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BALANCE SHEET
AS AT DECEMBER 31, 2006
Note 2006 2005
Rupees in '000
(Restated)
ASSETS
Cash and balances with treasury banks 7 1,574,531 1,618,521
Balances with other banks 8 3,755,151 2,510,190
Lendings to financial institutions 9 2,493,430 1,552,190
Investments 10 8,565,483 7,698,406
Advances 11 9,219,391 10,589,737
Operating fixed assets 12 142,002 140,206
Deferred tax assets 13 96,288 73,342
Other assets 14 1,364,984 891,345
27,211,260 25,073,937
LIABILITIES
Bills payable 15 150,435 119,308
Borrowings 16 4,325,809 4,374,154
Deposits and other accounts 17 19,076,564 17,452,170
Sub-ordinated loans - -
Liabilities against assets subject to finance lease - -
Deferred tax liabilities - -
Other liabilities 18 629,496 631,533
24,182,304 22,577,165
NET ASSETS 3,028,956 2,496,772
REPRESENTED BY
Share capital 19 2,000,949 1,231,034
Reserves 758,290 639,543
Unappropriated profit 103,890 176,089
2,863,129 2,046,666
Surplus on revaluation of securities 20 165,827 450,106
3,028,956 2,496,772
The annexed notes from 1 to 41 form an integral part of these financial statements.
The annexed notes from 1 to 41 form an integral part of these financial statements.
Reserves
Capital Revenue
Share Unappropr-
Statutory Reserve for Reserve for TOTAL
capital Reserve for Share Revenue Total iated profit
reserve consumer contingenc-
bonus issue premium reserve
Note financing ies*
------------------------------------------------------------------- Rupees in '000' --------------------------------------------------------------------
The annexed notes from 1 to 41 form an integral part of these financial statements.
The annexed notes from 1 to 41 form an integral part of these financial statements.
The Bank was established under The Bank of Khyber Act, 1991 (N.W.F.P. Act No. XIV of 1991) and is principally
engaged in the business of commercial, investment and development Banking. The Bank acquired the status of a
scheduled bank in 1994. The Bank is listed on the Karachi Stock Exchange (KSE). The registered office of the
Bank is situated at 24 The Mall, Peshawar Cantt, Peshawar. The Bank was operating 29 branches as at
December 31, 2006 (2005: 29 branches).
2. BASIS OF PRESENTATION
2.1 In accordance with the directives of the Federal Government regarding the shifting of the banking system to
Islamic modes, the State Bank of Pakistan (SBP) has issued various circulars from time to time. One permissible
form of trade related mode of financing comprises of purchase of goods by the banks from their customers and
resale to them at appropriate mark-up in price on deferred payment basis. The purchases and sales arising under
the respective arrangements (except for murabaha financings accounted for under Islamic Financial Accounting
Standard - 1 "Murabaha") are not reflected in these financial statements as such but are restricted to the amount
of facility actually utilized and the appropriate portion of rental/profit thereon. Following the setting up of the
Islamic Banking Division the Bank also provides financing through Shariah compliant modes of financing.
2.2 The financial results of the Islamic Banking Division have been consolidated in these financial statements for
reporting purpose, after eliminating the effects of intra-bank transactions and balances. The bank is conducting
Islamic Banking in five (2005: four) of its branches. Key financial figures of the Islamic Banking Division are
disclosed in annexure "A" to these financial statements.
3. STATEMENT OF COMPLIANCE
3.1 These financial statements have been prepared in accordance with the requirements of the Banking Companies
Ordinance, 1962, the Companies Ordinance, 1984, the directives issued by SBP including format for the financial
statements of banks issued by SBP through BSD Circular No. 04 dated February 17, 2006, and the International
Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB) and
interpretations issued by the Standing Interpretation Committee of IASB (the interpretations), as adopted in
Pakistan. However, the requirements of the Banking Companies Ordinance, 1962, the Companies Ordinance,
1984 and the directives of the SBP have been followed in case where their requirements are not consistent with
the requirements of the IFRSs and the interpretations.
3.2 The Securities and Exchange Commission of Pakistan (SECP) has approved the adoption of IAS 39 "Financial
Instruments: Recognition and Measurement" and IAS 40 "Investment Property". However, SBP through its BSD
Circular letter No.10 dated August 26, 2002 has deferred the implementation of these standards for banks in
Pakistan till further instructions. Accordingly, the requirements of these standards have not been considered in
preparation of these financial statements for the year ended December 31, 2006. However, investments have
been classified in accordance with the requirements of various circulars issued by the State Bank of Pakistan.
4. BASIS OF MEASUREMENT
These financial statements have been prepared under the historical cost convention except for certain financial
instruments which have been stated at fair value.
THE BANK OF KHYBER
The preparation of financial statements in conformity with approved accounting standards requires management
to make judgments, estimates and assumptions that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under the circumstances, the results of
which form the basis of making the judgments about carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates. The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in
which the estimate is revised if the revision affects only that period or in the period of the revision and future
periods if the revision affects both current and future periods.
The areas involving a higher degree of judgment, complexity or areas where assumptions and estimates are
significant to the financial statements are disclosed below:
6.1.1 During the year the Institute of Chartered Accountants of Pakistan (ICAP) issued a circular No. 06-2006 dated
June 19, 2006 which requires that all declarations of dividends to holders of equity instruments including
declaration of bonus issues and other appropriations except appropriations which are required by law after the
balance sheet date, should not be recognized as liabilities or change in reserves at the balance sheet date.
Previously all declarations of dividend to holders of equity instruments and transfers to reserves relating to profit
for the year declared subsequent to year end, were accounted for in the year to which those related. This change
has been accounted for as a change in accounting policy with retrospective effect in accordance with the
treatment specified in International Accounting Standard - 8 "Accounting Policies, Changes in Accounting
Estimates and Errors". The effect of this change has been disclosed in the Statement of Changes in Equity.
6.1.2 During the year, the Bank has adopted the Islamic Financial Accounting Standard 1 - "Murabaha" issued by the
Institute of Chartered Accountants of Pakistan and notified for adoption by the Securities and Exchange
Commission of Pakistan, vide SRO 865(I)/2005 dated August 24, 2005, by all financial insitutions for periods
beginning on or after January 01, 2006. Pursuant to the requirements of the said standard, funds disbursed for
puchase of goods are recorded as 'Advance against Murabaha'. On culmination of murabaha transaction, i.e. sale
of goods to the customer, murabaha financing is recorded at the invoiced amount. Previously, murabaha financing
were recorded at the cost of goods sold. Profit on murabaha transactions is recognized on accrual basis whereby
profit is recognized over the period of the contract. This change in accounting policy has been applied
retrospectively and does not have any impact on current or prior period's profit.
Had there been no change in accounting policy, amounts in the following balance sheet line items would have
been higher/(lower) by:
2006 2005
Rupees in '000'
6.2 Standards, interpretations and amendments to published approved accounting standards that are not yet
effective:
The IAS / IFRS / IFRIC interpretations, which have been published and / or revised and are applicable to financial
statements of the Bank covering accounting periods on or after January 01, 2007 or later periods are as follows:
a) IAS 1: Presentation of financial statements - Capital disclosures effective from January 01, 2007
b) IFRIC 11, IFRS 2 – Group Treasury Share Transactions effective from March 01, 2007
c) IFRIC 12 – Service Concession Arrangements effective from January 01, 2009
Adoption of above amendments would result in an impact on the extent of disclosures presented in the future
financial statements of the Bank.
