Crescent Commercial Bank Limited (CresBank), formerly MashreqBank Pakistan Limited, was incorporated as a public limited company on November 12, 2002 and is listed on all the stock exchanges of Pakistan.
Effective from July 9, 2003, the bank is operating as a fully accredited scheduled bank, engaged in commercial banking activities under the authority of the license granted by the State Bank of Pakistan. On October 21, 2004 Trust Commercial Bank Limited was amalgamated with and into CresBank in accordance with the scheme of arrangements sanctioned by the SBP on September 23, 2004. The bank operates 18 (2004: 12) branches in Pakistan through 495 employees (2004:334), of which over 40% are contract based/out sourced employees.
The authorised capital of CresBank as on December 31, 2005 is Rs 3 billion, comprising 300 million shares of Rs 10 each; of which the paid up capital is Rs 2.216 billion held by 7,525 shareholders.
The principal sponsors of the bank comprise the Crescent Group undertakings (16%), MashreqBank PSC of UAE (13%) and Doha Bank of Qatar (10%).
General public holding is nearly 29%, while National Bank of Pakistan (Trustee Department) holds nearly 10%
The rest of the shares are distributed among a large number of corporate entities including banks and DFIs The shares of the bank are quoted at 46% premium over par these days.
JCR-VIS has assigned a medium to long term rating of BBB+ (Triple B Plus) and a short term rating of A-2 (A Two). Total assets of CresBank on December 31, 2005 were Rs 9.618 billion, 9% lower than total assets of Rs 10.595 billion as on December 31, 2004.
Investments experienced 17% decline to Rs 2.160 billion (22 % of Total Assets) as on December 31, 2005 compared with Rs 2.596 billion (25% of TA) as on December 31, 2004.
One-fourth of the total investment on December 31, 2005 is in the associated companies. Net Advances on December 31, 2005 were Rs 3.724 billion, showing 7% decrease compared with Rs 4.016 billion as on December 31, 2004.
On December 31, 2005, all CresBank Advances are in local currency and in the private sector, while 66% (2004: 63%) of the Advances are for short term.
Major exposure of the bank by way of Advances is in Textiles Spinning (21%), Sugar (6%), Individuals (19%), Electronics (4%), Energy (11%), Services (4%) and Manufacturing (3%).
As on December 31, 2005, Gross NPLs were nearly 39% (2004: 48%) of Gross Advances.
However, the bank has made full provision for the NPLs in accordance with the SBP regulations. On net basis, NPLs are nearly 12% of Advances (2004: 25%).
High level of NPLs could partly be due to CresBank's merger with other financial institutions in the past The management is presumed to be taking measures for improvement.
Some doubtful loans or finance leases have the tendency to stay under cover for sometime due to different reasons, a prudent policy for CresBank would be that the management remains extra vigilant in the appraisal and monitoring of all loans.
Despite 17% increase in Deposits as on December 31, 2005 to Rs 5.984 billion compared to Rs 5.093 billion as on December 31, 2004, Total Liabilities experienced 3% decline to Rs 7.986 billion.
Due to losses for the year ended December 31, 2005, Shareholders Equity reduced by 30% to Rs 1.611 billion (2004: Rs 2.355 billion).
The Directors in their Report state that during the year ended December 31, 2005 CresBank recorded a loss of Rs 744 million mainly due to provisioning against non- performing assets and increased administrative costs necessitated by development of infrastructure and recruitment of experienced personnel.
Moreover, mark up expenses for the year ended December 31, 2005 were high at 86% of mark up income as compared with 58 % of mark up income for the previous year.
Also, non-mark up income for 2005 remained almost at the level of 2004.
PERFORMANCE STATISTICS ARE GIVEN BELOW:
Under Contingencies and Commitments are listed a number of disputed tax issues which CresBank has with the Income Tax Department relating to former Crescent Investment bank Limited and Trust Commercial Bank Limited (amalgamated entities).
No provision has been made in these accounts since the management considers that it has strong grounds against the demands created by the Department.
