reprt soneri.docx

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Capital Adequacy:

Managing Capital

Capital Management aims to ensure that there is sufcient capital to meet the capitalrequirements o the Bank as determined by the underlying business strategy and theminimum requirements o the SBP. The capital management process is governed by theBoard o Bank Management Committee Mancom!. "n addition# capital adequacy andmanagement is overseen by the $isk Management Committee o the Board B$MC! andStrategic Planning and %versight Committee &'P!.

Bank's capital management seeks to:

( To comply )ith the capital requirements set by regulators and comparable to peers

( &ctively manage the supply o capital costs and speed up capital

( To increase the strategic and tactical *e+ibility in deploying capital to allo) timelyreallocation o capital

( To improve the liquidity o the Bank,s assets or optimum deployment o the Bank,sresources

Statutory minimum capital requirement and management of capital:

The State Bank o Pakistan through its BS- Circular o. /0 dated 12 &pril 3//4 required th

the minimum paid up capital net o losses! or Banks to be raised to $s. 1/ billion by theyear ended 51 -ecember 3/15. The raise )as to be achieved in a phased manner requirin$s. 1/ billion paid up capital net o losses! by the end o the 6nancial year 3/15. The paidup capital net o losses! o the Bank or the year ended 51 -ecember 3/15 stood at $s.1/#/35.302 million. "n addition banks are also required to maintain a minimum Capital&dequacy $atio C&$! o 1/ percent o the risk )eighted e+posure o the Bank as at 51-ecember 3/15. The Bank7sC&$ as at 51 -ecember 3/15 )as 1/.42 percent o its risk )eighted e+posure.

The capital o the Bank is managed keeping in vie) the minimum 8Capital &dequacy $atirequired by the SBP through BP$- Circular o. /:; dated 12 &ugust 3/15. The adequacy the capital is tested )ith reerence to the risk<)eighted assets o the Bank.

Capital adequacy of Soneri Bank: Capital adequacy ratio or the year 2013 is 10!"and or the year 3/13 )as 123$#

C&$ = '>?"T@ A1//

$"S D'"ET'- &SS'T



C&$ 3/15 =

1/.42F

C&$ 3/13 =

13.50F

C&$ 3/11 =

13.:GF

C&$ 3/1/ =

13.:1F

%&planation:

Capital adequacy is very strong Soneri bank can say that the company is able to meet yourequirement very )ell. The total capital o Soneri Bank or the year 3/15

$s.13#055#GG2#/// )here it )as in 3/13 $s.11#354#H4H#///. 11#4/1#G:/#///I<. ence the

is an increase in the total capital by 15.3F. -emonstrating that can absorb losses )itho

bank needed to cease trading and real po)er o equity share holder here is aimed

increasing the po)er o bank in terms o losses that occur.



ro(ta)ility *atio 2013:ro(ta)ility *atio is 1"303!"000+,-"030"000:031#

*./AB *A. 2012:

1$220"4000+,-,,30,000:03""#

*./ A/%* A5 :11M.6

*./ A/%* A5 2012:

Corporate: Trading and sales: Retail banking:

6ote: Muqaddass please recheck these ration " think this is not accurate.. ahad hayat plJ

check the yello) highlighted thinks )ith muqadass.



ASS%S 78A:

Soneri Bank Kimited is evaluated encompassing ollo)ing consideration.

ro9ision against nonperforming loans and ad9ances and de)t securitieclassi(ed as in9estments

The Bank revie)s its loan portolio and debt securities classi6ed as investments to asseamount o non<perorming loans and advances and debt securities and provision requirethere<against. Dhile assessing this requirement various actors including the delinquency the account# 6nancial position o the borro)er# the orced sale value o the securities anthe requirements o the Prudential $egulations are considered. Lor portolio provision oconsumer advances# the Bank ollo)s# the general provision requirement set out Prudential $egulations. These provisions change due to Changes in requirements.

The Bank has a Special &sset Management Eroup S&ME!# )hich is responsible management o nonperorming loans.S&ME undertakes restructuring I rescheduling o problem loans# as )ell as litigation bocivil and criminal or collection o debt.

Lor the non<perorming loan portolio# the Bank makes a speci6c provision based on aassessment o the credit impairment o each loan. &t the end o 3/15# the speci6provisioning rate )as :H.3/F o the non<perorming loan portolio.

The accounting policies and methods used to determine speci6c and general provision agiven in to this 6nancial Summary page 53. The movement in speci6c and gene

provision held is given in to 6nancial statements.



6on erforming oans: on<perorming loans o the bank increased by mere 2 percent

during the year. The asset quality o the bank has improved )ith inection ratio do)n to 4.4

percent 3/13; 11.43 percent!. The PK coverage has been prudently managed and

increased to :H.GH percent in 3/15 N 3/13; :G.0: percent!.