THE BANK OF KHYBER
In addition to the above, a new series of standards called ‘International Financial Reporting Standards’ (IFRS)
have been introduced and seven IFRSs have been issued by the IASB. Out of these following four IFRSs have
been adopted by Securities and Exchange Commission of Pakistan (SECP) vide its S.R.O. (1) / 2006 dated
December 06, 2006:
The Bank expects that the adoption of the above-mentioned pronouncements will have no significant impact on
the financial statements in the period of initial application.
6.3 Investments
6.3.1 All investments acquired by the Bank are initially recognized at cost, being the fair value of consideration given
including acquisition cost. In accordance with the directives of the SBP, quoted and government securities,
excluding investments categorized as ‘held to maturity’ securities, are stated at revalued amounts. Investment in
unquoted securities (excluding investment in an associate) are stated at the lower of cost and break-up value.
Break-up value is calculated on the basis of net assets of the investee companies according to their latest
available audited financial statements.
Held to maturity
These are securities acquired by the Bank with the intention and ability to hold them upto maturity. In accordance
with BSD Circular No. 14 dated September 24, 2004 investments in securities categorized as ‘held to maturity’ are
carried at amortized cost.
Investment in associate is accounted for using the equity method of accounting wherein the company's share of
underlying net assets of the investee is recognized as the carrying amount of such investment. Difference
between the amounts previously recognized and the amount calculated at each year end is recognized in the
profit and loss account as share of profits of associate. Distribution received out of such profits is credited to the
carrying amount of investment in associated undertaking.
Provision for diminution in the value of securities (except TFCs) is made for permanent impairment, if any, in their
value. Provision against TFCs is made as per the aging criteria prescribed by Prudential Regulations.
THE BANK OF KHYBER
Securities sold with a simultaneous commitment to repurchase at a specified future date (repos) continue to be
recognised in the balance sheet and are measured in accordance with accounting policies for investment
securities. The counterparty liability for amounts received under these agreements is included in borrowings from
financial institutions. The difference between sale and repurchase price is treated as mark- up/return/interest
expense and accrued over the term of the related repo agreement.
Securities purchased with a corresponding commitment to resell at a specified future date (reverse repos) are not
recognised in the balance sheet, as the bank does not obtain control over the assets. Amounts paid under these
agreements are included in lendings to financial institutions. The difference between purchase and resale price is
treated as mark-up/return/interest income and accrued over the term of the related reverse repo agreement.
6.5 Advances
Advances are stated net of provisions for bad and doubtful debts and are based on the appraisal carried out,
taking into consideration the Prudential Regulations issued by the State Bank of Pakistan and where such
provision is considered necessary, it is charged to profit and loss account. The Bank also maintains general
provision in line with the Bank’s prudent policies as precautionary provision to hedge against unforeseen
contingencies. Advances are written-off when there are no realistic prospects of recovery.
6.5.1 Murabaha
Funds disbursed for purchase of goods are recorded as 'Advance for Murabaha'. On culmination of murabaha i.e.
sale of goods to customers, murabaha financings are recorded at the invoiced amount. Goods that have been
purchased but remained unsold are recorded as inventories. Profit is recorded at the time of sale of goods under
murabaha as deferred income and is included in the amount of murabaha financings. Profit is taken to the profit
and loss account over the period of the murabaha.
6.5.2 Ijarah
In case of ijarah financing, the present value of the ijarah rental is recognized as a receivable. The difference
between the gross receivable and the present value of the receivable is recognized as unearned ijarah income.
Ijarah income is recognized over the term of the ijarah using the net investment method (before tax), which
reflects a constant periodic rate of return.
6.6 Inventories
The Bank values its inventories at the lower of cost and net realizable value. Cost of inventories represent the
actual purchase made by the customer as an agent on behalf of the Bank from the funds disbursed for the
purposes of culmination of murabaha. The net realisable value is the estimated selling price in the ordinary course
of business less the estimated cost necessary to make the sale.
Minor renewals, replacements, maintenance, repairs and gains and losses on disposal of fixed assets are
charged to the profit and loss account when incurred. Major renewals and improvements are capitalized.
THE BANK OF KHYBER
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
When the carrying amount of an asset is greater than its estimated recoverable amount it is written down
immediately to its recoverable amount.
6.8 Taxation
6.8.1 Current
Provision for current taxation is based on taxable income at the current rates after considering tax credits and
rebates, if any.
6.8.2 Deferred
Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date
between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax
assets and any unused tax losses, to the extent that it is probable that taxable profits will be available against
which the deductible temporary differences, carry forward of unused tax assets and unused tax losses can be
utilised.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the
extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred
income tax asset to be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period
when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the balance sheet date.
Income tax relating to the items recognized directly in equity are recognized in equity.
THE BANK OF KHYBER
The principle actuarial assumptions used in the actuarial valuation comprised of discount rate at 10% per annum,
salary increase at 9% per annum, expected return on plan assets at 10% per annum and average expected
remaining working life of employees at 14 years.
Return / markup on advances (other than murabaha) and investments is recognized on accrual basis, except the
income which is required to be carried forward or taken to "mark-up in suspense account" in compliance with the
Prudential Regulations of the SBP.
The Bank follows the finance method in recognizing income on ijarah contracts. Under this method the unearned
income i.e. the excess of aggregate ijarah rentals over the cost of the asset under ijarah facility is deferred and
then amortized over the term of the ijarah, so as to produce a constant rate of return on net investment in the
ijarah. Gains / losses on termination of ijarah contracts, documentation charge, front-end fees and other ijarah
income are recognized as income on receipt basis.
Purchase and sale of investments are recorded on the dates of contract. Gains and losses on sale of investment
are also recorded on those dates.
The Bank's financial statements are presented in Pak Rupees (Rs.) which is the Bank's functional and
presentation currency. Assets and liabilities in foreign currencies are translated into Pak Rupees at the rates of
exchange approximating those prevailing at the balance sheet date except those covered by forward exchange
contracts, which are translated at the contracted rates. Consistent with prior years, forward exchange contracts
are valued at the rates applicable to the respective maturities of the relevant foreign exchange contracts. Gains or
losses on forward exchange contracts outstanding as at the year end are recognized currently. Exchange gains or
losses are included in income currently.
For purposes of the cash flow statement the cash and cash equivalents comprise of cash and balances with
treasury banks, balances with other banks and call lendings and placements with financial institutions having
maturities of three (3) months or less.
Provisions are recognized when the Bank has a present legal or constructive obligation arising as a result of past
events and it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate of the amount of the obligation can be made.
Contingent assets are not recognized, and are also not disclosed unless the realization of the asset is virtually
certain and contingent liabilities are not recognized, and are disclosed unless the probability of outflow of
resources embodying economic benefits is remote.
All the financial assets and financial liabilities are recognized at the time when the bank becomes a party to the
contractual provisions of the instrument. Any gain or loss on derecognition of the financial assets and financial
liabilities is taken to income currently.
