the period 20,305,022 18,963,729 Cash and cash equivalents at the end of the period 19,763,448 16,152,124 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD Cash and balances with treasury banks 7 19,492,133 15,453,429 Balances with other banks 8 884,195 1,001,781 Overdrawn nostro accounts 14 (612,880) (303,086) 19,763,448 16,152,124 The annexed notes 1 to 26 form an integral part of this condensed interim financial information. Mirza Zafar Baig Chief Financial Officer Alauddin Feerasta Chairman Mohammad Aftab Manzoor President & Chief Executive Officer Manzoor Ahmed Director Nooruddin Feerasta Director

13 FOR THE QUARTER ENDED 31 MARCH 2018 Soneri Bank Limited Quarterly Report CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY (UN-AUDITED) Particulars Share capital Discount on issue of shares Capital reserves Share premium Statutory reserve (a) General reserve Unappropriated profit (b) Total (Rupees in 000) Balance as at 1 January ,024, ,423,829-3,496,305 15,944,770 Changes in equity for quarter ended 31 March 2017 Transactions with owners recognised directly in equity Final cash dividend for the year ended 31 December 2016 at Rs per share (1,378,079) (1,378,079) Profit after tax for quarter ended 31 March , ,623 Transfer from surplus on revaluation of fixed assets to unappropriated profit - net of tax ,658 26,658 Transfer from unappropriated profit to statutory reserve ,125 - (119,125) - Balance as at 31 March ,024, ,542,954-2,621,382 15,188,972 Changes in equity for the nine months ended 31 December 2017 Profit after tax for nine months ended 31 December ,047,703 1,047,703 Other comprehensive income for the period - Remeasurement of defined benefit plan ,229 9,229 - Tax on remeasurement of defined benefit plan (3,230) (3,230) ,999 5,999 Transfer from surplus on revaluation of fixed assets to unappropriated profit - net of tax , ,036 Transfer from unappropriated profit to statutory reserve ,540 - (209,540) - Balance as at 31 December 2017 (audited) 11,024, ,752,494-3,664,580 16,441,710 Changes in equity for quarter ended 31 March 2018 Transactions with owners recognised directly in equity Final cash dividend for the year ended 31 December (826,848) (826,848) at Re per share Profit after tax for quarter ended 31 March , ,012 Transfer from surplus on revaluation of fixed assets to unappropriated profit - net of tax ,913 51,913 Transfer from unappropriated profit to statutory reserve ,002 - (132,002) - Balance as at 31 March ,024, ,884,496-3,417,655 16,326,787 (a) This represents reserve created under section 21 (i) (a) of the Banking Companies Ordinance, (b) As more fully explained in note 11.4 of this condensed interim financial information, unappropriated profit includes an amount of Rs million net of tax as at 31 March 2018 (31 December 2017: Rs million) representing additional profit arising from availing forced sale value benefit for determining provisioning requirement which is not available for the purpose of distribution of dividend to shareholders. The annexed notes 1 to 26 form an integral part of this condensed interim financial information. Mirza Zafar Baig Chief Financial Officer Alauddin Feerasta Chairman Mohammad Aftab Manzoor President & Chief Executive Officer Manzoor Ahmed Director Nooruddin Feerasta Director

14 NOTES TO AND FORMING PART OF THE CONDENSED INTERIM FINANCIAL INFORMATION (UN-AUDITED) FOR THE QUARTER ENDED 31 MARCH STATUS AND NATURE OF BUSINESS Soneri Bank Limited ( the Bank ) was incorporated in Pakistan on 28 September 1991 as a public limited company under the repealed Companies Ordinance, 1984 (now Companies Act, 2017). Its registered office is situated at Rupali House , Upper Mall Scheme, Anand Road, Lahore, Punjab and its shares are quoted on Pakistan Stock Exchange Limited. The Bank is engaged in banking services as described in the Banking Companies Ordinance, 1962 and operates with 290 branches including 19 Islamic banking branches (2017: 290 branches including 19 Islamic banking branches) in Pakistan. Based on the financial statements of the Bank for the year ended 31 December 2016 the Pakistan Credit Rating Agency Limited (PACRA) has maintained the Bank s long-term rating as AA- (31 December 2015: AA-) and short-term rating as A1+ (31 December 2015: A1+). 