Financial Statements - United Bank Limited

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NOTES TO AND FORMING PART OF THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012 44.2.5 Geographical segment analysis 2012 Profit before taxation Total assets employed Net assets employed Contingencies and commitments ---------------------------------------- (Rupees in '000) ---------------------------------------- Pakistan operations 23,424,408 691,365,103 60,490,817 373,701,299 Middle East 3,401,778 213,579,340 28,462,965 139,676,024 United States of America 184,364 3,782,679 1,850,136 3,832 Karachi Export Processing Zone 18,377 696,218 359,908 127,326 3,604,519 218,058,237 30,673,009 139,807,182 27,028,927 909,423,340 91,163,826 513,508,481 2011 Profit before taxation Total assets employed Net assets employed Contingencies and commitments ---------------------------------------- (Rupees in '000) ---------------------------------------- Pakistan operations 21,392,145 625,357,250 54,271,871 410,039,278 Middle East 2,618,024 152,250,045 22,976,014 121,309,333 United States of America 183,781 4,042,572 1,596,319 3,705 Karachi Export Processing Zone 28,841 1,518,215 308,704 136,162 2,830,646 157,810,832 24,881,037 121,449,200 24,222,791 783,168,082 79,152,908 531,488,478 24,222,791 778,059,741 79,152,908 Total assets employed include intra group items of Rs.15,024.688 million (2011: Rs.5,108.341 million). 44.3 Market Risk Market risk is the risk that the Bank may experience due to movements in market prices. It results from changes in interest rates, exchange rates and equity prices as well as the correlations between them. Each of these components of market risk include a general market risk and a specific aspect of market risk that originates in the portfolio structure of a bank. Measuring and controlling market risk is usually carried out at the portfolio level. However, certain controls are applied, where necessary, to individual risk types, to particular books and to specific exposures. Controls are also applied to prevent any undue risk concentrations in trading books, taking into account variations in price, volatility, market depth and liquidity. These controls also include limits on exposure to individual market risk variables as well as on concentrations of tenors, issuers etc. Trading activities are centered in the Treasury and Capital Markets Group to facilitate clients as well as run proprietary positions. The Bank is active in the cash and derivative markets for equity, interest rate and foreign exchange. The Market and Treasury Risk division performs market risk management activities. Within this division, the Market Risk Management unit is responsible for the development and review of market risk policies and processes, and is involved in research, financial modeling and testing / implementation of risk management systems, while Treasury Middle Office is responsible for implementation and monitoring of market risk and other policies, escalation of any deviation to senior management, and MIS reporting. The scope of market risk management is as follows: - - To keep the market risk exposure within the Bank’s risk appetite as assigned by the BoD and the BRMC. To develop, review and upgrade procedures for the effective implementation of market risk management policies approved by the BoD and BRMC. 49
NOTES TO AND FORMING PART OF THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012 - - To review new product proposals and propose / recommend / approve procedures for the management of their market risk. Various limits are assigned to different businesses on a product/portfolio basis. The products are approved through product programs, where risks are identified and limits and parameters are set. Any transactions / products falling outside these product programs are approved through separate transaction / product memos. To maintain a comprehensive database for performing risk analysis, stress testing and scenario analysis. Stress testing activities are performed on a quarterly basis on both the Banking and Trading books. 44.3.1 Foreign Exchange Risk 2012 Assets Liabilities Off - balance sheet items Net currency exposure ----------------------------- (Rupees in '000) ----------------------------- Pakistan Rupee 707,653,601 600,836,773 (16,752,154) 90,064,674 US Dollar 74,957,934 58,019,573 (16,581,683) 356,678 Pound Sterling 2,784,651 10,582,621 7,745,156 (52,814) Japanese Yen 28,985 8,641 (55,545) (35,201) Euro 2,370,763 5,803,173 3,414,984 (17,426) UAE Dirham 65,799,339 80,477,565 14,074,639 (603,587) Bahraini Dinar 10,596,389 16,424,191 5,828,363 561 Qatari Riyal 10,103,904 11,665,772 2,622,384 1,060,516 Other Currencies 20,103,086 19,416,517 (296,144) 390,425 894,398,652 803,234,826 - 91,163,826 Pakistan Rupee 606,852,073 518,985,310 (5,730,401) 82,136,362 US Dollar 63,231,377 43,904,874 (21,335,735) (2,009,232) Pound Sterling 2,630,855 10,811,280 7,953,477 (226,948) Japanese Yen 57,624 9,086 (44,050) 4,488 Euro 1,561,980 5,244,854 3,497,165 (185,709) UAE Dirham 68,550,969 83,187,074 9,218,891 (5,417,214) Bahraini Dinar 9,313,278 12,733,254 3,956,376 536,400 Qatari Riyal 12,798,773 13,011,881 2,383,686 2,170,578 Other Currencies 13,062,812 11,019,220 100,591 2,144,183 778,059,741 698,906,833 - 79,152,908 - Foreign Exchange Risk is the risk that the Bank is exposed to due to changes in exchange rates. Limits are used to monitor exposure in individual currencies and also on an overall basis to ensure compliance with the SBP’s Foreign Exchange Exposure Limit. The Bank's reporting currency is the Pakistan Rupee, but its assets, liabilities, income and expenses are denominated in different currencies. From time to time, the Treasury and Capital Markets Group proactively hedges foreign currency exposures, in accordance with SBP regulations and subject to pre-defined limits. 44.3.2 Equity position risk 2011 Assets Liabilities Off - balance Net currency sheet items exposure ----------------------------- (Rupees in '000) ----------------------------- The Bank is an active participant in the cash and derivatives markets for currencies and carries currency risk from these trading activities, conducted primarily by the Treasury and Capital Markets Group. These trading exposures are subject to monitoring through prescribed stress tests and sensitivity analysis. Equity position risk arises due to changes in the prices of individual stocks or levels of equity indices. The Bank’s equity book comprises of held for trading (HFT) and available for sale (AFS) portfolios. The objective of the HFT portfolio is to make short-term capital gains, whilst the AFS portfolio is maintained with a medium-term view of both capital gains and dividend income. Product program manuals have been developed to provide guidelines on the objectives and policies, risks and mitigants, limits and controls for the equity portfolios of the Bank. 50
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United Bank Limited UNCONSOLIDATED
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U N I T E D B A N K L I M I T E D i
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U N I T E D B A N K L I M I T E D B
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U N I T E D B A N K L I M I T E D n
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U N I T E D B A N K L I M I T E D
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U N I T E D B A N K L I M I T E D A
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U N I T E D B A N K L I M I T E D d
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U N I T E D B A N K L I M I T E D T
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BOO EBRAHIM a: CO. CHARTERED ACCOUN
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U N I T E D B A N K L I M I T E D m
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BOO EBRAHIM ft CO. CHARTERED ACCOUN
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UNCONSOLIDATED STATEMENT OF FINANCI
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Page 87 and 88: Annexure 'A' as referred to in note
Page 95 and 96: Sr. No. 1 Commercial Reprsentation
Page 97 and 98: Sr. No. Annexure 'B' as referred to
Page 111 and 112: Disposals of operating fixed assets
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