Derivative financial instruments are initially recognized at their fair value on the date on which the derivative
contract is entered into and are subsequently remeasured at fair value. All derivative financial instruments are
carried as asset when fair value is positive and liabilities when fair value is negative. Any change in the value of
derivative financial instruments is taken to the profit and loss account.
All regular way purchases/sales of investment are recognised on the trade date, i.e. the date the Bank commits to
purchase/sell the investments. Regular way purchases of sales of investment require delivery of securities within
three days after the transaction date as required by stock exchange regulations.
6.17 Off-Setting
Financial assets and financial liabilities are only set off and the net amount is reported in the financial statements
when there is a legally enforceable right to set off and the bank intends either to settle on a net basis, or to realize
the assets and to settle the liabilities simultaneously.
THE BANK OF KHYBER
7.1 The current account is maintained under the requirements of section 29 of the Banking Companies
Ordinance, 1962 as amended from time to time by the State Bank of Pakistan.
7.2 These include accounts maintained for mandatory reserve requirements and such balances are not available
for use in the Bank's operations.
7.3 The balance held in the foreign currency deposit account with the SBP represents the 20% (2005: 15%)
reserve requirement for holding FE-25 deposits. The rate of return on this account is 4.32% (2005: 3.29%)
per annum.
8.1 These represent short-term deposits with banks and carry mark-up at the rates ranging from 11.50% to
12.68% per annum (2005: 2.50% to 12.50% per annum) and having maturities upto June 28, 2007 (2005:
March 31, 2006).
8.2 These represent placements of funds with banks outside Pakistan, which have been generated through the
foreign currency deposit scheme (FE-25). The placements had been made at the rates ranging from 3.5% to
5.22% per annum (2005: 4.25% per annum) and had maturities upto January 17, 2007 (2005: January 19,
2006).
THE BANK OF KHYBER
8.3 Provision for doubtful placement with a bank Note 2006 2005
Rupees in '000
Repurchase agreement lendings (Reverse Repo) 9.2 & 9.5 310,000 192,190
Placements with financial institutions 9.3 2,194,430 1,361,000
2,504,430 1,553,190
Less: Provision for doubtful placements with financial institutions 9.4 11,000 1,000
2,493,430 1,552,190
9.2 Repurchase agreement lendings (reverse repos) carry interest at the rates ranging from 9.40% to 15% (2005:
7.50% to 13.00%) per annum and had maturities upto June 28, 2007 (2005: January 16, 2006).
9.3 These unsecured placements carry interest at rates ranging from 11.20% to 14% per annum (2005: 10.90%
to 14.00% per annum) and have maturities upto March 27, 2007 (2005: March 27, 2006).
9.4 Provision for doubtful placements with financial institutions Note 2006 2005
Rupees in '000
9.6 Aggregate market value of securities held as collateral is Rs.412.462 million as on December 31, 2006 (2005: Rs.. 238.766 million).
2006 2005
Held by Further Total Held by Further Total
10. INVESTMENTS bank given as bank given as
collateral collateral
10.1 Investments by types Rupees in '000
Held-to-maturity securities
Pakistan Investment Bonds 1,033,651### - 1,033,651 548,232 1,046,357 1,594,589
Wapda Bonds 200,010### - 200,010 200,010 - 200,010
Wapda Sukuk Bonds 75,000 - 75,000 - - -
1,308,661 - 1,308,661 748,242 1,046,357 1,794,599
Associates
Ordinary shares in unlisted compan 10.6 78,229 - ### 78,229 69,083 - ### 69,083
78,229 - 78,229 69,083 - 69,083
10.1.1 Pursuant to the requirements of BSD Circular no 7, dated May 30, 2006, which allowed a one time reclassification of securities between the
three catagories, the bank reclassified Pakistan Investment Bonds amounting to Rs. 537 million from "Held to Maturity" to "Availale for Sale"
THE BANK OF KHYBER
Federal Government Securities and NIT units, other than those further offerred as collateral, are
10.2.1 held by the Bank to meet Statutory Liquidity Requirements (SLR) of the SBP calculated on the
basis of time and demand liabilities.
10.2.2 Market Treasury Bills have a market value of Rs. 3,764.489 million (2005: Rs. 2,955.941 million).
These carry returns ranging from 8.49% to 9% per annum (2005: 5.85% to 8.79% per annum) and
have maturity periods ranging between Jan 2007 to December 2007 (2005: March 2006 to
December 2006). These are held with the SBP and are eligible for rediscounting.
THE BANK OF KHYBER
10.2.3 PIBs under 'available for sale' category have a market value of Rs. 1,603.691 million (2005: Rs.
1,209.346 million). These PIBs carry returns ranging from 7% to14% per annum (2005: 6% to13%
per annum) and have maturity periods ranging between October 2008 to October 2013 (2005:
October 2006 to October 2013). These are held with the SBP and are eligible for rediscounting.
10.2.4 The WAPDA bonds carry a return of 8.75% per annum (2005: 8.75% per annum) and are maturing
in March 2008 (2005: March 2008).
WAPDA Sukuk Bonds carry return of 10.89% per annum (2005: Nil) and are maturing in October
10.2.5 2012 (2005: Nil)
10.2.6 The market value of these open ended mutual fund units aggregated to Rs. 1,012.94 million (2005:
Rs. 831.992 million) as at December 31, 2006.
Available-for-sale securities
Ordinary shares in listed companies 8,267 8,267
Ordinary shares in unlisted companies 30,487 30,487
38,754 38,754
THE BANK OF KHYBER
10.4 Information relating to investment in ordinary shares / certificates of listed and unlisted companies / mutual funds, term finance certificates and bonds,
which is required to be disclosed as part of the financial statements under State Bank of Pakistan's BSD Circular No. 4 dated February 17, 2006, is
disclosed in Annexure "C" to these financial statements. Information relating to quality of available for sale securities is given in annexure "D"
10.5 The cost of investment in 16,055,670 units of National Investment Trust (NIT) as of December 31, 2006 aggregates to Rs. 243.476 million (2005: 243.476
million). The Government of Pakistan through a letter of comfort (LOC) dated August 8, 2001 has undertaken to facilitate NIT in redeeming these units at
Rs. 13.70 per unit on the condition that the Bank shall continue to hold all the units for a minimum period of five years from the date of the letter of comfort.
An amount of Rs. 476.621 million is included in surplus on revaluation of securities as at December 31, 2006 (2005: Rs. 414.806 million) which represents
the difference between the repurchase price of NIT units and their cost.
The Government of Pakistan (Ministry of Privitisation) through its letter ref. 2(10)Bkg/PC/97 dated November 27, 2005 had given options to the LOC
holders to either acquire proportionate management rights and manage its portion of funds as a separate split fund or to continue with the existing
arrangement wherein the funds continue to be managed by National Investment Trust Limited (NITL). In response, the Bank's management has requested
the Government of Pakistan (Ministry of Privitisation) to waive off the LOC status on its NIT units and conveyed that accordingly its holding may be split
and privatised in accordance with the terms mentioned in the aforementioned instructions for Non-LOC holders. A response from the Government of
Pakistan (Ministry of Privitisation) is awaited. However, Government of Pakistan vide its letter dated December 22, 2006 has extended the LOC status
upto June 30, 2007. Subsequent to year end, NIT through its letter dated February 23, 2007 has given following options to LOC holders:
Option (a): LOC holders may exercise their option of acquiring the right to manage their funds at same terms as determined by a competitive bidding
process for auction of the non-LOC management rights with no discount.
