Annual Report 2012 - Al Baraka Investment and Development

president & chief executiVe’s report
(continued)
Al BARAKA islAMiC BAnK B.s.C. BAhRAin (continued)
Al BARAKA BAnK (pAKistAn) liMited
Founded 2010
Pakistan’s GDP grew by a moderate 4.2% in 2012 compared with
2.4% in 2011. Nonetheless the economy continued to suffer, in
the wake of the floods of 2010 and the acute power shortages
which followed them. The large fiscal deficit stood at -6.6% of
GDP in the fiscal year to June 2012 and is anticipated to remain
around the same for 2012/13. Economic expansion remains an
uphill task, in light of structural imbalances and ongoing power
supply shortages. The current account deficit deteriorated yet
again in 2012, to an estimated -1.6% of GDP from -1.3% in
2011. The rate of inflation was estimated at 9.7%, similar to
the year before.
The State Bank of Pakistan continued its efforts to stimulate the
economy by once again reducing its discount rate steadily since
the beginning of the fiscal year 2012/13, reaching an aggregate
reduction of 2% by October.
Al Baraka Bank (Pakistan) Limited began life in 1991 when it
was established by Al Baraka Islamic Bank (Al Baraka Bahrain) as
a foreign bank under a commercial banking licence granted by
the State Bank of Pakistan. In 2009 Al Baraka Bahrain received
the approval of the State Bank of Pakistan for its Pakistan arm
to be licensed as a separate bank. In October 2010 Al Baraka
Bahrain acquired Emirates Global Islamic Bank, the resultant
new entity emerging as a subsidiary of Al Baraka Bahrain and
the second largest Islamic bank in Pakistan.
Al Baraka Bank Pakistan’s total assets declined in 2012 in US dollar
terms by 6% to $750 million due to the fall in the exchange rate
of the Pakistan Rupee over the period. The decline in assets was
44 Annual Report 2012
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reflected in a 4% reduction in total financings and investments,
which fell to $585 million, largely on account of a 20% decline
in Murabaha sales receivables. This in turn was reflected in a 5%
decline in customer deposits including equity of IAH.
As a consequence of the reduced Murabaha activity, total income
from joint financings and investments fell by 14% to $61 million.
The share of the IAH declined by 13% to $50 million and, after
accounting for this, the bank’s share including its share as Mudarib
was $11 million or 20% below that of 2011. Its combined income
from its own sales and investments, fees and commissions and
other operating income being 18% below that of the previous
year, the total operating income was 19% lower at $21 million.
Total operating expense was not dissimilar from 2011 at
$21 million, so that the net operating income was reduced to
$0.2 million which, after accounting for higher provisions but
a write back of taxation charge, resulted in a net loss for the
year of $6 million, compared with 2011’s net profit of $2 million.
The bank opened 5 new offices in 2012, expanding the total
network from 89 to 94 branches. This is in keeping with its
ambitious strategic plan, to establish a network of about 225
offices by 2017. New products added to the range included
the introduction of Tijarah – a short-term financing facility for
manufacturers whereby the bank purchases the finished goods
before they are sold to the ultimate buyer by the manufacturer
acting as agent for the bank. It enhanced its Sarparast savings
and investment plan to include Takaful life insurance and
introduced its Rahnuma travel service which provides complete,
Shari’a compliant Hajj and Umrah travel packages as well
as complete packages to select destinations such as Dubai,
Malaysia and Thailand.
(All figures in US Dollars unless otherwise stated)