1/.G -uring the current year# the Bank decided to avail additional LSO bene6t under BS-

circular o./1 dated 31 %ctober 3/11. Such bene6t is availed on case to case basis# basedon the risk assessment policies o the Bank. This resulted in reduction o provision against

nonperorming loans and advances by $s. H2.113 million.ad the bene6t o LSO not availed

by the Bank# the speci6c provision against non<perorming advances ta+ )ould have been

higher by appro+imately $s. 1#435.005 million as at 51 -ecember 3/15 and advances net

o provision! )ould have been lo)er by same amount. Lurther the net o ta+ pro6t#

amounted to $s. 1#32/.G23 million arising rom availing the bene6t o orced sale value is

not available or distribution amongst the shareholders either in the orm o cash or stock

dividend.



Credit *isk:

Credit risk# the potential deault o one or more debtors# is the largest source o risk or thBank. The Bank is e+posed to credit risk through its lending and investment activities. ThBank7s credit risk unction is divided into Corporate and Linancial "nstitutions $isCommercial and $etail $isk# and Consumer $isk. The unctions operate )ithin an integraterame)ork o credit policies# guidelines and processes. The credit risk managemeactivities are governed by the Credit $isk Lrame)ork o the Bank that de6nes the respectivroles and responsibilities# the

Credit risk management principles and the Bank7s credit risk strategy. Lurther Credit $iManagement is supported by a detailed Credit Policy and Procedural Manual.

Core capitalor ier 1 capital; Core capital or the year 3/15 is 13#33H#H44#/// and or

the year 3/13 its 11#354#H4H#///.ence there is an increase o H.04 F.

ier 2; Tier 3 capital or the year 3/15 is 2G#G3#25#///I< and or the year 3/13 its

::#12#:3#///I< . There is a decrease by 1$ # as per previous 6nancial year

&s per the chart# Soneri bank is lending in diversi6ed industries.

De can have a look rom the above menntioned acts that in year 3/15 Te+tile industry )a

more pro6table or Soneri bank )ith the gross advancement o 33#5:0#//4 )hich

contributing 31.GGF &dvance Eross!.



Contigency lia)ility; Contigentcy liabilities hace a share o $s.12#153#433#///I< as

maintained by Soneri Bank.

roportion of Bank ending:



n9estment policy:

"nvestment polices are bein changes on yearly basis and according to the economic

conditions o the country.Based uopn that policies are made )ith certain ammendments.

Credit Conectration:

Credit concentration head has a total o 31#GG3#///I< )ith the highest sum o unded

outstanding unded in enery sector )hich is )ith the due amount o $s.52#G:#/// and

makes a percentage o 1:.2GF



7uality of o; Balance s<eet tems:

The above representation is giving a clear vie) o Bank7s o balance sheet items )ith the

highest share o agriculture and orestry sector and "nsurance is at the lo)est )ith the valu

o /.//

Classi(cation of in9estments:



?nder SBP7s directives# equity investment may be classi6ed as 8eld Lor Trading LT!8&vailable or Sale &LS!9 or 8"nvestment in Subsidiaries and &ssociates9. Some o the equiinvestments are listed and traded in public through stock e+changes# )hile oth

investments are unlisted.• These are o t)o types loans;

SubQective;&ging system; returns should be made by 4/ days.&ll depends upon the nature o customer and can be changed accordingly.!

Credit *isk *ating:



The $ating System provides solid grounds or the assessment and measurement o creditrisk against each obligor in addition to ul6l regulatory requirements. The Bank has revisedand updated its Corporate# Small 'nterprises N Medium 'nterprises# and &griculture Linanc%bligor $isk $ating %$$! in the year 3/15 as per the requirement o Basel "" or adopting

Loundation "nternal $ating Based &pproach L"$B! using S&S 'nterprise Miner )hich havebeen approved by the B%-. The Bank also has B%- approved# Lacility $isk $ating SystemL$$! or its Corporate# $etail and Consumer clients. %$$ assigns risk grades to customersin accordance )ith the regulatory requirement# in t)elve 13! grades# out o )hich top nine4! grades reer to regular customers )hereas remaining three 5! grades pertain todeaulted ones. Dhereas# L$$ assigns each loan acility in si+ :! categories# in accordance)ith regulatory requirements. Business ?nits assign credit risk rating to every customer anloan acility as an integral part o the Bank,s credit approval process.



The above table is sho)ing rating as per Soneri Bank #starting rom &&& )hich are )ith

lo)est Credit risk and -'L are the deaulters.

The cumulative realiJed gain arose o $s. 1#3:0.H30 million 3/11; 05H.1H/ million! rosale o equity securities I certi6cates o mutual unds and units o open end mutual undho)ever unrealiJed gain o 2#/05.313 million 3/11; $s. 3#343.GH4 million! )as recogniJein the statement o 6nancial position in respect o 8&LS9 securities.