Option (b): In the event the above option is not acceptable the LOC holders may either choose:
(i) to enter into an agreement with NIT for a stagged redemption spread over period of several years with an initial payment from proceeds of sale
of PICIC and PSO shares.
(ii) to excerise the redemption option before the expiry of current LOC date with immediate payment at a discount of 10% over and above the
normal procedure.
The bank has not yet conveyed its concurrance to any of the above referred options as the matter is under consideration by the management.
Latest available financial statements December 31, 2006 December 31, 2005
10.6.1 Carrying value of associate under equity method of accounting Note 2006 2005
(Rupees in '000)
10.7 During the year ended December 31, 2005 and during the period upto September 30, 2006, the bank has been carrying out investment trading
transactions in respect of a portfolio which was owned by the bank but classified and treated as “Advances under Continuous Funding System (CFS)” in
the year ended December 31, 2005 and during the period from January 2006 to September 30, 2006 as “Advances under CFS” and partially as “Other
Assets”. Upon identification of the above matter by the management in September 2006, the bank carried out a review of its treasury transactions,
investment portfolio and advances under CFS and as a result transferred an aggregate portfolio of Rs 132.12 million, having a market value amounting to
Rs.107.52 million to “Investments Account” from “Advances under CFS” and “Other assets”. Consequently, the unrealized loss amounting to Rs.24.6
million relating to the above portfolio has also been recognized in the Profit and Loss Account for the current year. Further, the financial statements for the
year ended December 31, 2005 have also been restated to adjust the misclassification of investments which were previously classified as “Advances
under CFS”.
Similarly a portfolio of investments costing Rs. 218.856 million having market value of Rs.173.224 million was misclassified as “Available for sale” instead
of “Held for Trading” as on December 31, 2005 which resulted in overstatement of profit and loss for the year then ended by Rs. 45.6 million.
In addition to this CFS income and income on securities purchased under resale agreements (Reverse Repo) was overstated by 37.62 million and Rs.2.49
million in 2005 while capital gains and dividend income was understated by 31.74 million and 8.4 million respectively. The same has been reclassified
accordingly.
The effects of the said restatements on the prior year financial statements are tabulated below:
(Rupees in '000)
Decrease in advances under CFS 119,736
Increase in investments 75,782
Decrease in deficit on revaluation on securities 45,632
Decrease in profit 89,586
Decrease in CFS income 37,619
Decrease in income on Reverse Repo 2,485
Increase in Capital gains 31,739
Increase in Dividend income 8,365
Considering the above, the bank has appointed an independent firm of Chartered Accountants to carry out special audit of its Treasury and Investment
Division for the period from January 01, 2005 to September 30, 2006. Pending completion of the special audit, further misclassification/adjustment, if any,
would be accounted for in the subsequent year. However, the management believes that with the aforesaid adjustment and restatements, it is not
probable that a material misstatement relating to prior or current financial statements would have remained unidentified and unadjusted.
THE BANK OF KHYBER
11.3 Advances include amounts aggregating to Rs.3,187.646 million ( 2005: Rs.. 2,869.446 million) which have been placed under non-performing status as detailed below:-
2006
(Rupees in '000)
Classified Advances Provision Required Provision Held*
Category of Classification Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total
2005
(Rupees in '000)
Classified Advances Provision Required Provision Held*
Category of Classification Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total
* Adjusted for any amount of liquid assets realizable without recourse to a court of law and the forced sale value of any mortgaged/pledged securities as valued by professional
valuers.
11.3.1 The loss category includes balances aggregating Rs. 793.707 million (2005: Rs. 1,075.613 million) forwarded to the National Accountability Bureau for settlement and recovery
against which a provision of Rs. 631.556 million (2005: Rs. 677.869 million) is held in accordance with the Prudential Regulations of SBP.
11.4.2 As of December 31, 2006 the Bank has modified the method of computing provision against non-performing advances pursuant to the changes in the Prudential Regulations
issued by SBP. In accordance with the revisions in the regulations, the criteria has been amended as follows:
- provision required under the substandard category has been raised to 25% from 10% previously
- the benefit of forced sales value is allowed for financing facilities of Rs. 10 million and above as compared to Rs. 5 million and above previously, for all facilities other than
housing finance facilities under consumer financing.
The incremental provision resulting from the aforementioned revisions amounts to Rs. 65.685 million. Had the effect of the aforementioned revisions not been recognized,
advances (net of provisions) would have been higher by Rs. 65.685 million whereas the profit for the year would have been higher by Rs.65.685 million and the amount of
contingent liabilities as mentioned in Note 20.6 would have been lower by Rs. 22.332 million.
In terms of sub-section (3) of section 33A of the Banking Companies Ordinance, 1962 a statement in respect of write off of loans or any other financial relief of Rs 500,000 or
above allowed to a person(s) in Pakistan during the year ended December 31, 2006 is enclosed as annexure 'B' to the notes to these financial statements.
THE BANK OF KHYBER
11.6 Particulars of loans and advances to directors, associated companies, etc. Note 2006 2005
(Rupees in '000)
COST DEPRECIATION
As at As at As at Charge for the As at
Additions / Depreciation
January 01, December January 01, year / December Book Value
(Deletions) Rate (%)
2006 31, 2006 2006 (Adjustment) 31, 2006
Rupees in '000
Building on free hold land 11,620 - 11,620 7,554 406 7,960 3,660 10
Furniture and fixture 65,811 5,593 70,309 34,287 4,585 38,011 32,298 10 - 20
(1,095) (861)
Office equipment 88,861 13,880 102,670 52,860 8,198 60,993 41,677 10 - 20
(71) (65)
Vehicles 41,108 1,712 38,471 24,840 3,271 24,545 13,926 20
(4,349) (3,566)
Library books 460 87 547 249 23 272 275 10
COST DEPRECIATION
As at As at As at Charge for the As at
Additions / Depreciation
January 01, December January 01, year / December Book Value
(Deletions) Rate (%)
2005 31, 2005 2005 (Adjustment) 31, 2005
Rupees in '000
Building on free hold land 11,620 - 11,620 7,102 452 7,554 4,066 10
Furniture and fixture 54,829 11,464 65,811 29,947 4,647 34,287 31,524 10 - 20
(482) (307)
Office equipment 75,016 14,359 88,861 43,966 9,057 52,860 36,001 10 - 20
(514) (163)
Vehicles 36,497 7,914 41,108 23,401 4,117 24,840 16,268 20
(3,303) (2,678)
Library books 453 7 460 225 24 249 211 10
Free hold Building on free Building on Furniture Office Vehicles Library Total
land hold land other land and fixture equipment books
---------------------------------------------------------------------Rupees in '000--------------------------------------------------------------
Deletions
Cost - - - (482) (514) (3,303) - (4,299)
Depreciation - - - 307 163 2,678 - 3,148
Deletions
Cost - - - (1,095) (71) (4,349) - (5,515)
Depreciation - - - 861 65 3,566 - 4,492
12.2.2 None of the operating fixed assets having original cost of Rs. 1 million or book value of Rs. 0.250 million which ever is less, were disposed off during the year
12.2.3 Building on other land represents the cost of building constructed on a plot of land which is owned by the Government of N.W.F.P.