2 BASIS OF PRESENTATION 2.1 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 forms of trade-related modes of financing include 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 financial statements as such but are restricted to the amount of facility actually utilised and appropriate portion of mark-up thereon. 2.2 The results of the Islamic banking branches have been consolidated in this condensed interim financial information for reporting purposes after eliminating material inter branch transactions and balances. In accordance with the directives issued by the SBP, the un-audited condensed interim statement of financial position of Islamic banking branches is disclosed in note 22 of this condensed interim financial information. 3 STATEMENT OF COMPLIANCE 3.1 This condensed interim financial information has been prepared in accordance with the accounting and reporting standard as applicable in Pakistan for interim financial reporting. The accounting and reporting standards as applicable in Pakistan for interim financial reporting 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 Act, 2017, provisions of and the directives issued under the Companies Act, 2017, the Banking Companies Ordinance, 1962, and the directives issued by the Securities and Exchange Commission of Pakistan (SECP) and the State Bank of Pakistan (SBP). Wherever the requirements of provisions and directives issued under the Companies Act, 2017, the Banking Companies Ordinance, 1962, the IFASs notified under the Companies Act, 2017 and the directives issued by the SECP and the SBP differ from the requirements of the IFRSs, the provisions and the directives issued under the Companies Act, 2017, the Banking Companies Ordinance, 1962, IFASs notified under the Companies Act, 2017 and the directives issued by SECP and SBP prevail. 3.2 The SBP 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 No. 10 dated: 26 August 2002 till further instructions. In addition, the Securities and Exchange Commission of Pakistan has deferred the applicability of International Financial Reporting Standard 7, Financial Instruments: Disclosures (IFRS 7) vide SRO 411(I) / 2008 dated: 28 April 2008 till further orders. Accordingly, the requirements of these standards have not been considered in the preparation of these financial statements. However, investments have been classified and valued in accordance with the requirements prescribed by SBP through various circulars. 3.3 The SBP vide its BSD Circular No. 07 dated: 20 April 2010 has clarified that for the purpose of preparation of financial statements in accordance with International Accounting Standard - 1 (Revised), Presentation of Financial Statements, two statement approach shall be adopted i.e. separate Profit and Loss Account and Statement of Comprehensive Income shall be presented, and Balance Sheet shall be renamed as Statement of Financial Position. Furthermore, the surplus / deficit on revaluation of available for sale (AFS) securities shall be included in the Statement of Comprehensive Income. However, it should continue to be shown separately in the Statement of Financial Position below equity. Accordingly, the above requirements have been adopted in the preparation of these financial statements.

15 Soneri Bank Limited Quarterly Report The SBP vide its BPRD Circular No. 04 dated: 25 February 2015 has clarified that the reporting requirements of IFAS-3 for Islamic Banking Institutions (IBIs) relating to annual, half yearly and quarterly financial statements would be notified by SBP through issuance of specific instructions and uniform disclosure formats in consultation with IBIs. These reporting requirements have not been ratified to date. Accordingly, the disclosures requirements under IFAS 3 have not been considered in these financial statements. 3.5 The disclosures made in this condensed interim financial information have been limited based on the format prescribed by the State Bank of Pakistan through BSD Circular Letter No. 2 dated 12 May 2004 and the requirements of the International Accounting Standard 34, Interim Financial Reporting. This do not include all of the information required for the full set of annual financial statements and should be read in conjunction with the financial statements of the Bank for the year ended 31 December BASIS OF MEASUREMENT 4.1 Accounting convention This condensed interim financial information has been prepared under the historical cost convention, except that certain fixed assets are carried at revalued amounts, certain investments and commitments in respect of certain forward exchange contracts been marked to market and are carried at fair value. In addition, obligation in respect of staff retirement benefits is carried at present value. 