Annual Report

Transcription

Annual Report

Contents
Board of Directors’ Statement
Board of Directors
Organization Chart
Islamic Banking
Bank’s Objectives, Mission & Code of Ethics
Bank’s History
Credit Rating
Bank’s Achievements
Bank’s Projects in Process
Risk Management
AML/CFT Measures
Human Resources
Bank’s Branches
International Banking
Performance Indicators
Macro Economic - Banking Indicators
Summary of Financial Statements
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Profit (Loss) Statement For the Fiscal Year Ended March 20th, 2010 (amounts in IRR)
Comprehensive Profit and Loss Statement For the Fiscal Year Ended March 20th, 2010 (amounts in IRR)
Cash Flow s Statement For the Fiscal Year Ended March 20th, 2010 (amounts in IRR)
Notes to the Financial Statements For the Fiscal Year Ended March 20th, 2010
Financial Analysis
Board of Directors’ Statement
The global financial crisis experienced relative recovery and grow th in economic indicators at the beginning of the fiscal year 2009/10. This brought hope
for the Iranian economy and its banking system, w hich had demonstrated relatively successful performance and had been able to avoid the negative
impacts of the global economy. The fiscal year 2009/10 marks a new era in the history of Bank Tejarat as for the very first time; the shares of this bank
w ere supplied in the Tehran Stock Market. Follow ing the first offer some 7.2% of the shares of Bank Tejarat w ere sold. This figure w as 2% higher than
w hat had been initially anticipated. Follow ing the overw helming demand for the shares of Bank Tejarat, along w ith acquiring the first rank in terms of
earnings per share among the other state ow ned banks, the shares of this bank became the most cashable shares w ithin the banking sphere. This w as
due to efficient composition of assets, the proper management as w ell as grow th in the Bank’s profitability in comparison to the previous year. It is predicted
that this trend w ill continue during 2010/11. These successes w hich commenced at the beginning of the fourth decade of the Bank’s fruitful activities and
the joining of numerous shareholders to Bank Tejarat’s beneficiaries, increase the expectation of the society and specially our customers. Hence,
considering the existing increasing competitive market, the need for additional efforts is felt more than ever before. With the assistance of its directors and
experienced w orkforce, as w ell as high-tech equipment, together w ith the trust that our esteemed shareholders have placed in our abilities, w e intend not
only to continue to increase our market share, but w e are determined to become one of the superior banks in the Middle East region. In order to reach the
greater objectives of the Bank, w e vow that w e shall continue moving in the sacred path w hich shall lead this bank to a brighter future.
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Board of Directors
Dr. Majid Reza Davari
Managing Director & Chairman
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Seyed Mojtaba Fahim Hashem i
Board Member & Deputy of Managing Director (Executive
Manager)
Dr. Seyed Rahm at Allah Akram i
Vice Chairman & Board Member (Non-executive Manager)
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Siam ak Dolati
Board Member (Executive Manager)
Farshad Heidari
Board Member & Deputy of Managing Director (Executive
Manager)
Organization Chart
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Islamic Banking
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Having commenced its activities some three decades ago, the Islamic Banking system has enjoyed favourable grow th and attracted the attention of many
investors and bankers around the w orld. Instead of paying "a fixed interest", w hich is forbidden in Islamic law , Islamic banking shares its profit and loss
w ith customers. In this system, although the banks offer their clients on account interest, this rate may vary depending on the bank’s performance by the
end of the fiscal year. Based on this system, a bank has a close link w ith its clients and they make joint projects to sell to a third party. What is focused in
Islamic banking is the objective of Fixed Usury Free Banking for establishing social justice, w hich tends to be the first objective of Islamic economic system.
In fact, in usury-free banking system, the focus is on the applicant's purpose. For each contract, a special technique is devised, in a w ay that firstly, the
clients and the bank are not forced to pay or receive interest and secondly the profitability levels of the contract are also considered. In the Islamic banking
system, the banking transactions have, therefore, been presented in the form of contracts. The current Islamic contracts in Usury Free Banking are as
follow s::
Mozarebeh
Mozarebeh is a defined contract in the civil law under w hich the necessary facilities are granted to business people. In Mozarebeh, one of the parties
(ow ner) provides the funds, stipulating that the other party (agent) uses it for trading and both parties share the related profit.
Je'aleh
Je'aleh is a contract based on w hich the customer is obliged to pay a certain sum plus a defined commission in return for a certain action , according to the
contract. The acting party is called "agent" or "contracting party". This contract is applied in the fields of mine and industry, agriculture, housing, commerce
and public services. When the bank acts as an agent, it accepts to carry out a particular w ork under a mutual contract w ith the applicant. Regarding the
special conditions of the undertaking, the bank, then, embarks on assigning the executive operation of the accepted task, w holly or partly, to another party
under a second contract in order to fulfill its obligation.
Legal Partnership
Legal Partnership is a contract under w hich the bank provides part of the capital of new joint-stock companies or buys part of their stocks, hence sharing in
the profit of these companies.
Civil Partnership
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Civil Partnership is a contract under w hich facilities for the development of productive, commercial and service activities are provided. This contract is the
combination of legal or natural persons' shares in cash or kind and in common for profit making as per the contract. Regarding their applicability, the
applicants can take advantage of these facilities. To conduct this transaction, purpose of transaction, necessary capital for partnership, collaterals, the
goods price, approximate expenses, total price, selling price and selling method, and profit sharing ratio of the bank to applicant should be indicated.