8nder =riting Agreement:

There is no such ?nder qriting agreement by Soneri Bank.

nside rading: Soneri Bank has a strict and rigid policy to avoid any problem as being an

employee i you )ant to take advantage by purchasing more number o share ater hearing

some inormation



Management 7uality >MA6C.M?:

De can evaluate management quality o Soneri Bank Kimited on the basis ollo)iconsideration.

SA%M%6 .6 6%*6A C.6*.S: The Board o -irectors ackno)ledge its responsibility or ensuring that an adequate aneective internal control system covering all aspects o our banking operations is e+istence and vigorously ollo)ed by senior management. Based on our revie) o interncontrol system through various reports rom "nternal &udit -ivision# "nternal ContCompliance N Control Eroup and Statutory &uditors as )ell as various policies# procedureand other matters presented or our revie) and approval# rom time to time# )e observe

that adequate internal controls have been implemented# monitored and controlled.

Banking Services is entrusted )ith the responsibility o e+pediting recti6cation irregularities and control lapses in branches7 operations and various controlling ofcpointed out through audit revie)s. Oigorous eorts are made by Business Services improve the Control 'nvironment at grass root level by continuous revie) Nstreamlining procedures to prevent N rectiy control lapses as )ell as imparting training at various leve

The Compliance ensures adherence to the regulatory requirements and Bank7s internpolicies and procedures )ith speci6c emphasis on @CI&MK.

Dith the policies or procedures may deteriorate. o)ever# control activities are ongoinprocess that includes identi6cation# evaluation and management o signi6cant risks ace

by the Bank.$ecogniJing the same# the Management o &llied Bank has adopted an internationaaccepted C%S% "ntegrated Lrame)ork<1443# in accordance )ith the guidelines on "nternControls rom

The State Bank o Pakistan and has completed all stages o "nternal Control%ver Linanc$eporting "CL$!. "n addition# Bank has ormulated comprehensive guidelines or adherencto C%S% rame)ork on continuing basis.

Statement of compliance:

These unconsolidated 6nancial statements have been prepared in accordance )iapproved accounting standards as applicable in Pakistan. &pproved &ccounting Standard

comprise o such "nternational Linancial $eporting Standards "L$Ss! issued byt"nternational &ccounting Standards Board "&SB! as are noti6ed under the Compani%rdinance# 14HG# provisions o and directives issued under the Banking Compani%rdinance# 14:3# the Companies %rdinance# 14HG and the directives issue dby SBP. "n casrequirements o provisions and directives issued under the Banking companies %rdinanc14:3# Companies %rdinance# 14HG and the directives issued by State Bank o Pakistan dirom requirements o "L$Ss# the provisions o and directives issued under the BankiCompanies %rdinance# 14:3# the Companies %rdinance# 14HG and the directives issued bSBP shall prevail.



ec<nical Competency:

Soneri Bank devotes considerable resources in managing the risks to )hich it is e+pose

The momentum attained thus ar )ill be continued in the uture through signi6cainvestments in human resources# technology and training.

%arning Capacity:

'arning are evalutaed on the ollo)ing criteria

ro9isioning @ ro(ta)ility Accuracy:

Soneri Bank maintained its strategic ocus o increasing the shareholders7 value and

maintained healthy pro6tability despite operating under an increasing tough business

environment and managing all these challenges on a proactive basis. The Pro6t Beore Ta+

and &ter Ta+ during 3/15 rose by 31.1:F and 12.3F# respectively over the et Mark<up I

"nterest earned increased by $s. G#H2/#5/2 million over 3/13 to $s. G#HGG#/5G million#

attributable mainly to higher deployment o unds to)ards dividend bearing investment

activities. Consequently# on Mark<up I "nterest "ncome increased by $s. 3#5H/#G31 million

over 3/13 to $s. 1#H2:#453 million.

-espite tough competitive environment and slo) pace o business activities# the

management is endeavoring to urther optimiJe the contribution o ee and commission in

the overall income o Soneri Bank in coming years through leveraging strong technology

platorm and oering ne) innovative products and services to satisy customers7 needs.

@our Bank7s &dministrative '+penses increased by 1/.2F to $s. G#450#HG1 million. The rise

is broadly in line )ith the in*ationary trends prevailing during the year# increasing outlays

on inrastructure strengthening# technological upgradation and rising utility costs. The

provisions against advances and investments reduced by $s. 3#25H million to $s :2/ millio

during 3/13 compared to the previous year# attributable to active monitoring to curb the

gro)th in on<Perorming Koans PKs! and consistent recovery eorts against PKs. The

provision coverage against advances stood strong at H:F at end<-ec 3/13. o bene6t o

LSO has been taken )hile determining the provision against PKs also in 3/13 as allo)ed

under BS- Circular o. /3 o 3/1/ dated une /5# 3/1/.