12.2.4 The fair values of operating fixed assets according to estimates of the management are not materially different from their carrying amounts.
COST AMORTIZATION
As at As at As at As at
Additions / Charge for the Amortization
January 01, December January 01, December Book Value
(Deletions) year Rate (%)
2006 31, 2006 2006 31, 2006
Rupees in '000
COST AMORTIZATION
As at As at As at As at
Additions / Charge for the Amortization
January 01, December January 01, December Book Value
(Deletions) year Rate (%)
2005 31, 2005 2005 31, 2005
Rupees in '000
Rupees in '000
12.3.2 The cost of computer software includes the cost of fully amortized software amounting to Rs. 2.920 million (2005: Rs. 2.920 million) which is still in use.
THE BANK OF KHYBER
14.1 The amount includes Rs. 200.002 million (2005: Rs. 2.000 million) on account of
funds disbursed under agency agreements for purchase of goods to be sold under
murabaha arrangements.
14.2 Exchange Risk Fee is being amortized over the terms of the respective forward
exchange contracts. According to the SBP’s Foreign Exchange (FE) Circular No.
7 dated March 18, 2002, effective April 1, 2002 no fresh forward covers or their
rollovers will be provided for foreign currency deposits under FE Circular No. 31.
14.3 The amount represents the cost of goods purchased by the agents of the bank
under agency agreements to be sold under murabaha arrangements.
16. BORROWINGS
In Pakistan 4,280,227 4,313,378
Outside Pakistan 45,582 60,776
4,325,809 4,374,154
Secured
Borrowings from State Bank of Pakistan
Under export refinanc 16.2.1 380,472 239,615
Repurchase agreement bo 16.2.2 3,549,755 3,731,573
3,930,227 3,971,188
Unsecured
Call borrowings 16.3 350,000 342,190
Foreign credit lines 16.4 45,582 60,776
395,582 402,966
4,325,809 4,374,154
16.2.1 The Bank has entered into agreements for financing carrying markup
ranging from 6.5% to 7.5% (2005: 3.5% to 7.5%) with the State Bank of
Pakistan for extending export finance to customers. According to the
terms of the respective agreements, the SBP has the right to receive the
outstanding amount from the Bank at the date of maturity of the finances
by directly debiting the current account maintained by the Bank with the
SBP. A limit of Rs 400 million was allocated to the Bank by the SBP for
the fiscal year ending June 30, 2007 (2005: Rs. 650 million for the fiscal
16.3 These borrowings from a bank carry interest at the rate of 11.70 % per
annum (2005: 10.90% per annum) and have maturities upto March 30,
2007 (2005: March 27, 2006).
18.1 This balance is stated net of mark-up accrued aggregating Rs. 940.505 million (2005: Rs. 946.214
million) against non-performing loans.
THE BANK OF KHYBER
19 SHARE CAPITAL
Ordinary shares
Fully paid in cash
75,000,000 75,000,000 Opening balance 750,000 750,000
40,991,500 - Issued during the year 409,915 -
115,991,500 75,000,000 1,159,915 750,000
Issued as fully paid bonus shares
48,103,448 48,103,448 Opening balance 481,034 481,034
36,000,000 - Issued during the year 360,000 -
84,103,448 48,103,448 841,034 481,034
200,094,948 123,103,448 19.3 & 19.4 2,000,949 1,231,034
19.3 At December 31, 2006 the Government of N.W.F.P., held 130,580,604 (2005: 107,100,000) ordinary shares of Rs. 10 each.
19.4 The Bank is in the process of raising its paid up capital to Rs. 4 billion as according to BSD Circular No. 06 dated October
28, 2005 the Bank is required to raise its share capital to Rs 3 billion by December 31, 2006 and Rs. 4 billion by December
31, 2007. The Bank through its letter BOK/FD/06/439 dated November 18, 2006 applied to the SBP for relaxation of the
requirement as it intends to offer 100 percent right shares. The SBP vide its letter BSD/SU-1/608/722/2006 dated December
16, 2006 accepted the Bank’s request and extended the period of compliance with the aforementioned requirement till
January 15, 2007. Subsequently, the SBP has granted further extension upto March 30, 2007 vide its letter BSD/SU-
1/608/271/2007 dated February 06, 2007 in response to the Bank's letter dated December 26, 2006 for further extension.
The Bank has issued letter of rights on February 26, 2007 to the shareholders for payment by March 30, 2007.This right
issue will raise the paid-up capital of the Bank to over Rs. 4 billion which, in addition to meeting the minimum capital
requirements for the year ended December 31, 2006, will also meet the minimum capital requirements for the year ending
December 31, 2007.
21.2.1 The above amounts include expired letters of guarantee aggregating to Rs. 497.389 million as at December 31,
2006 (2005: Rs. 500.976 million) for which the formalities relating to return of the original documents are in
process.
21.4.1 All forward exchange contracts are backed by trade related transactions to meet the needs of the Bank's clients to
generate trading revenues and, as part of its asset and liability management activity, to hedge its own exposure to
currency risk. At the year end, all foreign exchange contracts have a remaining maturity of less than one year.
21.7 Taxation
21.7.1 Bank
21.7.1.1 Assessments of the Bank have been finalized upto and including the assessment year 2002-2003 (accounting year ended December 31,
2001). While finalizing the assessments for the assessment years 1994-95 to 2002-2003 the Deputy Commissioner of Income Tax
(DCIT) has made additions to income on account of mark-up taken to reserve in accordance with the requirements of Prudential
Regulations amounting to Rs. 167.886 million and on account of provisions against non–performing advances charged to income
amounting to Rs. 577.863 million resulting in additional tax demands of Rs. 98.069 million and Rs. 329.464 million respectively. Further,
additional tax demands aggregating Rs. 507.799 million may arise in respect of disallowance of provisions against non–performing
advances for the tax years 2003, 2004, 2005 and 2006 [accounting years ended December 31, 2002, 2003, 2004, 2005 and 2006.
The management of the Bank, based on the advice of its tax consultant, is confident that the appeals filed in respect of the
aforementioned assessment years will be decided in the Bank’s favour. Accordingly, no provision has been made in the financial
statements of the Bank in respect of the aggregate amount of Rs 957.113 million referred above.
21.7.1.2 The Bank had established ‘The Bank of Khyber Employees Gratuity Fund’ (the fund) through a trust deed dated January 1, 2001. The
CIT has granted approval to the fund in accordance with the requirements of the Sixth Schedule to the Income Tax Ordinance, 2001 with
effect from June 6, 2003.
The Bank while calculating the tax provisions for the years ended December 31, 1999 and 2000 has claimed the gratuity expenditure
aggregating Rs 19.684 million as an allowable deduction having an aggregate tax impact of Rs 11.417 million which was disallowed.
However, while finalizing the assessment for the accounting year ended December 31, 2001 the amount claimed as gratuity expenditure
was allowed by the assessing authorities. The management of the Bank, based on the advice of its tax consultant, is confident that
based on the aforementioned assessment for the accounting year ended December 31, 2001 the amounts claimed for the years ended
December 1999 and 2000 will be allowed by the assessing authorities and therefore, no provision has been made for the
aforementioned tax effect of the gratuity expenditure claimed.