Installm ent Sale
A contract under w hich the bank delivers goods to the customer at a set price, a part or w hole of w hich w ould be received on predetermined maturity
through equal or unequal installments.
Gharzolhasaneh
Under this contract, the bank as a lender pays a specific amount to legal or natural persons as the borrow er as per specified regulations. The borrow er's
repayment obligation is equal to the received amount plus its commission. The portion of each bank to grant Gharzolhasaneh, the maximum payable amount
(facilities) to each applicant, and the commissions are annually specified by Central Bank of Iran.
Mozare'eh
Under Mozare'eh contract, the Bank gives a farmland to the customer for a specified duration. The customer w orks on the land and related profits are
shared.
Hire Purchase
Under this contract, it is agreed that the lessee, if complying w ith the terms of the contract, w ill obtain the ow nership of the leased upon completion of the
contract.
Salaf
Salaf is forw ard purchasing of produced goods for specific amount. According to Usury Free Law and to partly provide the w orking capital of production
units, the bank purchases the goods produced by the customer as per their request w hether the ow ner is natural or legal. The banks are allow ed to
purchase the goods, w hich are produced solely by the units, cannot be easily spoiled and can be quickly traded.
Discounting
According to the discounting contract, the bank discounts the documents and drafts of production, trade and service units.
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According to the discounting contract, the bank discounts the documents and drafts of production, trade and service units.
Mosaghat
Mosaghat is a contract betw een a garden ow ner and another party w ho receives some of the product in return for maintaining and harvesting the garden.
Bank’s Objectives, Mission & Code of Ethics
Our Objectives
Becoming the best institution in Iran, w hich offers various financial services
Becoming one of the best banks in the Middle East Region in terms of valuing its beneficiaries.
Increasing our active presence in the international banking market.
Our Mission
Bank Tejarat, is active in offering various banking services such as absorbing deposits, offering facilities, accepting commitments etc. w ithin the framew ork
of Islamic Banking. Our mission includes analyzing current market situations, w hile continuously looking to identify new markets and commercial
opportunities; all for the purpose of meeting the requirements of our clients w hilst safeguarding the interests of our shareholders.
Our Code of Ethics
Our activities are based on certain values and principles w hich guide our decision making processes. These principles are related to our customers,
employees, shareholders, society as w ell as the use of up-to-date technology.
A. Customer
Since at Bank Tejarat, w e highly value our customers w e focus our efforts tow ard achieving customer satisfaction, w hich ultimately leads to customer
loyalty. For this purpose w e take advantage of state of the art technology.
B. Staff
We also believe that our human resources are our most valuable assets. Hence, at Bank Tejarat, w e constantly invest a great deal of time and resources on
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our employees.
C. Shareholders
Furthermore, w e are committed tow ard safeguarding the sustained interest of our shareholders alongside w ith their short term achievements.
D. Soc iety
In addition, w e strive to gain continuos social acceptance and w e intend to achieve this by follow ing the Bank’s principles and professional conduct. In
short, w e intend to achieve our objectives w hile respecting the framew ork of our code of ethics and values.
E. New Tec hnology & Knowledge
We use updated technology in order to meet our customers needs.
Bank’s History
Established in 1887, the East New Bank w as the first modernized bank w hich commenced its activities in Imam Khomeini Square (formally know n as Toupkhaneh)
w here Bank Tejarat is currently located. Although the activities of this bank did not last for more than a year, and w as replaced by Bank Shahi, it nevertheless set the
basis of modern banking in Iran. Prior to the victory of the Islamic Revolution in Iran in 1979, some thirty six private, state ow ned banks operated in the Country. Some
of the said banks w ere fully Iranian w hile others w ere jointly held by Iranian and foreign ow ners. Follow ing the victory of the Islamic Revolution, the Islamic
Revolutionary Council announced the nationalization of all the banks as w ell as merging some of them w ith each other in June 1979. Bank Tejarat w as established in
December 1979 follow ing a merger of 11 banks w ith a total capital of IRR39 billion. Later in 1981, the Iran-Russia Bank w as also merged w ith Bank Tejarat, increasing
the capital of the Bank to IRR41 billion. In order to execute the overall policies of the Article 44 of the Constitution, w hich refers to the privatization of the state ow ned
companies and institutions, Bank Tejarat became a listed company in the Tehran Stock Exchange (TSE) on April 29th, 2009 and for the very first time over 7% of its
shares w ere supplied in the TSE on May 18th, 2009. The pie chart below , demonstrates the shareholders composition of Bank Tejarat:
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Credit Rating
As the first large commercial bank in Iran, Bank Tejarat has been aw arded a BB- rating for its long-term Forex and B for short-term Forex and B+ for
financial robustness, by Capital Intelligence Rating Agency, w hich is one of the four main international rating agencies in the globe. These ratings
clearly reflect not only the suitability of Bank Tejarat as a commercial partner to its domestic or international counterparts, but also mean that its
customers can enjoy the peace of mind w hich is offered by the safety and low risks involved in banking performance of Bank Tejarat. Some of the
strengths of Bank Tejarat from the view point of the Capital Intelligence Rating Agency include: the suitable position of the bank w ithin the domestic
market in terms of market share and branch netw ork, sustainable composition of the Bank’s resources resulting from low cost deposits and long-term
investment deposits compositions, suitable ratio of operating expenses in relation w ith average of total assets.