4.2 Functional and presentation currency Items included in this condensed interim financial information are measured using the currency of the primary economic environment in which the Bank operates. This condensed interim financial information is presented in Pakistani Rupees, which is the Bank s functional and presentation currency. 4.3 Critical accounting estimates and assumptions The basis and the methods used for critical accounting estimates and judgements adopted in this condensed interim financial information are the same as those applied in the preparation of the annual financial statements of the Bank for the year ended 31 December SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies and the methods of computation used in the preparation of this condensed interim financial information are the same as those applied in the preparation of the annual financial statements of the Bank for the year ended 31 December 2017 except for the treatment of surplus/(deficit) on account of revaluation of Operating Fixed Assets due to the adoption of the Companies Act, 2017 as described below: With effect from 1 January 2018 the new Companies Act, 2017 is applicable on all companies. This Act does not prescribe any specific treatment for accounting of surplus/(deficit) on account of revaluation of Operating Fixed Assets previously being accounted for under sections 235 of the repealed Companies Ordinance, 1984 ( the repealed Ordinance ). Therefore, the accounting for surplus/(deficit) would be governed through International Accounting Standard 16 Property, Plant and Equipment. As per the standard, deficit on revaluation can only be offset against previously recognized surplus against the same asset. Previously, under the repealed Ordinance this deficit was allowed to be set-off against the surplus of another asset in the same category of operating fixed assets. Accordingly, any deficit on a particular fixed asset against which there is no previously recognized surplus, such deficit would be charged to the Profit and Loss Account. As this is a change in accounting policy, the change is to be applied retrospectively as per the International Accounting Standard 8 Accounting Policies, Changes in Accounting Estimates and Errors. The above explained change in accounting policy does not have any material effect on this condensed interim financial information and hence the amounts have not been restated. Furthermore, as per the requirements prescribed in IAS-16, the surplus on operating fixed assets is to be disclosed as part of equity. However, SBP through BSD Circular Letter No. 2 dated: 12 May 2004 has prescribed a format for the interim financial reporting of banks which requires the surplus/(deficit) on operating fixed assets to be disclosed in a separate account below equity i.e. surplus/(deficit) on revaluation of assetsnet of tax. Therefore, Bank has followed the presentation format as applicable to banks in Pakistan and disclosed the surplus on operating fixed assets in a separate head below equity.

16 6 FINANCIAL RISK MANAGEMENT The Bank s Financial Risk Management objectives and policies are consistent with those disclosed in the annual financial statements of the Bank for the year ended 31 December CASH AND BALANCES WITH TREASURY BANKS (Un-audited) (Audited) 31 March 31 December (Rupees in 000) In hand Local currency 3,656,688 3,766,397 Foreign currencies 1,726,701 1,458,786 In transit Local currency 6,800 1,420 Foreign currencies 564, ,298 With State Bank of Pakistan in Local currency current account 10,333,995 10,548,538 Foreign currency current account 615, ,452 Foreign currency deposit account against foreign currency deposits mobilised 1,711,363 1,623,784 With National Bank of Pakistan in Local currency current account 876,582 1,202,581 19,492,133 19,431,256 8 BALANCES WITH OTHER BANKS In Pakistan In current accounts 12,116 12,115 In deposit accounts 186, ,419 Outside Pakistan In current accounts 685, , ,195 1,151,015 9 LENDINGS TO FINANCIAL AND OTHER INSTITUTIONS Repurchase agreement lendings 2,487, ,507 Letters of placement 3,950,000 3,950,000 Bai Muajjal 1,608,645 1,608,645 8,046,546 6,544,152

