Commercial Banks: BANKISLAMI PAKISTAN LIMITED - Year Ended December 31, 2005 (Audited)
BankIslami Pakistan Limited (BankIslami) has finally started commercial operations from April 7, 2006. The most critical milestone has been crossed. BankIslami is a welcome addition to the banking sector in Pakistan. Earlier, the bank was declared as a scheduled bank by the State Bank of Pakistan with effect from March 17, 2006.
The bank had received incorporation certificate from SECP. The bank shares were formally listed on the Karachi Stock Exchange (KSE) on April 17, 2006. On May 23, 2006, the bank shares were being traded at KSE at a premium over 40% of the par value. On December 31, 2005 the bank had 29 employees (2004: 2 employees).
This new Islamic bank is co-sponsored by Jahangir Siddiqui & Company Limited, Dubai Bank PJSC (UAE) and Randeree family of DCD Group, UK. Jahangir Siddiqui & Co Ltd is a large and diversified financial services company in Pakistan, involved in investment banking, securities brokerage/trading and asset management. DCD Group is reportedly a foreign group with business interest in UK, USA, Middle East, South Africa, Pakistan, etc and involved in Trade Finance & Factoring, Property & Investment Management, Information Technology, and Venture Capital & Small Businesses ventures. It is also one of the leading investors in Islamic Bank of Britain and Al Baraka Bank in South Africa.
BankIslami on August 13, 2004 received the NOC from the SBP and was incorporated in Pakistan as an unlisted public limited company on October 18, 2004 under the Companies Ordinance, 1984 to carry out business of an Islamic Commercial Bank in accordance with the principles of Islamic Shariah. It took about a year and half to meet requisite conditions including the raising of paid up capital to the required level and obtaining other certifications before the commercial operations could be initiated.
In March 2006, the bank received its Certificate of Commencement of Business from the SECP and the SBP. The bank was declared by the SBP as a scheduled bank on March 17, 2006. However, membership of the clearing house was received in April 2006.
The bank will be the second full-fledge Islamic Commercial Bank in Pakistan. The bank plans to be the first bank in the world to provide integrated financial planning solutions which are also Shariah compliant.
It also plans to offer full range of retail banking products and services such as current accounts, saving accounts, car Ijara, and house financing to its customers.
The SBP issued a "Scheduled Islamic Commercial Bank" license to BankIslami on March 18, 2005. Such license requires that the bank shall obtain, in writing, prior approval for commencement of Islamic Banking Business from the SBP by fulfilling certain conditions, which inter alia, includes that the minimum capital of the bank would be Rs 2 billion and the Certificate of Commencement of Business is obtained from the SECP.
As on December 31, 2005, the authorised capital of BankIslami stood at Rs 2.5 billion comprising 250 million ordinary shares of Rs 10 each. The paid up capital on this date was Rs 595 million. The quarter ending March 31, 2006 was eventful in the life of BankIslami.
The bank made a successful debut at the Karachi Stock Exchange with the public offering oversubscribed by almost nine times. Before IPO, the bank had raised substantial paid up capital from Pre-IPO investors. By the start of commercial operations in April 2006, the paid up capital has been raised to Rs 2 billion. The relative contribution of the sponsors and the investors in the paid up capital is as under:
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Principal Sponsors: (Rs million) (% of Total)
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Randeree family, DCD Group: 375.0 18.75%
Dubai Bank PJSC: 375.0 18.75%
Jahangir Siddiqui & Co Ltd: 375.0 18.75%
Directors: 0.00%
Chief Justice Mahboob Ahmed (R): 0.5 0.03%
Mr Hasan A Bilgrami: 0.0 0.00%
Sub total: 1125.5 56.28%
Pre-IPO Investors: 474.5 23.72%
General Public/IPO: 400.0 20.00%
Total: 2000.0 100.00%
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The Shariah Board of the bank consists of Justice Muhammad Taqi Usmani (R), Professor Dr Fazlur Rahman and Mufti Irshad Ahmad Aijaz, who is also said to be a full-time Shariah Advisor.
Since the bank has not commenced its operations by December 31, 2005, all the preliminary/pre-operating expenses have been accounted for as Deferred Costs, no Profit and Loss Account has been prepared for the year ended December 31, 2005 (Financial statements for the quarter ending March 31, 2006 have also been prepared accordingly). Summary of Balance Sheet data as on December 31, 2005 and Cash Flow Statement for the year ended December 31, 2005 is given below.
According to the Directors' Report, BankIslami plans to open 12 branches by the year 2006 with presence in major cities of the country. This is in addition to some of the smart branches that the bank plans to set up. The bank focus is on providing Shariah compliant services to the customers in the most efficient manner with special emphasis on technology. The bank is planning to launch the first ATM of the country with biometric option and is planning to be the first bank of the country of offer Internet banking from the start.
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Performance Statistics -
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Balance Sheet (Audited) (Rs in 000)
As on December 31, 2005 2004
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Total Assets: 1,476,609 11,771
Cash, balances with banks: 1,160,098 3,020
Other Assets: 13,492 15
Operating fixed assets: 231,863 53
Deferred Costs: 71,156 8,683
Total Liabilities: 5,119 11,736
Net Assets: 1,471,490 35
Share Capital: 595,025 35
Advances for share capital: 876,465 0
Total Equity: 1,471,490 35
Contin.& Commitments: 31,143 0
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Ratios:
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Cash & bank/Total Assets: 79% 26%
Total Liabilities/Total Assets: 0.3% 99.7%
Total Equity/Total Assets: 99.7% 0.3%
Contin.& Comm./Equity-Times: 2.1% 0.0%
Book Value Per Share: 10.00 10.00
Quoted Price (23-05-06) - Rs: 14.45 -
Price/Book Value Ratio: 1.45 -
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Cash flow Summary 2005 2004
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Net Cash flow, Operations: -78,751 3,053
Net Cash flow, Investing: -235,641 -53
Net Cash flow, financing: 1,471,470 20
Change in Net Liquidity: 1,157,078 3,020
Net Liquidity at beginning: 3,020 0
Net Liquidity at end: 1,160,098 3,020
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COMPANY INFORMATION: Chairman: Chief Justice Mahboob Ahmed (Retd); President and CEO: Hasan Aziz Bilgrami; Director: Ali Raza Siddiqui; Company Secretary: Gohar Iqbal Shaikh; Auditors: Ford Rhodes Sidat Hyder & Co, Chartered Accountants; Legal Advisor: Haidermota & Co, Barrister at Law; Registered Office: 11th Floor, Executive Tower, Dolmen City, Marine Drive, Block-4, Clifton, Karachi; Web Address: www.bankislami.com.pk
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