21.8 There are a number of legal proceedings outstanding against the Bank which include counter claims and counter suits filed by the
borrowers as at December 31, 2006. No provision has been made in respect of these as the management of the Bank is confident that it
is unlikely that any significant loss will arise.
21.9 The State Bank of Pakistan’s Committee for Resolution of Cases (CRC) and Committee for Revival of Sick Industrial Units (CRSIU) have
finalised the settlement of certain non performing loans of the Bank having principal amounting to Rs. 340.015 million and overdue
markup amounting to Rs. 191.662 million for an aggregate amount of Rs. 137.156. The decision of the CRC in two of the
aforementioned cases have been upheld by the Peshawar High Court (Original Banking Jurisdiction). The Bank has filed writ petitions
against three cases in the Division Bench of the Peshawar High Court and against one case in the Lahore High Court, Rawalpindi
Bench. The Bank is in the process of filing a writ petition in one of the cases in the Sindh High Court and in another case the Peshawar
High Court has already considered the CRSIU decision in the normal legal proceeding undertaken by the Bank against the customer.
Based on the advise of its respective legal counsels the management of the Bank is confident that the aforementioned cases shall be
decided in its favour and therefore no further provision has been made for an aggregate amount of Rs. 33.819 million.
THE BANK OF KHYBER
26.1 During the year ended December 31, 2005 donation of Rs. 1 million was paid to Chief Minister's relief fund for earth quake
victims. No directors or his spouse had any interest in donee funds.
27. The amount represents the penalties imposed by the State Bank of Pakistan.
THE BANK OF KHYBER
2006 2005
Rupees in '000
28. TAXATION
Current - for the year
Bank 16,964 13,036
Associate 3,061 3,797
20,025 16,833
Deferred
Bank 27 (883)
Associate 3,223 108
3,250 (775)
23,275 16,058
29.1 Basic and diluted earnings per share are the same.
32.1 General description of the type of defined benefit plan and the accounting policy for recognizing actuarial gains and losses
are disclosed in Note 6.9.1 to these financial statements.
Number of persons 2 2 1 1 - -
34.1 In addition of the above, the Managing Director and the Acting Managing Director were provided with the free use of Bank's maintained car in
accordance with their terms of employment.
34.2 The figures for remuneration of the managing director include remuneration of the Acting Managing Director till September 20, 2006.
Liabilities
Bills payable 150,435 150,435 119,308 119,308
Borrowings 4,325,809 4,325,809 4,374,154 4,374,154
Deposits and other accounts 19,076,564 19,076,564 17,452,170 17,452,170
Sub-ordinated loans - - - -
Liabilities against assets subject to finance lease - - - -
Other liabilities 524,681 524,681 522,703 522,703
24,077,489 24,077,489 22,468,335 22,468,335
The Bank does not offer structured derivatives. However, the Bank’s treasury buys/sells foreign exchange financial instruments namely forward foreign
exchange contracts and swaps with the principle view of hedging the risks arising from its trade business.
As per the Bank’s policy, these contracts are reported on their fair value at the balance sheet date. The gains and losses from revaluation of these
contracts are included under “income from dealing in foreign currencies”. Unrealized gain and losses on these contracts are recorded on the balance
sheet under “Other Assets/Other Liabilities”.
These products are offered to the Bank’s customers to protect from unfavorable movements in foreign currencies. Such contracts are entered with only
those obligors whose credit worthiness has been assessed as per the bank’s credit/risk assessment framework. The Bank effectively hedges such
exposures in the inter-bank foreign exchange market.
In the above contracts, both parties must fulfill their contractual obligations at the time of settlement. These contracts are primarily based on the
imports/exports, market expectations, economic/political circumstances and the Bank’s inflow/outflow position.
These positions are reviewed on a regular basis by the Bank’s Asset and Liability Committee (ALCO).
THE BANK OF KHYBER
Total Income 786,460 549,617 121,588 792,347 651,460 433,108 85,441 548,068
Total Expenses 452,464 531,389 22,079 674,767 485,234 294,766 38,653 452,582
Net Income (Loss) 333,996 18,228 99,509 117,580 166,226 138,342 46,788 95,486
Segment Assets (Gross) 14,576,998 2,220,667 1,245,923 9,175,789 14,576,998 2,402,485 1,245,923 9,152,248
Segment Non Performing Loans - 13,947 18,465 3,155,234 - 12,744 14,057 2,842,248
Segment Provision Required - 10,370 10,634 1,868,320 - 801 4636 1,537,232
Segment Liabilities 7,998,550 7,716,346 945,408 7,533,011 6,566,837 3,731,573 952,052 11,326,703
Segment return on Net Assets (ROA) (%) 2% 1% 8% 1% 1% 6% 4% 1%
Segment cost of Funds (%) 6% 7% 2% 9% 7% 8% 4% 1%
37.1 Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions
and include the Government of NWFP, an associated company, retirement funds, directors and key management personnel.
37.2 The details of transactions with related parties during the year other than those which have been disclosed elsewhere in these financial statements are as follows:
2006 2005
Deposits
At January 1, 39 7,214 21,557 28,810 605 79,898 29,352 109,855
Deposited during the Quarter 14,417 1,405,756 161,783 1,581,956 7,930 7,832,711 420,866 8,261,507
Repaid during the Quarter (14,412) (1,394,794) (179,098) (1,588,304) (8,496) (7,905,395) (428,661) (8,342,552)
At December 31, 44 18,176 4,242 22,462 39 7,214 21,557 28,810
2006 2005
2006 2005
Rupees in '000
Regulatory Capital Base
Tier I Capital
Shareholders capital/Assigned capital 2,000,949 1,231,034
Reserves 628,346 511,939
Unappropriated profits 103,890 176,089
2,733,185 1,919,062
Less: Adjustments 426,226 -
2,306,959 1,919,062
Tier II Capital
Subordinated debt (upto 50% of total Tier I Capital) - -
General provisions subject to 1.25% of Total Risk Weighted Assets 129,944 127,604
Revaluation reserve (upto 50%) 80,947 -
210,891 127,604
Eligible Tier III Capital - -
Total Regulatory Capital (a) 2,517,850 2,046,666
Credit risk is managed through the bank's lending policy approved by its board of directors and other laid down procedures outlined in the credit
manual and related circulars. The Head Office Credit Committee is responsible for the effective operation and implementation of these policies
including the establishment of credit limits for all counter-parties after evaluation of their credit worthiness, pre-sanction evaluations of credit
proposals, adequacy of security documents, pre-disbursement examination of charge documents and security of advances through adequate
collaterals with an acceptable security margin. This multi tiered credit approving system, at branch and head office level, ensures at each stage
that each transaction is analyzed keeping in view the risk factors as well as the stipulation of the Prudential Regulations.
The bank has also established a separate recovery division (RRMC) to monitor stuck-up facilities along with negotiations with borrowers as well
as undertaking legal actions against the delinquent borrowers. Further, to strengthen the portfolio and as a matter of prudence, adequate
provision against non-performing loans is maintained in compliance with the prudential regulations. Investments and other assets, doubtful of
recovery are also adequately provided.