CresBank in June 2005 had a new President & CEO in Shehzad Naqvi, a respected senior banker from Citibank
He has been understandably busy in building his team and putting in place credit and other policies/manuals.
The full impact of the measures introduced by him would be hopefully reflected in the operating results for the year 2006.
In the coming months, CresBank is expected to be merged into PICIC/PICIC Commercial Bank Limited.
This will be a major challenge to the stakeholders particularly the sponsors and top management teams of the three institutions.
After all, it takes quite some time and effort before the cultures of amalgamating institutions really mix and the employees learn to act as a unified team towards enhancing shareholders value.
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Performance Statistics -
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Balance Sheet (Audited) (Rs million)
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As on December 31, 2005 2004
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Total Assets: 9,618 10,595
Cash, balances with banks: 950 1,095
Lending to financial institutions: 777 532
Investments-Net: 2,160 2,596
Advances-Net: 3,724 4,016
Borrowing from fin
Institutions: 1,259 1,946
Deposits, other accounts: 5,984 5,093
Total Liabilities: 7,986 8,250
Net Assets: 1,632 2,345
Share Capital: 2,216 2,216
Reserves, Un-app
Profit: -605 139
Total Equity: 1,611 2,355
Surplus on Revalue, Assets: 21 -10
Equity including
Revalue Surplus: 1,632 2,345
Subordinated Loan: 0 0
Equity and Sub
Loans: 1,632 2,345
Advances-Gross: 5,332 5,802
Gross NPLs: 2,073 2,798
Total Provision: 1,608 1,786
Conting & Commitments: 3,361 4,979
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Ratios:
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Cash and bank/Total Assets: 10% 10%
Investments/Total Assets: 22% 25%
Advance-Net/Total Assets: 39% 38%
Gross NPLs/Advances-Gross: 38.9% 48.2%
NPLs/Total Equity: 129% 119%
NPLs Prov/Advances - Gross: 30.2% 30.8%
Deposits/Total Assets: 62% 48%
Total Liabilities/Total Assets: 83% 78%
Total Equity/Total Assets: 17.0% 22.1%
Equity & S.Loans/Total Assets: 17.0% 22.1%
Deposits/Equity-Times: 3.7 2.2
Advances/Deposits: 62% 79%
Investments/Deposits: 36% 51%
Contin.& Comm./Equity -Times: 2.09 2.11
Book Value Per Share: 7.27 10.63
Quoted Price (10-04-06) - Rs: 14.60 -
Price/Book Value Ratio: 2.01 -
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Income Statement 2005 2004
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Markup- interest earned: 469 233
Markup- interest expensed: 403 136
Net Markup- interest income: 66 97
Provisions and write offs: -395 -74
Net markup/(Loss) after
Provision: -329 23
Total non-markup income: 117 116
Income/(Loss) before
Admn Exp.: -212 139
Admin Expenses, etc: 511 223
Profit/(Loss) Before Taxation: -740 -84
Current & deferred tax: 4 3
Profit/(Loss) after taxation: - 744 -87
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Ratios: (Annual Basis) -
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Markup earned/Total Assets: 4.9% 2.2%
Net Markup Income/Tassets: 0.7% 0.9%
Net markup (Loss) aft Prov/TA: -3.4% 0.2%
Non-Markup Income/TA: 1.2% 1.1%
Income (Loss) before AE/TA: -2.2% 1.3%
Admin Expenses/TA: 5.3% 2.1%
Profit (Loss) bef Tax/TA: -7.7% -0.8%
Profit (Loss) after taxation/TA: -7.7% -0.8%
Profit (Loss) aft tax/T Equity: -46.2% -3.7%
EPS- (year-end paid up) - Rs: -3.36 -0.39
Price/Earnings Ratio: -4.35 -
Cash Dividend: 0% 0%
Bonus Shares: 0% 0%
Cash flow Summary 2005 2004
Net Cash flow, Operations: -277 904
Net Cash flow, Investing: 132 -1,673
Net Cash flow, financing: 0 615
Change in Net Liquidity: -145 -154
Net Liquidity at beginning: 1,095 1,249
Net Liquidity at end: 950 1,095
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