17 Soneri Bank Limited Quarterly Report INVESTMENTS-Net 10.1 Investments by types Note (Un-audited) (Audited) 31 March December 2017 Held by Given as Held by Given as Total Bank collateral Bank collateral Total (Rupees in Held-for-trading securities ,681-27,681 10,525,132-10,525,132 Available-for-sale securities ,742,897 19,661,145 91,404,042 65,330,875 37,490, ,821,165 Held-to-maturity securities ,600,185-3,600,185 3,979,681-3,979,681 Total investments at cost 75,370,763 19,661,145 95,031,908 79,835,688 37,490, ,325,978 Provision for diminution in the value of investments 10.8 (117,452) - (117,452) (117,452) - (117,452) Total investments - net of provision 75,253,311 19,661,145 94,914,456 79,718,236 37,490, ,208,526 Surplus on revaluation of held-for-trading securities Surplus / (deficit) on revaluation of available-for-sale securities 56,280 (231) 56, ,338 21, ,956 Total investments at market value 75,310,027 19,660,914 94,970,941 79,916,608 37,511, ,428, Held-for-trading securities Fully paid-up ordinary shares 27,681-27, Market Treasury Bills ,525,132-10,525,132 27,681-27,681 10,525,132-10,525, Available-for-sale securities Market Treasury Bills 35,095,925 19,661,145 54,757,070 26,987,270 15,381,391 42,368,661 Pakistan Investment Bonds 27,435,492-27,435,492 30,034,160 22,108,899 52,143,059 Government of Pakistan - Ijarah Sukuk 2,006,770-2,006,770 2,009,104-2,009,104 Commercial papers 232, , , ,877 Sukkuk certificates 2,044,167-2,044,167 1,892,857-1,892,857 Term Finance Certificates 250, , , ,000 Fully paid-up ordinary shares 4,438,470-4,438,470 3,689,607-3,689,607 Units of mutual funds 240, , , ,000 71,742,897 19,661,145 91,404,042 65,330,875 37,490, ,821, Held-to-maturity securities Pakistan Investment Bonds 3,330,085-3,330,085 3,337,333-3,337,333 Term Finance Certificates 34,459-34,459 34,459-34,459 Sukkuk certificates 235, , , ,889 3,600,185-3,600,185 3,979,681-3,979,681

18 10.5 Investments by segment (Un-audited) (Audited) Note 31 March 31 December (Rupees in 000) Federal Government Securities - Market Treasury Bills 54,757,070 52,893,793 - Pakistan Investment Bonds ,765,577 55,480,392 - Government of Pakistan Ijara Sukuk 2,006,770 2,009,104 87,529, ,383,289 Fully paid-up ordinary shares - Listed companies 4,449,351 3,672,807 - Unlisted companies ,800 16,800 4,466,151 3,689,607 Units of mutual funds - Open ended 240, ,000 Term Finance, Sukuk Certificates and Commercial Papers - Listed Term Finance Certificates 16,269 16,269 - Unlisted Term Finance Certificates 268, ,190 - Sukuk certificates 2,279,808 2,500,746 - Commercial papers 232, ,877 2,796,340 3,013,082 Total investments at cost 95,031, ,325,978 Provision for diminution in the value of investments 10.8 (117,452) (117,452) Total investments - net of provisions 94,914, ,208,526 Surplus on revaluation of held-for-trading securities Surplus on revaluation of available-for-sale securities 56, ,956 Total investments at market value 94,970, ,428, This includes securities having book value of Rs million (31 December 2017: Rs million) pledged with the State Bank of Pakistan and National Bank of Pakistan to facilitate T. T. discounting facility for the branches of the Bank This includes shares of ISE Towers REIT Management Company Limited, formerly Islamabad Stock Exchange Limited (ISEL), acquired in pursuance of corporatization and demutualization of ISEL as a public company limited by shares Particulars of provision for diminution in the value of investments (Un-audited) (Audited) 31 March 31 December (Rupees in 000) Opening balance 117, ,284 Charge for the period / year - 3,168 Closing balance 117, ,452