Bank’s Achievements
Bank Tejarat has been successful in achieving a number of its objectives w hich include: augmenting its market share in terms of deposits, w hilst
allocating to itself the low est share of claims among the five largest commercial banks in Iran, fully realizing the anticipated Earnings Per Share (EPS),
realizing the deposits objectives by 94%, increasing the share of participation contracts w ithin the total facilities granted, increasing its share of bank
guarantees w ithin the five largest commercial banks in Iran, by one percent, offering banking operations such as payment of bills and installments,
transferring funds and acquiring account balances via SHETAB netw ork cards w ithin the internet as w ell as telephone banking and ATM machines,
offering internet purchasing services of shares via the w ebsite of the Bank's brokerage, making operational, SMS, email and chat systems w ithin the
call centre, as w ell as establishing Tejarat Exchange Company.
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Bank’s Projects in Process
a) Form ulating an Integrated Strategic Planning System
The Bank initially commenced upon this project in 2008/09 and continued during the reported period. The
main achievements of this project include identifying and extracting key performance indicators w ithin
strategic spheres as w ell as formulating a mission declaration and acquiring its approval from the
Strategic Planning Council.
b) Operational Budgeting
The main objective of this project is linking the Bank's objectives and strategies w ith its operations w ithin
the framew ork of an operational budgeting system. In other w ords, this project is to ensure that all
activities of Bank Tejarat are carried out in line w ith the Bank's greater objectives.
c) Core Banking
The main aim of this project is to solve all rising problems w ithin the Sphere of Information Technology
and to assist the Bank to render a w ide range of services to its customers. The identification phase of
this project has been carried out w ithin four main axis of “business model making”, “information model
making”, “documentation of the Bank’s existing applicable systems”, as w ell as documentation of the
Bank’s existing infrastructure.
d) Insurance Com pany
In order to expand our scope of activities and to offer a w ider range of services to our customers, w e
have decided to complement our existing activities by rendering insurance services. Feasibility studies
have already been carried out and w e are in the process of obtaining necessary licenses from the Central Insurance of Islamic Republic of Iran in order to
establish an insurance company.
e) Im plem enting an Organizational Governance System
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Since the supply of its shares in Tehran Stock Exchange (TSE) Bank Tejarat has paid special attention tow ard establishing an Organizational Governance
System. Several committees such as the Risk Management, Auditing and Internal Auditing Committees, have been created for this purpose. Further
measures such as organizational structural amendments as w ell as establishing other relevant committees are also planned.
Risk Management
The undeniable significance of risk management, together w ith the ever increasing requirements from international institutions such as the Basel
Committee, for operating risk management w ithin banks, have caused the domestic financial institutions to play an effective applicable role in this field.
to utilize and improve the existing methods of risk measurements w ithin various activities, to correspond our risk management methods w ith the Basel II
Code and finally, to move tow ard arranging information structures based on both internal and external data regarding customers.
Furthermore, follow ing the requirements of the Central Bank of the Islamic Republic of Iran (CBI), w e have made several measures in the recent years,
in order to improve the organizational structures for risk assessment. One such measure is the formation of the Risk Management High Committee,
along w ith subcommittees for assessing credit, liquidity, operational and market risks, together w ith an independent internal auditing department. Finally,
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w e have inline w ith CBI's requirement, formulated Bank Tejarat's Risk Management Code.
There are several types of risk to be managed, and are particularly concerned w ith the follow ing:
Credit Risk
Operational Risk
Market Risk
Liquidity Risk
Credit Risk
Credit risk w hich is mainly affected by the environmental conditions of economic preoccupation, is undoubtedly the most important risk w ithin financial
activities of the banking sphere. Hence, the banks and financial institutions pay a great deal of attention tow ard identifying and comprehending the business
environmental conditions and precise credit evaluation of customers and are in the process of improving their credit risk management portfolios. During
2009/10, Bank Tejarat has taken and is continuously taking effective steps for the purpose of identifying, measuring and managing credit risk. In order to
minimize credit risk, w e have taken several measures including:
Launching the Credit Report System, w hereby the credit history of our customers is submitted to us via the Credit Rating Consulting Company of Iran.
Preparing the Phase 1 of the Credit Rating System for the customers w ithin the branches (both natural and legal persons).
Identifying the existing risks in all credit related activities and suggesting the related methods in w hich these risks could be managed in accordance w ith the
Basel II Code.
In addition, further measures are currently being taken in order to best manage credit risk. These include: measuring the risk and estimating the capital of
customers' portfolios as w ell as formulating a suitable method for measuring their credit rating.
Operational Risk
Operational risk is a non-financial risk w hich covers a w ider scope of activities in comparison w ith other risks. According to the Basel Committee,
operational risk is defined as a possibility of loss occurring from any incomplete or unsuccessful activity in internal or external processes. The costs of
measuring such risks are higher than credit risks since they cover a w ider scope of methods, processes and systems. Some of the main measures taken
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by Bank Tejarat during the reported period w ith regard to minimizing operational risks include:
measuring this risk according to base methods, formulating instructions for the purpose of reducing losses resulting from external events, as w ell as
identifying the breakdow n of operational risks cases in terms of the Organization’s spheres, human resources, external factors as w ell as processes and
planning for the purpose of surveying each one of the above The measures currently being taken include planning tow ard improving the security of
cheques, as w ell as creating an integrated information bank w ith regard to losses via the use of advanced measurement methods.