Out of the total financial assets of Rs. 26,963.694 million (2005: Rs. 24,860.967 million), the financial assets which were subject to credit risk
amounted to Rs. 11,713.425 million (2005: Rs. 12,141.927 million). The major credit risk in respect of advances is concentrated in the fisheries
sector and some other sectors such as manufacturing, services, trading and micro finance.
2005
Contingencies and
Advances (Gross) Deposits Commitments
Rupees Percent Rupees Percent Rupees Percent
in '000 in '000 in '000
Agriculture, Forestry, Hunting and Fishing 1,274,854 12.04% 290,472 1.66% - 0.00%
Automobile and transportation equipment - 0.00% 441,520 2.53% 498,049 11.30%
Financial - 0.00% 780,564 4.47% - 0.00%
Services 1,307,495 12.35% 281,024 1.61% 2,209,470 50.13%
Individuals - 0.00% 2,436,450 13.96% - 0.00%
Fisheries 373,289 3.53% - 0.00% - 0.00%
Education and health - 0.00% 39,632 0.23% - 0.00%
Others 7,634,099 72.09% 13,182,508 75.54% 1,699,900 38.57%
10,589,737 100% 17,452,170 100% 4,407,419 100%
THE BANK OF KHYBER
2005
Contingencies and
Advances Deposits Commitments
Rupees Percent Rupees Percent Rupees Percent
in '000 in '000 in '000
39.1.1.3 Details of non-performing advances and specific provisions by class of business segment
2006 2005
Classified Specific Classified Specific
Advances Provisions Advances Provisions
Held Held
Rupees in '000
Public/ Government - - - -
Private 3,187,646 1,889,324 2,869,446 1,542,669
3,187,646 1,889,324 2,869,446 1,542,669
THE BANK OF KHYBER
Contingen-
Profit before Total assets Net assets cies and
taxation employed employed commitm-
ents
Rupees in '000
Pakistan 103,890 27,211,260 3,028,956 4,446,816
Asia Pacific (including South Asia) - - - -
Europe - - - -
United States of America and Canada - - - -
Middle East - - - -
Others - - - -
103,890 27,211,260 3,028,956 4,446,816
2005
Contingen-
Profit before Total assets Net assets cies and
taxation employed employed commitm-
ents
Rupees in '000
Pakistan 176,089 25,073,937 2,496,772 4,407,419
Asia Pacific (including South Asia) - - - -
Europe - - - -
United States of America and Canada - - - -
Middle East - - - -
Others - - - -
176,089 25,073,937 2,496,772 4,407,419
THE BANK OF KHYBER
2006
Rupees in '000
Pakistan rupee 26,897,064 23,989,977 (514,072) 2,907,087
United States dollar 249,501 136,877 390,487 112,624
Great Britain pound 18,035 11,157 9,406 6,878
Japanese yen 1,111 3 55,055 1,108
Euro 45,264 44,290 59,124 974
Other currencies 285 - - 285
27,211,260 24,182,304 - 3,028,956
2005
Rupees in '000
Pakistan rupee 24,922,948 22,429,530 (872,079) 2,493,418
United States dollar 101,228 98,432 663,269 2,796
Great Britain pound 8,201 7,793 217 408
Japanese yen 716 - 163,239 716
Euro 40,396 41,410 45,354 (1,014)
Other currencies 448 - - 448
25,073,937 22,577,165 - 2,496,772
Total Yield/Interest Risk Sensitivity Gap 2,730,324 (1,076,318) (6,033,204) 2,096,887 1,974,956 (136,970) 1,524,598 2,085,867 92,508
Cumulative Yield/Interest Risk Sensitivity Gap 2,730,324 1,654,006 (4,379,198) (2,282,311) (307,355) (444,325) 1,080,273 3,166,140 3,258,648
2005
Effective Total Exposed to Yield/ Interest risk
Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 Non-interest
Yield/ Upto 1 to 3 to 6 Months to 1 to 2 to 3 to 5 to 10 Above bearing financial
Interest Month Months Months Year Years Years Years Years 10 Years instruments
rate Rupees in '000
On-balance sheet financial instruments
Assets
Cash and balances with treasury banks 0.14% 1,618,521 22,061 - - - - - - - - 1,596,460
Balances with other banks 8.50% 2,510,190 - 1,921,339 - ### - ### - ### -### - ### - ### - 588,851
Lending to financial institutions 11.59% 1,552,190 816,190 736,000 - ### - ### - ### -### - ### - ### - -
Investments 11.39% 7,698,406 75,783 431,120 372,563### 3,520,670### 1,984,882### -### - ### - ### - 1,313,388
Advances 6.74% 10,589,737 623,294 339,920 1,164,450### 2,605,072### 1,894,579### 1,191,494### 2,655,074### 115,854### - -
Other assets 0.00% 891,345 - - - - - - - - - 891,345
- 24,860,389 1,537,328 3,428,379 1,537,013 6,125,742 3,879,461 1,191,494 2,655,074 115,854 - 4,390,044
Liabilities
Bills payable 0.00% 119,308 - - - - - - - - - 119,308
Borrowings 6.94% 4,374,154 849,814 3,360,649 87,986 25,065 10,128 10,128 30,384 - - -
Deposits and other accounts 4.02% 17,452,170 2,894,421 4,739,091 3,111,593 1,079,875 696,316 932,127 438,439 - - 3,560,308
Sub-ordinated loans 0.00% - - - - - - - - - - -
Liabilities against assets subject to finance lease 0.00% - - - - - - - - - - -
Other liabilities 0.00% 631,533 - - - - - - - - - 631,533
- 22,577,165 3,744,235 8,099,740 3,199,579 1,104,940 706,444 942,255 468,823 - - 4,311,149
On-balance sheet gap 2,283,224 (2,206,907) (4,671,361) (1,662,566) 5,020,802 3,173,017 249,239 2,186,251 115,854 - 78,895
Total Yield/Interest Risk Sensitivity Gap (2,206,907) (4,671,361) (1,662,566) 5,020,802 3,173,017 249,239 2,186,251 115,854 -
Cumulative Yield/Interest Risk Sensitivity Gap (2,206,907) (6,878,268) (8,540,834) (3,520,032) (347,015) (97,776) 2,088,475 2,204,329 2,204,329
Liquidity risk is the risk that the Bank is unable to meet its current and future financial obligations as they fall due at acceptable cost, and includes (a) the operational ability of the Bank to meet refinancing requirement, (b)
concentration risk i.e. the ability of the Bank to diversify its funding sources to prevent undue reliance on a single or related counterparites, and (c) tenor risk i.e. the ability of the Bank to raise adequate longer term funds
(maturity at issue in excess of 12 months).
The Bank’s liquidity position is managed by ALCO. The Committee monitors the maintenance of Balance Sheet liquidity ratios on monthly basis using duration and convexity analysis at the Middle Office. The core object is to
avoid undue reliance on individual deposits and extending advances for long periods. Thus on the whole the Bank manages liquidity and funding risk through a combination of prositive cash flow management, the maintenace of
portfolio containing high quality liquid assets, maintenance of a prudent fundings strategy and diversification of its funding base.