19 Soneri Bank Limited Quarterly Report ADVANCES-Net (Un-audited) (Audited) 31 March 31 December Note (Rupees in 000) Loans, cash credits, running finances, etc. In Pakistan 161,148, ,955,815 Bills discounted and purchased (excluding government treasury bills) - Payable in Pakistan 1,727,639 2,136,425 - Payable outside Pakistan 5,455,025 4,569,514 7,182,664 6,705,939 Assets held under Ijarah (IFAS-2) , ,549 Advance against islamic financings ,135, ,127 Advances - gross 169,834, ,772,430 Provision for non-performing advances - specific 11.3 (8,190,685) (8,440,840) Provision against consumer & small enterprises loans - general 11.3 (40,994) (38,675) Advances - net of provision 161,603, ,292, Advance against islamic financings - Murabaha 322, ,473 - Car ijarah 96,693 67,176 - Salam 716, ,478 1,135, , Asset held under Ijarah (IFAS-2) Motor vehicles 349, ,230 Plant and machinery 19,263 23, , , Advances include Rs. 9, million (31 December 2017: Rs. 10, million) which have been placed under non-performing status as detailed below: 31 March 2018 (Un-audited) Category of Classified advances Provision required Provision held classification Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total (Rupees in 000) Other Assets Especially Mentioned * 76,638-76, Substandard 101, ,684 20,177-20,177 20,177-20,177 Doubtful 454, , , , , ,853 Loss 9,038,724-9,038,724 7,993,690-7,993,690 7,993,690-7,993,690 9,671,366-9,671,366 8,190,685-8,190,685 8,190,685-8,190,685

20 31 December 2017 (Audited) Category of Classified advances Provision required Provision held classification Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total (Rupees in 000) Other Assets Especially Mentioned * 20,595-20, Substandard 193, ,956 24,557-24,557 24,557-24,557 Doubtful 592, , , , , ,746 Loss 9,437,726-9,437,726 8,159,126-8,159,126 8,159,126-8,159,126 10,244,669-10,244,669 8,440,840-8,440,840 8,440,840-8,440,840 * The Other Assets Especially Mentioned category pertains to agriculture finance,small enterprise finance and consumer finance amounting to Rs million (31 December 2017: Rs million), Rs million (31 December 2017: Rs million) and Rs million (31 December 2017: NIL) respectively Particulars of provision against non-performing loans and advances (Un-audited) (Audited) 31 March December 2017 General General Specific Consumer Small enterprises Total Specific Consumer Small enterprises Total (Rupees in 000) Opening balance 8,440,840 38,675-8,479,515 8,395,931 29,340 22,000 8,447,271 Charge for the period / year 215,904 2, , ,168 9, ,503 Reversals made during the period / year (428,904) - - (428,904) (695,256) - (22,000) (717,256) (213,000) 2,319 - (210,681) 75,912 9,335 (22,000) 63,247 Transfers , ,972 Amounts written off (37,155) - - (37,155) (56,975) - - (56,975) Closing balance 8,190,685 40,994-8,231,679 8,440,840 38,675-8,479, The general provision against consumer financing is required to be maintained at varying percentages based on the non-performing loan ratio present in the portfolio. These percentages range from 1% to 2.5% for secured and 4% to 7% for unsecured portfolio The Bank has maintained general provision against housing finance portfolio at the rate of 0.50% of the performing portfolio. The State Bank of Pakistan vide its circular No. 9 of 2017 dated: 22 December 2017 abolished the requirement of maintaining general reserve of 1% against secured Small Enterprise (SE) portfolio, while general reserve to be maintained against unsecured SE portfolio has been reduced from 2% to 1%. Currently, the Bank does not have any unsecured SE portfolio The Bank has availed the benefit of forced sales value of pledged stocks, mortgaged residential and commercial properties held as collateral against non-performing advances as allowed under the prudential regulations issued by the State Bank of Pakistan. Had the benefit not been taken by the Bank, the specific provision against non-performing advances would have been higher by Rs.1, million (31 December 2017: Rs. 1, million). The additional profit arising from availing this benefit - net of tax amounts to Rs million (31 December 2017: Rs million). This profit is not available for distribution either as cash or stock dividend to shareholders and bonus to employees The SBP has granted relaxation in provisioning requirements in respect of exposures in Dewan Mushtaq Group (DMG). Had this relaxation not been available, provision against loans and advances would have been higher by Rs million (2017: Rs million) The Bank has made provision against its non-performing portfolio as per the category of classification of the loans, however, the Bank still holds enforceable collateral realisable through litigation. These securities comprise of charge against various tangible assets of the borrower including land, building and machinery, stock in trade, etc.