Market & Exchange Rate Risks
Market risk occurs due to the uncertainty of prospective market fluctuations in value of cash flow s from financial tools occurring as a consequence to
changes in market variables such as interest rates, exchange rates as w ell as stock rates. Exchange rate risk occurs as a result of changes in the value of
the Bank's foreign currency, assets and liabilities due to the fluctuations of forex rate. Some of the measures taken by Bank Tejarat w ith regard to above
risks include:
calculation of Forex portfolio in the Value-at-Risk (VAR) model and installing its softw are w ithin the Bank’s International Affairs Management, formulating and
installing a softw are program for determining improved Forex portfolio of the Bank. In addition, some of the measures currently being taken include:
determining a report receiving system from the Risk Measurement Softw are as w ell as determining an optimized foreign currency portfolio, optimizing the
Risk Portfolio Measurement Systems based on advanced models.
Liquidity Risk
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Liquidity risk occurs w hen an obstacle to raising funds required for the purpose of settlement, is encountered. It refers to the accessibility to enough
resources to respond to the w ithdraw als from accounts and other liabilities of the Bank at the time of their occurrence. After credit risk, liquidity risk is
considered to be second potentially most threatening kind of risk to banks. One of the reasons for the occurrence of liquidity risk is due to outstanding
dues. The measures taken for the purpose of managing the liquidity risk include:
designing a statistical chart required for the purpose of forecasting the future liquidity gap levels of the Bank, formulating a suitable method for
calculating the rate of interest of the central account of the Bank, formulating a softw are for calculating the rate of interest of the central account on a
daily basis, designing and developing a softw are for optimizing the management of assets and liabilities of the Bank for the purpose of minimizing the
liquidity gap as w ell as the realization of the Bank's EPS, etc., and finally, applying a risk and liquidity gap measurement system.
AML/CFT Measures
Some of the anti-money laundering measures that w e have taken during the reported period include: answ ering to the numerous queries of the correspondent
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banks, issuing and distributing an informative brochure among our employees for the purpose of further familiarizing them w ith regard to such crimes, organizing
over 6,000 man/hours of training courses w ith regard to money laundering, demonstrating a staggering 151% increase in comparison w ith the previous year,
formulating guidelines concerning the optimization of the execution of anti-money laundering law and its bylaw s, establishing continuous links w ith our branches
w ith regard to methods of dealing w ith suspicious cases as w ell as sending reports, if required, cooperating w ith the judiciary and the police, w ith regard to
information relating to persons suspected of being linked to money laundering and terrorism, and finally, requesting information from our units regarding the
pursuance of persons (a list of names has been supplied by the United Nations) suspected of cooperation w ith Alqaida and Taliban Terrorist Organizations.
Human Resources
The composition of our human resources in terms of educational levels, gender and place of service is demonstrated in the table below :
At Bank Tejarat, w e believe that human resources are the most important asset of any organization. Furthermore, w e believe that having an effective
w orkforce is a necessary prerequisite for achieving its greater organizational objectives. Hence, w e have invested a great deal of time and resources in
recruiting the right personnel and their training. Thus, during the reported period, over 1,200 various training courses w ere organized w hilst some 714,581
hours of training w ere allocated to our employees.
Other measures taken place for the purpose of developing our human resources include:
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review ing the activities and processes of all units w ithin the Bank
review ing some of the directives and bylaw s relating to human resources
review ing the job classifications
analyzing and designing job descriptions
formulating the path tow ard job advancement for the key positions
designing and implementing employee performance evaluation
and finally, establishing an Employee Performance Evaluation Centre
Bank’s Branches
With almost 2,000 domestic branches nationw ide, offering a w ide range of financial services to the Iranian public, Bank Tejarat is one of the largest Iranian
banks in terms of the number of branches. In order to safeguard the interests of our shareholders and customers, it is our policy to close dow n the money
losing branches. How ever, the number of profit making branches during the reported period outw eighed the loss making branches by far. The table below
demonstrates comparison betw een the number of branches operating in 2008/09 and in 2009/10.
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International Banking
A) Deposits
B) Com m itm ents
C) Foreign Currency Branches
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D) Overseas Branches
The Bank has tw o overseas branches in Paris, France and Dushanbe, Tajikistan. Bank Tejarat is also one of the main shareholders of Persia International
Bank (P.I.B) and Europäisch-Iranische Handelsbank AG (E.I.H) in Hamburg.
Performance Indicators
Macro Economic - Banking Indicators
Macro Econom ic Indicators
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Source: Central Bank of the Islamic Republic of Iran (CBI)
*Since the official statistics of 2009/10 had not been published at the time of preparation of this report, the said statistic s have not been inc luded within this
report.
**Income per capita has been calc ulated by dividing GDP at c urrent prices into the population numbers
Perform ance of Banking Netw ork
Source: Bank Tejarat’s Quarterly Bulletin and the Ministry of Economic Affairs & Finance, March 2008 and 2009. Chosen from statistics of the CBI, March
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2009
* Since the official statistic s of 2009/10 had not been published at the time of preperation of this report, the said statistic s have not been inc luded within this
report.
Summary of Financial Statements
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Profit (Loss) Statement For the Fiscal Year Ended March 20th, 2010 (amounts in IRR)
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Comprehensive Profit and Loss Statement For the Fiscal Year Ended March 20th, 2010 (amounts in IRR)
Cash Flows Statement For the Fiscal Year Ended March 20th, 2010 (amounts in IRR)
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Notes to the Financial Statements For the Fiscal Year Ended March 20th, 2010
1. History of Activities
Bank Tejarat (Public Joint Stock) w as formed on December 18th 1979, as a result of the merger betw een Bank Etebarat Iran, Bank of Iran & Britain, Bank of
Iran & Middle East, Mercantile Bank of Iran, Bank Iranshahr, Bank Sanaye Iran, Bank Shahriar, Bank Iranian, Bank Kar, International Bank of Iran and Japan,
Bank Iran-o-Russ. The Bank w as registered under Registration Number 38027. The Bank w as transformed to a public joint stock company and drafted new
articles of association. The latest changes w ere registered w ith the Company Registrar on February 21st, 2009. The Bank's shares w ere enlisted w ith the
TSE on April 29th, 2009 and enlisted on the TSE Price Board on May 18th, 2009. The Bank's main headquarter is located in Tehran.