The provisions are sho)ing a clear picture that year 3/15 has achieved more pro6t as

compare to year 3/13.

/unded and non funded income:

&ll unds are non unded items because i bank commits rom other bank or the payment

o lended amount and lenders ails to repay then Bank has to repay on due time. So still

under the heads o Bank.ence in case o non payment it becomes unded.non unded are

those items )hich could be returned to the Bank.

ie of performance:

Soneri bank made a pro6t beore ta+ o $s. 1#25/#542I< million during 3/15 compared to $

1#033#/2:I< million in 3/13# an variance o <11.15F. Pro6t ater ta+ or the year decarese b

<:.1/F to $s.1#/5:#H20 less than $s.1#1/G#145 million in the corresponding year.

&s a result# the 'PS rom SBK bank decreased to $s. /.4GI< in 3/15 compared to $s.1.//I< in

3/13. -espite difcult environment# $%& and $%' o your bank business remained virtually

the same level as last year and stood at /.:5F and H.0/F respectively.

*eturn on assets or year 3/13 )as /.0: F )hile return on assets or the year 3/15 is/.:5F

*eturn on equity or 3/13 )as 1/.3GF )here $eturn on equity or 3/15 is H.0F.The resu

is sho)ing decline.



Soneri bank deposits increased to $s. 1G/#2H/ billion at -ecember 51# 3/15 compared to

$s. 13/#241 billion as o -ecember 3/13# Eross advances gro)th o 2.10F. Eross

investments increased to $s. G:#0/5 million at -ecember 51# 3/15# an -ecrease o <33F

over $s. 24#:0H millions at -ecember 51# 3/13.

heet siJe o SBK bank balance recorded a gro)th o 33.2F to $s. :51#412#/// at -ecembe

51# 3/13. The Core quity result rose 1G.11F to $s. G3#43H#/// at -ecember 51# 3/13

compared to $s. 50.:3/ million at -ecember 51# 3/11. et Mark<up I margin in 3/13

decreased by 30.1F rom 3/11 to $s. 1H.5:1 million# mainly attributable to increased

utiliJation o unds to investment activities bearing dividends. This is also re*ected in the

gro)th o a 4H.2F increase in price I "nterest "ncome not $s. 15#04G#/// in 3/13 compared

to $s. :#42/ million in 3/11.

&dministrative e+penses increased by 1/.2F to $s. 1G#2G:#/// in 3/13 compared to $s.

15#1::#/// in 3/11.

The provision o loans# investments and loans to 6nancial intermediaries ell by 0H.GF to $

:21 million in 3/13 compared to $s. 5.//4 million in 3/11. The coverage provisions agains

loan no permanent remained at H2.4F at -ecember 51# 3/13. o bene6t o LSO )as taken

)hile determining the provision or oreign loans mora than allo)ed by BS- Circular o. /3

o 3/1/ dated une 5# 3/1/.



iquidity:

-ay to day unding# is managed by Treasury -ivision through net cash *o)s rom payment

systems# resh deposits mobiliJed by branches# maturing money market deposits etc.The

Bank maintains a portolio o highly marketable assets viJ.# Market Treasury Bills and

Pakistan "nvestment Bonds# that can either be sold in the open market or unds can be

arranged there against under repo arrangement. This is urther supported by investments

short term securities viJ.# Certi6cate o "nvestments etc. "n line )ith its liquidity risk

management policy# the Bank maintains a cushion over and above the minimum statutory

liquidity requirement o SBP# or maintaining liquidity reserves# to ensure continuity o cash

*o)s.

iquidity *isk Monitoring:

The Bank monitors its liquidity risk through various liquidity ratios and liquidity risk

indicators and any deviations and breaches are reported to the concerned authorities or

timely action. Moreover# &sset and Kiability Management Committee &KC%!# a senior



management committee# also revie)s the liquidity position o the Bank on at least monthly

basis and take appropriate measures )here required.

S*: &s per SBP every bank has to keep a speci6c amount on daily basis )ith State bank

)hich is 14F o the total amount."ncase o any non payment a penalty o $s. H:/// )ould

be charged.

Bo

roing le9el and frequency of )orroing:



&ll advances are included and take percentages and compare.depends on )h is ul6lling

criteria and )ont be a deaulter.depends on Bank. et advances or the year 3/15 is

40#104/// and or the year 3/13 it )as 0:H32. ence an increase o 3:.G4 F.

/S Comments: Muqddass pl discuss t<e a)o9e <ig<lig<ted area it< me

reprt soneri.docx

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