21 Soneri Bank Limited Quarterly Report OPERATING FIXED ASSETS (Un-audited) (Audited) 31 March 31 December (Rupees in 000) Capital work-in-progress 534, ,895 Property and equipments Land - Freehold 1,255,970 1,255,970 - Leasehold 349, ,047 Building on - Freehold land 135, ,468 - Leasehold land 2,347,233 2,435,569 Leasehold improvements 997,585 1,001,209 Furniture and fixtures 194, ,738 Electrical, office and computers equipments 599, ,631 Vehicles 68,329 72,151 Intangible assets 95, ,787 6,577,740 6,581, The cost of additions made during the period was as follows: (Un-audited) (Un-audited) 31 March 31 March (Rupees in 000) Freehold land - - Building on - Freehold land Leasehold land 2, Leasehold improvements 12,730 25,618 Furniture and fixtures 4,338 8,174 Electrical, office and computers equipments 66,753 87,400 Vehicles 3,873 1,827 Intangibles 1,515 26,778 92, , The written down values of fixed assets disposed of / deleted during the period were as follows: Freehold land - - Building on - Freehold land Leasehold land - - Leasehold improvements - 1,832 Furniture and fixtures Electrical, office and computers equipments Vehicles ,198

22 (Un-audited) (Audited) 31 March 31 December BORROWINGS (Rupees in 000) Secured Borrowings from the State Bank of Pakistan - Under export refinance scheme 10,017,133 10,348,288 - Long-term financing facility (LTFF) for plant and machinery 1,099, ,524 - Modernisation of SME - rice husking 10,200 11,600 - Repurchase agreement borrowings - 35,035,335 Repurchase agreement borrowings - other banks 19,646,851 2,474,983 Borrowings from other financial institutions - Foreign 2,483,248 2,865,974 Borrowings from other financial institutions - Local 17,089,477 9,999,058 50,346,088 61,733,762 Unsecured Call borrowings 100,000 2,573,225 Overdrawn nostro accounts 612, ,249 51,058,968 64,584, DEPOSITS AND OTHER ACCOUNTS Customers Remunerative Fixed deposits 56,574,073 62,623,863 Savings deposits 84,247,483 84,278,761 Current accounts 592, ,198 Non-remunerative Current accounts 56,231,613 59,358,597 Call deposits 433, ,435 Margin deposits 4,437,656 3,378, ,516, ,686,214 Financial institutions Remunerative deposits 12,246,598 16,298,322 Non-remunerative current deposits 424, ,918 12,671,183 16,662, Particulars of deposits and other accounts 215,187, ,348,454 In local currency 203,709, ,459,536 In foreign currencies 11,478,856 10,888, ,187, ,348, SUB-ORDINATED LOANS Unsecured (Non-Participatory) -Listed Term Finance Certificates 2,997,000 2,997,600

23 Soneri Bank Limited Quarterly Report This denotes rated, listed and unsecured Term Finance Certificates (TFCs) issued as instrument of redeemable capital with a tenor of 8 years. The Pakistan Credit Rating Agency Limited (PACRA) has assigned a credit rating of A+ to the instrument as on 15 December The instrument is sub-ordinated as to the payment of principal and profit to all other indebtedness of the Bank (including deposits) and is not redeemable before maturity without prior approval of the State Bank of Pakistan. Principal is redeemable semi-annually in such a way that 0.30% of the principal will be redeemed in the first 90 months and the remaining principal of 99.70% at maturity at the end of the 96th month in July Mark-up is payable semi-annually in arrears calculated on a 365 days period on the outstanding principal amount and is chargeable at a floating rate of six months KIBOR (prevailing immediately preceding the date before the start of each six month period) plus 1.35% per annum (subject to no floor and cap). The TFCs contains a lock-in clause which stipulates that neither interest nor principal may be paid (even at maturity) if such payments will result in shortfall in the Bank s Minimum Capital Requirement (MCR) or Capital Adequacy Requirement (CAR) or increase any existing shortfall in MCR and CAR. The instrument will be subject to loss absorbency and / or any other requirements under SBP s Basel III Capital Rules. Upon the occurrence of a Point of Non-Viability event as defined by SBP s Basel III Capital Rule, SBP may at its option, fully and permanently convert the TFCs into common shares of the Bank and / or have them immediately written off (either partially or in full). Number of shares to be issued to TFC Holders at the time of conversion will be equal to the Outstanding Face Value of the TFC divided by market value per share of the Bank s common equity on the date of trigger of the non-viability event as declared by SBP, subject to the cap of 225,000,000 shares. 16 CONTINGENCIES AND COMMITMENTS (Un-audited) (Audited) 31 March 31 December (Rupees in 000) Direct credit substitutes Financial guarantees issued favouring: - Government 1,619,920 1,549,322 - Others 749,256 1,062,235 2,369,176 2,611, Transaction-related contingent liabilities Guarantees issued favouring: - Government 7,693,889 6,704,027 - Financial institutions 407, ,043 - Others 3,409,947 5,276,430 11,511,179 12,447, Trade-related contingent liabilities Letters of credit 23,487,834 20,567,881 Acceptances 3,222,242 3,126, Commitments in respect of purchase of fixed assets 664, , Commitments in respect of forward lendings Commitments to extend credits 9,213,492 10,654,182 The Bank has certain other commitments to extend credit that represent revocable commitments which do not attract any significant penalty or expense in case the facility is withdrawn unilaterally.