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2. Basis of Preparation of Financial Statem ents
The Bank's financial statements are prepared based on historical cost and w hen applicable current values are used.
3. Sum m ary of Significant Accounting Procedures
3.1. Investments
3.1.1. Valuation Method
Long-term investments are evaluated on cost less the provision for permanent investment devaluation. Current rapidly transacted investments in the market
are valued at minimum cost and net sales value of total investment. Other current investments are evaluated at minimum cost and net sale value of each
investment.
3.1.2. Income Recognition Method
Profit from investment in subsidiaries and affiliated companies recognized on the date that financial statements are approved by the general assembly of
shareholders of the investee company (until the date of approval of financial statements). The profit of other investments, including current and long-term
investments, are recognized on the date of approval by the general assembly of shareholders of the investee company (until the date of that balance sheet)
3.2. Tangible Fixed Assets
3.2.1. Tangible fixed assets, except land and building, (Note 3-2-2), are recorded on cost. Improvement costs and costs of fundamental repairs w hich
cause considerable increase in the capacity or useful life of the fixed assets or improve the quality of their output considerably are considered as capital
costs and are amortized in the remaining useful life of the relevant assets. The maintenance and trivial repairs costs w hose purpose is maintaining or revival
of expected economic interests of the commercial unit (in proportion to evaluated standard function) are considered as current costs and are entered into
profit and loss account of the period.
3.2.2. Land, building and goodw ill of the commercial units of the Bank w ere reassessed at the fiscal year ended March 2005 in execution of Article 62 of the
3rd Development Plan, and the total w as recorded as IRR10,830 billion. The excess amount resulting from the revaluation, totaling IRR9,206 billion w as
recorded as the government's capital increase in the Bank.
3.2.3. By virtue of Money & Credit Council Resolution No. 1077 dated February 17th, 2007, since the fiscal year 2006/07 the depreciation of fixed assets
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shall be calculated using the depreciation table provided in Article 151 of Direct Taxation Act. The rates and methods are as follow s:
Depreciation of buildings w ere reassessed at the fiscal year ended March 20th, 2005 and thereafter depreciation w as calculated in accordance w ith Note
10 of Depreciation Bylaw subject of Article 151 of Direct Taxation Act and based on 3.5% and Declining Method.
3.3. Goodwill of Commercial Units
The goodw ill of the Bank's commercial units w ere restated and registered into accounts at the fiscal year 2004/05 in execution of Article 62 of 3rd
Development Plan. Moreover, considering Money & Credit Council Resolution No. 1077, the Bank's assets are
depreciated in accordance w ith Depreciation Table of Article 151 of Direct Taxation Act and therefore starting March 21st, 2006 no depreciation is
calculated for goodw ill.
3.4. Income Recognition from Facilities Granted, Commission and Fines
Considering Directive No. MB/772 of July 18th, 2005 issued by Banking Studies & Regulation Department of Central Bank of Iran, and in accordance w ith
Money & Credit Council Resolution No. 1044 of July 16th, 2005, income is recognized through Accrual Method. Based on the mentioned method, the Bank's
income recognition is as follow s:
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3.5. Basis for Calculation of Depositors' Share from Joint Inc ome
In execution of Usury-free Banking Operation Regulation ratified on August 30th, 1983, relevant Bylaw and Executive Guidelines as w ell as CBI Directive No.
MB/1799 dated January 8th, 2004, income generated from activities related to granting financial facilities and investment in stocks and participation bonds
that are recognized w ithin the Bank's accounting practices are treated as joint income and depositors' share of the profit w ill be calculated in proportion to
the net resource used for the above activities.
3.6. Classification of Granted Facilities
Based on “Credit Institution's Asset Classification Guideline” ratified by the Money & Credit Council (subject of Directive No. MB/2823 issued by CBI's Banking
Studies & Regulations Department on February 24th, 2007, granted facilities by the Bank are classified based on their payment delay factors, clients'
financial status and clients' field of activity into the follow ing categories:
Current category (maximum 2 months overdue and …)
Overdue category (betw een 2 to 6 months overdue and …)
Deferred category (betw een 6 to 18 months overdue and …)
Doubtful category (more than 18 months overdue and …)
3.7. Doubtful Claims Provision
Doubtful claims provision is accounted and allow ed for in the accounts in accordance w ith Money & Credit Council Resolution (Directive No. MB/2823 dated
February 24th, 2007 issued by CBI’s Banking Studies & Regulations Department) "Credit Institution's Claims Provision Calculation Guideline" based on the
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follow ing:
At the end of each financial year a general provision equaling 1.5% of total loan balance (including old, current, overdue, deferred and doubtful
transactions) is taken into account, except remainder of facilities for w hich special provision is considered.
After applying the relevant coefficients to the collateral values, special provision for the balance of overdue, deferred and doubtful categories are
calculated as follow s:
3.8. Provision for Employees' End of Service & Leave Allowance
Provision for employees' end of service benefit is calculated and alloted in the accounts based on last fixed salary and continuous benefits for each year of
service
Provision for employees' leave benefits is calculated and alloted in the accounts based on one day last fixed salary and continuous benefits multiplied by the
employees' remainder of leave day(s). At the end of each financial year, the balance is adjusted in proportion to the remainder of leave days.