Total 2005
Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5
Upto 1 to 3 to 6 Months to 1 to 2 to 3 to 5 to 10 Above
Month Months Months Year Years Years Years Years 10 Years
Rupees in '000
Assets
Cash and balances with treasury banks 1,618,521 1,618,521 - - - - - - - -
Balances with other banks 2,510,190 110,190 2,400,000 - - - - - - -
Lending to financial institutions 1,552,190 816,190 736,000 - - - - - - -
Investments 7,698,406 75,373 431,120 372,563 3,520,670 244,313 244,312 1,123,858 1,686,197 -
Advances 10,589,737 623,294 339,920 1,164,450 2,605,072 1,894,579 1,191,494 2,655,074 115,854 -
Operating fixed assets 140,206 - - - - - - - 140,206 -
Deferred tax assets 73,342 - - - 73,342 - - - - -
Other assets 891,345 253,997 223,071 414,277 - - - - - -
25,073,937 3,497,565 4,130,111 1,951,290 6,199,084 2,138,892 1,435,806 3,778,932 1,942,257 -
Liabilities
Bills payable 119,308 119,308 - - - - - - - -
Borrowings 4,374,154 849,814 3,360,649 87,986 25,065 10,128 10,128 30,384 - -
Deposits and other accounts 17,452,170 6,454,729 4,739,091 3,111,593 1,079,875 696,316 932,127 438,439 - -
Sub-ordinated loans - - - - - - - - - -
Liabilities against assets subject to finance
lease - - - - - - - - - -
Deferred tax liabilities - - - - - - - - - -
Other liabilities 631,533 324,142 86,082 117,999 63,207 40,103 - - - -
22,577,165 7,747,993 8,185,822 3,317,578 1,168,147 746,547 942,255 468,823 - -
Net assets 2,496,772 (4,250,428) (4,055,711) (1,366,288) 5,030,937 1,392,345 493,551 3,310,109 1,942,257 -
41. GENERAL
41.1 These financial statements have been prepared using the revised format of financial statements prescribed in
BSD Circular No. 4 dated February 17, 2006 issued by the State Bank of Pakistan. The revised format for
presentation of financial statements is applicable for annual financial statements prepared by banks for periods
commencing from January 01, 2006. The significant changes in the revised format for presentation of financial
statements include the introduction of disclosures in respect of segment details with respect to business
activities and capital adequacy and expended disclosures in respect of the Company's risk management.
Captions as prescribed by the aforementioned circular, in respect of which there are no amounts, have not
been reproduced in these financial statements except for balance sheet and the profit and loss account.
41.2 Figures have been rounded off to the nearest thousand of rupees, unless otherwise stated.
41.3 Corresponding figures have been reclassified, wherever necessary. However, no significant re-classifications
have been made except as stated in notes 6.1.1, 6.1.2, 6.9.1 and 10.7 in these financial statements.
The bank is operating five (05) Islamic banking branches at the end of current year as compared to four (04) Islamic banking
branches at the end of prior year.
2006 2005
Rupees in '000
ASSETS
Cash and balances with treasury banks 268,866 184,482
Balances with and due from Financial Institutions 460,527 234,270
Investments 118,066 45,419
Financing and receivables
REPRESENTED BY
Islamic Banking Fund 150,000 150,000
Reserves 2,159 1,068
Unappropriated profit 22,316 22,186
174,475 173,254
Deficit on revaluation of assets (16,503) (5,601)
157,972 167,653
CHARITY FUND
Opening Balance 70 -
Additions during the period 56 70
Closing Balance 126 70
THE BANK OF KHYBER
ANNEXURE 'B' TO THE FINANCIAL STATEMENTS AS REFEREED TO IN NOTE 11.6
STATEMENT SHOWING WRITTEN-OFF LOANS OR ANY OTHER FINANCIAL RELIEF OF RS.
500,000 OR ABOVE PROVIDED DURING THE YEAR ENDED DECEMBER 31, 2006
2. Frontier Shakir Ullah Durrani S/o M. Zaman 26,299 10,654 - 36,953 - 10,565 - 10,565
Ceramics (Pvt.) CNIC # 17101-0271163-3 Khan Durrani
Ltd.
29-Industrial Shamsul Hassan S/o Aftab
Estate, Jamrud NIC # 517-39-014383 Hassan Late
Road, Maj. Gen. (R) Jehanzaib S/o Maghal Baz
Peshawar. Khan (Late) Khan Late
NIC # 136-23-081778
4. Gohar Rehman Altaf Gohar S/o Mir Gohar 4,007 940 - 4,947 - 940 - 940
& Sons CNIC # 35202-3656321-1 Rehman
269-Landa
Bazar, Lahore.
Listed Companies
* The paid-up value of each share in listed companies was Rs.. 10 per share (2005: Rs.. 10 per share ).
Al-Hamra Hills (private ) limited 5,000,000 5,000,000 50,000 50,000 Mr.Habib Ahmed
Asian Housing Finance Limited 500,000 500,000 5,000 5,000 Mr. Junaid Khan
Khakwani
Mohib Textile Mills Limited 1,190,500 1,190,500 25,000 25,000 Mr. M.Asif Saigol
Mohib Exports Limited 25,300 25,300 487 487 Mr. M.Abid Saigol
Breakup value 10.7 80,487 80,487
* The paid-up value of each share in unlisted companies was Rs.. 10 per share (2005: Rs.. 10 per share).
** As at December 31, 2006, the aggregate market value of listed shares / certificates was Rs.. 423.88 million (2005:Rs. 312.443 million) and aggregate book
value (break up value) of unlisted shares was Rs.. 52.364 million (2005: Rs.. 54.238 million). Provision for diminution in value of investments includes an
aggregate amount of Rs.. 30.487 million representing provision against investments held in unlisted companies.
As at December 31, 2006, the aggregate market value of listed shares / certificates was Rs.. 423.88 million (2005:Rs. 312.443 million) and aggregate book
value (break up value) of unlisted shares was Rs.. 52.364 million (2005: Rs.. 54.238 million). Provision for diminution in value of investments includes an
aggregate amount of Rs.. 30.487 million representing provision against investments held in unlisted companies.
* The paid-up value of each TFC held was Rs.. 5,000 per certificate (2005: Rs.. 5,000 per certificate).
** The market value of these TFCs amounting to Rs.. 220.117 million (2005: Rs.. 210.440 million) as at December 31, 2006. The rate of return on these TFCs
ranges from 10% to 14.4% (2005: 8.45% to 14%) per annum.
Dewan Textile Mills Limited 750 6,000 3,750 11,250 Dewan Ghulam
Mustafa Khalid
Orient Petroleum Inc. - 3,000 - 5,000 Mr. Anwar Moeen
Pakistan Mobile Communication (Private) Limited 4,800 6,000 24,000 30,000 Mr. Zohaib Abdul
Khaliq
Pakistan International Airlines Corporation 1,480 1,600 7,400 7,800 Mr. Tariq Kirmani
Reliance Export (Private) Limited 5 5 50,000 50,000 Mr. Fawad Ahmad
Sheikh
Union Bank Limited 4,741 - 23,705 - Mr. Badar Kazmi
123,855 151,414
THE BANK OF KHYBER
ANNEXURE 'D' TO THE FINANCIAL STATEMENTS AS REFEREED TO IN NOTE 10.4