24 16.6 Commitments in respect of forward exchange contracts (Un-audited) (Audited) 31 March 31 December (Rupees in 000) Purchase - From other banks 24,483,170 30,295,305 - From customers 2,369,195 2,643,340 Sale - To other banks 22,191,076 28,212,490 - To customers 636, ,488 The maturities of the above contracts are spread over a period of one year Other contingencies Taxation a) The Income tax returns of the Bank have been filed upto tax year 2017 (accounting year ended 31 December 2016). The Income tax authorities have amended assessment orders for tax years 2011, 2014, 2015 and 2016 and created an additional tax demands of Rs million which have been fully paid as required under the law. The Bank has filed appeals before the various appellate forums against these amendments. Assessments from Tax Year upto Tax Year 2010 have been decided at the level of Appellate Tribunal Inland Revenue. The department has filed tax references in respect of certain matters with the Honourable Lahore High Court which are currently pending. In case of any adverse decision an additional tax liability of Rs million (which includes impact of certain timing differences as well)] may arise. Further, assessments for tax years 2012 and 2013 have been decided at the level of Commissioner Inland Revenue (Appeals). The department has filed appeals with Appellate Tribunal Inland Revenue which are currently pending. In case of any adverse decision an additional tax liability of Rs million (which include impact of certain timing differences as well)] may arise. However, the management is confident that these matters will be ultimately decided in favor of the Bank and the Bank may not be exposed to any additional tax liability on these account. b) Tax Authorities have passed orders for tax years 2008 to 2012 levying Federal Excise Duty on certain items. The Bank has filed appeals against these assessments which are pending before various appellate forums. The aggregate net amount involved is Rs million. The management of the Bank is confident that the appeals will be decided in the favor of the Bank. c) Tax Authorities have passed order for tax years 2014 and 2015 under section 161/205 of the Income Tax Ordinance 2001, creating a demand of Rs million and Rs million respectively for non-deduction of tax at source. Against the said demands, the Bank has already filed appeals before the Commissioner Inland Revenue (Appeals), which are currently pending Claims against the Bank not acknowledged as debts amounted to Rs million (31 December 2017: Rs million) The Assistant Commissioner, Inland Revenue vide orders under section 182/140 of the Income Tax Ordinance, 2001 and under section 19 (6) of the Federal Excise Act, 2005 has levied penalties, against staff of the Bank amounting to Rs. 30 million and Rs million respectively. The action taken by the Bank in these cases were backed by legal opinion of the customer s lawyer / stay order of the Islamabad High Court. Currently, the matter is pending before Commissioner Inland Revenue (Appeals) subsequent to appeal filed by the staff. In case of any adverse decision in appeals, the Bank reserves the right of recourse on customers for re-imbursement A penalty of Rs. 50 million has been imposed by the Competition Commission of Pakistan ( the Commission ) on the Bank on account of uncompetitive behaviour and imposing uniform cost on cash withdrawal from ATM transactions. The Bank along with other banks had filed a constitutional petition before the Competition Appellate Tribunal which has set aside the order of the Commission. Against the said order of the Competition Appellate Tribunal, the Commission has filed an appeal before the Supreme Court of Pakistan, the hearing of which is currently pending.