3.9. Foreign Exc hange Translation
3.9.1. Domestic Accounts
Foreign currency monetary items are translated at the market rate at the date of the Balance Sheet (intra-banking reference exchange rate, w hich is
announced by CBI each day) and non-monetary items are translated at the market rate on the date of transaction. The difference resulting from settlement
or translation of foreign exchange monetary items are treated as income or expense for the period.
3.9.2. Overseas Units
All monetary and non-monetary items (except shareholders' equity) of overseas branches and units are exchanged at the market exchange rate at the date
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of Balance Sheet. Shareholders' equity are translated at market rates on their creation date (historical rates). Profit and loss items are translated at average
market exchange rate during the period. The difference resulting from conversion of financial statements' figures of the mentioned units are recorded under
the shareholders' equity heading.
3.10. Claims from the Government
Mandatory granted facilities w ere provided based on the guarantee of the country's Management & Planning Organization and are classified as claims from
the Government under the follow ing categories:
Deferred granted facilities resulting from client's inability to repay, insufficient collaterals on loan or the Bank's inability to collect the payment(s)
Overdue granted facilities related to the execution of capital assets acquisition projects
Facilities granted to ministries and governmental institutions
4. Cash
Cash enjoys sufficient insurance coverage at Iran Insurance Co. against dangers such as; robbery, fire and accidents.
5. Due from Central Banks
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6. Due from Banks & Credit Institutes
7. Due from the Governm ent
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8. Granted Facilities & Dues(am ounts in IRR m illion)
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8.1. Granted facilities and dues based on maturity date and profit rate:(amounts in IRR million)
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9. Other Accounts Receivable
10. Debtors for L/Cs & Term Bills of Exchange
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11. Participation Bonds
Payment of the original and allocated profits of the participation bonds of the Governments' civil projects, Ministries of Road & Transportation as w ell as
Energy is guaranteed by the President's Planning & Strategic Supervision Deputy.
12. Investm ents & Participations
13. Tangible Fixed Assets(am ounts in IRR m illion)
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14. Intangible Assets
15. Other Assets
Other assets amounted to IRR6,303,789 million w hich mainly include provisional debtors for IRR5,969,990 million and ow nership pledges for IRR271,959
million.
16. Item s in Transit
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The main part of the balance of items in transit is related to the difference of local debtors and creditors accounts as w ell as foreign exchange dues and
deposits accounts registered in overseas branches and Head Office.
17. Due to Banks & Credit Institutes
18. Dem and Deposits
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19. Savings & Sim ilar Gharzolhasaneh Deposits
20. Term Investm ent Deposits
20.1. Long-term investment deposits at the date of balance sheet are as follow s:
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21. Other Deposits
22. Bank's Debts for Acceptance of L/Cs Notes & Term Bills of Exchange
Bank's debt balance for acceptance of L/Cs and term bills of exchange w as related to endorsed and transacted notes of finance and usance L/Cs to
foreign correspondents w hich their due date w as since March 21st, 2010.
23. Provisions & Other Liabilities
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24. Dividend Payable
From the balance of dividend payable w hich amounted to IRR246,165,745,145, the amount of IRR241,860,138,160 w as related to Governments' dividend,
IRR2,780,699,060 w as related to legal entities and IRR1,524,907,925 w as related to real entities that until the date of balance sheet they didn't receive their
profit. It is w orth mentioning that according to Article 45 of the Budget Law 2009/10, from ratified dividend, the amount ofIRR537,667,224,423 w as allocated
in the previous fiscal year.
25. Capital
25.1. The charter capital of the Bank amounted to IRR39,120 million (including 39,120,000 shares w ith the nominal value of IRR1,000 each share). The capital
w as increased to IRR10,437,384 million (including 10,437,384,000 shares w ith the nominal value of IRR1,000 each share) until the end of the fiscal year
March 20th, 2010 based on the follow ing table:
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25.2. Composition of shareholders at the date of balance sheet is as follow s:
25.3. Capital Adequacy Ratio (CAR) w hich is the result of dividing the bank's base capital to risk w eighted assets, according to Central Bank of Iran
obligations must be at least 8%. The bank's CAR at the date of balance sheet is as follow s:
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26. Legal Reserve
Based on the contents of Article 33-A of the Monetary & Banking Law , 15% of the net profit of each year after deduction of losses in the previous years
are considered as legal reserve. This process is mandatory until the legal reserve reaches the Bank's capital and after that it is discretionary.
27. Other Reserves
Other reserves include contingency reserves. In order to reduce its risk, the Bank allocates 10% of its net profit of every year to contingency reserve
28. Result of Legal Foreign Exchange Rate Parities
By virtue of the approval of Money & Credit Council and circular no. 1309/MB dated March 9th, 2002 issued by Central Bank of Iran, w ith the subject of
Foreign Exchange Rate Unification Plan, on March 26th, 2002 the balance of bank's foreign exchange assets and liabilities account w as converted in
compliance w ith the above-mentioned circular and the result amounting to IRR723,900 million, entered into “result of legal foreign exchange rate parities after
tax” account.
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29 & 30. Joint Incom e
31. Difference in Definite and On Account Profit of Investm ent Deposits
Difference in definite and on account profit of long-term investment deposits of clients based on circular no. 1799/MB dated February 8th, 2004 of Central
Bank of Iran is calculated as follow s:
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* Amounts of granted facilities, investments, partic ipation bonds, investment deposits and legal reserve are c alc ulated based on weekly average during the
period.
32. Profit & Penalty Received (Non-joint Incom e)
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33. Com m ission Revenue (Non-joint Incom e)
34 & 35. Adm inistrative, General & Doubtful Debts Expenses
36. Financial Expenses
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37. Contra Nom inal Item s
37.1. Clients' commitments for L/Cs
37.2. Clients' commitments for issued L/Gs
37.3. Other commitments of clients
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37.4. Managed Funds & Similar Cases
Financial Analysis
1. Bank Tejarat's Position am ong the Five Major Com m ercial Banks
1.1. The Share of Bank Tejarat's Employees, Branches, Resources, Consumptions & Commitments in Comparison w ith the Five Major Commercial Banks
Although Bank Tejarat currently has 15% and 16% of the share of employees and branches among the five major banks, it has succeeded in acquiring
17.3% of total deposits, of 18% facilities, 37% of total L/G commitments and 25% of L/C commitments.
The table below demonstrates Bank Tejarat's share of employees, branches, resources, consumptions and commitments among five major commercial
banks of the country during the fiscal year 2007/08 and 2008/09.
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1.2. Bank Tejarat's Portion in Private Domestic Currency Deposits among the Five Major Commercial Banks
During the reported period, Bank Tejarat enjoyed a grow th in its Rial deposits by 29% w hile other five major commercial banks experienced a 26% grow th in
deposits. These figures demonstrate that the Bank's efforts in attracting deposits have been more successful than other banks. Furthermore, by allocating
22% of the current account deposits to itself, Bank Tejarat has also been more successful than other banks in attracting low cost deposits.
The follow ing page table provides detailed data w ith regard to Bank Tejarat's share of deposits from among the five major commercial banks in Iran:
1.3. Bank Tejarat's Private Domestic Currency Deposits Comparing to the Five Major Commercial Banks During the reported period, Bank Tejarat's
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performance in terms of attracting private domestic currency deposits w as more successful in comparison w ith other major banks. Thus, w hilst the
average share of deposits among the other five major commercial banks w as 20%, Bank Tejarat's share w as 26%.
Needless to mention that the excess of current deposits to total deposits ratio has enabled the Bank to enjoy higher profit margins resulting from the
composition of low cost deposits. Consequently, this has reduced the Bank's vulnerability against interest rate reduction policies.
A comparison of the deposit composition of Bank Tejarat is demonstrated in the follow ing table:
2. Percentage of Assets & Liabilities Com position
The table below show s each asset and liability item of the Balance Sheet for the last 3 years. During the fiscal year 2009/10, the income generating assets
(loans granted, participation bonds, investments and participations) increased and non-income assets (cash, fixed assets and other assets) decreased,
w hich indicates the Bank's success in allocation of resources. On the liability side, the increased debts to other banks in the fiscal year 2008/09 w as for the
loans received from the Central Bank of Iran. As the deposits w itnessed a considerable grow th during the period being reported, a significant portion of
debts to CBI w as settled.
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3. Analysis of the Main Variables Trend
3.1. Deposits As it is seen in the opposite bar chart, the balance of deposits at the fiscal year ended March 20th, 2010, amounted to IRR268,675 billion,
demonstrating a healthy grow th of 24.1% in comparison w ith the previous year. In addition, the Bank also enjoyed a 22.9% grow th in its liquidity. These
figures demonstrate that Bank Tejarat has been successful not only in attracting deposits, but also in rising its share in the country's monetary markets.
The follow ing bar chart demonstrates the balance of domestic and foreign currency total deposits of the Bank during the fiscal years 2006/07 through
2009/10.
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3.2. Composition of Deposits The portion of costless items w ithin the Bank's deposits, consisting of current, savings and other deposits is 47.7% and the
portion of cost bearing items such as short-term and long-term investment deposits is 52.3%.
The opposite pie chart demonstrates the composition of the Bank's deposits in terms of cost (both in Rials or local currency as w ell as foreign currency) at
the fiscal year ended March 20th, 2010.
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3.3. Facilities As can be seen in the opposite bar chart, the total facilities granted by Bank Tejarat during the past four years have experienced an average
grow th of 22.3% and the rate of grow th by March 2009 w as 21.7% in comparison w ith the corresponding period.
3.4. Composition of Facilities One of the main strategies of the Bank during the reported period w as moving tow ard granting more partnership facilities. As a
consequence, the share of such contracts among the rest of facilities granted, increased from 29% in March 20th, 2009 to 55% by the end of the reported
period, demonstrating Bank Tejarat's success in achieving this goal.
It is notew orthy that by increasing the number of its partnership contracts w hich demonstrate higher profitability (since they are geared tow ard industries
and commercial activities), not only does Bank Tejarat boost its profit levels, but it improves the optimum allocation of resources of society. In other w ords, in
addition to increasing its profitability and thereby safeguarding the interests of its shareholders, as a financial intermediary, Bank Tejarat makes a positive
contribution to the economy by directing idle funds received through its deposits tow ard w ealth generating sectors such as the industry.
Composition of facilities at the fiscal years ended March 20th, 2009 and March 20th, 2010 separated as exchanged contracts and partnership contracts is
show n on the pie charts below .
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As can be seen in the pie chart below , Bank Tejarat granted more of its facilities tow ard productive sectors (industry and mine, housing and construction
and agriculture) during 2009/10, indicating the Bank's continuous support for the productive and job creating sectors.
The pie chart below show s the composition of granted facilities balance broken dow n in various economic sectors during the reported period:
3.5. Commitments in Terms of Letters of Guarantee (L/Gs) It is mentionable that Bank Tejarat holds the first rank among all the state and privately ow ned
banks, in terms of L/Gs commitments. Thus, the share of Bank Tejarat in comparison w ith the five major commercial banks in the country, is over 37%.
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The table in the next page demonstrates the trend regarding issued L/Gs (in Forex and domestic currency), deposits of letters of guarantee and the relevant
commissions w ithin the 4-year period. These three items w itnessed a grow th of 14%, 4.7%, and 17%, respectively in 2009/10.
3.6. Commitments in Terms of Letters of Credit (L/Cs)
As can be seen in the follow ing table, the balance of commitments relating to L/Cs demonstrated a healthy grow th of 12.4% in comparison w ith the previous
year, despite the sanctions enforced against the Bank.
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3.7. Income
a. Total Income
The Bank's income during the fiscal year 2009/10 enjoyed a grow th of 21.5% to reach IRR33,402 billion from IRR27,491 billion in the previous year.
The next table and pie chart demonstrate the Bank's total earned incomes during the fiscal years 2006/07 to 2009/10 broken dow n in terms of volume and
percentage:
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b) Bank's Share from Income
The total joint and non-joint income share of the Bank in reported fiscal year amounted to IRR16,269 billion demonstrating a 3.6% grow th in comparison w ith
the previous year. Furthermore, some 49.2% of the Bank's income w as from joint income and 50.8% from non-joint income.
The follow ing charts demonstrate the Bank's share from income broken dow n into joint and non-joint income during the fiscal years 2006/07 to 2009/10.
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3.8. Profit Paid to Depositors
As can be seen in the opposite bar chart, during the reported period profits paid to depositors experienced an increase of 45% in comparison w ith the
previous year, the major part of w hich w as due to the 30% increase in investment deposits and a small portion is a result of a 0.6% increase in the average
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rate of the said deposits. It is notew orthy that the average investment deposits profit rate (w ithout deducting legal deposits) w as 12.7% in 2008/09 and
13.3% in 2009/10.
The trend of the profits paid to depositors w hich are in fact their share from the joint income of the bank is demonstrated in the opposite chart:
3.9. Expenditures
The banks' expenditure details are presented in the table below . As it is show n, the dow nw ard trend of doubtful debts expenditure during the present
period is due to the improvement of receivable classification and asset quality that subsequently decreased bad debts expenditure and increased other
expenditures.
Bank's Expenses
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3.10. Net Profit
As can be seen in the follow ing chart, the Bank has experienced an average grow th of net profits during the preceding four years, demonstrating a suitable
overall performance of Bank Tejarat in the previous years.
It is notew orthy that the higher rate of net profit in comparison w ith the previous years is due to the unusually high rate of non-operational profit, resulting
from the sale of excess properties of the Bank.
4) The Most Im portant Financial Ratios & Indicators
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4.1. Indicators of Profitability
4.1.1. Return on Equity (ROE)
As can be seen in the follow ing table, the ROE increased from 15% in 2008/09 to 15.1% in 2009/10, demonstrating an improvement in the management of
assets, liabilities as w ell as the Bank's performance as a w hole. As mentioned in 3.10, this unusual grow th, in 2007/08 is related to the grow th of nonoperational profits in that year.
The trend of ROE ratio during the previous 4 years is illustrated in the follow ing table:
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4.1.2. Profit Margin Ratio
As can be seen in the follow ing table, profit margin enjoyed an increase of 1.38%, despite a 1.23% rise in the cost of money. This performance is due to a
2.61% increase in the rate of returns from granted facilities as w ell as optimization of allocation of resources.
4.2. Agents' Efficiency Indicators
The indicators relating to 2009/10 as show n in the follow ing table demonstrate significant grow th in comparison 2008/09. Hence, the deposits per capita of
the personnel increased from Rls10.2 billion to Rls12.7 billion. The facilities per capita of the personnel also increased Rls9 billion to Rls10.8 billion.
Furthermore, the Bank's profits per capita increased from Rls131 billion in 2008/09 to Rls142 billion in 2009/10, demonstrating an 8.4% grow th.
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4.3. Operation Control Indicators
4.3.1. Fixed Assets to Total Assets Ratio
The follow ing table show s the fixed assets to total assets trend during the previous periods. This ratio represents the portion of assets that became
inoperative in order to finance fixed assets. Compared to the industry average, this ratio is favorable and its dow nw ard trend during the period indicates a
more efficient resource allocation to income generating assets.
Fixed Assets to Total Assets Ratio
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4.3.2. Capital Adequacy Ratio (CAR)
As can be seen in the follow ing bar charts, the CAR of Bank Tejarat has experienced a decrease during the reported period. This is due to the grow th in the
Bank's deposits.
Consequently, in order to counter the above reduction of CAR, the Bank plans to increase its capital by 30% in 2010/11 and has anticipated to boost the
ratio to 8.7% at the fiscal year ended March 20th, 2011.
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4.3.3. Foreign Currency Open Position
The follow ing graph presents the Bank's foreign currency open position during the three previous years. In 1386 (2007-08), due to special conditions of the
year and government's mandatory financial assignments, the Bank's foreign currency open position became w eaker than anticipated but fortunately
because the Forex rates remain constant in the fiscal year 2008/09 the bank did not incur such loss. It is w orth mentioning that in 2008/09 and 2009/10,
based on the Bank's planning and establishing a balance betw een the bank's resources and consumptions, the foreign currency position changes w as
completely under control, in such manner that the bank managed to manipulate it w ith respect to its expectations of future Forex rates.
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Annual Report

Transcription

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